SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995 OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18263
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Ford Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Incorporated in Delaware 38-2890269
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(State or other jurisidction of (I.R.S. Employer
incorporation or organization) Identification Number)
The American Road, Dearborn, Michigan 48121
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-322-3000
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Indicate by checkmark 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 .
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As of November 13, 1995, the Registrant had outstanding 1,099
shares of Common Stock, all of which were held, directly or
indirectly, by Ford Motor Company.
Page 1 of 11
Exhibit index located on sequential page number 9
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements - The financial data presented herein are
unaudited, but in the opinion of management reflect those 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 (the "10-K
Report") for the year ended December 31, 1994. Reference also should be
made to the Annual Report on Form 10-K for the year ended December 30, 1994,
and the Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
of Ford Motor Company, incorporated herein by reference.
<TABLE>
<CAPTION>
Ford Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended September 30, 1995 and 1994
(in millions)
Third Quarter Nine Months
----------------------- -----------------------
1995 1994 1995 1994
------ ------ ------ -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues
Financing revenues $1,368 $1,141 $3,933 $3,257
Investment and other income 280 220 764 527
Insurance premiums earned 136 168 469 511
------ ------ ------ ------
Total revenues 1,784 1,529 5,166 4,295
Expenses
Interest expense 650 512 1,870 1,439
Operating and other expenses 470 406 1,350 1,123
Provision for credit losses 191 153 548 436
Insurance claims 69 109 272 326
Depreciation 50 47 166 143
Interest credited on annuity contracts 43 32 125 80
Amortization of policy acquisition costs 25 20 57 63
------ ------ ------ ------
Total expenses 1,498 1,279 4,388 3,610
------ ------ ------ ------
Income before income taxes 286 250 778 685
Provision for income taxes 105 89 293 251
------ ------ ------ ------
Income before minority interests 181 161 485 434
Minority interests in net income/(loss)
of subsidiaries 0 1 7 (1)
------ ------ ------ ------
Net income $ 181 $ 160 $ 478 $ 435
====== ====== ====== ======
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ford Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
Sept. 30, Dec. 31,
1995 1994
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(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 876 $ 968
Investments in securities 5,887 4,979
Finance receivables, net 33,358 29,362
Accounts and notes receivable 509 415
Receivables from Ford and affiliated companies 500 167
Investments in direct financing leases, net 4,662 4,404
Investments in operating leases, net 1,685 1,579
Goodwill 1,725 1,768
Deferred policy acquisition costs 243 253
Other assets 529 478
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Total assets $49,974 $44,373
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 571 $ 469
Payables to Ford and affiliated companies 99 187
Insurance-related liabilities 1,090 1,064
Annuity contracts 2,998 2,722
Debt 38,100 33,820
Other liabilities and deferred income 1,399 1,096
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Total liabilities 44,257 39,358
Stockholders' equity
Preferred Stock, $1 par value 1,976 1,875
Common Stock, $1 par value,
authorized - 10,000 shares;
issued and outstanding - 1,099 shares * *
Capital in excess of par value of stock 965 965
Unrealized gain/(loss) on investments in
securities, net of taxes, and other 48 (160)
Earnings retained for use in business 2,728 2,335
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Total stockholders' equity 5,717 5,015
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Total liabilities and stockholders' equity $49,974 $44,373
======= =======
</TABLE>
- - - - - -
*Less than $50,000
-3-
<TABLE>
<CAPTION>
Ford Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended September 30, 1995 and 1994
(in millions)
Nine Months
--------------------------
1995 1994
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(unaudited)
<S> <C> <C>
Cash and cash equivalents at January 1 $ 968 $ 823
Cash flows from operating activities before securities trading 1,227 1,025
Net sales/(purchases) of trading securities 256 (32)
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Net cash flows from operating activities 1,483 993
Cash flows from investing activities
Acquisitions of finance receivables (25,094) (20,464)
Collections of finance receivables 20,448 16,939
Purchases of securities (4,434) (9,296)
Sales and maturities of securities 3,607 8,527
Recovery of equipment costs and residual interests 672 607
Cost of equipment and lease receivables acquired (1,040) (776)
Acquisitions of other companies - (426)
Other (245) 100
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Net cash used in investing activities (6,086) (4,789)
Cash flows from financing activities
Issuance of Preferred Stock 101 201
Proceeds from issuance of long-term debt 4,714 2,926
Principal payments on long-term debt (1,612) (1,442)
Changes in short-term debt 1,178 1,445
Dividends paid to shareholders (104) (66)
Receipts from annuity contracts, net 276 875
Other (42) 39
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Net cash provided by financing activities 4,511 3,978
Net increase in cash and cash equivalents (92) 182
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Cash and cash equivalents at September 30 $ 876 $ 1,005
======== =======
</TABLE>
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<PAGE>
Coopers
& Lybrand certified public accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Holdings, Inc.
