SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 28, 2000
----------------
FORD MOTOR CREDIT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-6368 38-1612444
- ----------------------- ----------------------- -------------------
(State or other juris- (Commission File Number (IRS Employer
diction of incorporation Number) 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
ITEM 5. Other Events.
The 1999 Audit of Consolidated Financial Statements of Ford Motor Credit
Company and Subsidiaries together with the Report of Independent Accountants of
PricewaterhouseCoopers LLP, independent certified public accountants is filed as
Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference
herein.
The news release dated January 26, 2000 of Ford Motor Company and
subsidiaries for the year ended December 31, 1999 is filed as Exhibit 99.2 to
this Current Report on Form 8-K and is incorporated by reference herein.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
EXHIBITS
Designation Description Method of Filing
- ----------- ----------- ----------------
Exhibit 23 Consent of Pricewater- Filed with this Report.
waterhouseCoopers LLP.
Exhibit 27 Financial Data Schedule. Filed with this Report.
Exhibit 99.1 1999 Audit of Consolidated Filed with this Report.
Financial Statements of
Ford Motor Credit Company
and Subsidiaries together
withthe Report of Independent
Accountants of
PricewaterhouseCoopers LLP,
independent certified public
accountants.
Exhibit 99.2 News release dated Filed with this Report.
January 26, 2000 of
Ford Motor Company and
Subsidiaries for the year
ended December 31, 1999
with attachments.
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 on the date indicated.
FORD MOTOR CREDIT COMPANY
(Registrant)
Date: January 28, 2000 By:/s/R. P. Conrad
-----------------
R. P. Conrad
Assistant Secretary
EXHIBIT INDEX
Designation Description
- ----------- -----------
Exhibit 23 Consent of Pricewater-
waterhouseCoopers LLP.
Exhibit 27 Financial Data Schedule.
Exhibit 99.1 1999 Audit of Consolidated
Financial Statements of
Ford Motor Credit Company
and Subsidiaries together
with the Report of
Independent Accountants of
PricewaterhouseCoopers
LLP, independent certified
public accountants.
Exhibit 99.2 News release dated
January 26, 2000 of
Ford Motor Company and
Subsidiaries for the year
ended December 31, 1999
with attachments.
Exhibit 23
CONSENT OF PRICEWATERHOUSECOOPERS LLP
Re: Ford Motor Credit Company Registration Statement
Nos. 333-91953, 333-75177, and 333-45015 on Form S-3
We consent to the incorporation by reference in the above Ford
Motor Credit Company Registration Statements of our report dated
January 24, 2000 on our audits of the consolidated financial
statements of Ford Motor Credit Company and Subsidiaries at
December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 included in Ford Motor Credit
Company's Current Report on Form 8-K dated January 28, 2000.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
January 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Ford Credit's condensed consolidated balance sheet is unclassified. Thereof, the
following pages 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 942
<SECURITIES> 524
<RECEIVABLES> 108,754
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 156,631
<CURRENT-LIABILITIES> 0
<BONDS> 133,074
0
0
<COMMON> 25
<OTHER-SE> 10,899
<TOTAL-LIABILITY-AND-EQUITY> 156,631
<SALES> 0
<TOTAL-REVENUES> 20,360
<CGS> 0
<TOTAL-COSTS> 18,256
<OTHER-EXPENSES> 9,897
<LOSS-PROVISION> 1,166
<INTEREST-EXPENSE> 7,193
<INCOME-PRETAX> 1,313
<INCOME-TAX> 791
<INCOME-CONTINUING> 1,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,261
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ford Motor Credit Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Ford Motor
Credit Company and its subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Detroit, Michigan
January 24, 2000
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Financing revenue
Operating leases $ 9,850.0 $ 9,661.4 $ 8,895.2
Retail 6,931.1 6,209.6 5,226.9
Wholesale 1,683.2 1,620.4 1,588.4
Other 421.1 398.9 391.4
------------ ----------- -----------
Total financing revenue 18,885.4 17,890.3 16,101.9
Depreciation on operating leases (7,564.5) (7,327.4) (6,188.2)
Interest Expense (7,193.4) (6,910.4) (6,268.2)
---------- ---------- ----------
Net financing margin 4,127.5 3,652.5 3,645.5
Other revenue
Insurance premiums earned 236.6 292.9 298.3
Investment and Other Income 1,237.7 1,119.3 944.9
----------- ---------- -----------
Total financing margin and revenue 5,601.8 5,064.7 4,888.7
Expenses
Operating expenses 2,124.5 1,777.0 1,477.4
Provision for credit losses 1,166.4 1,179.5 1,338.2
Other Insurance Expenses 207.1 296.0 267.1
------------ ----------- -----------
Total Expenses 3,498.0 3,252.5 3,082.7
----------- ---------- ----------
Income before income taxes 2,103.8 1,812.2 1,806.0
Provision for Income Taxes 790.6 680.2 726.8
------------ ----------- -----------
Income before minority interests 1,313.2 1,132.0 1,079.2
Minority Interests in Net Income of Subsidiaries 52.1 47.8 48.4
--------- --------- ---------
Net Income $ 1,261.1 $ 1,084.2 $ 1,030.8
========== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
DECEMBER 31
-------------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 942.2 $ 780.8
Investments in securities 524.4 725.8
Finance receivables, net 108,753.8 95,941.6
Net investment, operating leases 32,838.2 34,566.5
Retained interest in securitized assets 3,442.8 1,256.3
Notes and accounts receivable from affiliated companies 6,128.2 1,099.8
Other Assets 4,001.1 2,877.0
-------- ---------
Total Assets $ 156,630.7 $ 137,247.8
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Trade, customer deposits, and dealer reserves $ 2,908.3 $ 3,009.6
Affiliated Companies 1,235.2 1,108.1
------- -------
Total accounts payable 4,143.5 4,117.7
Debt 133,073.7 114,967.3
Deferred income taxes 3,564.0 3,157.7
Other Liabilities and Deferred Income 4,511.0 4,014.4
-------- -------
Total liabilities 145,292.2 126,257.1
Minority interests in net assets of subsidiaries 414.4 346.0
Stockholder's Equity
Capital stock, par value $100 a share, 250,000 shares
authorized, issued and outstanding 25.0 25.0
Paid-in surplus (contributions by stockholder) 4,341.6 4,343.4
Note receivable from affiliated company - (1,517.0)
Accumulated other comprehensive income/(loss) (298.0) (118.1)
Retained Earnings 6,855.5 7,911.4
------- -------
Total Stockholder's Equity 10,924.1 10,644.7
-------- --------
Total Liabilities and Stockholder's Equity $ 156,630.7 $ 137,247.8
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
ACCUMULATED OTHER
COMPREHENSIVE INCOME/(LOSS)
-----------------------------------------
UNREALIZED
NOTE GAIN ON UNREALIZED
RECEIVABLE RETAINED GAIN/(LOSS)
PAID FROM INTEREST IN FOREIGN ON
CAPITAL IN AFFILIATED RETAINED SECURITIZED CURRENCY INVESTMENTS
STOCK SURPLUS COMPANY EARNINGS ASSETS TRANSLATION IN SECURITIES TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $ 25.0 $3,747.6 $(1,517.0) $ 6,892.1 $ $ (0.9) $ 56.9 $9,203.7
Comprehensive income
Net income 1,030.8 1,030.8
Foreign currency translation (188.5) (188.5)
Unrealized loss
(net of tax of $6.8) (10.0) ( 10.0)
-------- --------- ---------- --------- ----------- ---------- --------- ---------
Total comprehensive income,
net of tax 1,030.8 (188.5) (10.0) 832.3
Paid-in surplus 144.0 144.0
Cash dividends (595.5) (595.5)
-------- --------- ---------- --------- ----------- ---------- --------- ---------
YEAR ENDED DECEMBER 31, 1997 $ 25.0 $3,891.6 $(1,517.0) $ 7,327.4 $ $ (189.4) $ 46.9 $9,584.5
Comprehensive income
Net income 1,084.2 1,084.2
Foreign currency translation 29.3 29.3
Unrealized gain
(net of tax of $12.3) 20.5 20.5
Less: Reclassification adjustment
for gains realized in net
income (net of tax of $15.3) (25.4) (25.4)
-------- --------- --------- --------- ----------- ---------- --------- ----------
Total comprehensive income,
net of tax 1,084.2 29.3 (4.9) 1,108.6
Paid-in surplus 451.8 451.8
Cash dividends (500.2) (500.2)
--------- --------- --------- --------- ----------- ---------- --------- ----------
YEAR ENDED DECEMBER 31, 1998 $ 25.0 $4,343.4 $(1,517.0) $ 7,911.4 $ $ (160.1) $ 42.0 $10,644.7
Comprehensive income
Net income 1,261.1 1,261.1
Retained interest in securitized
assets (net of tax of $33.4) 55.4 55.4
Foreign currency translation (209.4) (209.4)
Unrealized gain
(net of tax of $1.9) (3.2) (3.2)
Less: Reclassification adjustment
for gains realized in net
income (net of tax of $13.7) (22.7) (22.7)
-------- ---------- --------- --------- ----------- ---------- ---------- ----------
Total comprehensive income,
net of tax 1,261.1 55.4 (209.4) (25.9) 1,081.2
Settlement of Note Receivable 1,517.0 1,517.0
Paid-in surplus (1.8) (1.8)
Cash dividends (2,317.0) (2,317.0)
-------- ----------- --------- --------- ----------- ---------- ---------- ----------
YEAR ENDED DECEMBER 31, 1999 $ 25.0 $4,341.6 $ 0.0 $6,855.5 $ 55.4 $ (369.5) $ 16.1 $10,924.1
======== =========== ========= ========= =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31
--------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,261.1 $ 1,084.2 $ 1,030.8
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for credit losses 1,166.4 1,179.5 1,338.2
Depreciation and amortization 7,995.1 7,366.3 6,398.9
Gain on sales of finance receivables (82.6) (192.7) (64.5)
Increase/(decrease) in deferred income taxes 432.2 356.4 (92.8)
(Increase)/decrease in other assets (1,343.7) (1,353.6) 451.6
Increase/(decrease) in other liabilities 127.0 (52.8) 155.0
Other 110.5 260.2 302.6
-------- ---------- --------
Net cash provided by operating activities 9,666.0 8,647.5 9,519.8
-------- ---------- --------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (54,525.8) (48,886.3) (38,396.0)
Collection of finance receivables (other than wholesale) 33,575.6 28,033.7 32,207.8
Purchase of operating lease vehicles (23,334.9) (19,156.7) (22,917.6)
Liquidation of operating lease vehicles 16,668.2 12,798.1 12,164.0
Net change in wholesale receivables (4,026.2) (797.6) (1,759.1)
Proceeds from sales of receivables 9,928.9 7,907.8 3,850.4
Increase in note receivable with affiliate (4,757.6) - -
Proceeds from settlement of intercompany note receivable 1,517.0 - -
Purchase of investment securities (894.4) (1,911.7) (2,732.3)
Proceeds from sale/maturity of investment securities 1,095.8 2,073.8 3,169.9
Other (217.8) (37.7) (148.9)
---------- ---------- ----------
Net cash used in investing activities (24,971.2) (19,976.6) (14,561.8)
---------- ---------- ----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 34,128.4 18,186.7 11,826.6
Principal payments on long-term debt (12,266.0) (12,922.1) (10,340.8)
Change in short-term debt, net (3,974.5) 6,541.2 2,212.2
Cash dividends paid (2,167.0) (500.2) (595.5)
Other 7.4 35.6 (57.5)
----------- ----------- -----------
Net cash provided by financing activities 15,728.3 11,341.2 3,045.0
Effect of exchange rate changes on cash and cash equivalents (261.7) 79.2 (29.5)
----------- ----------- -----------
Net change in cash and cash equivalents 161.4 91.3 (2,026.5)
Cash and cash equivalents, beginning of year 780.8 689.5 2,716.0
---------- ------------ ------------
Cash and cash equivalents, end of year $ 942.2 $ 780.8 $ 689.5
============ =========== ============
Supplementary cash flow information
Interest paid $ 6,681.6 $ 6,526.6 $ 6,117.3
Taxes paid 215.1 325.9 520.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ford
Motor Credit Company, its controlled domestic and foreign subsidiaries and
controlled joint ventures ("Ford Credit"). Affiliates that are 20-50 percent
owned are included in the consolidated financial statements on an equity
basis. Ford Credit is an indirect wholly owned subsidiary of Ford Motor
Company ("Ford"). Use of estimates as determined by management is required
in the preparation of consolidated financial statements in conformity
with generally accepted accounting principles. Actual results could differ
from these estimates and assumptions. Certain amounts in prior years'
financial statements have been reclassified to conform with current year
presentation.
