Ford 2002 Annual Report Download - page 43

Download and view the complete annual report

Please find page 43 of the 2002 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales of receivables reduce Ford Credit’s financing revenues in the year the receivables are sold, as well as in future years,
compared with what they otherwise would be if Ford Credit continued to own the receivables. These foregone revenues can
reduce financing margins and offset any positive impact associated with the gain on sales of receivables. The net impact of
securitizations on Ford Credit’s revenues and earnings in a given year will vary depending on the amount, type of receivable
and timing of securitizations in the current year and the preceding two to three year period, as well as the interest rate environ-
ment at the times the finance receivables were originated and securitized. The following table shows the estimated after-tax
impact of sales of receivables through securitizations and whole-loan sale transactions for the years indicated, net of the
effect of reduced financing margins resulting from the foregone revenue attributable to the sold receivables (in millions):
2002 2001 2000
Gain on sales of receivables $ 728 $ 739 $ 14
SFAS No. 133 fair value basis adjustment (199) (327) -
Net gain on sales of receivables $ 529 $ 412 $ 14
Servicing fees 700 456 190
Interest income from retained securities 606 379 152
Excess spread and other 775 186 201
Total revenue related to receivables sales $ 2,610 $ 1,433 $ 557
Reduction in financing margin from current-year securitizations* (968) (1,059) (243)
Reduction in financing margin from prior-year securitizations* (1,967) (611) (521)
Pre-tax impact of receivable sales (325) (237) (207)
Tax 120 88 77
After-tax impact of receivable sales $ (205) $ (149) $ (130)
Memo:
After-tax impact of sales of receivables excluding SFAS No. 133 $ (79) $ 57 $ (130)
* Calculated on a basis using a borrowing cost equal to the actual financing rate paid to securitization investors, which was significantly lower than Ford Credit’s
average borrowing cost for unsecured debt for the years presented. If calculated on a basis using Ford Credit’s average borrowing cost for unsecured debt,
thereduction in financing margin from securitization would be significantly lower and the estimated after-tax impact of receivable sales would be significantly
higher than the amounts shown.
Earnings at Hertz in 2002, before the cumulative effect of a change in accounting principle, were $127 million. The Hertz
results shown here include amortization of intangibles at Ford FSG, Inc., Hertz’ parent company, which is not applicable to
Hertz’ financial statements. Results for Hertz in 2002 included a $294 million non-cash charge related to impairment of goodwill
in Hertz’ industrial and construction equipment rental business in accordance with SFAS No. 142, Goodwill and Other Intangible
Assets. In 2001, Hertz had earnings of $23 million. The increase in earnings, before the change in accounting principle, was
principally due to an improved car rental pricing environment and lower costs.
Included in the $91 million loss for “minority interests and other” within the Financial Services sector for 2002 is an after-tax
charge related to our equity interest in a partnership that holds diversified financing assets. These are assets that we retained
in connection with our sale of the assets of USL Capital Corporation in 1996. The charge, totaling $95 million after-tax, is
specifically related to aircraft leases to United Airlines (twelve aircraft) and US Airways (five aircraft) which are in bankruptcy,
and telecommunications equipment leases to a WorldCom subsidiary. In all, the partnership has leased 69 aircraft to 11 lessees,
primarily to U.S.-based airlines; our share of the partnership’s remaining investment in aircraft leases is about $350 million.
2001 COMPARED WITH 2000
Ford Credit’s consolidated income from continuing operations in 2001 was $831 million, down $711 million or 46% from 2000.
Excluding Ford Credit’s share of the charges associated with the Revitalization Plan, net income was about $1 billion, down $507
million compared with 2000, due primarily to a higher provision for credit losses and the net unfavorable impact of SFAS No. 133
from hedging activity, offset partially by favorable earnings effects related to securitization transactions, higher financing volumes
of finance receivables and operating leases and improved financing margins.
Earnings at Hertz in 2001 were $23 million. In 2000, Hertz had earnings of $358 million. The decrease in earnings was primarily
due to lower car rental volume in the United States, reflecting the adverse impact on business travel and downward pricing
pressure due to the slowdown in the United States economy and the adverse impact of the terrorist attacks.