We have reviewed the consolidated balance sheet of Ford Holdings,
Inc. and Subsidiaries at September 30, 1995 and the related
consolidated statement of income and condensed consolidated
statement of cash flows for the periods set forth in Form 10-Q
for the quarter ended September 30, 1995. 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 financial statements
referred to above 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, 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated January 27, 1995, we
expressed an unqualified opinion on those consolidated financial
statements.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
October 18, 1995
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
- ----------------------------------------------------------
OVERVIEW
The Company's net income in the third quarter of 1995 was $181
million, compared with $160 million earned in the third quarter
of 1994. The increase resulted primarily from improved earnings
at The Associates and USL Capital, offset partially by lower
earnings at American Road.
Consolidated results reflect the acquisition-related costs of
purchasing The Associates, including interest expense, goodwill,
and adjustments to record the fair value of net assets acquired.
These adjustments will vary over time as the acquired assets and
liabilities liquidate.
The consolidated financial statements on pages 2 through 4
inclusive should be read as an integral part of this review.
RESULTS OF OPERATIONS: THIRD QUARTER 1995 COMPARED WITH THIRD
QUARTER 1994
The Associates earned a record $171 million in the third quarter
of 1995, compared with $151 million a year ago. The increase
reflected higher levels of earning assets and improved net
interest margins.
USL Capital earned a record $31 million in the third quarter of
1995, compared with $27 million a year ago. The improvement
resulted primarily from higher levels of earning assets.
American Road earned $9 million in the third quarter of 1995,
compared with $14 million a year ago. The decrease reflected
primarily lower investment income.
FIRST NINE MONTHS 1995 COMPARED WITH FIRST NINE MONTHS 1994
The Company's net income in the first nine months of 1995 was
$478 million, compared with $435 million in the first nine months
of 1994. The increase resulted primarily from improved earnings
at The Associates and USL Capital, offset partially by lower
earnings at American Road.
The Associates earned a record $464 million in the first nine
months of 1995, compared with $400 million a year ago. The
improvement reflected primarily the same factors as those
described in the discussion of third quarter results of
operations.
USL Capital earned a record $87 million, compared with
$75 million a year ago. The improvement reflected higher levels
of earning assets and higher gains on asset sales.
American Road earned $5 million in the first nine months of 1995,
compared with $44 million a year ago. The decrease reflected
primarily lower underwriting results in floor plan products, the
restructuring of the annuity investment portfolio, and the
dissolution of an operating subsidiary.
RECENT DEVELOPMENTS
Ford Motor Company ("Ford") has announced that it is reviewing
alternative strategies for the non-automotive affiliates of its
Financial Services operations. Alternatives being reviewed
include the sale by Ford Holdings of a portion of The Associates
and sale of all or a portion of USL Capital. No decisions have
been made at this time.
