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 March 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ----------------
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, 1998.
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 22
EXHIBIT INDEX APPEARS AT PAGE 18.
<PAGE>
<PAGE 2>
ITEM 5. Other Events.
FORD MOTOR CREDIT COMPANY FINANCIAL STATEMENTS FOR THE PERIOD ENDED
March 31, 1998.
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, 1997 (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, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
First Quarter
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Financing revenue
Operating leases $ 2,329.3 $ 2,141.6
Retail 1,383.1 1,257.5
Wholesale 402.9 432.2
Other 93.4 98.5
--------- ---------
Total financing revenue 4,208.7 3,929.8
Depreciation on operating leases (1,682.0) (1,445.5)
Interest expense (1,610.5) (1,559.0)
--------- ---------
Net financing margin 916.2 925.3
Other revenue
Insurance premiums earned 79.9 69.8
Investment and other income 269.6 242.4
--------- ---------
Total financing margin and revenue 1,265.7 1,237.5
Expenses
Operating expenses 385.8 341.8
Provision for credit losses 321.5 355.7
Other insurance expenses 69.5 66.9
--------- ---------
Total expenses 776.8 764.4
--------- ---------
Equity in net income of affiliated
companies 0.3 0.7
--------- ---------
Income before income taxes 489.2 473.8
Provision for income taxes 192.6 182.8
--------- ---------
Income before minority interests 296.6 291.0
Minority interests in net income of
subsidiaries 18.8 15.1
--------- ---------
Net income 277.8 275.9
<PAGE>
Earnings retained for use in the business
Beginning of period 7,327.4 6,892.1
Dividends - (14.5)
---------- ----------
End of period $ 7,605.2 $ 7,153.5
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE 3>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1998 1997 1997
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 843.7 $ 689.5 $ 1,567.3
Investments in securities 976.5 887.9 1,473.6
Finance receivables, net and retained
interest in sold receivables (Note 2) 83,692.8 82,311.2 79,115.7
Net investment, operating leases 35,299.1 34,746.0 32,660.5
Notes and accounts receivable from
affiliated companies 1,102.7 734.2 836.6
Equity in net assets of affiliated
companies 40.3 49.6 45.4
Other assets 2,577.4 2,554.9 4,122.8
----------- ----------- -----------
Total assets $ 124,532.5 $ 121,973.3 $ 119,821.9
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and
dealer reserves $ 3,059.8 $ 2,835.0 $ 3,597.4
Affiliated companies 1,127.5 2,815.7 1,846.1
----------- ----------- -----------
Total accounts payable 4,187.3 5,650.7 5,443.5
Debt (Note 3) 104,280.3 100,725.0 97,955.1
Deferred income taxes 2,931.5 2,732.2 3,550.7
Other liabilities and deferred income 2,759.2 2,803.2 2,927.4
----------- ----------- -----------
Total liabilities 114,158.3 111,911.1 109,876.7
Minority interests in net assets of
subsidiaries 497.8 477.7 336.2
Preferred stockholder's equity in a
subsidiary company - - 286.5
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) 3,896.4 3,891.6 3,719.5
Note receivable from affiliated
company (1,517.0) (1,517.0) (1,517.0)
Accumulated other comprehensive
income/(loss) (Note 4) (133.2) (142.5) (58.5)
Earnings retained for use in the business 7,605.2 7,327.4 7,153.5
----------- ----------- -----------
Total stockholder's equity 9,876.4 9,584.5 9,322.5
----------- ----------- -----------
Total liabilities and stockholder's
equity $ 124,532.5 $ 121,973.3 $ 119,821.9
=========== =========== ===========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE 4>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Periods Ended March 31, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
First Quarter
1998 1997
--------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 277.8 $ 275.9
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 321.5 355.7
Depreciation and amortization 1,685.3 1,544.1
Gain on sales of finance receivables (50.8) (26.5)
Equity in net income of affiliates (0.3) (0.7)
Deferred income taxes 133.9 (205.5)
Increase in assets (360.1) (387.2)