NATURE OF OPERATIONS
Ford Credit operates in many locations around the world, the most
significant of which are the United States and Europe. Ford Credit's reportable
operating segments include Ford Credit North America, Ford Credit International,
and Personal Financial Services. Ford Credit North America consists of the
United States and Canada. Ford Credit International consists of all other
countries. Personal Financial Services consists of insurance operations and new
business ventures.
Ford Credit's financing operations primarily consist of: the purchase
from franchised Ford vehicle dealers of retail installment sale contracts and
retail leases; wholesale financing and capital loans to franchised Ford vehicle
dealers and other franchises associated with such dealers; and loans to vehicle
leasing companies. Ford Credit conducts insurance operations through its wholly
owned subsidiary, The American Road Insurance Company ("TARIC").
REVENUE RECOGNITION
Revenue from finance receivables is recognized using the interest
(actuarial) method. Certain origination costs on receivables are deferred and
amortized to financing revenue over the life of the related receivable using the
interest method. Rental revenue on operating leases is recognized on a
straight-line basis over the term of the lease. Initial direct costs related to
leases are deferred and amortized over the term of the lease. The accrual of
interest on receivables is discontinued at the time a receivable is determined
to be impaired. Subsequent amounts of interest collected are recognized in
income only if full recovery of the remaining principal is expected. Other
amounts collected are generally recognized first as a reduction of principal.
Any remaining amounts are treated as a recovery.
Agreements with Ford and other affiliates provide for interest
supplements and other support payments to Ford Credit on certain financing and
leasing transactions. These payments are recognized as income over the period
that the related finance receivables and leases are outstanding.
Insurance premiums are earned over the policy periods on bases related
to amounts at risk. Premiums from extended service plan contracts and other
contractual liability coverages are earned over the life of the policy based on
historical loss experience. Physical damage insurance premiums covering vehicles
financed at wholesale by Ford Credit and its finance subsidiaries are recognized
as income on a monthly basis as billed. Other physical damage, credit life, and
credit disability premiums are earned over the life of the related policies,
primarily on the sum-of-the-digits basis. Certain costs of acquiring new
business are deferred and amortized over the terms of the related policies on
the same basis on which premiums are earned. Direct and ceded insurance premiums
are earned over the life of the policy based on historical loss experience for
contractual liability policies, and on the sum-of-the-digits basis for credit
life and disability policies. Ceded insurance agreements do not relieve TARIC of
its primary obligation to policyholders.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1. ACCOUNTING POLICIES - CONTINUED
SALE OF RECEIVABLES AND OPERATING LEASES
Ford Credit periodically sells finance receivables through special
purpose subsidiaries, retains the servicing rights and certain other beneficial
interests, and receives a servicing fee which is recognized as collected over
the remaining term of the related sold finance receivables. Estimated gains or
losses from the sale of finance receivables are recognized in the period in
which the sale occurs. In determining the gain or loss on each qualifying sale
of finance receivables, the investment in the sold receivable pool is allocated
between the portion sold and the portion retained based on their relative fair
values at the date of sale (see Note 7). The retained interest includes senior
notes, interest-only strips, subordinated certificates, and restricted cash
held by securitization trusts. These financial instruments are recorded at
market with the resultant unrealized gains or losses excluded from income and
reported, net of tax, as a separate component of accumulated other
comprehensive income in stockholder's equity.
Ford Credit also periodically sells vehicles subject to operating
leases to special purpose subsidiaries under sale-leaseback arrangements. The
leaseback arrangements are structured as operating leases. Pursuant to these
transactions, the vehicles sold are removed from the balance sheet and any gain
on sale is deferred and amortized over the period of the leaseback arrangement.
Ford Credit continues to service the leases and is paid a servicing fee which is
recognized as received. Ford Credit also retains certain residual value and
credit risk which is considered in the calculation of the gain on sale.
DEPRECIATION
Depreciation expense on operating leases is provided on a straight-line
basis over the term of the lease in an amount necessary to reduce the leased
vehicle to its estimated residual value at the end of the lease term. Gains or
losses upon disposal and adjustments to reflect impairment of the vehicle's
residual value are also included in depreciation expense.
RESIDUAL VALUES
The Company has significant investments in the residual values of its
leasing portfolios. Residual values represent estimates of the value of the
assets at the end of the lease terms and are initially calculated based on
appraisals and estimates. Residual values are reviewed on a regular basis to
determine that recorded amounts are appropriate. Estimated reserves for residual
values are based on assumptions as to used car prices at lease termination and
the number of vehicles that will be returned to the Company. These assumptions
and the related reserve may change based on changing market conditions.
ALLOWANCE FOR CREDIT LOSSES
An allowance for estimated credit losses is established during the
period in which receivables or vehicles leased are acquired and is based on
historical experience and other factors that affect collectibility. The
allowance for estimated credit losses includes a provision for certain
non-homogenous impaired receivables. Impaired receivables are measured based on
the present value of expected future cash flows discounted at the receivable's
effective interest rate. Finance receivables and lease investments are charged
to the allowance for credit losses when an account is deemed to be
uncollectible, taking into consideration the financial condition of the borrower
or lessee, the value of the collateral, recourse to guarantors and other
factors. Collateral held for resale included in other assets is carried at its
estimated fair value at the date of repossession net of estimated disposal
costs. Recoveries on finance receivables and lease investments previously
charged off as uncollectible are credited to the allowance for credit losses.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1. ACCOUNTING POLICIES - CONTINUED
INSURANCE LIABILITIES
A liability for reported insurance claims and an estimate of unreported
insurance claims which is based on past experience is included in other
liabilities and deferred income.
DERIVATIVE FINANCIAL INSTRUMENTS
Ford Credit operates in many countries worldwide, and is exposed to
market risks, including the effects of changes in interest rates and foreign
currency exchange rates. Ford Credit issues debt and other payables with various
maturities and interest rate structures in various currencies to ensure funding
over business and economic cycles and to minimize overall borrowing costs. The
maturity and interest rate structures frequently differ from the invested
assets. Exposure to fluctuations in interest rates is created by differences in
maturities of liabilities versus maturities of assets. Financial exposure is
monitored and managed in accordance with Ford Credit's established policies and
procedures.
Ford Credit has entered into agreements to manage exposures to
fluctuations in interest rates and foreign exchange. These agreements are used
to hedge interest rate exposure and to hedge debt and intercompany loans
denominated in foreign currencies. All such instruments are classified as "held
for purposes other than trading"; company policy specifically prohibits the use
of derivatives for speculative purposes.
Interest rate swap agreements are used to manage the effects of
interest rate fluctuations by changing the interest rate characteristics of Ford
Credit's debt to match the interest rate characteristics of related assets. All
interest rate swap agreements are designated to hedge either a specific debt
issue or pool of debt. The differential paid or received on interest rate swap
agreements is recognized on an accrual basis as an adjustment to interest
expense. Gains and losses on terminated interest rate swaps are amortized and
reflected in interest expense over the remaining term of the underlying debt.
Foreign currency agreements, including swaps and forward contracts, are
used to manage foreign exchange exposure. All currency swaps and forward
contracts are designated to hedge specific foreign currency denominated debt
instruments or intercompany loans. The differential paid or received on these
contracts is recognized on an accrual basis as an adjustment to interest
expense. Unrealized gains or losses are recognized concurrently with foreign
currency translation gains and losses on the underlying debt.
FOREIGN CURRENCY TRANSLATION
Revenues, costs and expenses of foreign subsidiaries are translated to
U.S. dollars at average-period exchange rates. Assets and liabilities of foreign
subsidiaries are translated to U.S. dollars at year-end exchange rates with the
effects of these translation adjustments being reported as a separate component
of accumulated other comprehensive income in stockholder's equity.
The change in this account results from translation adjustments recorded during
the year.
CASH EQUIVALENTS
Ford Credit considers investments purchased with a maturity of three
months or less to be cash equivalents.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 2. ADDITIONS TO PAID-IN SURPLUS
Additions to paid-in surplus represent contributions from Ford for
various financial services subsidiaries.