Ford Holdings has announced its intention to exchange for cash
its outstanding preferred stock (totaling about $2 billion) by
means of a cash-out merger, subject to approval by the holders of
a majority of the voting power of the outstanding capital stock
of Ford Holdings. Because Ford directly or indirectly owns all
the outstanding common stock of Ford Holdings, representing 75%
of the combined voting power of all classes of capital stock of
Ford Holdings, stockholder approval is assured. As provided in
-6-
<PAGE>
RECENT DEVELOPMENTS (Continued)
the terms of the preferred stock, Ford Holdings will pay the
preferred stockholders the liquidation preference of the stock,
i.e., the price at which the stock was originally issued,
plus accrued dividends. Ford Holdings expects to fund the
cash-out merger primarily with bank loans. It is anticipated
that the merger will become effective by the end of 1995.
However, see Part II., "Other Information", Item 1., "Legal
Proceedings", for a discussion of a lawsuit seeking to enjoin the
merger. Ford Holdings has filed with the Securities and Exchange
Commission (the "Commission") a Schedule 13E-3 and a Schedule 14C
relating to the merger, which are being reviewed by the
Commission.
The boards of directors of Ford and Ford Holdings have approved
a plan of reorganization of the Financial Services operations
that will affect Ford Holdings. The purpose of the reorganization
is to align more closely under a single subsidiary legal ownership
of the Financial Services affiliates with management responsibility
for such affiliates. The reorganization would take place regardless
of the potential sale of a portion of The Associates or the sale of
all or a portion of USL Capital. This plan of reorganization would
include the creation of a new subsidiary ("Newco") into which
Ford Holdings would contribute The Associates in exchange for
common stock of Newco and the assumption of certain debt of Ford Holdings
and into which Ford would contribute the common stock of one or more of
its Financial Services affiliates in exchange for a class of Newco common
stock that will have controlling voting power of Newco, but otherwise will
be equal to all other common stock of Newco as to the payment of dividends,
etc. Certain aspects of the reorganization are subject to regulatory
approvals.
American Road has agreed to sell its annuity business to SunAmerica Inc.
for $172.5 million. The sale is expected to be completed in early 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and investments in securities totaled $6.8
billion at September 30, 1995, up $816 million from December 31,
1994.
Net receivables and lease investments were $40.7 billion at
September 30, 1995, up $4.8 billion from December 31, 1994. The
increase reflected continued growth in earning assets at The
Associates and USL Capital.
Total debt was $38.1 billion at September 30, 1995, up $4.3
billion from December 31, 1994. The increase resulted primarily
from higher debt levels required to finance growth in earning
assets at The Associates and USL Capital.
The liability for annuity contracts was $3 billion at September
30, 1995, up $276 million from December 31, 1994.
Insurance premiums written by American Road were $203 million
during the first nine months of 1995, compared with $241 million
a year ago.
At September 30, 1995, the Company had approximately $11.7
billion of support facilities, all of which were contractually
committed. Less than 1% of these facilities were in use at that
date.
OTHER FINANCIAL INFORMATION
Coopers & Lybrand L.L.P., the Company's independent public
accountants, performed a limited review of the financial data
presented on pages 2 through 4 inclusive. The review was
performed in accordance with standards for such reviews
established by the American Institute of Certified Public
Accountants. The review did not constitute an audit;
accordingly, Coopers & Lybrand L.L.P. did not express an opinion
on the aforementioned data. The financial data include any
material adjustments or disclosures proposed by Coopers & Lybrand
L.L.P. as a result of their review.
-7-
<PAGE>
Part II. Other Information
---------------------------
Item 1. Legal Proceedings
- --------------------------
On November 3, 1995, a purported class action lawsuit was filed
in the Court of Chancery of Delaware, New Castle County by Weldon
D. Sanders on behalf of himself and all other holders of
outstanding preferred stock of Ford Holdings (the "plaintiffs")
against Ford Holdings, its directors and certain of its
affiliates (including Ford) (the "defendants"). The complaint
alleges among other things that in approving the cash-out merger
described under Part I., "Financial Information", Item 2.,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", the defendants breached their fiduciary
duties and contractual obligations. The plaintiffs seek an
unspecified amount of damages and seek to have the cash-out
merger enjoined. Ford Holdings believes the lawsuit is without
merit and that it will prevail in the matter.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
Please refer to the Exhibit Index on page 9 for Exhibits
12, 15, and 27.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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 HOLDINGS, INC.