(Decrease)/increase in liabilities (909.3) 887.9
Other 90.3 (191.0)
--------- ----------
Net cash provided by operating activities 1,188.3 2,252.7
--------- ----------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (10,538.5) (8,228.2)
Collection of finance receivables (other than wholesale) 6,594.9 8,213.6
Purchase of operating lease vehicles (5,136.9) (6,530.8)
Liquidation of operating lease vehicles 2,913.9 2,920.7
Net change in wholesale receivables (481.6) (148.6)
Proceeds from sales of finance receivables 2,045.2 801.4
Purchase of investment securities (391.6) (916.8)
Proceeds from sale/maturity of investment securities 303.3 768.1
Other (37.9) 4.4
--------- ----------
Net cash used in investing activities (4,729.2) (3,116.2)
--------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 5,168.6 2,399.2
Principal payments on long-term debt (4,029.7) (2,246.8)
Change in short-term debt, net 2,535.8 (505.2)
Cash dividends paid - (14.5)
Other 21.4 105.2
--------- ----------
Net cash provided by/(used in) financing activities 3,696.1 (262.1)
--------- ----------
Effect of exchange rate changes on cash and cash
equivalents (1.0) (23.1)
--------- ----------
Net change in cash and cash equivalents 154.2 (1,148.7)
Cash and cash equivalents, beginning of period 689.5 2,716.0
-------- ---------
Cash and cash equivalents, end of period $ 843.7 $ 1,567.3
========= ==========
Supplementary cash flow information
Interest paid $ 1,688.3 $ 1,601.7
Taxes paid 63.8 36.8
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE 5>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
Notes To Financial Statements
Note 1. Acquistions
Effective March 31, 1998, Ford FSG Inc. (FFSGI) contributed its shares of FCE
Reinsurance Ltd. to Ford Credit. The transaction was recorded by Ford Credit at
FCE Reinsurance Ltd.'s book value as a credit to paid-in surplus.
Note 2. Finance Receivables, Net and Retained Interest in Sold Receivables
(in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1998 1997 1997
----------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Retail $ 55,670.0 $ 55,601.0 $ 51,162.1
Wholesale 22,081.8 21,605.5 22,392.3
Other 5,780.2 5,275.9 5,850.6
----------- ----------- ----------
Total finance receivables, net of
unearned income 83,532.0 82,482.4 79,405.0
Less allowance for credit losses (1,196.2) (1,169.8) (968.4)
----------- ----------- ----------
Finance receivables, net 82,335.8 81,312.6 78,436.6
Retained interest in sold receivables 1,357.0 998.6 679.1
----------- ----------- ----------
Finance receivables, net and retained
interest in sold receivables $ 83,692.8 $ 82,311.2 $ 79,115.7
=========== =========== ==========
</TABLE>
<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,
1998 1997 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
PAYABLE WITHIN ONE YEAR:
Commercial paper $ 42,299.5 $ 40,856.8 $ 38,108.7
Other short-term debt* 6,499.4 5,351.0 4,957.6
----------- ----------- ----------
Total short-term debt 48,798.9 46,207.8 43,066.3
Senior notes payable within one year** 10,114.2 9,572.6 10,568.5
----------- ----------- ----------
Total payable within
one year 58,913.1 55,780.4 53,634.8
----------- ----------- ----------
<CAPTION>
March 31, 1998
----------------------------
Weighted-Average
Interest Rates*** Maturities
---------------- ----------
<S> <C> <C> <C> <C> <C>
PAYABLE AFTER ONE YEAR:
Secured indebtedness 19.29% 1999-2000 12.0 13.5 9.8
Unsecured senior indebtedness
Notes**** 6.54% 1998-2048 44,033.1 43,584.1 43,124.6
Debentures 4.37% 2001-2005 1,228.1 1,247.6 1,130.0
Unamortized discount (5.6) (3.0) (18.3)
----------- ----------- ----------
Total secured and unsecured
senior indebtedness 45,267.6 44,842.2 44,246.1
Unsecured long-term
subordinated notes 8.51% 2005 99.6 102.4 74.2
----------- ----------- ----------
Total payable after
one year 45,367.2 44,944.6 44,320.3
----------- ----------- ----------
Total debt $ 104,280.3 $ 100,725.0 $ 97,955.1
=========== =========== ==========
<FN>
* Includes $1,800.0 million, $830.5 million, and $1,802.6 million with
affiliated companies at March 31, 1998, December 31, 1997, and March 31,
1997, respectively.