NOTE 3. INVESTMENTS IN SECURITIES
Investments in securities consist of debt, municipal, corporate,
mortgage-backed and other securities. Available-for-sale securities are recorded
at fair value with unrealized gains and losses excluded from income and
reported, net of tax, as a separate component of accumulated other comprehensive
income in stockholder's equity. Held-to-maturity securities are recorded at
amortized cost. Equity securities which do not have readily determinable fair
values are recorded at cost. The basis of cost used in determining realized
gains and losses is specific identification.
The fair value of substantially all securities was estimated based on
quoted market prices. For securities for which there were no quoted market
prices, the estimate of fair value was based on similar types of securities that
are traded in the market.
Investments in securities at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Corporate debt securities $ 151.0 $ - $ (5.6) $ 145.4
Mortgage-backed securities 201.9 0.1 (6.8) 195.2
Debt securities issued by U.S. government and agencies 81.7 - (2.9) 78.8
Equity securities 27.7 42.3 (2.0) 68.0
Debt securities issued by foreign government 12.9 - - 12.9
Municipal Securities 18.4 - (0.9) 17.5
---------- ----------- --------- --------
Total available-for-sale securities 493.6 42.4 (18.2) 517.8
---------- ----------- --------- --------
HELD-TO-MATURITY SECURITIES
Corporate debt securities 0.4 - - 0.4
Debt securities issued by U.S. government and agencies 6.2 0.1 (0.3) 6.0
------------ ----------- --------- --------
Total held-to-maturity securities 6.6 0.1 (0.3) 6.4
------------ ------------ --------- --------
Total investments in securities $ 500.2 $ 42.5 $ (18.5) $ 524.2
======== ======= ======= ========
</TABLE>
<PAGE>
NOTE 3. INVESTMENTS IN SECURITIES - CONTINUED
Investments in securities at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
Corporate debt securities $ 187.8 $ 2.9 $ (1.6) $ 189.1
Mortgage-backed securities 198.3 2.8 (0.4) 200.7
Debt securities issued by U.S. government and agencies 146.6 3.0 (0.2) 149.4
Equity securities 35.0 57.7 (1.4) 91.3
Debt securities issued by foreign government 23.2 0.2 - 23.4
Municipal securities 62.9 1.7 - 64.6
------------ ------------ ------------ ------------
Total available-for-sale securities 653.8 68.3 (3.6) 718.5
------------ ------------ ------------ ------------
HELD-TO-MATURITY SECURITIES
Corporate debt securities 1.5 - - 1.5
Debt securities issued by U.S. Government and agencies 5.8 0.4 - 6.2
------------ ------------ -------------- ------------
Total held-to-maturity securities 7.3 0.4 - 7.7
------------ ------------ --------------- -----------
Total investments in securities $ 661.1 $ 68.7 $ (3.6) $ 726.2
======== ======= ======== ========
</TABLE>
The amortized cost and fair value of investments in available-for-sale
securities and held-to-maturity securities at December 31, 1999, by contractual
maturity, were as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------ -------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less $ 0.4 $ 0.4 $ 0.4 $ 0.4
Due after one year through five years 102.0 100.3 2.7 2.7
Due after five years through ten years 51.8 49.6 3.1 2.8
Due after ten years 109.8 104.3 0.4 0.5
Mortgage-backed securities 201.9 195.2 - -
Equity securities 27.7 68.0 - -
------- ------- --------- ---------
Total $ 493.6 $ 517.8 $ 6.6 $ 6.4
========= ========= ======== =========
</TABLE>
Proceeds from sales of available-for-sale securities were $1.1 billion
and $2.1 billion in 1999 and 1998, respectively. Gross realized gains and losses
for 1999 were $32.8 million and $14.2 million, respectively. Gross realized
gains and losses for 1998 were $48.1 million and $3.4 million, respectively.
Gross realized gains and losses for 1997 were $95.1 million and $7.4 million,
respectively.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 4. FINANCE RECEIVABLES
Net finance receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Retail $ 76,181.6 $ 67,732.7
Wholesale 26,450.0 22,650.1
Other 7,244.3 6,838.8
------------- ------------
Total finance receivables, net of unearned income 109,875.9 97,221.6
Less: Allowance for credit losses (1,122.1) (1,280.0)
------------- -------------
Finance receivables, net $ 108,753.8 $ 95,941.6
=========== ==========
</TABLE>
At December 31, 1999 finance receivables include $2.6 billion owed by
three customers with the largest receivable balances.
The contractual maturities of total finance receivables outstanding at
December 31, 1999, net of unearned income and adjusted for estimated
prepayments, were as follows:
<TABLE>
<CAPTION>
DUE
DUE IN YEAR ENDING DECEMBER 31 AFTER
------------------------------------------------- ------------- --------------
2000 2001 2002 2002 TOTAL
-------------- -------------- -------------- ------------- --------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Retail $ 34,753.1 $ 21,590.4 $ 12,139.4 $ 7,698.7 $ 76,181.6
Wholesale 26,441.5 6.9 0.4 1.2 26,450.0
Other 4,214.5 253.7 180.2 2,595.9 7,244.3
------------- ----------- ---------- ------------ -------------
Total $ 65,409.1 $ 21,851.0 $ 12,320.0 $ 10,295.8 $ 109,875.9
============= =========== ========== ============ =============
</TABLE>
It is Ford Credit's experience that a substantial portion of finance
receivables are repaid before contractual maturity dates. The above table,
therefore, is not to be regarded as a forecast of future cash collections.
The aggregate receivable balances related to accounts past due 60 days
or more at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Retail $ 619.7 $ 473.5
Wholesale 60.5 73.2
Other 46.5 31.6
---- ----
Total $ 726.7 $ 578.3
============= ============
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 4. FINANCE RECEIVABLES - CONTINUED
Included in retail and other receivables are investments in direct
financing leases related to the leasing of motor vehicles.
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
NET INVESTMENT IN DIRECT FINANCING LEASES
Minimum lease rentals to be received $ 4,479.8 $ 4,405.6
Estimated residual values 3,278.8 3,720.2
Less: Unearned income (901.6) (1,106.0)
Origination costs 83.7 59.6
Less: Allowance for credit losses (50.8) (79.8)
---------- ----------
Net investment in direct financing leases $ 6,889.9 $ 6,999.6
============= ============
</TABLE>
Minimum direct financing lease rentals for each of the five succeeding
years are as follows (in millions): 2000 - $1,693.6; 2001 - $1,222.5;
2002 - $908.0; 2003 - $516.7; 2004 - $121.7; thereafter - $17.3.
NOTE 5. NET INVESTMENT, OPERATING LEASES
Operating leases at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
INVESTMENT IN OPERATING LEASES
Vehicles, at cost $ 41,537.1 $ 42,663.3
Lease initial direct costs 51.7 62.7
Less: Accumulated depreciation (8,397.1) (7,891.3)
Allowance for credit losses (353.5) (268.2)
---------- ---------
Net investment in operating leases $ 32,838.2 $ 34,566.5
============ ===========
</TABLE>
Future minimum rentals on operating leases are as follows (in millions):
2000 - $6,702.5; 2001 - $4,489.9; 2002 - $2,238.3; 2003 - $228.3; 2004 - $98.8.
NOTE 6. ALLOWANCE FOR CREDIT LOSSES
Following is an analysis of the allowance for credit losses related to
finance receivables and operating leases for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year $ 1,548.2 $ 1,471.4 $ 1,217.6
Provision charged to operations 1,166.4 1,179.5 1,338.2
Deductions
Losses 1,274.2 1,242.7 1,239.1
Recoveries (274.5) (203.3) (232.0)
--------- -------- --------
Net losses 999.7 1,039.4 1,007.1
Other changes, principally amounts related to finance receivables
And operating leases sold and translation adjustments 239.3 63.3 77.3
--------- --------- --------
Net deductions 1,239.0 1,102.7 1,084.4
-------- --------- --------
Balance, end of year $ 1,475.6 $ 1,548.2 $ 1,471.4
========= ========== ========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7. RETAINED INTEREST IN SECURITIZED ASSETS
Ford Credit has sold retail and wholesale receivables through special
purpose subsidiaries. Ford Credit's servicing portfolio relating to these
finance receivable sales amounted to $19.5 billion and $13.5 billion at December
31, 1999 and 1998 respectively. Ford Credit periodically sells vehicles subject
to operating leases to special purpose subsidiaries under sale-leaseback
arrangements. Ford Credit's servicing portfolio related to these sales amounted
to $144.3 million and $394.9 million at December 31, 1999 and 1998,
respectively. The interest-only strips, subordinated certificates, and
restricted cash held by securitization trusts are subject to limited recourse
provisions. In determining the fair value of the assets, the Company discounts
the present value of projected cash flows (which considers anticipated credit
losses and prepayment rates) retained at various discount rates based on
economic factors in individual countries. The weighted average discount rate of
the projected cash flows was 13.57% at December 31, 1999. Estimated credit
losses related to these assets are based principally on historical and projected
loss experience over the life of the finance receivables and operating leases.
