Ford Announces Second-Quarter 2005 Financial Results
- Net income of 47 cents per share, or $946 million.
- Earnings from continuing operations of 47 cents per share, or $936 million, excluding special items.*
- Worldwide automotive pre-tax loss of $245 million, excluding special items.
- Financial Services sector pre-tax profit of $1.3 billion.
- Full-year earnings guidance unchanged at $1.00 to $1.25 per share from continuing operations, excluding special items.
DEARBORN, Mich., July 19 -- Ford Motor Company today reported net income of 47 cents per share, or $946 million, for the second quarter of 2005. This compares with net income of 57 cents per share, or $1.2 billion, in the second quarter of 2004.
Ford's second-quarter earnings from continuing operations, excluding special items, were 47 cents per share, or $936 million, compared to 61 cents per share, or $1.2 billion, in the same period last year.*
Ford's total sales and revenue in the second quarter was $44.5 billion, compared to $42.9 billion in the year-ago period.
* Earnings per share from continuing operations is calculated on a basis
that includes pre-tax profit and provision for taxes, excluding special
items, and minority interest. See table following "Safe Harbor/Risk
Factors" for the nature and amount of these special items and
reconciliation to GAAP.
"Despite profitability in most regions, our global automotive results were disappointing, reflecting the fiercely competitive environment in which we continue to operate, particularly in North America," said Chairman and Chief Executive Officer Bill Ford. "We are responding to this tougher operating environment through actions aimed at improving our cost structure, optimizing our global footprint, strengthening our balance sheet and making essential investments for the future. We'll continue to share our plans as the year progresses."
Actions in the second quarter included:
-- Announced plans to further reduce salaried personnel and related costs
in North America.
-- Consolidation of U.K. manufacturing at Jaguar, including personnel
separations. Final assembly operations at the Browns Lane plant have
ceased and are transitioning to Castle Bromwich.
-- A Memorandum of Understanding with Visteon Corp., Ford's largest
supplier. Over time, the agreement will allow the Company to diversify
its supply base and enhance its access to parts, systems and
technologies that are more competitive.
-- Announced evaluation of strategic options for Hertz Corp., its rental
car and equipment unit, including a potential partial initial public
offering or a sale to a third party.
On the product front, Ford continues to deliver more new products with the recent launch of the 2006 Mercury Mariner Hybrid, Range Rover Sport, and new diesel-powered cars from Jaguar and Volvo in Europe. On schedule for fall introductions in North America are the all-new Ford Fusion, Mercury Milan and Lincoln Zephyr mid-size sedans, the redesigned Ford Explorer and Mercury Mountaineer and the Mazda MX-5. In Europe, the high-performance Ford Focus ST will go on sale later this year.
The following discussion of the results of our Automotive sector and Automotive business units is on a basis that excludes special items. See table following "Safe Harbor/Risk Factors" for the nature and amount of these special items and reconciliation to GAAP.
AUTOMOTIVE SECTOR
On a pre-tax basis, worldwide automotive losses in the second quarter were $245 million, down $342 million from a $97 million profit during the same period a year ago.
Worldwide automotive sales for the second quarter rose to $38.7 billion from $36.7 billion in the same period last year. Worldwide vehicle-unit sales in the quarter were 1,718,000, down from 1,751,000 a year ago.
Total cash, including automotive cash, marketable securities, loaned securities and short-term Voluntary Employee Beneficiary Association (VEBA) assets on June 30, 2005, was $21.8 billion, down from $22.9 billion at the end of the first quarter. The Company contributed $1.1 billion to its pension plans and long-term VEBA in the second quarter.
THE AMERICAS
For the second quarter, the Americas reported a pre-tax loss of $819 million, down $1.3 billion from a $476 million pre-tax profit in the same period a year ago.
North America: In the second quarter, Ford's North American automotive operations reported a pre-tax loss of $907 million, down $1.4 billion from a $454 million pre-tax profit a year ago. Higher costs and lower volumes contributed to the decline. Sales were $19.9 billion, down $568 million from the same period a year ago.
South America: Ford's South American automotive operations reported a second-quarter pre-tax profit of $88 million, an increase of $66 million from a $22 million pre-tax profit a year ago. The improvement primarily reflected higher volumes and pricing, partially offset by higher commodity costs. Sales for the second quarter improved to $1 billion from $665 million in 2004.
FORD EUROPE AND PREMIER AUTOMOTIVE GROUP (PAG)
The 2005 second-quarter combined pre-tax profit for Ford Europe and PAG automotive operations was $83 million, compared with a loss of $136 million for the year-ago period, an improvement of $219 million.