** Includes $1,300.7 million, $1,716.0 million, and $1,030.9 million with
affiliated companies at March 31, 1998, December 31, 1997, and March
31, 1997, respectively.
*** Rates were variable on about 18.7% of the debt payable after one year
including the effects of interest rate swap agreements.
**** Includes $1,814.5 million, $1,830.6 million, and $3,123.1 million with
affiliated companies at March 31, 1998, December 31, 1997, and March
31, 1997, respectively.
</TABLE>
<PAGE>
<PAGE 7>
Note 4. Comprehensive Income
Ford Credit adopted Statement of Financial Accounting Standards 130, "Reporting
Comprehensive Income", as of January 1, 1998. Total comprehensive income for the
three months ended March 31, 1998 was as follows (in millions):
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Income $ 277.8 $ 275.9
Other comprehensive income
Foreign currency translation adjustments 0.5 (10.4)
Unrealized gain on investments in securities
available for sale, net of taxes 8.8 (104.1)
---------- ----------
Total other comprehensive income 9.3 (114.5)
---------- ----------
Total comprehensive income $ 287.1 $ 161.4
========== ==========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORD CREDIT FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997 RESULTS OF
OPERATIONS
Ford Credit's consolidated net income in the first quarter of 1998 was $278
million, up $2 million from 1997. Compared with results from a year ago, the
increase primarily reflects a smaller increase in credit loss reserve
requirements and higher levels of earning assets. Lower net financing margins,
higher credit losses, and higher operating costs were partial offsets.
Net financing margins decreased compared with the same period a year ago
primarily reflecting increased depreciation expense for leased vehicles offset
partially by lower borrowing costs (6.37% net borrowing rate in first quarter
1998 compared with 6.45% in first quarter 1997). Increased depreciation expense
for leased vehicles primarily reflects lower than anticipated residual values on
leased vehicles. Higher depreciation expense on leased vehicles is expected
to adversely affect Ford Credit's earnings for the remainder of 1998.
The smaller increase in credit loss reserve requirements in first quarter 1998
compared with first quarter 1997 reflects Ford Credit's estimate that the
increase in credit losses for 1998 over 1997 will be less than the increase that
occurred in 1997 over 1996. Credit losses as a percent of average net finance
receivables, including net investment in operating leases, increased to 0.93% in
1998 from 0.87% in 1997 reflecting higher losses per repossession offset
partially by a decrease in repossession rates. The increase in losses per
repossession reflects a weaker used vehicle market resulting in Ford Credit
realizing lower prices for repossessed units sold at auction.
Total net finance receivables and net investment in operating leases at March
31, 1998 were $117.6 billion, up $6.5 billion or 6% from a year earlier.
For the first quarter of 1998, Ford Credit financed 38% of all new cars and
trucks sold by Ford Motor Company dealers in the U.S. compared with 39% in the
first quarter of 1997. In Europe, Ford Credit financed 26% of all new vehicles
sold by Ford Motor Company in the first quarter of 1998, compared with 25% in
the first quarter of 1997. Ford Credit provided retail customers with financing
<PAGE>
<PAGE 8>
for 627,000 new and used vehicles in the United States and 192,000 in Europe. In
the first quarter of 1998, Ford Credit provided wholesale financing for 80% of
Ford Motor Company U.S. factory sales and 95% of Ford Motor Company factory
sales in Europe compared with 77% for the U.S. and 94% for Europe in first
quarter 1997.
