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Ford Motor Credit Company
QUARTERLY REPORT
ON FORM 10-Q
for the quarter ended
March 31, 2005
Filed pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 1-6368
Ford Motor Credit Company
(Exact name of registrant as specified in its charter)
Delaware 38-1612444
(State of incorporation) (I.R.S. employer identification no.)
One American Road, Dearborn, Michigan 48126
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (313) 322-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
----- -----
As of May 2, 2005, the registrant had outstanding 250,000 shares of Common
Stock. No voting stock of the registrant is held by non-affiliates of the
registrant.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
EXHIBIT INDEX APPEARS AT PAGE 36
================================================================================
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended March 31, 2005 and 2004
(in millions)
First Quarter
---------------------
2005 2004
-------- --------
(Unaudited)
Financing revenue
Operating leases $ 1,358 $ 1,574
Retail 1,070 1,071
Interest supplements and other support costs earned
from affiliated companies 843 856
Wholesale 251 189
Other 56 49
-------- --------
Total financing revenue 3,578 3,739
Depreciation on vehicles subject to operating leases (1,077) (1,307)
Interest expense (1,426) (1,329)
-------- --------
Net financing margin 1,075 1,103
Other revenue
Investment and other income related to sales
of receivables (Note 5) 445 492
Insurance premiums earned, net 52 60
Other income 170 228
-------- --------
Total financing margin and other revenue 1,742 1,883
Expenses
Operating expenses 528 517
Provision for credit losses (Note 4) 117 282
Insurance expenses 36 37
-------- --------
Total expenses 681 836
-------- --------
Income from continuing operations before income taxes 1,061 1,047
Provision for income taxes 387 383
-------- --------
Income from continuing operations before minority interests 674 664
Minority interests in net income of subsidiaries 1 -
-------- --------
Income from continuing operations 673 664
Income from discontinued/held-for-sale operations 37 24
-------- --------
Net income $ 710 $ 688
======== ========
The accompanying notes are an integral part of the financial statements.
-1-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
March 31, December 31,
2005 2004
----------- -----------
(Unaudited)
ASSETS
Cash and cash equivalents (Note 1) $ 13,091 $ 12,668
Investments in securities 663 653
Finance receivables, net (Note 2) 103,494 110,851
Net investment in operating leases (Note 3) 21,741 21,866
Retained interest in securitized assets (Note 5) 8,028 9,166
Notes and accounts receivable from affiliated companies 1,423 1,780
Derivative financial instruments (Note 9) 4,543 6,930
Assets of discontinued/held-for-sale operations 2,456 2,186
Other assets 6,114 6,521
---------- ----------
Total assets $ 161,553 $ 172,621
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and other $ 1,628 $ 1,645
Affiliated companies 1,489 819
---------- ----------
Total accounts payable 3,117 2,464
Debt (Note 7) 132,744 144,274
Deferred income taxes, net 7,926 7,593
Derivative financial instruments (Note 9) 863 911
Liabilities of discontinued/held-for-sale operations 112 93
Other liabilities and deferred income 5,173 5,802
---------- ----------
Total liabilities 149,935 161,137
Minority interests in net assets of subsidiaries 14 13
Stockholder's equity
Capital stock, par value $100 a share, 250,000 shares
authorized, issued and outstanding 25 25
Paid-in surplus (contributions by stockholder) 5,117 5,117
Accumulated other comprehensive income (Note 8) 736 855
Retained earnings (Note 8) 5,726 5,474
---------- ----------
Total stockholder's equity 11,604 11,471
---------- ----------
Total liabilities and stockholder's equity $ 161,553 $ 172,621
========== ==========
The accompanying notes are an integral part of the financial statements.
-2-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS FROM CONTINUING OPERATIONS
For the Periods Ended March 31, 2005 and 2004
(in millions)
First Quarter
---------------------------
2005 2004
---------- -----------
(Unaudited)
Cash flows from operating activities
Income from continuing operations $ 673 $ 664
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Provision for credit losses 117 282
Depreciation and amortization 1,167 1,413
Net gain on sales of finance receivables (25) (34)
Increase in deferred income taxes 299 396
Decrease in other assets 1,765 2,663
Decrease in other liabilities (495) (465)
All other operating activities 25 (53)
---------- -----------
Net cash provided by operating activities 3,526 4,866
---------- -----------
Cash flows from investing activities
Purchase of finance receivables (other than wholesale) (11,027) (11,260)
Collection of finance receivables (other than wholesale) 10,413 9,949
Purchase of operating lease vehicles (3,130) (2,661)
Liquidation of operating lease vehicles 2,055 2,101
Increase in wholesale receivables (1,255) (155)
Net change in retained interest (98) (1,295)
Decrease/(increase) notes receivable with affiliates 129 (24)
Proceeds from sale of receivables 9,739 2,602
Purchase of investment securities (114) (147)
Proceeds from sale/maturity of investment securities 95 192
All other investing activities (215) 268
---------- -----------
Net cash provided by/(used in) investing activities 6,592 (430)
---------- -----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 5,233 3,414
Principal payments on long-term debt (15,490) (12,354)
Change in short-term debt, net 1,198 2,257
Cash dividends paid (450) (900)
All other financing activities (23) (13)
---------- -----------
Net cash used in financing activities (9,532) (7,596)
Effect of exchange rate changes on cash and cash equivalents (163) (44)
---------- -----------
Net change in cash and cash equivalents 423 (3,204)
Cash and cash equivalents, beginning of period 12,668 15,698
---------- -----------
Cash and cash equivalents, end of period $ 13,091 $ 12,494
========== ===========
Supplementary cash flow information
Interest paid $ 1,733 $ 1,612
Taxes paid 33 29
The accompanying notes are an integral part of the financial statements.
-3-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include Ford Motor Credit
Company, its controlled domestic and foreign subsidiaries and joint ventures,
and consolidated variable interest entities ("VIEs") in which Ford Motor Credit
Company is the primary beneficiary (collectively referred to herein as "Ford
Credit", "we", "our" or "us"). Affiliates that we do not consolidate, but for
which we have significant influence over operating and financial policies, are
accounted for using the equity method. We are an indirect, wholly owned
subsidiary of Ford Motor Company ("Ford").
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America for
interim financial information, and instructions to the Form 10-Q and Rule 10-01
of Regulation S-X. In the opinion of management, these unaudited financial
statements include all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair statement of the results for interim periods.
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 our
Annual Report on Form 10-K for the year ended December 31, 2004.
We reclassified certain prior year amounts in our consolidated financial
statements to conform to current period presentation.
Cash
At March 31, 2005 and December 31, 2004, approximately $1.7 billion and
$1.4 billion, respectively, of our cash balance is legally isolated, of which
$1.5 billion and $1.3 billion, respectively, supports our consolidated
securitization special purpose entities ("SPEs").
-4-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 2. FINANCE RECEIVABLES
Net finance receivables at March 31, 2005 and December 31, 2004 were as
follows (in millions):
March 31, December 31,
2005 2004
----------- -----------
(Unaudited)
Retail $ 74,866 $ 83,719
Wholesale 25,187 23,930
Other 5,385 5,331
----------- -----------
Total finance receivables, net of unearned income (a) 105,438 112,980
Less: Allowance for credit losses (1,944) (2,129)
----------- -----------
Finance receivables, net (b) $ 103,494 $ 110,851
=========== ===========
(a) At March 31, 2005 and December 31, 2004, includes $1.9 billion and
$1.8 billion, respectively, of primarily wholesale receivables with
entities that are reported as consolidated subsidiaries of Ford.
(b) At March 31, 2005 and December 31, 2004, includes $19.4 billion and
$16.9 billion, respectively, of receivables that have been sold for legal
purposes to consolidated securitization SPEs and are available only for
repayment of debt issued by those entities, and to pay other securitization
investors and other participants; they are not available to pay our other
obligations or the claims of our other creditors.
NOTE 3. NET INVESTMENT IN OPERATING LEASES
Net investment in operating leases at March 31, 2005 and December 31, 2004
were as follows (in millions):
March 31, December 31,
2005 2004
------------ -----------
(Unaudited)
Vehicles, at cost, including initial direct costs $ 29,198 $ 29,756
Less: Accumulated depreciation (7,178) (7,585)
Less: Allowance for credit losses (279) (305)
----------- -----------
Net investment in operating leases (a) $ 21,741 $ 21,866
=========== ===========
(a) At March 31, 2005 and December 31, 2004, includes interests in operating
leases and the related vehicles of $2.4 billion and $2.5 billion,
respectively, that have been transferred for legal purposes to consolidated
securitization SPEs and are available only for repayment of debt issued by
those entities, and to pay other securitization investors and other
participants; they are not available to pay our other obligations or the
claims of our other creditors.