Ford Europe: Ford Europe's second-quarter pre-tax profit was $66 million, compared with a pre-tax profit of $211 million during the 2004 period. The deterioration of $145 million primarily reflected lower net pricing, lower production volumes, higher material and pension costs and lower profits from operations in Turkey. These were partially offset by internal cost reductions and mix improvements. Ford Europe's sales in the second quarter were $7.9 billion, compared with $6.7 billion during the second quarter of 2004.
Premier Automotive Group: PAG reported a pre-tax profit of $17 million for the second quarter, compared with a pre-tax loss of $347 million for the same period in 2004. The improvement primarily reflected richer product mix and higher net revenue, primarily at Land Rover, partially offset by unfavorable exchange. Second-quarter sales for PAG were $7.9 billion, compared with $6.9 billion a year ago.
FORD ASIA-PACIFIC and AFRICA/MAZDA
The 2005 second-quarter combined pre-tax profit for Ford Asia-Pacific and Africa/Mazda was $93 million, compared with $55 million for the year-ago period, an improvement of $38 million.
Ford Asia-Pacific and Africa: For the second quarter of 2005, Ford Asia- Pacific and Africa reported a pre-tax profit of $36 million, an improvement of $41 million from a $5 million pre-tax loss a year ago. The results primarily reflected favorable exchange, higher volumes and improved mix, partially offset by higher developments costs for future products. Sales were $2 billion, an improvement of $100 million from $1.9 billion during the second quarter of 2004.
Mazda: During the second quarter of 2005, Ford's share of Mazda profits and associated operations was $57 million, down from $60 million during the same period a year ago.
OTHER AUTOMOTIVE
Second-quarter earnings included a profit of $398 million in other automotive financial results. This is an improvement of $696 million from the same period last year, primarily reflecting interest income related to tax refunds.
FORD MOTOR CREDIT COMPANY
On a pre-tax basis, Ford Motor Credit earned $1.2 billion in the second quarter, down $229 million from the previous year. The decline primarily reflected higher borrowing costs and the impact of lower receivable levels, partially offset by improved credit loss performance. Ford Motor Credit reported net income of $740 million in the second quarter of 2005, down from $897 million in the same period a year ago.
HERTZ CORP.
Hertz reported a second-quarter pre-tax profit of $153 million, a $9 million improvement from the $144 million pre-tax profit from the same period in 2004. The improvement reflected higher car and equipment rental volumes and higher proceeds from the disposal of used vehicles and equipment, partially offset by a highly competitive pricing environment in car rental markets. Net income in the second quarter for Hertz was $97 million, up from $94 million in the same period last year.
SPECIAL ITEMS*
In total, special items had no impact on earnings per share in the second quarter. Charges for Visteon-related actions and personnel reduction programs reduced earnings per share by 18 cents. These charges were fully offset by non-recurring adjustments that, in total, significantly reduced the Company's tax accrual during the quarter. These adjustments primarily reflect prior year federal and state tax settlements.
* See table following "Safe Harbor/Risk Factors" for the nature and amount of these special items and reconciliation to GAAP.
OUTLOOK
Commenting on the Company's financial outlook, Executive Vice President and Chief Financial Officer, Don Leclair, said "We recognize we have more to do in an environment that continues to be extremely challenging. We will continue to focus on improving our operating efficiencies and margins."
The Company's 2005 full-year earnings guidance is unchanged at $1.00 to $1.25 per share. Full-year earnings-per-share guidance excludes the effect of special items and discontinued operations, which are presently estimated to include the following items:
TOTAL COMPANY 2005 FULL-YEAR SPECIAL ITEMS AND DISCONTINUED OPERATIONS
Special Items Full Year EPS
-- Visteon-Related Charges $(0.21) - (0.30)
-- Personnel Reduction Programs
- North America (0.02)
- PAG (0.03)
- Further Personnel Reduction Programs (TBD)
-- Fuel Cell Technology Charges (0.05)
-- Non-Core Businesses Held for Sale (0.01)
-- Tax Adjustments 0.18
Total Special Items $(0.14) - (TBD)
Discontinued Operations 0.02
Effect of Special Items and $(0.12) - (TBD)
Discontinued Operations
Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, manufactures and distributes automobiles in 200 markets across six continents. With more than 324,000 employees worldwide, the Company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Motor Credit Company and The Hertz Corporation.