At December 31, 1999, the assumed credit loss rate was 1.54% over the life of
the pool. The assumed prepayment rate, which represents expected payments in
excess of normal schedule maturity rates, was 1.46% (weighted average rate for
all pools) at December 31, 1999. The following summarizes the components of
retained interest in securitized assets for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
Senior notes $ 1,983.5 $ -
Interest-only strips 336.7 305.3
Subordinated certificates 939.9 841.5
Restricted cash held by securitization trusts 182.7 109.5
----------- --------
Total $ 3,442.8 $ 1,256.3
========= =========
</TABLE>
NOTE 8. OTHER ASSETS
Other assets at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
Investment in used vehicles held for resale, at estimated fair value $1,533.1 $1,120.5
Deferred charges and other assets 1,259.1 1,168.9
Prepaid reinsurance premiums 952.0 383.1
Property and equipment, net of accumulated depreciation of $164.5
in 1999 and $139.6 in 1998 256.9 204.5
---------- ---------
Total $4,001.1 $2,877.0
======== =========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 9. DEBT
Debt at December 31 was as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE (A)
INTEREST RATES BOOK VALUE
----------------------- --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
PAYABLE WITHIN ONE YEAR (IN MILLIONS)
<S> <C> <C> <C> <C>
Commercial paper (B) $ 43,077.9 $ 46,188.2
Other short-term debt (C ) 6,769.8 7,445.0
-------- --------
Total short-term debt 5.99% 5.69% 49,847.7 53,633.2
LONG-TERM INDEBTEDNESS PAYABLE WITHIN ONE YEAR (D) (E) 6.24% 5.74% 19,893.4 9,689.2
------------- --------
TOTAL PAYABLE WITHIN ONE YEAR 6.06% 5.69% 69,741.1 63,322.4
------------- --------
PAYABLE AFTER ONE YEAR
Unsecured senior indebtedness
Notes (F) 6.43% 6.25% 61,271.1 49,899.0
Debentures 3.15% 3.97% 2,051.4 1,661.1
Unamortized discount (84.2) (25.5)
----------- ------------
Total unsecured senior indebtedness 63,238.3 51,534.6
Unsecured long-term subordinated notes 8.51% 8.50% 94.3 110.3
----------- ------------
Total payable after one year (E) 63,332.6 51,644.9
------------ ------------
Total debt 6.19% 5.91% $ 133,073.7 $114,967.3
=========== ==========
</TABLE>
(A) Excludes the effect of interest rate swap agreements.
(B) The average remaining maturities of commercial paper was 25 days at
December 31, 1999 and 30 days at December 31, 1998. Includes $1,031.0
million and $0 million with an affiliated company at December 31, 1999 and
1998, respectively.
(C) Includes $717.5 million and $988.6 million with affiliated companies at
December 31, 1999 and 1998, respectively.
(D) Includes $763.6 million and $394.9 million with an affiliated company at
December 31, 1999 and 1998, respectively.
(E) Unsecured senior notes and debentures mature at various dates through 2078.
Maturities are as follows (in millions): 2000 - $19,893.4; 2001 - $14,084.4;
2002 - $12,015.5; 2003 - $9,749.1; 2004 - $10,144.7; thereafter - $17,338.9.
(F) Includes $2,693.2 million and $2,483.0 million with affiliated companies at
December 31, 1999 and 1998, respectively.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 9. DEBT - CONTINUED
<TABLE>
<CAPTION>
1999 1998
---- ----
PAYABLE AFTER ONE YEAR (A) (IN MILLIONS)
<S> <C> <C>
Fixed interest rates $ 40,608.3 $ 33,724.6
Variable interest rates (generally based on libor or other short-term rates) 22,724.3 17,920.3
----------- ----------
Total payable after one year $ 63,332.6 $ 51,644.9
========== ==========
</TABLE>
(A) Excludes the effect of interest rate swap agreements.
Ford Credit and certain of its subsidiaries have entered into interest
rate swap agreements to manage exposures to fluctuations in interest rates. The
agreements decreased the overall weighted-average interest rate on total debt
from 6.19% to 6.08% as of December 31, 1999 and decreased the overall
weighted-average interest rate on total debt from 5.91% to 5.75% as of December
31, 1998. In addition, the agreements decreased Ford Credit's overall
weighted-average effective interest rates for full year 1999 from 5.82% to 5.76%
and decreased full year 1998 from 6.46% to 6.42%. The agreements effectively
converted all long-term obligations payable after one year subject to variable
interest rates to fixed rates, as of December 31, 1999 and 1998. Additionally,
the Company manages the anticipated refinancing of commercial paper. The
agreements decreased commercial paper subject to variable interest rates as of
December 31, 1999 and 1998 to $36,498.5 and $35,370.1, respectively. The effect
of these agreements is to reduce the effect of interest rate changes on
profitability. Approximately 29% of Ford Credit's interest rate swaps mature in
2000 and approximately 89% mature by 2004.
Certain of these obligations are denominated in currencies other than
the currency of the issuing country. Foreign currency swap and forward
agreements are used to hedge exposure to changes in exchange rates of these
obligations.
NOTE 10. SUPPORT FACILITIES
Support facilities represent additional sources of funds, if required.
At December 31, 1999, Ford Credit had approximately $18.3 billion of
contractually committed facilities. In addition, $7.7 billion of Ford lines of
credit may be used by Ford Credit at Ford's option. The lines have various
maturity dates through June 30, 2004 and may be used, at Ford Credit's option,
by any of its direct or indirect majority-owned subsidiaries. Any such
borrowings will be guaranteed by Ford Credit. Banks also provide $1.4 billion of
contractually committed liquidity facilities to support Ford Credit's asset
backed commercial paper program.
Additionally, at December 31, 1999, there were approximately $4.6
billion of contractually committed facilities available for FCE Bank plc's ("FCE
Bank") use. In addition, $615 million of Ford credit lines may be used by FCE
Bank at Ford's option. The lines have various maturity dates through June 30,
2004 and may be used, at FCE Bank's option, by any of its direct or indirect
majority-owned subsidiaries. Any such borrowings will be guaranteed by FCE Bank.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 11. INCOME TAXES
Ford Credit and certain of its domestic subsidiaries join Ford in
filing consolidated United Stated federal and state income tax returns. In
accordance with its intercompany tax sharing agreement with Ford, United States
income tax liabilities or credits are allocated to Ford Credit generally on a
separate return basis. The provision for income taxes was estimated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
CURRENTLY PAYABLE
U.S. federal $ - $ 15.9 $ 572.1
Foreign 246.5 264.3 231.9
State and local - - 15.3
------------ ------------ ------------
Total currently payable/(refundable) 246.5 280.2 819.3
DEFERRED TAX (BENEFIT)/LIABILITY
U.S. federal 464.8 390.5 (136.3)
Foreign 14.2 (37.8) 32.8
State and local 65.1 47.3 11.0
----------- ------------ ------------
Total deferred 544.1 400.0 (92.5)
----------- ------------ ------------
Total provision $ 790.6 $ 680.2 $ 726.8
=========== ============ ============
</TABLE>
A reconciliation of the provision for income taxes as a percentage of
income before income taxes, excluding equity in net income of affiliated
companies and minority interest in net income of a joint venture, with the
United States statutory tax rate for the last three years is shown below:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ------------
<S> <C> <C> <C>
U.S. statutory tax rate 35.0% 35.0% 35.0%
Effect of (in percentage points)
Taxes attributable to foreign source income 0.5 0.6 3.7
State and local income taxes 1.8 1.7 1.7
Investment income not subject to tax or subject to tax at reduced rates (0.2) (0.2) (0.2)
Rate adjustments on deferred taxes 0.2 - (0.7)
Other 0.3 0.5 0.8
--------- -------- ----------
Effective tax rate 37.6% 37.6% 40.3%
======== ======= =========
</TABLE>
Deferred income taxes reflect the estimated tax effect of temporary
differences between the bases of assets and liabilities for financial reporting
purposes and those amounts as measured by tax laws and regulations. The
components of deferred income tax assets and liabilities as of December 31 were
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(IN MILLIONS)
<S> <C> <C>
DEFERRED TAX LIABILITIES
Leasing transactions $ 4,824.6 $ 4,627.9
Finance receivables 1,327.7 526.5
Purchased tax benefits 274.5 301.5
Sales of receivables 216.2 118.9
Other 321.0 173.8
--------- ----------
Total deferred tax liabilities 6,964.0 5,748.6
DEFERRED TAX ASSETS
Net operating losses and foreign tax credits 1,752.0 833.4
Provision for credit losses 997.2 955.6
Alternative minimum tax 296.6 298.0
Employee benefit plans 141.6 131.0
Other 212.6 372.9
--------- ---------
Total deferred tax assets 3,400.0 2,590.9
--------- ---------
Net deferred tax liabilities $ 3,564.0 $ 3,157.7
============ ==========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 12. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Ford Credit and certain of its subsidiaries provide selected health
care and life insurance benefits for retired salaried employees under unfunded
plans sponsored by Ford and certain of its subsidiaries. Ford Credit's U.S. and
Canadian salaried employees may become eligible for those benefits if they
retire while working for Ford Credit; however, benefits and eligibility rules
may be modified from time to time. The estimated cost for post-retirement health
care benefits is accrued on an actuarially determined basis.
Increasing the assumed health care cost trend rate by one percentage
point is estimated to increase the aggregate service and interest cost
components of net post-retirement benefit expense for 1999 by approximately $8
million and the accumulated post-retirement benefit obligation at December 31,
1999 by approximately $53 million. A decrease of one percentage point would
reduce service and interest cost by about $6 million and decrease the December
31, 1999 post-retirement benefit obligation by about $41 million.
Net post-retirement benefit expense included the following for the years
ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
COSTS RECOGNIZED IN INCOME (IN MILLIONS)
<S> <C> <C> <C>
Service cost $ 14.4 $ 9.7 $ 7.8
Interest cost 20.5 16.4 14.6
Curtailments 13.1 1.5 -
Amortization of prior service cost (0.4) (0.2) (0.2)
Amortization of losses 0.5 0.1 -
---------- ---------- ----------
NET POST-RETIREMENT BENEFIT EXPENSE $ 48.1 $ 27.5 $ 22.2
=========== =========== ===========
Discount rate for expense 6.5% 7.0% 7.5%
Initial health care cost trend rate 7.1% 6.6% 6.4%
Ultimate health care cost trend rate 5.0% 5.0% 5.0%
Number of years to ultimate trend rate 9 10 10
</TABLE>
The year-end status of these plans was as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
CHANGE IN BENEFIT OBLIGATION (IN MILLIONS)
<S> <C> <C>
Benefit obligation at January 1 $ 300.7 $ 239.4
Service cost 14.4 9.7
Interest cost 20.5 16.4
Amendments (4.6) -
Curtailments 13.1 1.5
Benefits paid (8.9) (6.3)
Foreign exchange 0.1 -
Actuarial loss 12.9 40.0
---------- --------
BENEFIT OBLIGATION AT DECEMBER 31 $ 348.2 $ 300.7
============ ============
FUNDED STATUS OF THE PLAN
Plan assets less than projected benefits $ (348.2) $ (300.7)
Unamortized prior service cost (5.2) (1.0)
Unamortized net losses 37.6 25.4
---------- -----------
Net amount recognized $ (315.8) $ (276.3)
=========== ===========
AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSIST OF:
Accrued liabilities $ (315.8) $ (276.3)
=========== ===========
Assumptions as of December 31
Discount rate 7.8% 6.5%
Initial health care cost trend rate 9.0% 7.1%
Ultimate health care cost trend rate 5.0% 5.0%
Number of years to ultimate trend rate 8 9
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 13. TRANSACTIONS WITH AFFILIATED COMPANIES
An agreement with Ford provides for payments by Ford to Ford Credit
that would maintain Ford Credit's consolidated income before income taxes and
net income at specified minimum levels. No payments were required under the
agreement during 1999, 1998, or 1997.