-5-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 4. ALLOWANCE FOR CREDIT LOSSES
Following is an analysis of the allowance for credit losses related to
finance receivables and operating leases for the periods ended March 31 (in
millions):
First Quarter
---------------------
2005 2004
--------- ---------
(Unaudited)
Balance, beginning of period $ 2,434 $ 2,908
Provision for credit losses 117 282
Deductions
Charge-offs 311 430
Recoveries (130) (115)
--------- ---------
Net charge-offs 181 315
Other changes, principally amounts related to finance
receivables sold and translation adjustments 147 27
--------- ---------
Net deductions 328 342
--------- ---------
Balance, end of period $ 2,223 $ 2,848
========= =========
NOTE 5. SALES OF RECEIVABLES
Retained Interest
Components of retained interest in securitized assets at March 31, 2005 and
December 31, 2004 included the following (in millions):
March 31, December 31,
2005 2004
----------- -----------
(Unaudited)
Interest in sold wholesale receivables $ 5,710 $ 6,904
Residual interest in securitization transactions 969 756
Subordinated securities 788 875
Restricted cash held for benefit of securitization SPEs 561 503
Senior securities - 128
----------- -----------
Retained interest in securitized assets $ 8,028 $ 9,166
=========== ===========
Most of the retained interest in sold wholesale receivables ($4.1 billion
and $5.5 billion at March 31, 2005 and December 31, 2004, respectively)
represents our undivided interest in wholesale receivables that are available to
support the issuance of additional securities by a securitization SPE; the
balance represents credit enhancements.
Retained interests are recorded at fair value. For wholesale receivables,
book value approximates fair value because of their short-term maturities. The
fair value of subordinated and senior securities is estimated based on market
prices. In determining the fair value of residual interest in securitization
transactions, we discount the present value of the projected cash flows retained
at various discount rates based on economic factors in individual countries.
Investments in subordinated securities and restricted cash are senior to the
residual interest in securitization transactions.
-6-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 5. SALES OF RECEIVABLES (Continued)
Investment and Other Income
The following table summarizes the activity related to off-balance sheet
sales of receivables reported in investment and other income for the periods
ended March 31 (in millions):
First Quarter
-----------------
2005 2004
------- -------
(Unaudited)
Net gain on sales of receivables $ 25 $ 34
Income on interest in sold wholesale receivables
and retained securities 116 136
Servicing fees 99 104
Income on residual interest and other 205 218
------- -------
Investment and other income related to sales of receivables $ 445 $ 492
======= =======
On-Balance Sheet Securitization SPEs
At March 31, 2005 and December 31, 2004, finance receivables of
$19.4 billion and $16.9 billion, respectively, have been sold for legal purposes
to consolidated securitization SPEs. In addition, interests in operating leases
and the related vehicles of $2.4 billion at March 31, 2005 and $2.5 billion at
December 31, 2004 have been transferred for legal purposes to consolidated
securitization SPEs. These receivables and interests in operating leases and the
related vehicles are available only to pay the obligations or claims of the
SPEs; they are not available to pay our other obligations or the claims of our
other creditors. The associated debt issued by the SPEs was $17.9 billion and
$16.5 billion at March 31, 2005 and December 31, 2004, respectively, and
includes both asset-backed commercial paper and notes payable out of collections
on these receivables and interests in operating leases and the related vehicles.
This debt is the legal obligation of the SPEs, but for financial statement
reporting purposes is reported as debt on our balance sheet.
NOTE 6. VARIABLE INTEREST ENTITIES
We have investments in certain joint ventures deemed to be VIEs of which we
are not the primary beneficiary. The risks and rewards associated with our
interests in these entities are based primarily on ownership percentages. Our
maximum exposure (approximately $180 million at March 31, 2005) to any potential
losses associated with these VIEs is limited to our equity investments and,
where applicable, receivables due from the VIEs.
We also sell, in contractually committed agreements, finance receivables and
notes (backed by interests in vehicles subject to operating leases) to
bank-sponsored asset-backed commercial paper issuers that are SPEs of the
sponsor bank; these SPEs are not consolidated by us. At March 31, 2005 and
December 31, 2004, approximately $6.4 billion and $5.0 billion, respectively, of
finance receivables and notes have been sold.
-7-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 7. DEBT
At March 31, 2005 and December 31, 2004, debt was as follows (in millions):
Interest Rates
-----------------------------
Average Weighted-
Contractual (a) Average (b)
--------------- ------------- March 31, December 31,
2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ----------- -----------
(Unaudited)
Short-term debt
Asset-backed commercial paper (c) 2.5% 2.1% $ 14,192 $ 12,612
Commercial paper 2.5% 2.4% 8,220 8,916
Floating rate demand notes 3.0% 2.5% 7,886 7,718
Other short-term debt (d) 5.3% 4.8% 2,696 2,562
--------- ----------
Total short-term debt 2.8% 2.5% 3.2% 2.8% 32,994 31,808
--------- ----------
Long-term debt
Senior indebtedness
Notes payable within one year (e) 25,724 30,073
Notes payable after one year (f) 74,087 82,454
Unamortized discount (61) (61)
--------- ----------
Total long-term debt (g) 5.8% 5.8% 4.4% 4.4% 99,750 112,466
--------- ----------
Total debt 5.1% 5.0% 4.1% 4.0% $ 132,744 $ 144,274
========= ==========
(a) First quarter 2005 and fourth quarter 2004 average contractual interest
rates exclude the effects of interest rate swap agreements and facility
fees.
(b) First quarter 2005 and fourth quarter 2004 weighted-average interest rates
include the effects of interest rate swap agreements and facility fees.
(c) Amounts represent asset-backed commercial paper issued by FCAR Owner Trust
("FCAR"), a consolidated securitization SPE, which is payable out of
collections on the receivables supporting FCAR. This debt is the legal
obligation of FCAR.
(d) Includes $66 million and $17 million with affiliated companies at
March 31, 2005 and December 31, 2004, respectively.
(e) Includes $27 million and $77 million with affiliated companies at
March 31, 2005 and December 31, 2004, respectively.
(f) Includes $32 million with affiliated companies at both March 31, 2005 and
December 31, 2004.
(g) Includes debt of $3,685 million and $3,845 million at March 31, 2005 and
December 31, 2004, respectively, issued by consolidated securitization SPEs
which is payable out of collections on the finance receivables or interests
in operating leases and the related vehicles transferred to the SPEs. This
debt is the legal obligation of the securitization SPEs. Average
contractual and weighted-average interest rates for total long-term debt
represent the rates for both notes payable within one year and notes
payable after one year.
-8-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 8. RETAINED EARNINGS AND COMPREHENSIVE INCOME
Retained Earnings
The following table summarizes retained earnings for the periods ended
March 31 (in millions):
First Quarter
------------------
2005 2004
-------- --------
(Unaudited)
Retained earnings, beginning balance $ 5,474 $ 6,912
Net income 710 688
Dividends (a) (458) (900)
-------- --------
Retained earnings, ending balance $ 5,726 $ 6,700
======== ========
(a) Dividends for the period ended March 31, 2005 included the transfer of a
Ford Credit affiliate to Ford, with a net book value of $8 million.
Comprehensive Income
The following table summarizes comprehensive income for the periods ended
March 31 (in millions):
First Quarter
------------------
2005 2004
-------- --------
(Unaudited)
Net income $ 710 $ 688
Other comprehensive income (119) 20
-------- --------
Total comprehensive income $ 591 $ 708
======== ========
Comprehensive income includes foreign currency translation adjustments,
unrealized gains and losses on investments in securities, unrealized gains and
losses on certain derivative instruments, and unrealized gains and losses on
retained interests in securitized assets (unrealized amounts are net of related
tax effects).
-9-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS
Income Statement Impact
The ineffective portion of both fair value and cash flow hedges,
amortization of mark-to-market adjustments associated with hedging relationships
that have been terminated, and mark-to-market adjustments that reflect changes
in exchange and interest rates for non-designated hedging activity are recorded
in other income and are shown for the periods ended March 31 (in millions):
First Quarter
----------------
2005 2004
------- -------
(Unaudited)
(Loss)/income from continuing operations before income taxes $ (50) $ 47
Balance Sheet Impact
The fair value of derivatives reflects the price that a third party would be
willing to pay or receive in arm's length transactions for assuming our position
in the derivatives transaction and includes mark-to-market adjustments to
reflect the effects of changes in interest rates, accrued interest and, for
derivatives with a foreign currency component, a revaluation adjustment. The
following table summarizes, at March 31, 2005 and December 31, 2004, the
estimated fair value of our derivative financial instruments, taking into
consideration the effects of legally enforceable netting agreements, which allow
us to settle positive and negative positions with the same counterparty on a net
basis (in millions):
March 31, 2005 December 31, 2004
------------------------ -----------------------
Fair Fair Fair Fair
Value Value Value Value
Assets Liabilities Assets Liabilities
-------- -------------- --------- ------------
(Unaudited)
Foreign currency swaps $ 2,492 $ 623 $ 4,201 $ 816
Interest rate swaps 2,144 148 3,074 180
Forwards and options (a) - 185 - 260
Impact of netting agreements (93) (93) (345) (345)
-------- ------- -------- -------
Total derivative financial instruments $ 4,543 $ 863 $ 6,930 $ 911
======== ======= ======== =======
(a) Includes internal forward contracts between Ford Credit and an affiliated
company.