Ford Credit Liquidity and Capital Resources
Ford Credit's outstanding debt at March 31, 1998 and at the end of each of the
last three years was as follows:
<TABLE>
<CAPTION>
December 31
Mar 31, -------------------------
1998 1997 1996 1995
-------- -------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
Commercial paper & STBAs(a) $ 43,520 $ 42,311 $ 38,774 $ 40,419
Other short-term debt (b) 5,279 3,897 4,243 1,781
Long-term debt (including
current portion)(c) 55,481 54,517 55,007 49,980
-------- ------- ------- --------
Total debt $104,280 $100,725 $ 98,024 $ 92,180
======== ======== ======= =======
United States 80,037 $78,443 $ 76,635 $ 73,178
Europe 14,228 12,491 14,028 13,013
Other international 10,015 9,791 7,361 5,989
-------- -------- ------- -------
Total debt $104,280 $100,725 $ 98,024 $ 92,180
======== ======== ======== ========
Memo:
Total support facilities
(billions) as of March 31, 1998
and December 31, 1997-1995,
respectively:
Ford Credit $ 26.6 $ 26.6 $ 27.2 $ 27.4
Ford Credit Europe 5.3 5.2 5.7 4.7
<FN>
- - - - - -
(a) Short-term borrowing agreements with bank trust departments.
(b) Includes $1,800 million, $831 million, $2,478 million, and $176 million
with affiliated companies at March 31, 1998, December 31, 1997, December
31, 1996 and December 31, 1995, respectively.
(c) Includes $3,115 million, $3,547 million, $4,237 million, and $1,174 million
with affiliated companies at March 31, 1998, December 31, 1997, December
31, 1996 and December 31, 1995, respectively.
</TABLE>
Support facilities represent additional sources of funds, if required. At March
31, 1998, Ford Credit had approximately $19.2 billion of contractually committed
facilities. In addition, $7.4 billion of Ford lines may be used by Ford Credit
at Ford's option. The lines have various maturity dates through June 30, 2002
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 $1.5 billion of contractually committed liquidity
facilities to support Ford Credit's asset backed commercial paper program.
Additionally, at March 31, 1998, there was approximately $4.7 billion of
contractually committed facilities available for Ford Credit Europe Plc's use.
In addition, $615 million of Ford bank lines may be used by Ford Credit Europe
Plc at Ford's option. The lines have various maturity dates through June 30,
2002 and may be used, at Ford Credit Europe Plc's option, by any of its direct
or indirect majority-owned subsidiaries. Any such borrowing will be guaranteed
by Ford Credit Europe Plc.
<PAGE>
<PAGE 9>
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information,"
effective for 1998, establishes standards for reporting information
about operating segments in annual financial statements and, beginning in
1999, requires reporting of selected information about operating segments
in interim financial reports issued to stockholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. Ford Credit will adopt SFAS 131 for its
financial statements for the year ending December 31, 1998. Management
is evaluating the impact, if any, the Statement will have on Ford
Credit's present segment reporting.
Statement of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers'
Disclosures about Pensions and Other Postretirement Benefits," was issued
by the Financial Accounting Standards Board in February 1998. This
Statement revises employers' disclosures about pension and other post-
retirement benefit plans. It does not change the measurement or recognition
of those plans. This Statement standardizes the disclosure requirements
for pensions and other postretirement benefits to the extent practicable,
requires additional information on changes in the benefit obligations and fair
values of plan assets, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. The Statement is effective for
Ford Credit's financial statements for the year ended December 31, 1998.
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," was issued by the
American Institute of Certified Public Accountants in March 1998. This
SOP provides guidance on accounting for the costs of computer software
developed or obtained for internal use. Effective for fiscal years beginning
after December 15, 1998, this SOP requires capitalization of certain internal-
use computer software costs. Presently, Ford Credit expenses the costs of
developing or obtaining internal-use software.
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
<PAGE>
<PAGE 10>
INFORMATION CONCERNING FORD
Following is a condensed consolidated statement of income (unaudited) of Ford
for the periods ended March 31, 1998 and 1997 (in millions except amounts per
share):
First Quarter
-------------
1998 1997
---- ----
Sales and revenues $36,584 $37,314
Total costs and expenses 33,968 34,799
Operating income 2,616 2,515
Automotive net interest income 123 55
Automotive equity in net loss
of affiliated companies (10) (144)
Gain on spin-off of The Associates 15,955 -
Income before income taxes 18,684 2,426
Provision for income taxes 972 898
Minority interests in net income
of subsidiaries 66 59
Net income $17,646 $ 1,469
Amounts Per Share of Common Stock
and Class B Stock after Preferred
Stock Dividends
Basic income $ 14.48 $ 1.23
Diluted income $ 14,23 $ 1.20
Cash dividends per share $ 0.42 $ 0.385
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - FORD
OVERVIEW
The company's worldwide operating earnings were $1,691 million in first quarter
1998, or $1.36 per diluted share of Common and Class B Stock in first quarter
1998, compared with $1,469 million, or $1.20 per diluted share in first quarter
1997.