Ford Credit and its subsidiaries, from time to time, purchase accounts
receivable of certain divisions and subsidiaries of Ford. The amount of such
receivables outstanding was $3,658.4 million at December 31, 1999 and $3,887.4
million at December 31, 1998. Agreements with Ford and other affiliates also
provide for payments to Ford Credit for interest supplements and other support
costs on certain financing and leasing transactions. Amounts included in the
income statement for these and other transactions with Ford were as follows (in
millions): 1999 - $3,186.2; 1998 - $2,395.2; 1997 - $1,778.5. Ford Credit and
its subsidiaries purchase from Ford and affiliates certain vehicles which were
previously acquired by Ford principally from its fleet and rental car customers.
The fair values of these vehicles held for resale and included in other assets
at December 31 were as follows (in millions): 1999 - $1,305.5; 1998 - $862.8.
Ford Credit also has entered into a sale-leaseback agreement with Ford for
vehicles leased to employees of Ford and its subsidiaries. The net investment in
these vehicles included in operating leases at December 31 was as follows (in
millions): 1999 - $824.9; 1998 - $796.9.
Ford Credit sold commercial paper to Ford during 1999. Interest
expense associated with the commercial paper was as follows (in millions):
1999 - $5.9; 1998 - $0; 1997 - $0. Ford Credit also incurred interest expense
on debt with affiliated companies as follows (in millions): 1999 - $185.6;
1998 - $193.8; 1997 - $327.8.
Ford Credit and Ford revised their intercompany tax sharing agreement
in 1997 effective for years ended after December 31, 1994. Ford Credit recorded
a deferred tax asset for amounts due from Ford under the revised agreement. Ford
compensates Ford Credit for the temporary use of these funds. The interest
income earned and included in income was as follows (in millions): 1999 - $55.8;
1998 - $49.9; 1997 - $41.6.
Ford Credit and its subsidiaries, from time to time, provide loans to
Ford and other affiliates. The amount of such loans was $4,769.8 million at
December 31, 1999 and $12.9 million at December 31, 1998. Interest income earned
and included in income was as follows (in millions): 1999 - $162.1; 1998 - $3.1;
1997 - $0. Ford Credit's promissory note from Ford Holdings, Inc. for $1,517
million was settled in the Fourth Quarter 1999. Interest income earned on the
promissory note was as follows (in millions): 1999 - $63.5; 1998 - $88.5; 1997 -
$91.6.
Ford Credit and its subsidiaries receive technical and administrative
advice and services from Ford and its subsidiaries, occupy office space
furnished by Ford and its subsidiaries and utilize data processing facilities
maintained by Ford. Payments to Ford and its subsidiaries for such advice and
services are charged to operating expenses and were as follows (in millions):
1999 - $166.9; 1998 - $130.6; 1997 - $120.7.
Retirement benefits are provided under defined benefit plans for
employees of Ford Credit and its subsidiaries in the United States by the Ford
General Retirement Plan and for employees of the foreign subsidiaries in Europe,
Australia, and Canada by the respective Ford retirement plans. Employee
retirement plan costs allocated to Ford Credit and its subsidiaries from Ford
and charged to operating expenses were as follows (in millions): 1999 - $15.4;
1998 - $16.9; 1997 - $13.6.
Earned premiums reinsured to a Ford-owned affiliate were as follows (in
millions): 1999 - $236.8; 1998 - $53.0; 1997 - $1.5. Loss and loss adjustment
expense recoveries from the same affiliate were as follows (in millions): 1999
- - $121.9; 1998 - $29.4; 1997 - $0.6.
Ford Credit has sold notes backed by retail receivables through special
purpose subsidiaries. Ford purchased a portion of these notes as part of their
investment portfolio. The outstanding balance of these notes are $94.1 million
and $0 at December 31, 1999 and 1998, respectively.
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 13. TRANSACTIONS WITH AFFILIATED COMPANIES - CONTINUED
Agreements with Ford and other affiliates also provide guarantees for
Ford Credit and its subsidiaries related to certain finance receivables. The
amount of such receivables was $472.8 million at December 31, 1999 and $0 at
December 31, 1998.
NOTE 14. LITIGATION, CLAIMS, AND LEASE COMMITMENTS
Various legal actions, governmental proceedings and other claims are
pending or may be instituted or asserted in the future against Ford Credit and
its subsidiaries. Certain of the pending legal actions are, or purport to be,
class actions. Some of these matters involve or may involve compensatory,
punitive, antitrust or other treble damage claims in very significant amounts or
other relief which, if granted, would require very significant expenditures.
Litigation is subject to many uncertainties, the outcome of individual
litigated matters is not predictable with assurance and it is reasonably
possible that some of the foregoing matters could be decided unfavorably to Ford
Credit or the subsidiary involved. Although the amount of liability at December
31, 1999 with respect to these matters cannot be ascertained, Ford Credit
believes that any resulting liability should not materially affect the
consolidated financial position or results of operations of Ford Credit and its
subsidiaries.
At December 31, 1999 the company had the following minimum rental
commitments under non-cancelable operating leases (in millions): 2000 - $82;
2001 - $70; 2002 - $56; 2003 - $13; 2004 - $7; thereafter - $9. These amounts
include rental commitments for certain land, buildings, machinery and equipment.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 15. FINANCIAL INSTRUMENTS
BOOK AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments held by Ford Credit
and its subsidiaries at December 31, and the valuation techniques used to
estimate the fair value, were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
ESTIMATED ESTIMATED
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
ASSETS (IN MILLIONS)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 942.2 $ 942.2 $ 780.8 $ 780.8
Investments in securities 524.4 524.2 725.8 726.2
Finance receivables, net 101,796.6 102,475.3 88,838.6 88,712.5
Retained interest in securitized assets $ 3,442.8 $ 3,442.8 $ 1,256.3 $ 1,256.3
LIABILITIES
Debt payable within one year $ 69,741.1 $ 69,978.6 $ 63,322.4 $ 63,386.3
Debt payable after one year 63,332.6 62,425.8 51,644.9 53,095.7
DERIVATIVE CONTRACTS:
Foreign exchange instruments
Contracts with unrealized gains $ 161.8 $ 159.7 $ 161.1 $ 433.8
Contracts with unrealized losses (602.5) (498.1) (506.7) (363.2)
Interest rate instruments
Contracts with unrealized gains 101.8 329.9 104.3 935.1
Contracts with unrealized losses (48.3) (321.9) (107.7) (243.3)
</TABLE>
CASH AND CASH EQUIVALENTS. The book value approximates fair value
because of the short maturity of these instruments.
INVESTMENTS IN SECURITIES. The estimated fair value of investments in
marketable equity and debt securities are estimated based on market prices. Book
value of investments in non-marketable equity securities approximate fair value.
FINANCE RECEIVABLES, NET. The fair value of substantially all finance
receivables is estimated by discounting future cash flows using an estimated
discount rate which reflects the current credit, interest rate and prepayment
risks associated with similar types of instruments. For receivables with short
maturities, the book values approximate fair values. Certain leases are excluded
from the fair market valuation of finance receivables.
RETAINED INTEREST IN SECURITIZED ASSETS. The fair value of
interest-only strips are recorded at the present value of actual and estimated
future cash flows discounted at rates commensurate with this type of instrument.
The fair value of senior notes and subordinated certificates are estimated based
on market prices. Book value of restricted cash approximates fair value.
DEBT PAYABLE WITHIN ONE YEAR. For maturities of 3 months or less, the
book value approximates fair value because of the short maturities of these
instruments. For maturities of 3 months to one year, fair value is estimated
based on quoted market prices or current rates for similar debt with the same
maturities.
DEBT PAYABLE AFTER ONE YEAR. The fair value is estimated based on
quoted market prices or current rates for similar debt with the same remaining
maturities.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 15. FINANCIAL INSTRUMENTS - CONTINUED
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The following sections describe the various off-balance-sheet financial
instruments that Ford Credit and its subsidiaries held as of December 31, 1999
and 1998. Also included is a brief discussion of the estimated fair value of
those contracts and certain risks associated with holding those contracts
through maturity.
FOREIGN EXCHANGE INSTRUMENTS. Ford Credit and certain of its
subsidiaries have entered into foreign currency swap and forward agreements to
manage exposure to foreign exchange rate fluctuations. At December 31, 1999 and
1998, the total notional amount of Ford Credit's foreign exchange instruments
outstanding was $17.1 billion and $14.5 billion, respectively. These agreements
hedge principal and interest payments on debt and intercompany loans denominated
in foreign currencies. The fair value of these foreign exchange agreements was
estimated using current market interest and foreign exchange rates.
INTEREST RATE INSTRUMENTS. Ford Credit and certain of its subsidiaries
have entered into interest rate instrument agreements to manage exposure to
fluctuations in interest rates. The underlying notional amount of interest rate
instruments was $125.2 billion at December 31, 1999 and $97.3 billion at
December 31, 1998, respectively.
The differential paid or received on interest rate swap agreements is
recognized on an accrual basis as an adjustment to interest expense. The book
value of an interest rate swap agreement represents the differential receivable
or payable with a swap counterparty since the last settlement date.
The fair value of an interest rate swap is the estimated amount Ford
Credit would receive or pay to terminate the agreement. The fair value is
calculated using current market rates for similar instruments with the same
remaining maturities. Unrealized gains and losses are netted for individual
counterparties where legally permissible.
COUNTERPARTY CREDIT RISK
Ford Credit manages its foreign currency and interest rate counterparty
credit risks by limiting exposure and by monitoring the financial condition of
counterparties. The amount of exposure Ford Credit may have to a single
counterparty on a worldwide basis is limited by company policy. In the unlikely
event that a counterparty fails to meet the terms of a foreign currency or an
interest rate instrument, risk is limited to the fair value of the instrument.