Period-to-period changes in the derivative asset and liability amounts may
be impacted by net interest or foreign currency settlements, changes in foreign
exchange and interest rates, and the notional amount of derivatives outstanding.
NOTE 10. DISPOSITIONS
During the fourth quarter of 2004, we committed to a plan to sell Triad
Financial Corporation, our operation in the United States that specializes in
automobile retail installment sales contracts with borrowers who generally would
not be expected to qualify, based on their credit worthiness, for traditional
financing sources such as those provided by commercial banks or automobile
manufacturers' affiliated finance companies. We completed the sale of this
business during April 2005 for an amount approximately equal to book value.
-10-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 11. SEGMENT INFORMATION
We divide our operating segments based on geographic regions: the North
America segment (includes operations in the United States and Canada) and the
International segment (includes operations in all other countries). We measure
the performance of our segments primarily on an income before income taxes
basis, after excluding the impact to earnings from hedge ineffectiveness, and
other related adjustments. These adjustments are included in unallocated risk
management and excluded in assessing segment performance because our risk
management activities are carried out on a centralized basis at the corporate
level, with only certain elements allocated to our segments. The segments are
presented on a managed basis, which includes on-balance sheet receivables and
securitized off-balance sheet receivables activity. The effect of off-balance
sheet securitizations is included in unallocated/eliminations.
Key operating data for our operating segments for the periods ended March 31
were as follows (in millions):
Unallocated/Eliminations
----------------------------------- Ford
North Unallocated Effect of Credit
America International Risk Sales of Financial
Segment Segment Management Receivables Total Statements
---------- ------------- ----------- ----------- --------- ----------
(Unaudited)
First Quarter 2005
Revenue $ 3,555 $ 1,012 $ (50) $ (272) $ (322) $ 4,245
Income
Income from continuing operations
before income taxes 852 259 (50) - (50) 1,061
Provision for income taxes 316 90 (19) - (19) 387
Income from continuing operations 536 169 (32) - (32) 673
Other disclosures
Depreciation on vehicles subject
to operating leases 980 97 - - - 1,077
Interest expense 1,203 465 - (242) (242) 1,426
Provision for credit losses 102 15 - - - 117
Finance receivables (including net
investment in operating leases) 123,234 41,145 185 (39,329) (39,144) 125,235
Total assets 147,959 44,710 185 (31,301) (31,116) 161,553
First Quarter 2004
Revenue $ 3,894 $ 964 $ 47 $ (386) $ (339) $ 4,519
Income
Income from continuing operations
before income taxes 774 226 47 - 47 1,047
Provision for income taxes 287 80 16 - 16 383
Income from continuing operations 487 146 31 - 31 664
Other disclosures
Depreciation on vehicles subject
to operating leases 1,201 106 - - - 1,307
Interest expense 1,121 460 - (252) (252) 1,329
Provision for credit losses 241 41 - - - 282
Finance receivables (including net
investment in operating leases) 133,310 38,964 447 (45,415) (44,968) 127,306
Total assets 158,617 45,002 447 (32,561) (32,114) 171,505
-11-
Item 1. Financial Statements (Continued)
FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS (Continued)
NOTE 12. GUARANTEES
The fair values of guarantees and indemnifications issued since
December 31, 2002 are recorded in the financial statements and are de minimis.
At March 31, 2005, the following guarantees were issued and outstanding:
Guarantees of certain obligations of unconsolidated and other affiliates:
In some cases, we have guaranteed debt and other financial obligations of
unconsolidated affiliates, including joint ventures and Ford. Expiration dates
vary, and guarantees will terminate on payment and/or cancellation of the
obligation. A payment would be triggered by failure of the guaranteed party to
fulfill its obligation covered by the guarantee. In some circumstances, we are
entitled to recover from Ford or an affiliate of Ford amounts paid by us under
the guarantee. However, our ability to enforce these rights is sometimes stayed
until the guaranteed party is paid in full. The maximum potential payments under
these guarantees total approximately $237 million.
Indemnifications: We regularly evaluate the probability of having to incur
costs associated with indemnifications contained in contracts that we are a
party to and have accrued for expected losses that are probable and for which a
loss can be estimated. During the first quarter of 2005, there were no
significant changes to our indemnifications.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We were incorporated in Delaware in 1959. We are an indirect, wholly owned
subsidiary of Ford Motor Company ("Ford"). We have operations in 36 countries
and support Ford, Lincoln, Mercury, Aston Martin, Jaguar, Land Rover, Mazda and
Volvo dealers and customers. Our principal executive offices are located at One
American Road, Dearborn, Michigan 48126, and our telephone number is
(313) 322-3000.
Our North America segment includes our operations in the United States and
Canada. Our International segment includes our operations in all other countries
in which we do business directly and indirectly. Our International segment
includes operations in three main regions: Europe, Asia-Pacific and Latin
America. These operations offer substantially similar products and services,
subject to local legal restrictions and market conditions. For a more detailed
discussion of our business segments and the geographic scope of our operations,
refer to the "Overview" section of Item 1 of our Annual Report on Form 10-K for
the year ended December 31, 2004 ("2004 10-K Report").
We review our business performance from several perspectives, including:
o On-balance sheet basis - includes the receivables we own and
receivables sold for legal purposes that remain on our balance sheet,
o Securitized off-balance sheet basis - includes receivables sold in
securitization transactions that are not reflected on our balance
sheet,
o Managed basis - includes on-balance sheet and securitized off-balance
sheet receivables that we continue to service, and
o Serviced basis - includes managed receivables and receivables sold in
whole-loan sale transactions where we retain no interest in the sold
receivables, but which we continue to service.
We analyze our financial performance primarily on an on-balance sheet and
managed basis. We retain interests in receivables sold in off-balance sheet
securitizations and, with respect to subordinated retained interests, we have
credit risk. As a result, we evaluate charge-offs, receivables and leverage on a
managed basis as well as on an on-balance sheet basis. In contrast, we do not
have the same financial interest in the performance of receivables sold in
whole-loan sale transactions. As a result, we generally review the performance
of our serviced portfolio only to evaluate the effectiveness of our origination
and collection activities. To evaluate the performance of these activities, we
monitor a number of serviced performance measures, such as repossession
statistics, losses on repossessions and the number of bankruptcy filings.
We measure the performance of our North America segment and our
International segment primarily on an income before income taxes basis, after
excluding the impact to earnings from hedge ineffectiveness, and other related
adjustments. For further discussion regarding our segments, see Note 11 of our
Notes to the Financial Statements.
Results of Operations
Discontinued Operations
During the fourth quarter of 2004, we committed to a plan to sell Triad
Financial Corporation, our operation in the United States that specializes in
automobile retail installment sales contracts with borrowers who generally would
not be expected to qualify, based on their credit worthiness, for traditional
financing sources such as those provided by commercial banks or automobile
manufacturers' affiliated finance companies. We completed the sale of this
business during April 2005 for an amount approximately equal to book value.
-13-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
First Quarter 2005 Compared with First Quarter 2004
In the first quarter of 2005, net income was up $22 million compared with a
year ago. Our income from continuing operations before income taxes was up
$14 million. The increase in earnings primarily resulted from improved credit
loss performance, offset partially by the impact of lower receivable levels and
higher borrowing costs.
Results of our operations by business segment for the first quarter of 2005
and 2004 are shown below:
First Quarter
----------------------------------------
2005
Over/(Under)
2005 2004 2004
---------- ----------- ------------
Income from continuing operations before income taxes (in millions)
North America segment............................ $ 852 $ 774 $ 78
International segment............................ 259 226 33
Unallocated/eliminations......................... (50) 47 (97)
---------- ---------- ---------
Income from continuing operations before income
taxes......................................... 1,061 1,047 14
Provision for income taxes and minority interests.. (388) (383) (5)
Income from discontinued/held-for-sale operations.. 37 24 13
---------- --------- ---------
Total net income.............................. $ 710 $ 688 $ 22
========== ========= =========
The increase in North America segment income primarily reflected improved
credit loss performance offset partially by the impact of lower receivable
levels and higher borrowing costs.
The increase in International segment income primarily reflected improved
residual performance in Germany, improved credit loss performance and favorable
changes in currency exchange rates. These increases were offset partially by the
non-recurrence of the 2004 gain on sale of the full-service leasing portfolio in
the United Kingdom.