These operating results exclude a one-time gain of $15,955 million, or $12.94
per diluted share, resulting from the spin-off of The Associates First Capital
Corporation ("The Associates") (discussed below), and a one-time earnings per
share reduction of $0.07 per share resulting from the premium paid to repurchase
the company's Series B Cumulative Preferred Stock. Including both one-time
factors, the company's reported first quarter earnings were $17,646 million,
or $14.23 per diluted share. The company's results in first quarter 1998
include Ford's share of The Associates' earnings through March 12, the record
date for the spin-off of The Associates.
The company's worldwide sales and revenues were $36.6 billion in first quarter
1998, down $730 million from first quarter 1997. Vehicle unit sales of cars and
trucks were 1,721,000, up 40,000 units or 2% from a year ago. Stockholders'
equity was $21.5 billion at March 31, 1998, compared with $30.7 billion at
December 31, 1997. The reduction in stockholders' equity reflects primarily The
Associates spin-off.
<PAGE>
<PAGE 11>
RESULTS OF OPERATIONS - FORD
The company's net income for worldwide Automotive operations in first quarter
1998 and 1997 was as follows (in millions):
<TABLE>
<CAPTION>
First Quarter 1998
--------------------- O/(U)
1998 1997 1997
-------- -------- -------
<S> <C> <C> <C>
North America Automotive $1,010 $1,020 $(10)
Automotive Outside North America
- Europe 230 105 125
- South America (45) (47) 2
- Other 40 (74) 114
------ ------ ----
Total Automotive Outside North America 225 (16) 241
------ ------ ----
Total Automotive $1,235 $1,004 $231
====== ====== ====
</TABLE>
<PAGE>
<PAGE 12>
The company's net income for worldwide Financial Services operations in first
quarter 1998 and 1997 was as follows (in millions):
<TABLE>
<CAPTION>
First Quarter 1998
--------------------- O/(U)
1998 1997 1997
-------- -------- --------
<S> <C> <C> <C>
Ford Credit $ 278 $ 276 $ 2
The Associates 220* 238 (18)
Hertz 35 20 15
Minority Interests, Eliminations and Other (77) (69) (8)
------- ------ -------
Financial Services (excluding the gain
on The Associates spin-off) 456 465 (9)
Gain on Spin-Off of The Associates 15,955 - 15,955
------- ------ -------
Total Financial Services $16,411 $ 465 $15,946
======= ====== =======
Memo: Ford's share of earnings in
The Associates $ 177* $ 192 (15)
Hertz 29 20 9
- - - - -
* Through March 12, 1998
</TABLE>
FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997 - FORD
Automotive Operations
Ford's worldwide Automotive operations earned $1,235 million in first quarter
1998 on sales of $29.1 billion, compared with earnings of $1,004 million on
sales of $30 billion in first quarter 1997. Increased earnings in first quarter
1998 compared with first quarter 1997 reflect primarily continued cost
reductions, the effects of improved product mix, and higher volumes outside
North America. Adjusted for constant volume and mix, total automotive costs were
down $400 million compared with first quarter a year ago.
Earnings for Automotive operations in North America were $1,010 million in first
quarter 1998, down $10 million compared with first quarter a year ago. Cost
reductions in North America were offset by higher marketing costs. The after-tax
return on sales was 5%, up 1/10 of a point from first quarter 1997.
The U.S. economy continued on a path of strong growth, low unemployment, and
moderate inflation in first quarter 1998. The seasonally-adjusted annual selling
rate for the U.S. car and truck industry was 15.3 million units in first quarter
1998, down from 15.9 million units in first quarter 1997. The company expects
car and truck industry sales for full-year 1998 to be slightly lower than the
15.5 million units in 1997. Ford's combined U.S. car and truck share was 24.5%,
down 6/10 of a point from first quarter a year ago.