CONCENTRATIONS
The business of Ford Credit is substantially dependent upon Ford Motor
Company. Any protracted reduction or suspension of Ford's production or sale of
vehicles, resulting from a decline in demand, a work stoppage, governmental
action, adverse publicity, or other event, could have a substantial adverse
effect on Ford Credit.
The majority of Ford Credit's finance receivables are geographically
diversified through the United States. Foreign finance receivables are
concentrated in Europe, Canada, and Australia. Ford Credit controls its credit
risk through credit standards, limits on exposure and by monitoring the
financial condition of other parties. TARIC has credit risk related to
receivables from reinsurers which are collateralized by trust funds, letters of
credit, or custodial accounts.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 16. STOCK OPTIONS
Ford Credit employees participate in the stock option plans of Ford.
Ford Credit has stock options outstanding under Ford's 1990 Long-Term Incentive
Plan and the 1998 Long-Term Incentive Plan. Grants may be made under the 1998
Plan through April 2008. Options granted in 1997 under the 1990 Plan and options
granted under the 1998 Plan become exercisable 33% after one year from the date
of grant, 67% after two years and in full after three years. In general, options
granted prior to 1997 under the 1990 Plan become exercisable 25% after one year
from the date of grant, 50% after two years, 75% after three years and in full
after four years. Options under both plans expire after 10 years.
The estimated fair value as of date of grant of options granted in
1999, 1998, and 1997 using the Black-Scholes option-pricing model, was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Estimated fair value per share of options granted during the year $ 17.53 $ 9.25 $ 5.76
Assumptions:
Annualized dividend yield 3.2% 4.1% 4.8%
Common stock price volatility 36.5% 28.1% 22.1%
Risk-free rate of return 5.2% 5.7% 6.7%
Expected option term (in years) 5 5 5
</TABLE>
Ford Credit measures compensation cost using the intrinsic value
method. Accordingly, no compensation cost for stock options has been recognized.
If compensation cost had been determined based on the estimated fair value of
options granted since 1995, the pro forma effects on Ford Credit's net income
would not have been material.
Information concerning stock options for Ford Credit's employees is as
follows (shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------ -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES SUBJECT TO OPTION EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 3,200 $ 26.39 2,419 $ 28.44 2,446 $ 26.93
New grants (based on fair value of
common stock at dates of grant) 906 57.75 912 41.28 430 32.05
Associates adjustment * - 1,057
Transferred into Ford Credit 177 29.64 331 21.26
Exercised ** (438) 59.40 (1,005) 45.13 (404) 23.19
Transferred out of Ford Credit (68) 33.22 (492) 20.47
Surrendered upon exercise of stock
appreciation rights (53) 22.44
Terminated and expired (4) 43.87 (22) 37.82 -
------ ------- -------
Outstanding at end of period 3,773 34.56 3,200 26.39 2,419 28.44
Outstanding but not exercisable (1,892) (1,721) (1,078)
------ ------- -------
Exercisable at end of period 1,881 23.49 1,479 19.58 1,341 25.85
====== ======= =======
</TABLE>
* Outstanding stock option grants were adjusted to restore the option
holder's economic position as a result of the Associates spin-off on
March 12, 1998.
** Exercised at prices ranging from $49.81 to $67.00 during 1999, $20.06 to
$61.13 during 1998, and $15.00 to $32.69 during 1997.
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 17. SEGMENT INFORMATION
Financial results for Ford Credit's operating segments have been
prepared using a management approach which included certain securitized assets
not included in Ford Credit's balance sheet. This is consistent with the basis
and manner in which Ford Credit management internally reviews financial
information for the purposes of assisting in making internal operating
decisions. Results were as follows (in millions):
<TABLE>
<CAPTION>
FORD
CREDIT FORD PERSONAL FORD CREDIT
NORTH CREDIT FINANCIAL ELIMINATIONS/ FINANCIAL
AMERICA INTERNATIONAL SERVICES RECLASSIFICATIONS STATEMENTS
1999
<S> <C> <C> <C> <C> <C> <C>
REVENUE $ 17,178.4 $ 3,559.8 $ 306.2 $ (684.7) $ 20,359.7
INCOME
Income before income taxes 1,474.9 605.0 43.1 (19.2) 2,103.8
Provision for income taxes 526.0 253.4 16.5 (5.3) 790.6
Net income 948.9 351.6 26.6 (66.0) 1,261.1
OTHER DISCLOSURES
Depreciation on operating
leases 6,827.5 664.7 - 72.3 7,564.5
Interest expense 6,687.0 1,529.8 - (1,023.4) 7,193.4
Finance receivables
(including net investment
operating leases) 134,013.1 28,202.6 - (20,623.7) 141,592.0
Total assets 139,925.2 29,730.3 1,724.7 (14,749.5) 156,630.7
</TABLE>
<TABLE>
<CAPTION>
FORD
CREDIT FORD PERSONAL FORD CREDIT
NORTH CREDIT FINANCIAL ELIMINATIONS/ FINANCIAL
AMERICA INTERNATIONAL SERVICES RECLASSIFICATIONS STATEMENTS
1998
<S> <C> <C> <C> <C> <C>
REVENUE $ 16,220.5 $ 3,542.4 $ 427.1 $ (887.5) $ 19,302.5
INCOME
Income before income taxes 1,128.0 545.3 77.0 61.9 1,812.2
Provision for income taxes 398.6 230.0 27.1 24.5 680.2
Net income 729.4 315.3 49.9 (10.4) 1,084.2
OTHER DISCLOSURES
Depreciation on operating
leases 6,922.4 537.4 - (132.4) 7,327.4
Interest expense 6,042.1 1,646.7 - (778.4) 6,910.4
Finance receivables
(including net investment
operating leases) 117,424.6 28,361.6 - (15,278.1) 130,508.1
Total assets 115,469.3 29,818.2 1,364.5 (9,404.2) 137,247.8
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 17. SEGMENT INFORMATION - CONTINUED
<TABLE>
<CAPTION>
1997
<S> <C> <C> <C> <C> <C>
REVENUE $ 15,304.7 $ 3,238.9 $ 476.5 $ (1,675.0) $ 17,345.1
INCOME
Income before income taxes 1,143.0 520.0 152.0 (9.0) 1,806.0
Provision for income taxes 445.5 234.9 56.9 (10.5) 726.8
Net income 697.5 285.1 95.1 (46.9) 1,030.8
OTHER DISCLOSURES
Depreciation on operating
leases 6,213.8 534.2 - (559.8) 6,188.2
Interest expense 5,650.8 1,398.6 - (781.2) 6,268.2
Finance receivables
(including net investment
operating leases) 107,859.7 25,165.5 - (16,966.6) 116,058.6
Total assets 105,508.4 26,649.3 1,021.3 (11,205.7) 121,973.3
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 17. SEGMENT INFORMATION - CONTINUED
Total revenue, income before income taxes, net income, finance
receivables, and assets identifiable with United States, Europe, and other
foreign operations were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
REVENUE (IN MILLIONS)
<S> <C> <C> <C>
United States operations $ 15,321.1 $ 14,396.8 $ 13,912.5
European operations 2,432.9 2,314.4 1,916.8
Other foreign operations 2,605.7 2,591.3 1,515.8
-------- -------- --------
Total revenue $ 20,359.7 $ 19,302.5 $ 17,345.1
=========== =========== ===========
INCOME BEFORE INCOME TAXES
United States operations $ 1,524.0 $ 1,292.4 $ 1,245.8
European operations 466.3 431.7 383.5
Other foreign operations 113.5 88.1 176.7
----- -------- -----
Total income before income taxes $ 2,103.8 $ 1,812.2 $ 1,806.0
============ ============ ============
NET INCOME
United States operations $ 941.7 $ 791.8 $ 736.4
European operations 272.5 246.1 207.5
Other foreign operations 46.9 46.3 86.9
----- ------ ------
Total net income $ 1,261.1 $ 1,084.2 $ 1,030.8
============ ============ ============
FINANCE RECEIVABLES AT DECEMBER 31 (INCLUDING NET INVESTMENT
OPERATING LEASES)
United States operations $106,087.3 $ 94,945.4 $ 87,721.2
European operations 20,099.0 21,588.7 17,148.1
Other foreign operations 15,405.7 13,974.0 11,189.3
------------ ------------ ------------
Total finance receivables $141,592.0 $130,508.1 $116,058.6
========== ========== ==========
ASSETS AT DECEMBER 31
United States operations $118,541.8 $ 99,991.8 $ 92,457.2
European operations 21,435.2 22,473.0 17,867.7
Other foreign operations 16,653.7 14,783.0 11,648.4
------------ ------------ ------------
Total assets $156,630.7 $137,247.8 $121,973.3
========== ========== ==========
</TABLE>
<PAGE>
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data by calendar quarter were as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
(IN MILLIONS)
1999
<S> <C> <C> <C> <C> <C>
Total financing revenue $ 4,646.5 $ 4,584.1 $ 4,758.4 $ 4,896.4 $18,885.4
Depreciation on operating leases 1,841.3 1,954.1 1,864.8 1,904.3 7,564.5
Interest expense 1,761.5 1,706.7 1,836.9 1,888.3 7,193.4
Total financing margin and revenue 1,317.0 1,358.1 1,430.3 1,496.4 5,601.8
Provision for credit losses 325.1 281.4 301.4 258.5 1,166.4
Net income 299.8 335.3 316.9 309.1 1,261.1
1998
Total financing revenue $ 4,208.7 $ 4,494.2 $ 4,337.1 $ 4,850.3 $ 17,890.3
Depreciation on operating leases 1,682.0 1,841.2 1,791.7 2,012.5 7,327.4
Interest expense 1,610.5 1,691.0 1,662.0 1,946.9 6,910.4
Total financing margin and revenue 1,266.0 1,318.9 1,221.3 1,258.5 5,064.7
Provision for credit losses 321.5 270.5 290.2 297.3 1,179.5
Net income 277.8 299.8 272.4 234.2 1,084.2
</TABLE>
EXHIBIT 99.2
Media Information Center, 14441 Rotunda Drive, Suite 185, Dearborn, MI 48120
Telephone: 800-665-1515; Fax: 313-845-7512
E-Mail: [email protected]; Internet: http://media.ford.com
Contact: Media Inquiries Securities Analysts Shareholder Inquiries
Jim Cain Mike Holland (800) 555-5259 or
313-322-3428 313-323-8221 (313) 845-8540
FORD MOTOR COMPANY REPORTS INDUSTRY-RECORD OPERATING INCOME OF $7.2 BILLION IN
1999 AND RECORD FOURTH QUARTER EARNINGS OF $1.8 BILLION
DEARBORN, January 26, 2000 - Ford Motor Company [NYSE: F] earned $7.2 billion in
1999, more than any other automotive company in history, and also established a
new company record for annual revenue, which was $163 billion, up 13 percent.