The decrease in the unallocated/eliminations category income reflected the
unfavorable market valuation of derivative instruments and associated exposures.
-14-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Placement Volume and Financing Share
Total worldwide financing contract placement volumes for new and used
vehicles are shown below:
First Quarter
-------------------
2005 2004
-------- ---------
(in thousands)
Worldwide
Retail installment....................... 578 598
Operating and finance leases............. 123 112
--- ---
Total financing volume................. 701 710
=== ===
North America segment
United States............................ 410 398
Canada................................... 31 36
--- ---
Total North America segment............ 441 434
International segment
Europe................................... 186 202
Other international...................... 74 74
--- ---
Total International segment............ 260 276
=== ===
Total financing volume................. 701 710
=== ===
Shown below are our financing shares of new Ford, Lincoln and Mercury brand
vehicles sold by dealers in the United States and Ford brand vehicles sold by
dealers in Europe. Also shown below are our wholesale financing shares of new
Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United
States, excluding fleet, and of new Ford brand vehicles acquired by dealers in
Europe:
First Quarter
-------------------
2005 2004
-------- ---------
United States
Financing share - Ford, Lincoln and Mercury
Retail installment and lease........... 43% 38%
Wholesale.............................. 82 84
Europe
Financing share - Ford
Retail installment and lease........... 26% 26%
Wholesale.............................. 97 96
North America Segment. In the first quarter of 2005, our total financing
contract placement volumes were 441,000 contracts, up 7,000 contracts compared
with a year ago reflecting an increase in new retail and lease contracts, offset
partially by lower used vehicle contracts. Our financing share of new Ford,
Lincoln and Mercury brand cars and light trucks sold by dealers in the United
States was 43% compared with 38% a year ago, resulting from favorable
Ford-sponsored marketing programs.
In the first quarter of 2005, the average original term for new Ford,
Lincoln and Mercury brand vehicles was about 57 months in the United States
compared with 58 months a year ago. For 2004 and 2003, the average original
terms were about 58 and 59 months, respectively.
In the United States, the average amount financed for new Ford, Lincoln and
Mercury brand vehicles under retail installment sale contracts was about $23,274
in the first quarter of 2005, compared with $25,500 a year ago. For 2004 and
2003, the amounts were about $24,000 and $25,088 respectively. The corresponding
average customer payment due for all contracts, including retail installment
sale contracts with non-uniform payment periods, was about $515 in the first
quarter of 2005 and $535 a year ago. For 2004 and 2003, the amounts were about
$505 and $510 respectively. Excluding the effects of non-uniform payment
contracts, the average monthly customer payment due was about $478 in the first
quarter of 2005 and $494 a year ago. For 2004 and 2003, the amounts were about
$477 and $478, respectively.
International Segment. In the first quarter of 2005, our total financing
contract placement volumes were 260,000 contracts, down 16,000 contracts
compared with a year ago, reflecting lower volumes in Europe, primarily due to
lower Ford-sponsored marketing programs and lower used car volumes.
-15-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Financial Condition
Finance Receivables and Operating Leases
Our financial condition is impacted significantly by the level of our
receivables, which are shown below:
March 31, December 31,
Receivables 2005 2004
------------- -------------
(in billions)
On-Balance Sheet
(including on-balance sheet securitizations)
Finance receivables
Retail installment.......................... $ 73.1 $ 81.7
Wholesale................................... 25.1 23.8
Other....................................... 5.3 5.3
--------- ---------
Total finance receivables, net........... 103.5 110.8
Net investment in operating leases............. 21.7 21.9
--------- ---------
Total on-balance sheet................... $ 125.2 $ 132.7
========= =========
Memo: Allowance for credit losses included
above................................... $ 2.2 $ 2.4
Securitized Off-Balance Sheet
Finance receivables
Retail installment.......................... $ 20.1 $ 16.7
Wholesale................................... 19.2 18.9
Other....................................... -- --
--------- ---------
Total finance receivables................ 39.3 35.6
Net investment in operating leases............. -- --
--------- ---------
Total securitized off-balance sheet...... $ 39.3 $ 35.6
========= =========
Managed
Finance receivables
Retail installment.......................... $ 93.2 $ 98.4
Wholesale................................... 44.3 42.7
Other....................................... 5.3 5.3
--------- ---------
Total finance receivables, net........... 142.8 146.4
Net investment in operating leases............. 21.7 21.9
--------- ---------
Total managed............................ $ 164.5 $ 168.3
========= =========
Serviced....................................... $ 169.3 $ 172.3
On-Balance Sheet Receivables. On-balance sheet net finance receivables and
net investment in operating leases at March 31, 2005, were $125.2 billion, down
$7.5 billion from year-end 2004. At March 31, 2005 and December 31, 2004,
finance receivables of $19.4 billion and $16.9 billion, respectively, have been
sold for legal purposes to consolidated securitization special purpose entities
("SPEs"). In addition, interests in operating leases and the related vehicles of
$2.4 billion at March 31, 2005 and $2.5 billion at December 31, 2004 have been
transferred for legal purposes to consolidated securitization SPEs. These
receivables and interests in operating leases and the related vehicles are
available only to pay the obligations or claims of the SPEs; they are not
available to pay our other obligations or the claims of our other creditors.
Securitized Off-Balance Sheet Receivables. Total securitized off-balance
sheet receivables increased $3.7 billion from year-end 2004.
Managed Receivables. Total managed receivables decreased $3.8 billion from
year-end 2004, primarily reflecting the portfolio effect of lower retail and
operating lease contract placement volumes and the impact of a whole-loan sale
transaction during the first quarter of 2005.
Serviced Receivables. Serviced receivables include our managed receivables
and receivables that we sold in whole-loan sale transactions. We continue to
service the receivables sold in whole-loan sale transactions.
-16-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Credit Risk
Credit risk is the possibility of loss from a customer's failure to make
payments according to contract terms. Credit risk has a significant impact on
our business. We actively manage the credit risk of our consumer and
non-consumer portfolios to balance our level of risk and return. The allowance
for credit losses reflected on our balance sheet is our estimate of the credit
losses for receivables and leases that are impaired at the points in time shown
on our balance sheet.
Credit Loss Metrics
Worldwide
The following table shows actual credit losses net of recoveries
("charge-offs") worldwide for the various categories of financing during the
periods indicated. Reacquired receivables reflect the amount of receivables that
resulted from the accounting consolidation of FCAR Owner Trust ("FCAR") in the
second quarter of 2003. The loss-to-receivables ratios, which equal annualized
charge-offs divided by the average amount of receivables outstanding for the
period, are shown for our on-balance sheet and managed portfolios.
First Quarter
----------------------
2005 2004
-------- ---------
Charge-offs (in millions)
On-Balance Sheet
Retail installment and lease................... $ 167 $ 313
Wholesale...................................... 17 3
Other.......................................... (3) (1)
-------- --------
Total on-balance sheet........................ $ 181 $ 315
======== ========
Reacquired Receivables (retail)................... 9 25
Securitized Off-Balance Sheet
Retail installment and lease................... $ 39 $ 89
Wholesale...................................... -- --
Other.......................................... -- --
-------- --------
Total securitized off-balance sheet........... $ 39 $ 89
======== ========
Managed
Retail installment and lease................... $ 215 $ 427
Wholesale...................................... 17 3
Other.......................................... (3) (1)
-------- --------
Total managed................................. $ 229 $ 429
======== ========
Loss-to-Receivables Ratios
On-Balance Sheet
Retail installment and lease................... 0.67% 1.23%
Wholesale...................................... 0.28 0.05
Total including other......................... 0.56% 0.97%
Managed
Retail installment and lease................... 0.73% 1.35%
Wholesale...................................... 0.16 0.03
Total including other......................... 0.55% 0.98%
Most of our charge-offs are related to retail installment sale and lease
contracts. Charge-offs depend on the number of vehicle repossessions, the unpaid
balance outstanding at the time of repossession, and the net resale price of
repossessed vehicles and other losses associated with impaired accounts and
unrecoverable vehicles. We also incur credit losses on our wholesale loans, but
default rates for these receivables historically have been substantially lower
than those for retail installment sale and lease contracts.
-17-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
On-Balance Sheet. In the first quarter of 2005, charge-offs for our
on-balance sheet portfolio declined $134 million from a year ago, primarily
reflecting fewer repossessions and a lower average loss per repossession in our
U.S. retail installment and operating lease portfolio. These improvements
resulted from a higher quality retail installment and lease portfolio and
enhancements to our collection practices. Lower levels of receivables resulting
from lower retail installment and operating lease contract placement volumes
over the past several years also reduced charge-offs. The on-balance sheet
loss-to-receivables ratio declined to 0.56% in the first quarter of 2005 from
0.97% a year ago, primarily reflecting improvements in charge-offs as described
above.