------------------------------------
(Registrant)
Date: November 13, 1995 By: /s/ Eric A. Law
---------------------------------
Eric A. Law
Vice President - Controller
(principal Accounting officer)
-8-
EXHIBIT INDEX
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<TABLE>
<CAPTION>
Sequential
Page Number
Designation Description at Which Found
- ----------- ----------------------------------------------- --------------
<S> <C> <C>
Exhibit 12 Ford Holdings, Inc. and Subsidiaries 10
Calculation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
Exhibit 15 Letter of Coopers & Lybrand L.L.P., Independent 11
Public Accountants, November 10, 1995,
relating to Financial Information
Exhibit 27 Financial Data Schedule -- Ford Holdings, Inc. (Not included)
and Subsidiaries
-9-
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12
Ford Holdings, Inc. and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
Nine Months
------------------------
1995 1994
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<S> <C> <C>
Earnings (a)
Income before income taxes $ 778 $ 685
Adjusted fixed charges (b) 2,079 1,580
------ ------
Total earnings $2,857 $2,265
====== ======
Combined Fixed Charges and
Preferred Stock Dividends (a)
Interest expense $2,004 $1,527
Interest portion of rental expense 25 19
Preferred stock dividend requirements (c) 153 110
------ ------
Total combined fixed charges and preferred
stock dividends $2,182 $1,656
====== ======
Ratio of earnings to combined fixed
charges and preferred stock dividends 1.3 1.4
</TABLE>
- - - - - -
(a) For purposes of computing the ratio of earnings to
combined fixed charges and preferred stock dividends,
"earnings" include earnings before income taxes plus
adjusted fixed charges. "Combined fixed charges and
preferred stock dividends" consist of interest on borrowed
funds, amortization of debt discount, premium and issuance
expense, one-third of all rental expense (the portion
deemed representative of the interest factor) and preferred
stock dividend requirements.
(b) Adjusted fixed charges exclude the amount of interest
capitalized during the period and preferred stock dividend
requirements.
(c) Preferred stock dividend requirements have been increased
to an amount representing the pre-tax earnings which would
be required to cover such dividend requirements based on
Ford Holdings' effective income tax rates for the respective
periods.
-10-
Exhibit 15
Coopers certified public accountants
& Lybrand
Ford Holdings, Inc.
The American Road
Dearborn, Michigan
Re: Ford Holdings, Inc. Registration Statement Nos. 33-48743,
33-60232, 33-50419, 33-56335, and 33-56747 on Form S-3 and
Ford Holdings, Inc. and Ford Motor Company Registration
Statement Nos. 33-32641, 33-55474, and 33-55171 on Form S-3
We are aware that our report dated October 18, 1995 accompanying
the unaudited interim financial information of Ford Holdings, Inc.
for the periods ended September 30, 1995 and 1994 and included in
Ford Holdings, Inc. Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 will be incorporated by reference in the
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 that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
November 10, 1995
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Ford Holdings, Inc. - Financial Data Schedule
</LEGEND>
<CIK> 0000857775
<NAME> FORD HOLDINGS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 876
<SECURITIES> 5,887
<RECEIVABLES> 40,714
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,974
<CURRENT-LIABILITIES> 0
<BONDS> 38,100
<COMMON> 0
0
1,976
<OTHER-SE> 3,741
<TOTAL-LIABILITY-AND-EQUITY> 49,974
<SALES> 5,166
<TOTAL-REVENUES> 5,166
<CGS> 0
<TOTAL-COSTS> 4,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 548
<INTEREST-EXPENSE> 1,995
<INCOME-PRETAX> 778
<INCOME-TAX> 293
<INCOME-CONTINUING> 478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 478
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>