"Ford had an outstanding year in 1999 by most measures and we achieved
industry-record earnings, but what truly set the company apart was our
consumer-focused business strategy," said President and CEO Jac Nasser. "We made
tremendous progress toward strengthening our brands and transforming the way all
the people of Ford connect with consumers. This holistic approach is improving
our core automotive business and enhancing shareholder value."
Ford reported full-year earnings of $7,237 million or $5.86 per diluted share of
common and Class B stock. In 1998, Ford reported earnings of $22,071 million or
$17.76 per share, including a non-cash gain of $15,955 million that resulted
from Ford's spin-off of Associates First Capital [NYSE: AFS].
Fourth-quarter 1999 earnings were $1,806 million or $1.47 per share on revenue
of $44 billion. In the fourth quarter of 1998, Ford earned $1,043 million or 84
cents per share on revenue of $38 billion. The fourth quarter of 1998 included a
charge of $631 million or 51 cents per share primarily for employee separation
programs in North America, Europe and South America.
As highlights of 1999, Nasser pointed to:
o Ford's acquisition of Volvo Car and the creation of the Premier Automotive
Group, which is comprised of Volvo, Jaguar, Lincoln and Aston Martin, to
drive growth in higher margin vehicle segments.
o The acquisitions of Kwik-Fit, Automobile Protection Corporation (APCO) and
other businesses to accelerate Ford's growth in automotive consumer
services.
o The development of e-business partnerships with Microsoft's CarPoint,
Oracle, TeleTech, Yahoo! (announced in January 2000) and others to better
connect with consumers and drive operating efficiencies at Ford, among its
dealers and with supplier companies.
Ford also launched several highly successful products, including the Ford Focus,
Mercury Sable and Ford Taurus in North America, as well as the Volvo S40/V40,
Lincoln LS, Jaguar S-TYPE and Ford Excursion. In India, Ford launched the new
IKON.
The Focus was the first vehicle to be named Car of the Year by journalists in
both North America and Europe, and the Lincoln LS was NAMED MOTOR TREND'S Car of
the Year.
AUTOMOTIVE OPERATIONS
Full-year 1999 earnings from automotive operations were a record $5,721 million
on record revenue of $137 billion; after-tax return on sales (ROS) was 4.2
percent. In 1998, earnings from automotive operations were $4,752 million on
revenue of $119 billion; ROS was 4.0 percent.
Worldwide factory unit sales of 7.2 million vehicles in 1999 exceeded the
previous record of 7.0 million established in 1997. Ford also reduced its total
costs in 1999 by $1 billion at constant volume and mix, bringing total cost
reductions to more than $6 billion since 1996.
Net income from automotive operations in the fourth quarter of 1999 was a record
$1,449 million on revenue of $38 billion, compared with fourth-quarter 1998
earnings of $820 million on revenue of $32 billion.
Up-front lump-sum payments of $103 million or eight cents per share associated
with the ratification of the company's new contracts with the United Auto
Workers (UAW) and Canadian Auto Workers (CAW) unions are included in automotive
results in the North America region for the quarter.
"In North America, our momentum is very strong and our results in the region
show the fundamental strength of our brands when the products are right and the
cost is right," Nasser said. "Our results in Europe and South America are
unacceptable, but we are making product investments that will deliver more hits
such as the Ford Focus. At the same time, we are rigorously addressing costs."
NORTH AMERICA: Full-year 1999 earnings in North America were a record $6,137
million on record revenue of $100 billion; ROS was 6.2 percent. Full-year 1998
earnings in North America were $4,612 million on revenue of $87 billion; ROS was
5.3 percent.
Fourth-quarter 1999 earnings in North America were a record $1,576 million on
record revenue of $27 billion. Fourth-quarter 1998 earnings were $1,047 million
on revenue of $24 billion. Compared with 1998, Ford's fourth-quarter 1999
earnings reflect the non-recurrence of the charge for employee separation costs,
lower costs, higher volume and a more favorable vehicle mix.
EUROPE: Full-year 1999 earnings in Europe were $28 million on revenue of $30
billion. Full-year 1998 earnings in Europe were $193 million on revenue of
$24 billion.
Fourth-quarter 1999 results in Europe improved to a loss of $55 million on
revenue of $9 billion. Fourth-quarter 1998 results were a loss of $74 million on
revenue of $7 billion. Compared with 1998, Ford's fourth-quarter 1999 results
reflect the non-recurrence of the charge for employee separation costs, the
addition of Volvo Car and lower taxes, offset by lower volumes and market share
of Ford-brand vehicles, primarily the Ka, Fiesta and Mondeo.
<PAGE>
SOUTH AMERICA: Full-year 1999 results in South America were a loss of $452
million on revenue of $2 billion. In 1998, Ford lost $226 million in South
America on revenue of $4 billion.
Fourth-quarter 1999 results in South America improved to a loss of $95 million
on revenue of $547 million. Fourth-quarter 1998 results were a loss of $151
million on revenue of $725 million. Compared with 1998, Ford's fourth-quarter
1999 results primarily reflect lower costs and the non-recurrence of the charge
for employee separation costs, partially offset by lower revenue.
OTHER MARKETS
Full-year 1999 earnings in Ford's other markets, which include Australia, Japan,
Thailand, India and other Asia-Pacific countries, were $133 million on revenue
of $5 billion. In 1998, Ford earned $173 million in the region on revenue of $4
billion.
Fourth-quarter 1999 earnings in the region were $23 million on revenue of $1
billion. In the same period in 1998, Ford lost $2 million on revenue of $815
million. These results reflect primarily Ford's share of the profit improvement
at Mazda Motor Corp.
VISTEON AUTOMOTIVE SYSTEMS
The earnings of Visteon Automotive Systems are included in the company's
automotive results. In 1999, Visteon earned $735 million, compared with $703
million in 1998.
In the fourth quarter of 1999, Visteon earned $95 million, compared with $129
million in fourth quarter of 1998. Compared with 1998, the decline in
fourth-quarter 1999 earnings reflected the impact of negotiated price
reductions, the labor agreement in North America and currency-related costs,
offset partially by cost efficiencies and improved volume.
Ford and Visteon are close to completing a market-pricing review begun in 1999
of various carry-over components and systems Ford purchases from Visteon. When
the review is completed and both parties agree to a final pricing level, it is
expected that Visteon will reduce prices to Ford.
<PAGE>
FORD CREDIT
Full-year 1999 earnings at Ford Credit were $1,261 million up 16 percent
compared with 1998 earnings of $1,084 million. Return on equity was 11.5
percent, up 0.9 points.
In the fourth quarter of 1999, Ford Credit earned $309 million compared with
earnings of $234 million in the fourth-quarter of 1998. Compared with 1998, the
increase in fourth-quarter 1999 earnings reflects improved credit loss
performance and a higher level of finance receivables, offset partially by
higher operating costs.
HERTZ
The Hertz Corporation [NYSE: HRZ] reported its sixth consecutive year of record
earnings in 1999, and eighth consecutive year of increased earnings. Full-year
net income was $336 million, up 21 percent compared with earnings of $277
million in 1998. Ford's share of Hertz' 1999 earnings was $273 million.
In the fourth quarter of 1999, Hertz earned a record $60 million, up 26 percent
compared with earnings of $48 million in the same period a year ago. Ford's
share of Hertz' fourth-quarter 1999 earnings was $50 million.
2000 OUTLOOK AND MILESTONES
Earlier in January, Ford established financial milestones for 2000 to deliver
record earnings North America, improve results in Europe, South America and the
rest of the world, grow total company revenue by $5 billion and reduce total
costs by $1 billion. Ford Credit's milestone is to grow earnings by 10 percent
while improving returns. The milestone for Hertz is to achieve record earnings
(ninth year of increased earnings). The milestone for Visteon Automotive Systems
is to achieve independence.
"We have great brands, innovative products in the market and in the pipeline,
growing financial and consumer services businesses and an e-commerce strategy
that will be a real competitive advantage. These are powerful platforms for
growth," Nasser said. "I'm proud of what the Ford team accomplished in 1999, and
our people are energized to deliver even greater value to consumers and
shareholders in 2000."