Securitized Off-Balance Sheet. In the first quarter of 2005, charge-offs for
our securitized off-balance sheet portfolio declined $50 million from a year
ago, primarily reflecting fewer repossessions and a lower average loss per
repossession in our U.S. retail installment portfolio, and lower off-balance
sheet securitization activity.
Managed. In the first quarter of 2005, charge-offs for our managed portfolio
declined $200 million from a year ago for the same reasons as described above in
the on-balance sheet discussion. The loss-to-receivables ratio for our managed
portfolio was 0.55%, down from 0.98% a year ago.
Ford, Lincoln and Mercury Brand Retail and Operating Lease
The following table shows the charge-offs, loss-to-receivables,
repossession, bankruptcy and delinquency statistics for our Ford, Lincoln and
Mercury brand U.S. retail installment sale and lease portfolio, which was
approximately 60% of our worldwide-managed portfolio of retail installment
receivables and net investment in operating leases at March 31, 2005. Trends and
causal factors are generally consistent with the above discussion of worldwide
results.
First Quarter
-------------------------
2005 2004
---------- ----------
On-Balance Sheet
Charge-offs (in millions)......................... $ 96 $ 192
Loss-to-receivables ratios....................... 0.65% 1.29%
Managed
Charge-offs (in millions)......................... $ 129 $ 277
Loss-to-receivables ratios....................... 0.72% 1.46%
Other Metrics -- Serviced
Repossessions (in thousands)...................... 30 46
Repossession ratios............................... 2.41% 3.24%
Average loss per repossession..................... $ 6,250 $ 6,750
New bankruptcy filings (in thousands)............. 18 23
Over-60 day delinquency ratio*.................... 0.11% 0.21%
- - - - -
* Delinquencies are expressed as a percent of the end-of-period accounts outstanding
for non-bankrupt accounts.
Other Metrics - Serviced. Repossessions are shown in aggregate and as a
percent of the average number of accounts outstanding during the relevant
periods, defined as the repossession ratio. The decrease in repossessions
primarily reflected a higher quality receivable portfolio and enhancements to
our collection practices. Our average loss per repossession was down $500 per
unit from a year ago primarily reflecting higher used vehicle prices.
-18-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Allowance for Credit Losses
Our allowance for credit losses and our allowance for credit losses as a
percentage of end-of-period receivables, for our on-balance sheet portfolio, are
shown below:
March 31, December 31,
2005 2004
---------- ------------
Allowance for Credit Losses (in billions)
Retail installment and lease.................. $ 2.1 $ 2.3
Wholesale..................................... 0.1 0.1
Other......................................... 0.0 0.0
---------- ----------
Total allowance for credit losses........... $ 2.2 $ 2.4
========== ==========
As a Percentage of End-of-Period Receivables
Retail installment and lease.................. 2.14% 2.14%
Wholesale..................................... 0.43 0.55
Other......................................... 0.73 0.74
Total....................................... 1.74% 1.80%
The decrease in the allowance for credit losses of approximately
$200 million primarily reflected the improved charge-off performance in the
United States and the impact of lower receivables.
-19-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Residual Risk
We are exposed to residual risk on operating leases, Red Carpet Option
contracts and similar balloon payment products where the customer has the right
to return the financed vehicle to us. Residual risk is the possibility that the
amount we obtain from returned vehicles will be less than our estimate of the
expected residual value for the vehicle.
Retail Operating Lease Experience
We use various statistics to monitor our residual risk:
o Placement volume measures the number of leases we purchase in a given
period.
o Termination volume measures the number of vehicles for which the lease
has ended in the given period.
o Return volume reflects the number of vehicles returned to us by
customers at lease end.
The following table shows operating lease placement, termination and
return volumes for our North America segment, which accounted for 93% of our
total investment in operating leases at March 31, 2005:
First Quarter
-----------------------
2005 2004
---------- ----------
(in thousands)
Placements........... 84 75
Terminations......... 106 125
Returns.............. 69 79
In the first quarter of 2005, North America placement volumes were up
9,000 units compared with the same period a year ago. The decline in termination
volumes and return volumes primarily reflected lower placement volumes in 2002
and 2003.
The following table shows the disposal channels we use to sell vehicles
returned to us at lease termination:
First Quarter
-----------------------
2005 2004
---------- ----------
Auctions............. 86% 94%
Other channels....... 14 6
The increase in vehicles disposed of through other channels primarily
reflected the impact of Ford, Lincoln and Mercury brand U.S. dealers
participating in a remarketing program.
-20-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Credit Ratings
Our short- and long-term debt is rated by four credit rating agencies
designated as nationally recognized statistical rating organizations ("NRSROs")
by the Securities and Exchange Commission:
o Dominion Bond Rating Service Limited ("DBRS");
o Fitch, Inc. ("Fitch");
o Moody's Investors Service, Inc. ("Moody's"); and
o Standard & Poor's Rating Services, a division of McGraw-Hill
Companies, Inc. ("S&P").
In several markets, locally recognized rating agencies also rate us. A
credit rating reflects an assessment by the rating agency of the credit risk
associated with particular securities we issue, based on information provided by
Ford, other sources, and us. Credit ratings are not recommendations to buy, sell
or hold securities and are subject to revision or withdrawal at any time by the
assigning rating agency. Each rating agency may have different criteria for
evaluating company risk and, therefore, ratings should be evaluated
independently for each rating agency. Lower credit ratings generally result in
higher borrowing costs and reduced access to capital markets. Our credit ratings
from all of the NRSROs are closely associated with their opinions on Ford. Our
lower ratings over the past several years are primarily a reflection of those
opinions, including concerns regarding Ford's automotive cash flow and
profitability, declining market share, excess industry capacity, industry
pricing pressure and rising healthcare costs.
In April 2005, DBRS confirmed our long-term rating, downgraded our
short-term rating to R-2(high) from R-1(low), and revised our trend to Negative
from Stable. Fitch and S&P revised our rating outlook to Negative from Stable,
and Moody's placed our long-term rating under review for possible downgrade and
affirmed our short-term rating. In May 2005, S&P lowered our long- and
short-term ratings to BB+ and B-1 from BBB- and A-3, respectively, and
maintained our outlook at Negative. Further rating actions could occur at any
time. The following chart summarizes our credit ratings and the outlook assigned
by the NRSROs since 2002:
- ---------- --------------------------------- ------------------------- ---------------------- -------------------------
DBRS Fitch Moody's S&P
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Date Long-Term Short-Term Trend Long- Short- Outlook Long- Short- Outlook Long- Short- Outlook
Term Term Term Term Term Term
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Jan. 2002 A (low) R-1 (low) Stable BBB+ F2 Negative A3 P-2 Negative BBB+ A-2 Negative
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Oct. 2002 A (low) R-1 (low) Negative BBB+ F2 Negative A3 P-2 Negative BBB A-2 Negative
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Apr. 2003 BBB (high) R-1 (low) Stable BBB+ F2 Negative A3 P-2 Negative BBB A-2 Negative
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Nov. 2003 BBB (high) R-1 (low) Stable BBB+ F2 Negative A3 P-2 Negative BBB- A-3 Stable
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
May 2004 BBB (high) R-1 (low) Stable BBB+ F2 Stable A3 P-2 Negative BBB- A-3 Stable
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
Apr. 2005 BBB (high) R-2 (high) Negative BBB+ F2 Negative A3* P-2 Negative BBB- A-3 Negative
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
May 2005 BBB (high) R-2 (high) Negative BBB+ F2 Negative A3* P-2 Negative BB+ B-1 Negative
- ---------- ---------- ---------- --------- -------- ------ --------- ----- ------ --------- -------- ------ ---------
* Long-term rating under credit review for possible downgrade.
-21-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Funding
Our outstanding debt and securitized off-balance sheet funding was as
follows on the dates indicated:
March 31, December 31,
2005 2004
---------- ------------
(in billions)
Debt
Asset-backed commercial paper*............. $ 14.2 $ 12.6
Commercial paper -- unsecured.............. 8.2 8.9
Floating rate demand notes................. 7.9 7.7
Other short-term debt...................... 2.7 2.6
-------- ----------
Total short-term debt.................... 33.0 31.8
Long-term debt (including notes payable
within one year).......................... 99.7 112.5
-------- ----------
Total debt............................. 132.7 144.3
Securitized Off-Balance Sheet Funding
Securitized off-balance sheet portfolio.... 39.3 35.6
Retained interest.......................... (8.0) (9.2)
--------- ----------
Total securitized off-balance sheet
funding................................. 31.3 26.4
--------- ----------
Total debt plus securitized off-balance
sheet funding........................... $ 164.0 $ 170.7
========= ==========
Ratios
Credit lines to total unsecured commercial
paper...................................... 93% 84%
Credit lines to total unsecured commercial
paper (including Ford bank Lines).......... >100 >100
Securitized funding to managed receivables.. 29 24
Short-term debt and notes payable within
one year to total debt..................... 44 43
Short-term debt and notes payable within
one year to total capitalization........... 41 40
- - - - -
* Amounts represent asset-backed commercial paper issued by FCAR, a consolidated
securitization SPE, which is payable out of collections on the receivables
supporting FCAR. This debt is the legal obligation of FCAR.