TOTAL COMPANY 2005 SECOND QUARTER INCOME FROM CONTINUING OPERATIONS
COMPARED WITH NET INCOME*
Second Quarter
Earnings Memo:
Per After-Tax Pre-Tax
Share** Profit Profit
(Mils.) (Mils.)
Income from Continuing Operations
Excluding Special Items $0.47 $936 $1,052
Special Items
-- Visteon-Related Charges $(0.15) $(313) $(318)
-- Personnel Reduction Programs
- North America (0.02) (41) (63)
- PAG (0.01) (21) (33)
Fuel Cell Technology Charges *** (11) (11)
Non-Core Businesses Held for Sale *** 9 14
Tax Adjustments**** 0.18 384 85
Total Special Items $0 $7 $(326)
Income from Continuing
Operations $0.47 $943 $726
Discontinued Operations *** 3
Net Income $0.47 $ 946
* Additional reconciling items are available in the materials
supporting the July 19, 2005 conference calls at
www.shareholder.ford.com
** Earnings per share from continuing operations is calculated on a
basis that includes pre-tax profit, provision for taxes,
and minority interest.
*** Less than $0.01/$1 million
**** Primarily reflects prior year federal and state tax settlements
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended June 30, 2005 and 2004
(in millions, except per share amounts)
Second Quarter First Half
2005 2004 2005 2004
(unaudited) (unaudited)
Sales and revenues
Automotive sales $38,685 $36,661 $78,017 $75,461
Financial Services
revenues 5,863 6,212 11,667 12,135
Total sales and
revenues 44,548 42,873 89,684 87,596
Costs and expenses
Cost of sales 36,713 33,624 72,271 67,678
Selling, administrative
and other expenses 6,127 5,920 12,217 11,739
Interest expense 1,719 1,734 3,683 3,569
Provision for credit
and insurance losses (17) 174 168 527
Total costs and
expenses 44,542 41,452 88,339 83,513
Automotive interest
income and other
non-operating
income/(expense), net 651 (20) 804 125
Automotive equity in net
income/(loss) of
affiliated companies 69 84 126 140
Income/(loss) before
income taxes 726 1,485 2,275 4,348
Provision for/(benefit
from) income taxes (301) 261 13 1,080
Income/(loss) before
minority interests 1,027 1,224 2,262 3,268
Minority interests in
net income/(loss) of
subsidiaries 84 72 142 157
Income/(loss) from
continuing operations 943 1,152 2,120 3,111
Income/(loss) from
discontinued operations 3 13 38 6
Net income/(loss) $946 $1,165 $2,158 $3,117
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income/(loss)
Income/(loss) from
continuing operations $0.51 $0.63 $1.16 $1.71
Income/(loss) from
discontinued operations - 0.01 0.02 -
Net income/(loss) $0.51 $0.64 $1.18 $1.71
Diluted income/(loss)
Income/(loss) from
continuing operations $0.47 $0.57 $1.05 $1.51
Income/(loss) from
discontinued operations - - 0.01 -
Net income/(loss) $0.47 $0.57 $1.06 $1.51
Cash dividends $0.10 $0.10 $0.20 $0.20
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.
FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR STATEMENT OF INCOME
For the Periods Ended June 30, 2005 and 2004
(in millions, except per share amounts)
Second Quarter First Half
2005 2004 2005 2004
(unaudited) (unaudited)
AUTOMOTIVE
Sales $38,685 $36,661 $78,017 $75,461
Costs and expenses
Cost of sales 36,713 33,624 72,271 67,678
Selling, administrative
and other expenses 3,076 2,832 6,185 5,574
Total costs and
expenses 39,789 36,456 78,456 73,252
Operating
income/(loss) (1,104) 205 (439) 2,209
Interest expense 187 312 589 697
Interest income and other
non-operating
income/(expense), net 651 (20) 804 125
Equity in net income/(loss)
of affiliated companies 69 84 126 140
Income/(loss) before
income taxes
- Automotive (571) (43) (98) 1,777
FINANCIAL SERVICES
Revenues 5,863 6,212 11,667 12,135
Costs and expenses
Interest expense 1,532 1,422 3,094 2,872
Depreciation 1,540 1,659 3,054 3,388
Operating and other
expenses 1,511 1,429 2,978 2,777
Provision for credit
and insurance losses (17) 174 168 527
Total costs and
expenses 4,566 4,684 9,294 9,564
Income/(loss) before
income taxes
- Financial Services 1,297 1,528 2,373 2,571
TOTAL COMPANY
Income/(loss) before
income taxes 726 1,485 2,275 4,348
Provision for/(benefit
from) income taxes (301) 261 13 1,080
Income/(loss) before
minority interests 1,027 1,224 2,262 3,268
Minority interests in
net income/(loss) of
subsidiaries 84 72 142 157
Income/(loss) from