Automotive operations in Europe earned $230 million in first quarter 1998, up
$125 million compared with first quarter a year ago. The improvement reflected
primarily higher volumes and lower operating costs, offset partially by
increased marketing costs.
<PAGE>
<PAGE 13>
The seasonally-adjusted annual selling rate for the European car and truck
industry was 15.5 million units in first quarter 1998, compared with 14.3
million units in first quarter 1997. European car and truck industry sales in
full-year 1998 are expected to be about equal to or slightly higher than the 15
million units in 1997. Ford's combined European car and truck share was 11.5% in
first quarter 1998, unchanged from first quarter a year ago.
Automotive operations in South America lost $45 million in first quarter 1998,
compared with a loss of $47 million in first quarter a year ago. In first
quarter 1998, the seasonally-adjusted annual selling rate for the Brazilian car
and truck industry totaled 1.6 million units, compared with 1.8 million units in
first quarter a year ago. For full-year 1998, the company expects the car and
truck industry in Brazil to be lower than the 1.9 million units in 1997. Ford's
combined car and truck share in Brazil was 13.7% in first quarter 1998, up 2.7
points from first quarter 1997.
Financial Services Operations
Operating results for Financial Services operations in first quarter 1998 were
$456 million, down $9 million compared with first quarter a year ago. Including
the gain on the spin-off of The Associates in first quarter 1998, results were
$16,411 million, up $15,946 million from first quarter 1997. Excluding Ford's
share of The Associates operating income in first quarter 1998 ($177 million
through March 12) and the gain on the spin-off, operating results were $279
million, compared with $273 million in first quarter 1997 on a comparable basis.
For a discussion of Ford Credit's results of operations in first quarter 1998,
see Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Ford Credit First Quarter 1998 Compared with First
Quarter 1997 Results of Operations."
Earnings at Hertz in first quarter 1998 were a record $35 million (of which $29
million was Ford's share), up $15 million from the same period a year ago. The
increase reflects primarily higher revenues in U.S. car rental operations.
LIQUIDITY AND CAPITAL RESOURCES - FORD
Automotive Operations
Automotive cash and marketable securities were $21.3 billion at March 31, 1998,
up $442 million from December 31, 1997. The company paid $519 million in cash
dividends on its Common Stock, Class B Stock and Preferred Stock during first
quarter 1998. As described below, in connection with The Associates spin-off, a
$3.2 billion cash dividend on shares of Ford stock held in U.S. employee savings
plans was paid on April 7, 1998.
Automotive capital expenditures totaled $2.1 billion in first quarter 1998, up
$488 million from first quarter 1997. Capital expenditures were 7.2% of sales in
first quarter 1998, up 1.8 points from first quarter 1997.
Automotive debt at March 31, 1998 totaled $8.2 billion, which was 28% of total
capitalization (stockholders' equity and Automotive debt), compared with $8.1
billion, or 21% of total capitalization at December 31, 1997. The increase in
the ratio in 1998 reflects the reduction in stockholders' equity resulting from
The Associates spin-off.
<PAGE>
<PAGE 14>
Financial Services Operations -
The company's balance sheet at March 31, 1998 does not include The Associates,
which explains primarily the declines discussed below.
Financial Services cash and investments in securities totaled $2.5 billion at
March 31, 1998, down $1.3 billion from December 31, 1997.
Net receivables and lease investments were $124.1 billion at March 31, 1998,
down $52.3 billion from December 31, 1997.
Total debt was $113.4 billion at March 31, 1998, down $46.7 billion from
December 31, 1997.
Outstanding commercial paper at March 31, 1998 totaled $42.3 billion at Ford
Credit, and $1.5 billion at Hertz, with an average remaining maturity of 22 days
and 42 days, respectively.
SPIN-OFF OF THE ASSOCIATES
On March 2, 1998, the Board of Directors of the company approved the spin-off of
The Associates by declaring a dividend on Ford's outstanding shares of Common
and Class B Stock consisting of Ford's 80.7% interest (279.5 millions shares) in
The Associates. The Board of Directors also declared a dividend in cash on
shares of company stock held in U.S. employee savings plans equal to the market
value of The Associates stock to be distributed per share of the company's
Common and Class B Stock. Both the stock dividend and the cash dividend were
paid on April 7, 1998 to stockholders of record on March 12, 1998.