Outstanding unsecured commercial paper was $8.2 billion at March 31, 2005.
As of April 30, 2005, outstanding unsecured commercial paper was $5.6 billion,
reflecting decreased investor demand. At March 31, 2005, total debt plus
securitized off-balance sheet funding was down $6.7 billion compared with
year-end 2004, primarily reflecting repayment of maturing debt and lower funding
requirements due to lower asset levels. The ratio of total credit lines to total
unsecured commercial paper (including Ford bank lines) remains at more than 100%
at the end of the first quarter of 2005.
During the first quarter of 2005, we issued $5.2 billion of public and
private long-term debt with maturities of one to 10 years, including
$4.1 billion of unsecured institutional funding, and $1.1 billion of unsecured
retail bonds. In addition, we realized proceeds of $9.7 billion from public and
private sales of receivables in off-balance sheet securitizations.
As a result of our funding strategy and the reduction in our managed
receivables, lower credit ratings during the past three years have not had a
material impact on our ability to fund our operations. However, as a result of
S&P downgrading our credit rating to BB+ (non-investment grade) in May 2005, we
anticipate increased borrowing costs. We also anticipate restricted access to
unsecured debt markets, which would cause our outstanding unsecured commercial
paper and unsecured term debt balances to decline. In response, we plan to
increase our use of securitization and other asset-related sources of liquidity.
Over time, we may also need to reduce further the amount of receivables we
purchase. A significant reduction in the amount of purchased receivables would
significantly reduce our ongoing profits, and could adversely affect our ability
to support the sale of Ford vehicles.
-22-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Liquidity
Maintaining liquidity through access to diverse funding sources has always
been a key factor in our funding strategy. We define liquidity as our ability to
meet our funding needs, which includes purchasing retail installment sale and
lease contracts, funding other financing programs and repaying our debt
obligations as they become due, or earlier under certain debt retirement
programs. Our policy is to have sufficient cash and cash equivalents, unused
bank-sponsored commercial paper issuer ("conduit") capacity, securitizable
assets and back-up credit facilities to provide liquidity for all of our
short-term funding obligations. In addition to unsecured debt offerings
(discussed above) and sales of receivables (discussed below), we have access to
the following other sources of liquidity:
Cash and Cash Equivalents. At March 31, 2005, our cash and cash equivalents
totaled $13.1 billion, compared with $12.7 billion at year end 2004, up
approximately $400 million. In the normal course of our funding activities, we
may generate more proceeds than are necessary for our immediate funding needs.
These excess amounts are maintained primarily as highly liquid investments,
which provide liquidity for our short-term funding obligations and give us
flexibility in the use of our other funding programs. Our cash and cash
equivalents include short-term U.S. Treasury bills, federal agency discount
notes, A-1/P-1 (or higher) rated commercial paper, and bank time deposits with
investment grade institutions. The average term of these investments is
typically less than 60 days. We monitor our cash levels daily and adjust them as
necessary to support our short-term liquidity needs.
Conduit Program. We have entered into agreements with a number of conduits
under which such conduits are contractually committed to purchase from us, at
our option, up to $15.6 billion of receivables in the aggregate as of
March 31, 2005. This is an extremely liquid funding source, as we are able to
access funds in two days. These agreements have varying maturity dates between
June 23, 2005 and October 27, 2005 and, in the past, have been renewed on an
annual basis. As of March 31, 2005, approximately $5.9 billion of these conduit
commitments were in use. These agreements do not contain restrictive financial
covenants (for example, debt-to-equity limitations or minimum net worth
requirements) or material adverse change clauses that would relieve the conduit
of its obligation to purchase receivables. However, they do contain provisions
that could terminate the unused portion of the purchase commitments if the
performance of the sold receivables deteriorates beyond specified levels. Based
on our experience, we do not expect any commitments to be terminated due to
these performance requirements. None of these arrangements may be terminated
based on a change in our credit rating.
Whole-Loan Sale Transactions. During 2002, we began a program to sell retail
installment sale contracts in transactions where we retain no interest and thus
no exposure to the sold assets. These transactions, which we refer to as
"whole-loan sale transactions," provide liquidity by enabling us to reduce our
managed receivables and our need for funding to support those receivables. In
March 2005, we sold approximately $1.5 billion of receivables in a whole-loan
sale transaction. Total outstanding receivables sold in whole-loan transactions
at March 31, 2005 were $4.8 billion.
-23-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Back-up Credit Facilities
Our back-up credit facilities were as follows on the dates indicated:
March 31, December 31,
2005 2004
--------- -----------
(in billions)
Back-up Credit Facilities
Ford Credit........................................ $ 4.5 $ 4.3
FCE Bank plc....................................... 3.1 3.2
Ford bank lines (available at Ford's option)....... 7.0 6.9
Asset-backed commercial paper lines................ 18.0 18.0
-------- --------
Total back-up facilities....................... 32.6 32.4
Drawn amounts...................................... (0.8) (0.8)
-------- --------
Total available back-up facilities............. $ 31.8 $ 31.6
======== ========
For additional funding and to maintain liquidity, we and our majority-owned
subsidiaries, including FCE Bank plc ("FCE"), have contractually committed
credit facilities with financial institutions that totaled approximately
$7.6 billion at March 31, 2005. This includes $4.5 billion of Ford Credit
facilities ($3.9 billion global and approximately $600 million non-global) and
$3.1 billion of FCE facilities ($2.9 billion global and approximately
$200 million non-global). Approximately $800 million of the total facilities
were in use at March 31, 2005. These facilities have various maturity dates. Of
the $7.6 billion, about 38% of these facilities are committed through
June 30, 2009. Our global credit facilities may be used at our option by any of
our direct or indirect, majority-owned subsidiaries. FCE's global credit
facilities may be used at its option by any of its direct or indirect,
majority-owned subsidiaries. We or FCE, as the case may be, will guarantee any
such borrowings. All of the global credit facilities have substantially
identical contract terms (other than commitment amounts) and are free of
material adverse change clauses and restrictive financial covenants (for
example, debt-to-equity limitations, minimum net worth requirements and credit
rating triggers) that would limit our ability to borrow.
At Ford's option, approximately $7 billion of Ford's global lines of credit
may be used by any of its direct or indirect, majority-owned subsidiaries on a
guaranteed basis. Ford also has the ability to transfer, on a non-guaranteed
basis, $2.6 billion of such credit lines to us and $518 million to FCE.
Additionally, at March 31, 2005, banks provided $18.0 billion of
contractually committed liquidity facilities supporting two asset-backed
commercial paper programs; $17.5 billion supported our FCAR program and
$500 million supported our Motown NotesSM program. Unlike our other credit
facilities described above, these facilities provide liquidity exclusively to
each individual asset-backed commercial paper program. Utilization of these
facilities is subject to conditions specific to each program. At March 31, 2005,
$17.3 billion of FCAR's bank credit facilities were available to support FCAR's
asset-backed commercial paper or subordinated debt. The remaining $200 million
of available credit lines could be accessed for additional funding if FCAR
issued additional subordinated debt.
-24-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Off-Balance Sheet Sales of Receivables Activity
The following table illustrates our worldwide receivable sales activity in
off-balance sheet securitizations and whole-loan sale transactions for the
periods indicated:
First Quarter
------------------------
2005 2004
----------- -----------
(in billions)
Net Proceeds from Receivable Sales
North America segment
Public retail............................ $ 4.5 $ --
Conduit.................................. 2.0 0.7
Motown NotesSM program................... 1.4 1.0
FCAR..................................... -- --
Public wholesale......................... -- --
Canada and other......................... -- --
--------- ---------
Total North America segment............ 7.9 1.7
International segment
Europe
Public.................................. 0.2 0.4
Conduit................................. 0.1 0.1
--------- ---------
Total Europe........................... 0.3 0.5
Asia-Pacific............................. -- 0.4
Latin America............................ -- --
--------- ---------
Total International segment............ 0.3 0.9
--------- ---------
Net proceeds......................... 8.2 2.6
Whole-loan sales........................ 1.5 --
--------- ---------
Total net proceeds................... 9.7 2.6
Retained interest and other................. (0.8) (0.1)
--------- ---------
Total receivables sold............... 8.9 2.5
Prior period sold receivables, net of paydown
activity.................................. 35.2 49.3
--------- ---------
Total sold receivables outstanding at
the end of the relevant period..... 44.1 51.8
Memo:
Less: Receivables outstanding in whole-loan
sale transactions......................... (4.8) (6.4)
--------- ---------
Total securitized off-balance sheet
receivables........................ $ 39.3 $ 45.4
========= =========
At March 31, 2005, off-balance sheet receivables outstanding totaled
$44.1 billion, down $7.7 billion compared with a year ago. In the first quarter
of 2005, the amount of receivables sold in off-balance sheet transactions was
$8.9 billion, up about $6.4 billion from a year ago.
