Ford Reports Third Quarter 2005 Financial Results
- Net loss of 15 cents per share, or $284 million.
- Loss from continuing operations of 10 cents per share, or $191 million, excluding special items.*
- Worldwide automotive pre-tax loss of $1.3 billion, excluding special items.
- Financial Services sector pre-tax profit of $1.1 billion, excluding special items.
- Full-year earnings results expected to be at the low end of the current guidance range of $1.00 to $1.25 per share from continuing operations, excluding special items.
DEARBORN, Mich., Oct. 20 -- Ford Motor Company today reported a net loss of 15 cents per share, or $284 million, for the third quarter of 2005. This compares with net income of 15 cents per share, or $266 million, in the third quarter of 2004.
Ford's third-quarter loss from continuing operations, excluding special items, was 10 cents per share, or $191 million, compared to a profit of 27 cents per share, or $515 million, in the same period last year.*
Ford's total sales and revenue in the third quarter was $40.9 billion, compared to $39.1 billion in the year-ago period.
* Earnings per share from continuing operations excluding special items is
calculated on a basis that includes pre-tax profit and provision for
taxes and minority interest. See table following "Safe Harbor/Risk
Factors" for the nature and amount of these special items and a
reconciliation to GAAP.
"As our results indicate, we face many challenges in this competitive and difficult environment," said Chairman and Chief Executive Officer Bill Ford. "We have demonstrated throughout the year that we will continue to take the actions necessary to return our core business to sustainable profitability. We understand the issues, our priorities, and have the right team in place to get the job done."
Third-quarter actions included:
-- Finalization of the Visteon agreement.
-- An agreement to sell The Hertz Corporation.
-- The introduction of new supply base consolidation initiative.
-- Announcement of the Company's innovation initiative, including a
tenfold increase in annual hybrid vehicle production by 2010.
-- Continued global personnel reductions.
-- The launch of Ford Fusion, Mercury Milan and Lincoln Zephyr in North
America.
-- Premier Automotive Group reveal of Volvo C70 and Jaguar XK.
-- Roll-out of Ford Focus in Asia Pacific.
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 a reconciliation to GAAP.
AUTOMOTIVE SECTOR
On a pre-tax basis, worldwide automotive losses in the third quarter were $1.3 billion, a decline of $732 million from a loss of $609 million during the same period a year ago.
Worldwide automotive sales for the third quarter rose to $34.7 billion from $32.8 billion in the same period last year. Worldwide vehicle-unit sales in the quarter were 1,531,000, up from 1,508,000 a year ago.
Total cash, including automotive cash, marketable securities, loaned securities and short-term Voluntary Employee Beneficiary Association (VEBA) assets on September 30, 2005 was $19.6 billion, down from $21.8 billion at the end of the second quarter.
THE AMERICAS
For the third quarter, the Americas reported a pre-tax loss of $1.1 billion, a decline of $648 million from a $422 million pre-tax loss in the same period a year ago.
North America: In the third quarter, Ford's North American automotive operations reported a pre-tax loss of $1.2 billion, a decline of $685 million from a $481 million pre-tax loss a year ago. Lower dealer inventories, unfavorable vehicle mix, lower net pricing and higher warranty and material costs contributed to the deterioration. Higher industry volumes and market share were partial offsets. Included in the higher warranty costs was the favorable impact of the $240 million settlement reached with Bridgestone Firestone North American Tire, LLC regarding Firestone's August 2000 voluntary safety recall and Ford's May 2001 tire replacement program. Sales were $18.2 billion, up $59 million from the same period a year ago.
South America: Ford's South American automotive operations reported a third-quarter pre-tax profit of $96 million, an increase of $37 million from a $59 million pre-tax profit a year ago. Higher volumes and net pricing in excess of higher commodity costs were the primary drivers of the improvement. Sales for the third quarter improved to $1.2 billion from $784 million in 2004.
FORD EUROPE AND PREMIER AUTOMOTIVE GROUP (PAG)
The 2005 third quarter combined pre-tax loss for Ford Europe and PAG automotive operations was $163 million, an improvement of $41 million compared with a loss of $204 million for the year-ago period.
Ford Europe: Ford Europe's third-quarter pre-tax loss was $55 million, compared with a pre-tax loss of $33 million during the 2004 period. The decline was more than explained by higher material costs. These were partially offset by higher net pricing and higher subsidiary profits. Ford Europe's sales in the third quarter were $6.4 billion, compared with $5.9 billion during the third quarter of 2004.
Premier Automotive Group: PAG reported a pre-tax loss of $108 million for the third quarter, compared with a pre-tax loss of $171 million for the same period in 2004. This is more than explained by the impact of new products, resulting in a richer mix and improved net pricing, primarily at Land Rover. Unfavorable currency exchange was a significant partial offset. Third-quarter sales for PAG were $6.8 billion, compared with $6.1 billion a year ago.