Holders of Ford Common and Class B Stock on the record date received 0.262085
shares of The Associates common stock for each share of Ford stock, and
participants in U.S. employee savings plans who held Ford stock in such plans on
the record date received $22.12 in cash per share of Ford stock, which amount
was based on the volume-weighted average price of The Associates stock of
$84.3849 per share on the New York Stock Exchange on April 7, 1998. The total
value of the distribution (including the $3.2 billion cash dividend) was $26.8
billion or $22.12 per share of Ford stock.
As a result of the spin-off of The Associates, Ford realized a gain of $15,955
million based on the fair value of The Associates as of the record date, March
12, 1998. Ford has received a ruling from the U.S. Internal Revenue Service that
the distribution qualifies as a tax-free transaction for U.S. federal income tax
purposes.
The company's results in first quarter 1998 include Ford's share of The
Associates earnings through the record date, March 12 ($177 million). The
balance sheet at March 31, 1998 does not include The Associates, but it includes
in "Other payables" a $3.2 billion dividend payable generated by the cash
dividend to participants in U.S. employee savings plans.
NEW ACCOUNTING STANDARDS - FORD
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information," effective for 1998,
establishes standards for reporting information about operating segments in
annual financial statements and, beginning in 1999, requires reporting of
selected information about operating segments in interim financial reports
issued to stockholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. Ford will
adopt SFAS 131 for its financial statements for the year ending December 31,
1998. Management is evaluating the impact, if any, the Statement will have on
the company's present segment reporting.
<PAGE>
<PAGE 15>
Statement of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers'
Disclosures about Pensions and Other Postretirement Benefits," was issued by the
Financial Accounting Standards Board in February 1998. This Statement revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets, and eliminates
certain disclosures. Restatement of disclosures for earlier periods is required.
The Statement is effective for Ford's financial statements for the year ended
December 31, 1998.
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," was issued by the American
Institute of Certified Public Accountants in March 1998. This SOP provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. Effective for fiscal years beginning after December 15, 1998,
this SOP requires capitalization of certain internal-use computer software
costs. Presently, Ford expenses the costs of developing or obtaining
internal-use software.
OTHER INFORMATION - FORD
Final regulations implementing the Fastener Quality Act of 1990 are applicable
to certain fasteners (i.e., nuts, bolts, washers and screws) manufactured after
July 26, 1998. The regulations impose burdensome and costly testing,
certification and record keeping requirements which are not compatible with
quality assurance systems used in the automotive industry. Unless the
regulations are delayed or modified, there is a risk that fastener manufacturers
that supply Ford and its suppliers will not be able to timely comply with the
regulations. As a result, Ford's ability to produce vehicles could be adversely
affected.
<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, 1998:
<TABLE>
<CAPTION> FINANCIAL
DATE OF REPORT ITEM STATEMENTS FILED
- -------------- --------------------- ----------------
<S> <C> <C>
January 12 1998 Item 5 - Other Events None.
February 3, 1998 Item 5 - Other Events 1997 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 27, 1998
of Ford Motor Company and
Subsidiaries for the year
ended December 31, 1997 with
attachments.
February 11, 1998 Item 5 - Other Events None.
March 30, 1998 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/ E. S. Acton
May 13, 1998 --------------------------
E. S. Acton
Vice President - Finance
<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, 1998 and 1997, 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, 1998. 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, 1997 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 26, 1998, 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, 1997 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, 1998
<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 13, 1998,
regarding unaudited
interim financial infor-
mation.
27 Financial Data Schedule Filed with this
Report.