Our worldwide proceeds from the sale of retail and wholesale finance
receivables through off-balance sheet securitizations and whole-loan sale
transactions are shown below for the periods indicated:
First Quarter
-----------------------
2005 2004
Receivable Sales Transactions ----------- ----------
(in billions)
Retail ..................................... $ 6.8 $ 1.6
Wholesale................................... 1.4 1.0
-------- --------
Net proceeds.............................. 8.2 2.6
Whole-loan.................................. 1.5 --
-------- --------
Total net proceeds....................... $ 9.7 $ 2.6
======== ========
-25-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The Effect of Off-Balance Sheet Receivables Sales Activity on Financial
Reporting
We report the following items in Investment and other income related to
sales of receivables on our income statement:
o Net gain on sales of finance receivables,
o Income on interest in sold wholesale receivables and retained
securities,
o Servicing fee income from sold receivables that we continue to service,
and
o Income from residual interest and other income.
The following table summarizes activity related to off-balance sheet sales
of receivables reported in Investment and other income related to sales of
receivables for the periods indicated:
First Quarter
----------------------
2005 2004
--------- ---------
(in millions)
Net gain on sales of receivables............ $ 25 $ 34
Income on interest in sold wholesale
receivables and retained securities........ 116 136
Servicing fees.............................. 99 104
Income on residual interest and other....... 205 218
-------- --------
Investment and other income related to
sales of receivables..................... 445 492
Less: Whole-loan income .................... (16) (24)
-------- --------
Income related to off-balance sheet
securitizations ......................... $ 429 $ 468
======== ========
Memo:
Finance receivables sold.................. $ 8,881 $ 2,452
Servicing portfolio as of period-end...... 44,145 51,813
Pre-tax gain per dollar of retail
receivables sold......................... 0.3% 1.4%
In the first quarter of 2005, investment and other income related to sales
of receivables declined $47 million compared with 2004. Excluding the effects of
whole-loan sale transactions, which totaled $11.8 billion in the 2002 - 2005
period, off-balance sheet securitization income declined $39 million compared
with the first quarter of 2004.
Sales of finance receivables through off-balance sheet securitizations have
the impact on earnings of recalendarizing and reclassifying net financing margin
(financing revenue less interest expense) and credit losses related to the sold
receivables, compared with how they would have been reported if we continued to
report the sold receivables on our balance sheet and funded them through
asset-backed financings. Recalendarization effects occur initially when the gain
or loss on the sale of the receivables is recognized in the period the
receivables are sold. Over the life of the securitization transactions, we
recognize income from residual interest in securitization transactions, interest
income from retained securities, servicing fees and other receivable sale
income.
The net impact of off-balance sheet securitizations on our earnings in a
given period will vary depending on the amount and type of receivables sold and
the timing of the transactions in the current period and the preceding
two-to-three-year period, as well as the interest rate environment at the time
the finance receivables were originated and securitized.
-26-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The following table shows, on an analytical basis, the earnings impact of
our off-balance sheet securitizations as if we had reported them on-balance
sheet and funded them through asset-backed financings for the periods indicated:
First Quarter
------------------------
2005 2004
--------- --------
(in millions)
Financing revenue
Retail revenue...................................... $ 400 $ 587
Wholesale revenue................................... 301 267
------- -------
Total financing revenue........................... 701 854
Borrowing cost........................................ (242) (252)
------- -------
Net financing margin.............................. 459 602
Net credit losses..................................... (39) (89)
------- -------
Income before income taxes........................ $ 420 $ 513
======= =======
Memo:
Income related to off-balance sheet securitizations .. $ 429 $ 468
Recalendarization impact of off-balance sheet
securitizations ..................................... 9 (45)
In the first quarter of 2005, the impact on earnings of reporting the sold
receivables as off-balance sheet securitizations was $9 million higher than had
these transactions been structured as on-balance sheet securitizations. This
difference resulted from recalendarization effects caused by gain-on-sale
accounting requirements. This effect will fluctuate as the amount of receivables
sold in our off-balance sheet securitizations increases or decreases over time.
In a steady state of securitization activity, the difference between reporting
securitizations on- or off-balance sheet in a particular year approaches zero.
While the difference in earnings impact between on- or off-balance sheet
securitizations is minimal, this funding source has provided us with significant
borrowing cost savings compared with unsecured debt and funding flexibility in a
difficult economic environment.
-27-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Leverage
We use leverage, or the debt-to-equity ratio, to make various business
decisions, including establishing pricing for retail, wholesale and lease
financing, and assessing our capital structure. For a discussion of our capital
structure, see the "Capital Adequacy" section in our 2004 10-K Report. We
calculate leverage on a financial statement basis and on a managed basis using
the following formulas:
Financial Total Debt
Statement = ----------
Leverage Equity
Retained
Interest
in
Securitized Securitized
Off-balance Off-balance Cash SFAS No. 133
Sheet Sheet and Cash Adjustments
Total + Receivables - Receivables - Equivalents - on Total Debt
Debt
Managed Leverage = _____________________________________________________________________________
SFAS No. 133
Equity + Minority - Adjustment
Interest on Equity
The following table shows the calculation of our financial statement leverage (in billions, except for ratios):
March 31, December 31,
2005 2004
----------- ------------
Total debt......................................... $ 132.7 $ 144.3
Total stockholder's equity......................... 11.6 11.5
Financial statement leverage (to 1)................ 11.4 12.6
The following table shows the calculation of our managed leverage (in billions, except for ratios):
March 31, December 31,
2005 2004
---------- ------------
Total debt........................................ $ 132.7 $ 144.3
Securitized off-balance sheet receivables
outstanding*...................................... 41.1 37.7
Retained interest in securitized off-balance sheet
receivables**................................... (8.3) (9.5)
Adjustments for cash and cash equivalents......... (13.1) (12.7)
Adjustments for SFAS No. 133...................... (2.2) (3.2)
--------- ---------
Total adjusted debt............................ $ 150.2 $ 156.6
` ========= =========
Total stockholder's equity (including minority
interest)........................................ $ 11.6 $ 11.5
Adjustments for SFAS No. 133...................... (0.1) (0.1)
--------- ---------
Total adjusted equity.......................... $ 11.5 $ 11.4
========= =========
Managed leverage (to 1) .......................... 13.0 13.7
- - - - -
* Includes securitized funding from discontinued operations
** Includes retained interest in securitized receivables from discontinued operations
-28-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
We believe that managed leverage is useful to our investors because it
reflects the way we manage our business. We retain interests in receivables sold
in off-balance sheet securitization transactions and, with respect to
subordinated retained interests, are exposed to credit risk. Accordingly, we
consider securitization as an alternative source of funding and evaluate
charge-offs, receivables and leverage on a managed as well as a financial
statement basis. We also deduct cash and cash equivalents because they generally
correspond to excess debt beyond the amount required to support our operations.
In addition, we add our minority interests to our financial statement equity,
because all of the debt of such consolidated entities is included in our total
debt. Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
Accounting for Derivative Instruments and Hedging Activities requires us to make
fair value adjustments to our assets, debt and equity positions to reflect the
impact of interest rate instruments we use in connection with our term debt
issuances and securitizations. SFAS No. 133 adjustments vary over the term of
the underlying debt and securitized funding obligations based on changes in
market interest rates. We generally repay our debt obligations as they mature.
As a result, we exclude the impact of SFAS No. 133 on both the numerator and
denominator in order to exclude the interim effects of changes in market
interest rates. For a discussion of our use of interest rate instruments and
other derivatives, see Item 3. We believe the managed leverage measure provides
our investors with meaningful information regarding management's decision-making
processes.
Our managed leverage strategy involves establishing a leverage level that we
believe reflects the risk characteristics of our underlying assets. In
establishing a target leverage level, we consider the characteristics of the
receivables in our managed portfolio and the prevailing market conditions.
At March 31, 2005, our managed leverage was 13.0 to 1, compared with 13.7 to
1 at year-end 2004. Our dividend policy is based, in part, on our strategy to
maintain managed leverage at about 13 to 1. Based on profitability and managed
receivable levels, we paid cash dividends of $450 million in the first quarter
of 2005.
Outlook
We expect our earnings in 2005 to be lower than our earnings in 2004,
primarily resulting from the impact of lower receivable levels and higher
interest rates. At year-end 2005, we anticipate managed receivables to be about
$160 billion.