continuing operations 943 1,152 2,120 3,111
Income/(loss) from
discontinued operations 3 13 38 6
Net income/(loss) $946 $1,165 $2,158 $3,117
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income/(loss)
Income/(loss) from
continuing operations $0.51 $0.63 $1.16 $1.71
Income/(loss) from
discontinued operations - 0.01 0.02 -
Net income/(loss) $0.51 $0.64 $1.18 $1.71
Diluted income/(loss)
Income/(loss) from
continuing operations $0.47 $0.57 $1.05 $1.51
Income/(loss) from
discontinued operations - - 0.01 -
Net income/(loss) $0.47 $0.57 $1.06 $1.51
Cash dividends $0.10 $0.10 $0.20 $0.20
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
June 30, December 31,
2005 2004
(unaudited)
ASSETS
Cash and cash equivalents $30,133 $23,510
Marketable securities 8,614 9,507
Loaned securities 734 1,058
Finance receivables, net 97,565 110,749
Other receivables, net 6,523 5,969
Net investment in operating leases 33,859 31,763
Retained interest in sold receivables 5,287 9,166
Inventories 11,550 10,766
Equity in net assets of affiliated companies 2,861 2,835
Net property 42,281 44,549
Deferred income taxes 4,567 4,830
Goodwill and other intangible assets 6,679 7,271
Assets of discontinued/held-for-sale operations 23 2,374
Other assets 26,158 29,511
Total assets $276,834 $293,858
LIABILITIES AND STOCKHOLDERS' EQUITY
Payables $23,853 $22,689
Accrued and other liabilities 73,911 74,964
Debt 158,441 172,973
Deferred income taxes 5,605 6,171
Liabilities of discontinued/held-for-sale
operations 15 139
Total liabilities 261,825 276,936
Minority interests 806 877
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per
share (1,837 million shares issued) 18 18
Class B Stock, par value $0.01 per
share (71 million shares issued) 1 1
Capital in excess of par value of stock 5,110 5,321
Accumulated other comprehensive income/(loss) (2,611) 1,258
Treasury stock (1,281) (1,728)
Earnings retained for use in business 12,966 11,175
Total stockholders' equity 14,203 16,045
Total liabilities and stockholders' equity $276,834 $293,858
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.
FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET
(in millions)
June 30, December 31,
2005 2004
(unaudited)
ASSETS
Automotive
Cash and cash equivalents $10,812 $10,142
Marketable securities 7,607 8,291
Loaned securities 734 1,058
Total cash, marketable and loaned securities 19,153 19,491
Receivables, net 2,832 2,894
Inventories 11,550 10,766
Deferred income taxes 3,356 3,837
Other current assets 8,080 8,916
Total current assets 44,971 45,904
Equity in net assets of affiliated companies 1,975 1,907
Net property 40,675 42,904
Deferred income taxes 8,646 10,894
Goodwill and other intangible assets 5,787 6,374
Assets of discontinued/held-for-sale operations 23 188
Other assets 10,366 9,455
Total Automotive assets 112,443 117,626
Financial Services
Cash and cash equivalents 19,321 13,368
Investments in securities 1,007 1,216
Finance receivables, net 101,256 113,824
Net investment in operating leases 33,859 31,763
Retained interest in sold receivables 5,287 9,166
Goodwill and other intangible assets 892 897
Assets of discontinued/held-for-sale operations - 2,186
Other assets 10,240 13,746
Receivable from Automotive 1,655 2,753
Total Financial Services assets 173,517 188,919
Intersector elimination (1,655) (2,753)
Total assets $284,305 $303,792
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $16,440 $16,026
Other payables 4,679 4,269
Accrued and other liabilities 31,285 31,059
Deferred income taxes 2,490 2,514
Debt payable within one year 1,058 977
Current payable to Financial Services 1,026 1,382
Total current liabilities 56,978 56,227
Long-term debt 17,034 17,458
Other liabilities 35,503 35,699
Deferred income taxes - 3,042
Liabilities of discontinued/held-for-sale
operations 15 46
Payable to Financial Services 629 1,371
Total Automotive liabilities 110,159 113,843
Financial Services
Payables 2,734 2,394
Debt 140,349 154,538
Deferred income taxes 10,586 10,549
Other liabilities and deferred income 7,123 8,206
Liabilities of discontinued/held-for-sale
operations - 93
Total Financial Services liabilities 160,792 175,780
Minority interests 806 877
Stockholders' equity
Capital stock
Common Stock, par value $0.01 per