<PAGE19> Exhibit 12-A
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(in millions)
<TABLE>
<CAPTION>
March 31 For the Years Ended December 31
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense $ 1,610.5 $ 1,559.0 $ 6,268.2 $ 6,235.7 $ 5,987.8 $ 4,226.3 $ 3,699.9
Rents 5.4 6.8 26.2 22.2 19.5 16.9 13.0
--------- --------- --------- --------- --------- --------- ---------
Total fixed
charges 1,615.9 1,565.8 6,294.4 6,257.9 6,007.3 4,243.2 3,712.9
Earnings
Income before income
taxes 489.2 473.8 1,806.0 2,240.2 2,327.8 2,335.5 2,147.5
Less equity in net
income from affiliated
companies 0.3 0.7 1.0 55.3 255.4 232.5 198.0
Less minority interest
in net income of
subsidiaries 18.8 15.1 48.4 68.0 65.5 59.3 44.6
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed
charges $ 2,086.0 $ 2,023.8 $ 8,051.0 $ 8,374.8 $ 8,014.2 $ 6,286.9 $ 5,617.8
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to
fixed charges 1.3 1.3 1.3 1.3 1.3 1.5 1.5
========= ========= ========= ========= ========= ========= =========
<FN>
For purposes of the Ford Credit ratio, earnings consist of income before taxes
and fixed charges. Income before income taxes 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,
amortization of debt discount, premium, and issuance expense, and one-third of
all rental expense (the proportion deemed representative of the interest
factor).
</TABLE>
<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 For the Years Ended December 31
Quarter ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes $18,684 $10,939 $ 6,793 $ 6,705 $ 8,789 $ 4,003
Equity in net (income)/loss of affiliates
plus dividends from affiliates 13 121 36 179 (182) (98)
Adjusted fixed charges a/ 2,656 10,911 10,801 10,556 8,122 7,648
------- ------- ------- ------- ------- -------
Earnings $21,353 $21,971 $17,630 $17,440 $16,729 $11,553
======= ======= ======= ======= ======= =======
Combined Fixed Charges and
Preferred Stock Dividends
- --------------------------
Interest expense b/ $ 2,585 $10,570 $10,464 $10,121 $ 7,787 $ 7,351
Interest portion of rental expense c/ 61 309 300 396 265 266
Preferred stock dividend requirements of
majority owned subsidiaries and trusts d/ 14 55 55 199 160 115
------- ------- ------- ------- ------- -------
Fixed charges 2,660 10,934 10,819 10,716 8,212 7,732
Ford preferred stock dividend requirements e/ 100 82 95 459 472 442
------- ------- ------- ------- ------- -------
Total combined fixed charges
and preferred stock dividends $ 2,760 $11,016 $10,914 $11,175 $ 8,684 $ 8,174
======= ======= ======= ======= ======= =======
Ratios
- ------
Ratio of earnings to fixed charges 8.0 f/ 2.0 1.6 1.6 2.0 1.5
Ratio of earnings to combined fixed
charges and preferred stock dividends 7.7 f/ 2.0 1.6 1.6 1.9 1.4
</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.
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
1993 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. 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.
f/ Earnings used in calculation of this ratio include the $15,955 million gain
on the spin-off of The Associates. Excluding this gain, the ratio is 2.0.
<PAGE 21>
EXHIBIT 15
Ford Motor Credit Company
The American Road
Dearborn, Michigan
Re: Ford Motor Credit Company Registration Statement Nos. 333-50611,
333-45015, 333-41059, 333-40477 and 33-64237 on Form S-3
We are aware that our report dated April 15, 1998 accompanying the
unaudited interim financial information of Ford Motor Credit Company and
subsidiaries for the periods ended March 31, 1998 and 1997 and included
in the Ford Motor Credit Company Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 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 13, 1998
<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 per share is
not presented because Ford Credit is an indirect wholly owned subsidiary of Ford
Motor Company.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 844
<SECURITIES> 976
<RECEIVABLES> 82,336
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 124,532
<CURRENT-LIABILITIES> 0
<BONDS> 104,280
0
0
<COMMON> 25
<OTHER-SE> 9,851
<TOTAL-LIABILITY-AND-EQUITY> 124,532
<SALES> 0
<TOTAL-REVENUES> 4,558
<CGS> 0
<TOTAL-COSTS> 4,069
<OTHER-EXPENSES> 2,137
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> 1,610
<INCOME-PRETAX> 489
<INCOME-TAX> 193
<INCOME-CONTINUING> 278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