-29-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Cautionary Statement Regarding Forward Looking Statements
Statements included in this Report or incorporated by reference into this
Report may constitute "forward-looking statements" within the meaning of the
federal securities laws, including the Private Securities Litigation Reform Act
of 1995. The words "anticipate," "believe," "estimate," "expect," "intend,"
"may," "plan," "will," "project," "future" and "should" and similar expressions
are intended to identify forward-looking statements, and these statements are
based on our current expectations and assumptions concerning future events.
These statements involve a number of risks, uncertainties, and other factors
that could cause actual results to differ materially from those expressed or
implied by such statements, including the following:
Automotive Related:
o Greater price competition resulting from currency fluctuations, industry
overcapacity or other factors;
o Significant decline in automotive industry sales and our financing of
those sales, particularly in the United States or Europe, resulting from
slowing economic growth, geo-political events or other factors;
o Lower-than-anticipated market acceptance of new or existing Ford
products;
o Economic distress of suppliers that may require Ford to provide
financial support or take other measures to ensure supplies of
materials;
o Increased safety, emissions, fuel economy or other regulations resulting
in higher costs and/or sales restrictions;
o Work stoppages at Ford or supplier facilities or other interruptions of
supplies;
o Discovery of defects in Ford vehicles resulting in delays in new model
launches, recall campaigns, increased warranty costs or litigation;
o Unusual or significant litigation or governmental investigations arising
out of alleged defects in Ford products or otherwise;
o Higher prices for or reduced availability of fuel;
o Market shift from truck sales or from sales of other more profitable
vehicles in the United States;
o Changes in Ford's requirements or obligations under long-term supply
arrangements pursuant to which Ford is obligated to purchase minimum
quantities or a fixed percentage of output or pay minimum amounts;
o Change in the nature or mix of automotive marketing programs and
incentives;
Ford Credit Related:
o Inability to access debt or securitization markets around the world at
competitive rates or in sufficient amounts;
o Higher-than-expected credit losses;
o Collection and servicing problems related to our finance receivables and
net investment in operating leases;
o Lower-than-anticipated residual values and higher-than-expected lease
return rates;
o New or increased credit, consumer protection or other regulations
resulting in higher costs and/or additional financing restrictions;
o Changes in Ford's marketing programs that de-emphasize financing
incentives, which could result in a decline in our share of financing
Ford vehicles;
-30-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
General:
o Credit rating downgrades;
o Major capital market disruptions that could prevent Ford or us from
having access to the capital markets or that would limit our liquidity;
o Availability of securitization as a source of funding;
o Labor or other constraints on Ford's or our ability to restructure
Ford's or our business;
o Increased price competition in the rental car industry and/or a general
decline in business or leisure travel due to terrorist attacks, acts of
war, epidemic diseases or measures taken by governments in response
thereto that negatively affect the travel industry;
o Worse-than-assumed economic and demographic experience for our
post-retirement benefit plans (e.g., investment returns, interest rates,
healthcare trends, benefit improvements);
o Economic difficulties in any significant market;
o Currency or commodity fluctuations, including rising steel prices; and
o Changes in interest rates.
Other Financial Information
PricewaterhouseCoopers LLP ("PwC") has not audited the interim financial
information included in this 10-Q report. In reviewing such information, PwC has
applied limited procedures in accordance with professional standards for reviews
of interim financial information. Accordingly, you should restrict your reliance
on their reports on such information. PwC is not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their reports on the
interim financial information because such reports do not constitute "reports"
or "parts" of the registration statements prepared or certified by PwC within
the meaning of Sections 7 and 11 of the Securities Act of 1933.
-31-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In our 2004 10-K Report, we discuss in greater detail our market risk,
counter-party risk, and operating risk. To provide a quantitative measure of the
sensitivity of our pre-tax net interest income to changes in interest rates, we
use interest rate scenarios that assume a hypothetical, instantaneous increase
or decrease in interest rates of 100 basis points (or 1%) across all maturities,
as well as a base case that assumes that interest rates remain constant at
existing levels. These interest rate scenarios are purely hypothetical and do
not represent our view of future interest rate movements. The differences in
pre-tax net interest income between these scenarios and the base case over a
twelve-month period represent an estimate of the sensitivity of our pre-tax net
interest income. Under this model, we estimate that at March 31, 2005, all else
constant, such an increase in interest rates would reduce our pre-tax net
interest income by approximately $28 million over the next twelve months,
compared with $93 million at December 31, 2004. The sensitivity analysis
presented above assumes a one-percentage point interest rate change to the yield
curve that is both instantaneous and parallel. In reality, interest rate changes
are rarely instantaneous or parallel and rates could move more or less than the
one percentage point assumed in our analysis. As a result, the actual impact to
pre-tax net interest income could be higher or lower than the results detailed
above.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Michael E. Bannister, our Chief Executive Officer, and David P. Cosper, our
Vice Chairman, Chief Financial Officer and Treasurer, have performed an
evaluation of the Company's disclosure controls and procedures, as that term is
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as of March 31, 2005 and each has concluded that such
disclosure controls and procedures are effective to ensure that information
required to be disclosed in our periodic reports filed under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
by the Securities and Exchange Commission's rules and regulations.
Changes in Internal Control Over Financial Reporting
In January 2005, as part of an ongoing roll-out in North America and Europe,
we replaced our primary receivables system in the United Kingdom. The internal
controls affected by the implementation of the new system are appropriate and
functioning effectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Borlay v. PRIMUS (formerly Claybrook v. PRIMUS and reported on page 12 of
our 2004 10-K Report) was tried in federal court in Tennessee in March 2005.
The judge in Borlay announced her intention to find in favor of the Plaintiffs
but has not yet entered a formal ruling. The judge ordered the parties to
mediate the matter. Mediation has not yet been scheduled.
ITEM 5. OTHER INFORMATION
You can find additional information about Ford in Ford's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2005, which has been included
as an exhibit to this Report (without Exhibits or Financial Statements).
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was
enacted in April 2005. The new law creates a means test to determine whether
debtors should be forgiven all of their debts or repay some of their debts.
There may be an increase in new bankruptcy filings as consumers who had been
considering bankruptcy protection file for bankruptcy before the new law goes
into effect later this year.
-32-
ITEM 6. EXHIBITS
Exhibits: please refer to Exhibit Index on page 36.
Instruments defining the rights of holders of certain issues of long-term
debt of Ford Credit have not been filed as exhibits to this Report because the
authorized principal amount of any one of such issues does not exceed 10% of the
total assets of Ford Credit. Ford Credit agrees to furnish a copy of each of
such instruments to the Commission upon request.
-33-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Ford Motor Credit Company has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FORD MOTOR CREDIT COMPANY
By: /s/ David P. Cosper
----------------------------------------------------
(David P. Cosper)
Vice Chairman, Chief Financial Officer and Treasurer
Date: May 10, 2005
-34-
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of
Ford Motor Credit Company:
We have reviewed the accompanying consolidated balance sheet of Ford Motor
Credit Company and its subsidiaries as of March 31, 2005, and the related
consolidated statements of income for each of the three-month periods ended
March 31, 2005 and 2004 and the consolidated statement of cash flows for the
three-month periods ended March 31, 2005 and 2004. These interim financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet as of December 31, 2004, and the related consolidated statements of
income, stockholder's equity, and cash flows for the year then ended,
management's assessment of the effectiveness of the Company's internal control
over financial reporting as of December 31, 2004 and the effectiveness of the
Company's internal control over financial reporting as of December 31, 2004; and
in our report dated March 9, 2005, we expressed unqualified opinions thereon.
The consolidated financial statements and management's assessment of the
effectiveness of internal control over financial reporting referred to above are
not presented herein. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 2004 is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
May 10, 2005
-35-
FORD MOTOR CREDIT COMPANY
EXHIBIT INDEX
Designation Description Method of Filing
- ------------- ------------------------------------ -----------------------
Exhibit 12 Ford Motor Credit Company Filed with this Report
and Subsidiaries
Calculation of Ratio of
Earnings to Fixed Charges
Exhibit 15 Letter of Filed with this Report
PricewaterhouseCoopers LLP, dated
May 10, 2005, relating to Financial
Information
Exhibit 31.1 Rule 15d-14(a) Certification of CEO Filed with this Report
Exhibit 31.2 Rule 15d-14(a) Certification of CFO Filed with this Report
Exhibit 32.1 Section 1350 Certification of CEO Furnished with this Report
Exhibit 32.2 Section 1350 Certification of CFO Furnished with this Report
Exhibit 99 Items 2 and 4 of Part I and Items Filed with this Report
1 and 2 of Part II of Ford Motor
Company's Quarterly Report on Form
10-Q for the quarterly period ended
March 31, 2005
-36-