share (1,837 million shares issued) 18 18
Class B Stock, par value $0.01 per
share (71 million shares issued) 1 1
Capital in excess of par value of stock 5,110 5,321
Accumulated other comprehensive income/(loss) (2,611) 1,258
Treasury stock (1,281) (1,728)
Earnings retained for use in business 12,966 11,175
Total stockholders' equity 14,203 16,045
Intersector elimination (1,655) (2,753)
Total liabilities and stockholders' equity $284,305 $303,792
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended June 30, 2005 and 2004
(in millions)
First Half
2005 2004
(unaudited)
Cash and cash equivalents at January 1 $23,510 $23,208
Cash flows from operating activities before
securities trading 18,275 13,235
Net sales/(purchases) of trading securities (3,679) (723)
Net cash flows from operating activities 14,596 12,512
Cash flows from investing activities
Capital expenditures (3,572) (2,780)
Acquisitions of retail and other finance
receivables and operating leases (28,951) (31,727)
Collections of retail and other finance
receivables and operating leases 25,150 23,795
Net acquisitions of daily rental vehicles (2,997) (2,902)
Purchases of securities (2,451) (6,026)
Sales and maturities of securities 2,395 5,703
Proceeds from sales of retail and other
finance receivables and operating leases 12,506 3,760
Proceeds from sale of businesses 2,070 125
Cash paid for acquisitions (1,296) (30)
Other 71 (48)
Net cash (used in)/provided by investing
activities 2,925 (10,130)
Cash flows from financing activities
Cash dividends (367) (366)
Net sales/(purchases) of Common Stock 184 (101)
Changes in short-term debt 821 8,412
Proceeds from issuance of other debt 14,765 7,831
Principal payments on other debt (25,769) (24,401)
Other (6) (35)
Net cash (used in)/provided by financing
activities (10,372) (8,660)
Effect of exchange rate changes on cash (526) (145)
Net increase/(decrease) in cash and cash
equivalents 6,623 (6,423)
Cash and cash equivalents at March 31 $30,133 $16,785
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended June 30, 2005 and 2004
(in millions)
First Half 2005 First Half 2004
Financial Financial
Automotive Services Automotive Services
(unaudited) (unaudited)
Cash and cash equivalents
at January 1 $10,142 $13,368 $6,856 $16,352
Cash flows from operating
activities before
securities trading 4,049 10,059 3,582 9,454
Net sales/(purchases) of
trading securities 1,058 (4,737) (692) (31)
Net cash flows from
operating activities 5,107 5,322 2,890 9,423
Cash flows from investing
activities
Capital expenditures (3,347) (225) (2,591) (189)
Acquisitions of retail
and other finance
receivables and
operating leases - (28,951) - (31,727)
Collections of retail
and other finance
receivables and
operating leases - 24,979 - 23,895
Net (acquisitions)/
collections of
wholesale receivables - 599 - (865)
Net acquisitions of
daily rental vehicles - (2,997) - (2,902)
Purchases of
securities (2,149) (302) (5,593) (433)
Sales and maturities
of securities 1,883 512 5,312 391
Proceeds from sales of
retail and other
finance receivables
and operating leases - 12,506 - 3,760
Proceeds from sales
of wholesale receivables - 3,739 - 964
Proceeds from sale of
businesses 29 2,041 125 -
Net investing activity
with Financial
Services 1,402 - 1,832 -
Cash paid for
acquisitions (1,296) - (30) -
Other (11) 82 17 (65)
Net cash (used in)/
provided by investing
activities (3,489) 11,983 (928) (7,171)
Cash flows from financing
activities
Cash dividends (367) - (366) -
Net sales/(purchases)
of Common Stock 184 - (101) -
Changes in short-term
debt 145 676 (267) 8,679
Proceeds from issuance
of other debt 84 14,681 289 7,542
Principal payments on
other debt (595) (25,174) (1,729) (22,672)
Net financing activity
with Automotive - (1,402) - (1,832)
Other (4) (2) (15) (20)
Net cash (used in)/
provided by financing
activities (553) (11,221) (2,189) (8,303)
Effect of exchange rate
changes on cash (39) (487) (37) (108)
Net transactions with
Automotive/Financial
Services (356) 356 474 (474)
Net increase/(decrease)
in cash and cash
equivalents 670 5,953 210 (6,633)
Cash and cash equivalents
at June 30 $10,812 $19,321 $7,066 $9,719
Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.