<PAGE>
FS-1
Ford Motor Company and Subsidiaries
HIGHLIGHTS
<TABLE>
<CAPTION>
Fourth Quarter Full Year
---------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - North America 1,280 1,197 4,787 4,370
- - Outside North America 639 617 2,433 2,453
----- ----- ----- -----
Total 1,919 1,814 7,220 6,823
===== ===== ===== =====
Sales and revenues (in millions)
- - Automotive $ 37,781 $ 32,204 $ 136,973 $ 119,083
- - Financial Services 6,637 5,699 25,585 25,333
--------- --------- --------- ---------
Total $ 44,418 $ 37,903 $ 162,558 $ 144,416
========= ========= ========= =========
Net income (in millions)
- - Automotive $ 1,449 $ 820 $ 5,721 $ 4,752
- - Financial Services (excl. The Associates) 357 223 1,516 1,187
- - The Associates - - - 177
- - Gain on spin-off of the Associates - - - 15,955
--------- --------- --------- ---------
Total $ 1,806 $ 1,043 $ 7,237 $ 22,071
========= ========= ========= =========
Capital expenditures (in millions)
- - Automotive $ 2,921 $ 2,445 $ 7,945 $ 8,113
- - Financial Services 155 106 590 504
--------- --------- --------- ---------
Total $ 3,076 $ 2,551 $ 8,535 $ 8,617
========= ========= ========= =========
Automotive capital expenditures as a
percentage of sales 7.7% 7.6% 5.8% 6.8%
Stockholders' equity at December 31
- - Total (in millions) $ 27,537 $ 23,409 $ 27,537 $ 23,409
- - After-tax return on Common and
Class B stockholders' equity 26.6% 17.8% 28.1% 25.4%
Automotive net cash at December 31
(in millions)
- - Cash and marketable securities $ 23,585 $ 23,805 $ 23,585 $ 23,805
- - Debt 12,144 9,834 12,144 9,834
--------- --------- --------- ---------
Automotive Net Cash $ 11,441 $ 13,971 $ 11,441 $ 13,971
========= ========= ========= =========
After-tax return on sales
- - North American Automotive 5.8% 4.5% 6.2% 5.3%
- - Total Automotive 3.9% 2.6% 4.2% 4.0%
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,207 1,210 1,210 1,211
- - Number outstanding at December 31 1,207 1,209 1,207 1,209
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- - High $54-7/8 $59- 7/8 $67-7/8 $61- 7/16
- - Low 48-1/2 38-13/16 46-1/4 28-15/32
AMOUNTS PER SHARE OF COMMON AND CLASS B
STOCK AFTER PREFERRED STOCK DIVIDENDS
Income assuming dilution
- - Automotive $ 1.18 $ 0.66 $ 4.63 $ 3.76
- - Financial Services (excl. The Associates) 0.29 0.18 1.23 0.96
- - The Associates - - - 0.14
- - Gain on spin-off of the Associates - - - 12.90
--------- --------- --------- ---------
Total $ 1.47 $ 0.84 $ 5.86 $ 17.76
========= ========= ========= =========
Cash dividends $ 0.50 $ 0.46 $ 1.88 $ 1.72
</TABLE>
<PAGE>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
For the Periods Ended December 31, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Fourth Quarter Full Year
------------------------ --------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
NORTH AMERICA
United States
Cars 497 428 1,725 1,563
Trucks 646 654 2,660 2,425
----- ----- ----- -----
Total United States 1,143 1,082 4,385 3,988
Canada 100 87 288 279
Mexico 37 28 114 103
----- ----- ----- -----
Total North America 1,280 1,197 4,787 4,370
EUROPE
Britain 122 102 518 498
Germany 80 143 353 444
Italy 59 56 209 205
Spain 45 46 180 155
France 44 54 172 171
Other Countries 175 95 528 377
----- ----- ----- -----
Total Europe 525 496 1,960 1,850
OTHER INTERNATIONAL
Australia 30 35 125 133
Brazil 26 34 117 178
Argentina 16 16 60 97
Taiwan 11 12 56 77
Japan 8 5 32 25
Other Countries 23 19 83 93
----- ----- ----- -----
Total Other International 114 121 473 603
----- ----- ----- -----
TOTAL WORLDWIDE VEHICLE UNIT SALES 1,919 1,814 7,220 6,823
===== ===== ===== =====
</TABLE>
Vehicle unit sales generally are reported worldwide on a "where sold" basis and
include sales of all Ford-badged units, as well as units manufactured by Ford
and sold to other manufacturers.
Prior periods were restated to correct reported unit sales.
<PAGE>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1999, 1998 and 1997
(in millions, except amounts per share)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
------------ ------------ ------------
<S> <C> <C> <C>
AUTOMOTIVE
Sales $136,973 $119,083 $122,935
COSTS AND EXPENSES:
Costs of sales 119,046 103,905 107,994
Selling, Administrative and Other Expenses 9,548 8,493 7,995
-------- -------- --------
Total costs and expenses 128,594 112,398 115,989
OPERATING INCOME 8,379 6,685 6,946
Interest income 1,428 1,331 1,116
Interest Expense 1,397 829 788
-------- -------- --------
Net interest income 31 502 328
Equity in net income/(loss) of affiliated companies 82 (38) (88)
Net expense from transactions with
Financial Services (45) (191) (104)
-------- -------- --------
Income Before Income Taxes - Automotive 8,447 6,958 7,082
FINANCIAL SERVICES
Revenues 25,585 25,333 30,692
Costs and Expenses:
Interest expense 7,679 8,036 9,712
Depreciation 9,254 8,589 7,645
Operating and other expenses 4,653 4,618 6,621
Provision for credit and insurance losses 1,465 1,798 3,230
-------- -------- --------
Total costs and expenses 23,051 23,041 27,208
Net revenue from transactions with Automotive 45 191 104
Gain on spin-off of The Associates - 15,955 -
Gain on sale of common stock of a subsidiary - - 269
-------- -------- --------
INCOME BEFORE INCOME TAXES - FINANCIAL SERVICES 2,579 18,438 3,857
-------- -------- --------
TOTAL COMPANY
Income Before Income Taxes 11,026 25,396 10,939
Provision for income taxes 3,670 3,176 3,741
-------- -------- --------
Income before minority interests 7,356 22,220 7,198
Minority interests in net income of subsidiaries 119 149 278
-------- -------- --------
Net Income $ 7,237 $ 22,071 $ 6,920
======== ======== ========
Income attributable to Common and Class B Stock
after preferred stock dividends $ 7,222 $ 21,964 $ 6,866
Average number of shares of Common and Class B
Stock outstanding 1,210 1,211 1,195
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic Income $ 5.99 $ 18.17 $ 5.75
Diluted Income $ 5.86 $ 17.76 $ 5.62
Cash Dividends $ 1.88 $ 1.72 $ 1.645
</TABLE>
Prior period costs of sales and selling, administrative and other expenses were
reclassified.
<PAGE>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in millions)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
--------------- ----------------
<S> <C> <C>
ASSETS
Automotive
Cash and cash equivalents $ 4,642 $ 3,685
Marketable Securities 18,943 20,120
-------- --------
Total cash and marketable securities 23,585 23,805
Receivables 3,769 2,604
Inventories 6,435 5,656
Deferred income taxes 3,872 3,239
Other current assets 4,126 3,405
Current receivable from Financial Services 2,304 0
-------- --------
Total current assets 44,091 38,709
Equity in net assets of affiliated companies 2,744 2,401
Net property 42,317 37,320
Deferred income taxes 2,816 3,175
Other assets 13,213 7,139
-------- --------
Total Automotive assets 105,181 88,744
Financial Services
Cash and cash equivalents 1,588 1,151
Investments in securities 733 968
Finance receivables 113,298 97,176
Net investment in operating leases 42,471 41,173
Other assets 11,123 7,445
Receivable from Automotive 1,835 888
-------- --------
Total Financial Services Assets 171,048 148,801
-------- --------
Total Assets $276,229 $237,545
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 14,450 $ 13,368
Other payables 4,156 2,755
Accrued liabilities 19,321 16,925
Income taxes payable 1,862 1,404
Debt payable within one year 1,602 1,121
Current payable to Financial Services 0 70
-------- --------
Total current liabilities 41,391 35,643
Long-term debt 10,542 8,713
Other liabilities 33,247 30,133
Deferred income taxes 1,376 751
Payable to Financial Services 1,835 818
-------- --------
Total Automotive liabilities 88,391 76,058
Financial Services
Payables 3,550 3,555
Debt 139,919 122,324
Deferred income taxes 7,078 5,488
Other liabilities and deferred income 6,775 6,034
payable to Automotive 2,304 0
-------- --------
Total Financial Services liabilities 159,626 137,401
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company 675 677
Stockholders' Equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million) * *
Common Stock, par value $1.00 per share (1,151 million shares issued) 1,151 1,151
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,049 5,283
Accumulated other comprehensive income (1,923) (1,670)
ESOP loan and treasury stock (1,417) (1,085)
Earnings retained for use in business 24,606 19,659
-------- --------
Total Stockholders' Equity 27,537 23,409
-------- --------
Total Liabilities and Stockholders' Equity $276,229 $237,545
======== ========
</TABLE>
- - - - -
*Less than $1 million
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
(in millions)
1999 1998 1997
--------------------------- ---------------------------- --------------------------
Financial Financial Financial
Automotive Services Automotive Services Automotive Services
------------- ------------ -------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 3,685 $ 1,151 $ 6,316 $ 1,618 $ 3,578 $ 3,689
Cash flows from operating activities 16,500 12,540 9,622 13,478 13,984 13,650
Cash flows from investing activities
Capital expenditures (7,945) (590) (8,113) (504) (8,142) (575)
Purchase of leased assets - - (110) - (332) -
Acquisitions of other companies (6,342) (144) - (344) - (40)
Acquisitions of receivables and lease
investments - (80,422) - (78,863) - (117,895)
Collections of receivables and lease
investments - 46,646 - 49,303 - 86,842
Net acquisitions of daily rental vehicles - (1,739) - (1,790) - (958)
Purchases of securities (2,838) (900) (758) (2,102) (43) (3,067)
Sales and maturities of securities 2,352 1,100 590 2,271 13 3,520
Proceeds from sales of receivables and
lease investments - 9,931 - 8,413 - 5,197
Net investing activity with
Financial Services 1,329 - 642 - 258 -
Other (68) 119 (468) (463) (285) (569)
------- -------- ------- -------- ------- --------
Net cash used in investing activities (13,512) (25,999) (8,217) (24,079) (8,531) (27,545)
Cash flows from financing activities
Cash dividends (2,290) - (5,348) - (2,020) -
Issuance of Common Stock 336 - 157 - 310 -
Issuance of Common Stock of a subsidiary - - - - - 453
Purchase of Ford Treasury Stock (707) - (669) - (15) -
Preferred stock - Series B repurchase,
Series A redemption - - (420) - - -
Changes in short-term debt 64 5,547 497 7,475 (430) 6,210
Proceeds from issuance of other debt 3,428 37,184 2,403 21,776 1,100 22,923
Principal payments on other debt (1,182) (28,672) (1,434) (16,797) (668) (18,215)
Net financing activity with Automotive - (1,329) - (642) - (258)
Spin-off of The Associates cash - - - (508) - -
Other (254) 88 (472) (12) 16 (206)
------- ------- ------- -------- ------- --------
Net cash (used in)/provided by
financing activities (605) 12,818 (5,286) 11,292 (1,707) 10,907
Effect of exchange rate changes on cash (69) (279) (54) 146 (119) 28
Net transactions with Automotive/
Financial Services (1,357) 1,357 1,304 (1,304) (889) 889
------- -------- ------- -------- ------- --------
Net (decrease)/increase in cash and
cash equivalents 957 437 (2,631) (467) 2,738 (2,071)
------- -------- ------- -------- ------- --------
Cash and cash equivalents at December 31 $ 4,642 $ 1,588 $ 3,685 $ 1,151 $ 6,316 $ 1,618
======= ======== ======= ======== ======= ========
====================================================================================================================================
</TABLE>
