Ford 2007 Annual Report Download - page 35

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2007 Annual Report 33
The following table illustrates the calculation of Ford Credit's financial statement leverage (in billions, except for ratios):
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G*67E!N,26<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< =! AB@<>! =! AB@<$! =! ABB<>!
G*67E!,b:56J <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< ! AB<>! ! AA<C! ! AA<>!
D5(7()57E!0676,+,(6!E,;,47O,!.6*!A1 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< ! A#<>! ! AA<@! ! AA<$!
The following table illustrates the calculation of Ford Credit's managed leverage (in billions, except for ratios):
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F,):4565`,N!*33W27E7(),!0P,,6!4,),5;72E,0!*:6067(N5(O<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! ! %<#! ! A"<"! ! AC<#!
Z,675(,N!5(6,4,06!5(!0,):4565`,N!*33W27E7(),!0P,,6!4,),5;72E,0 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! ! .#<$1! ! .A<#1! ! .A<>1!
9Nf:06+,(60!3*4!)70P?!)70P!,b:5;7E,(60!7(N!+74T,672E,!0,):4565,0!.71 <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! ! .A%<$1! ! ."A<C1! ! .A$<@1!
9Nf:06+,(60!3*4!P,NO,!7))*:(65(O!.21<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! !!!!!!!!!!!Q! ! .#<A1! ! .#<&1!
G*67E!7Nf:06,N!N,26<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! =! A"C<#! =! A"@<#! =! ABA<%!
G*67E!,b:56J!.5()E:N5(O!+5(*456J!5(6,4,061<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! =! AB<>! =! AA<C! =! AA<>!
9Nf:06+,(60!3*4!P,NO,!7))*:(65(O!.21<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! ! .#<B1! ! .#<&1! ! .#<$1!
G*67E!7Nf:06,N!,b:56J<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! =! AB<A! =! AA<B! =! A#<$!
M7(7O,N!E,;,47O,!.6*!A1<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<! ! @<C! ! AA<>! ! A"<B!
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(a) Excluding marketable securities related to insurance activities.
(b) Primarily related to market valuation adjustments from derivatives due to movements in interest rates.
Ford Credit believes that managed leverage is useful to its investors because it reflects the way Ford Credit manages
its business. Ford Credit retains interests in receivables sold in off-balance sheet securitization transactions and, with
respect to subordinated retained interests, is exposed to credit risk. Accordingly, Ford Credit evaluates charge-offs,
receivables and leverage on a managed as well as a financial statement basis. Ford Credit also deducts cash and cash
equivalents and marketable securities (excluding marketable securities related to insurance activities) because they
generally correspond to excess debt beyond the amount required to support its operations and amounts to support its on-
balance sheet securitizations.
In addition, Ford Credit adds its minority interests to its financial statement equity because all of the debt of such
consolidated entities is included in its total debt. Ford Credit makes hedge accounting adjustments to its assets, debt and
equity positions to reflect the impact of interest rate instruments Ford Credit uses in connection with its term-debt
issuances and securitizations. The hedge accounting adjustments vary over the term of the underlying debt and
securitized funding obligations based on changes in market interest rates. Ford Credit generally repays its debt
obligations as they mature. As a result, Ford Credit excludes the impact of the hedge accounting adjustments on both the
numerator and denominator in order to exclude the interim effects of changes in market interest rates. Ford Credit
believes the managed leverage measure provides its investors with meaningful information regarding management's
decision-making processes.
Ford Credit plans its managed leverage by considering prevailing market conditions and the risk characteristics of its
business. At December 31, 2007, Ford Credit's managed leverage was 9.8 to 1, compared with 11.4 to 1 a year ago. In
2006, Ford Credit paid cash dividends of $1.35 billion. In 2007, Ford Credit did not pay any distributions or dividends.
Total Company
Stockholders' Equity. Our stockholders' equity was $5.6 billion at December 31, 2007, improved by about $9.1 billion
compared with December 31, 2006. The improvement primarily reflected favorable changes in Accumulated other
comprehensive income/(loss), the conversion of 43% of our Trust Preferred Securities into shares of Ford Common Stock,
and favorable changes in Retained earnings due to the adoption of Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109 ("FIN 48"), offset partially by 2007 net losses. See the Consolidated Statement
of Stockholders' Equity in our Financial Statements for details of Comprehensive income/(loss), and Note 19 of the Notes
to the Financial Statements for details of FIN 48.