FORD ASIA-PACIFIC AND AFRICA/MAZDA
The 2005 third quarter combined pre-tax profit for Ford Asia-Pacific and Africa/Mazda was $133 million, an improvement of $85 million compared with a profit of $48 million for the year-ago period.
Ford Asia-Pacific and Africa: For the third quarter of 2005, Ford Asia- Pacific and Africa reported a pre-tax profit of $21 million, a decline of $14 million from a $35 million pre-tax profit a year ago. The decline was primarily explained by a higher mix of smaller cars, partially offset by improved net pricing. Sales were $1.9 billion, unchanged from third quarter 2004.
Mazda: During the third quarter of 2005, Ford's share of Mazda profits and associated operations was $112 million, an improvement of $99 million from $13 million during the same period a year ago. The improvement primarily reflects gains on our investment in Mazda's convertible bonds and improved operating results at Mazda.
OTHER AUTOMOTIVE
Third-quarter earnings included a loss of $241 million in other automotive financial results. This is a decline of $210 million from the same period last year, primarily reflecting the non-recurrence of tax-related interest income on refund claims received last year.
FORD MOTOR CREDIT COMPANY
Ford Motor Credit Company reported net income of $577 million in the third quarter of 2005, down $157 million from a year earlier. On a pre-tax basis from continuing operations, Ford Motor Credit earned $901 million in the third quarter, compared with $1.1 billion in the previous year. The decrease in earnings primarily reflected higher borrowing costs and the impact of lower receivable levels, partially offset by improved credit loss performance.
THE HERTZ CORP.
Hertz reported a third-quarter pre-tax profit of $262 million, an improvement of $13 million from the same period in 2004. The improvement reflected higher car and equipment rental volume, partially offset by lower pricing.
SPECIAL ITEMS*
In total, special items reduced earnings per share by 6 cents in the third quarter. Charges for Visteon-related actions, personnel reduction programs, and fuel cell technology were partially offset by a gain on the sale of a non- core business.
* See table following "Safe Harbor/Risk Factors" for the nature and amount
of these special items and a reconciliation to GAAP.
OUTLOOK
Commenting on the Company's financial outlook, Executive Vice President and Chief Financial Officer Don Leclair said, "We expect the fourth quarter to be another extremely competitive period. Our new products put us in an excellent position to compete in the marketplace. We will continue the turnaround in our operations in Europe, the investment in growth in Asia, and to address our issues in North America."
The Company's 2005 full-year earnings guidance is expected to be at the low end of the current guidance range of $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 ANTICIPATED FULL-YEAR SPECIAL ITEMS AND DISCONTINUED OPERATIONS Special Items Full-Year EPS -- Visteon-Related Charges $(0.26) - (0.24) -- Personnel Reduction Programs (0.21) -- Fuel Cell Technology Charges (0.05) -- Sale of Non-Core Businesses 0.05 -- Tax Adjustments 0.18 -- Hertz Sale 0.33 - 0.42 Total Special Items $0.04 - 0.15 Discontinued Operations 0.02 Cumul. Change in Acctg. Principles (Asset Retirement Obligations) (TBD)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 THIRD QUARTER INCOME/LOSS FROM CONTINUING OPERATIONS COMPARED WITH NET LOSS* Earnings Memo: Per Share Pre-Tax Profit (Mils.) Loss from Continuing Operations Excluding Special Items $(0.10) $(203) Special Items - Visteon-Related Charges $(0.08) $(180) - Personnel Reduction Programs (0.06) (158) - Fuel Cell Technology Charges (0.03) (66) - Sale of Non-Core Businesses 0.08 146 - Hertz Sale** 0.03 84 Total Special Items $(0.06) $(174) Loss from Continuing Operations $(0.16) $(377) Discontinued Operations 0.01 Net Loss $(0.15) * Earnings per share from continuing operations is calculated on a basis that includes pre-tax profit, provision for taxes, and minority interest; additional information regarding the method of calculating earnings per share is available in the materials supporting the Oct. 20, 2005 conference calls at http://www.shareholder.ford.com/. ** Represents effect of Hertz being held for sale in the third quarter of 2005. FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Periods Ended September 30, 2005 and 2004 (in millions, except per share amounts) Third Quarter Nine Months 2005 2004 2005 2004 (unaudited) (unaudited) Sales and revenues Automotive sales $34,675 $32,797 $112,692 $108,258 Financial Services revenues 6,181 6,324 17,848 18,459 Total sales and revenues 40,856 39,121 130,540 126,717 Costs and expenses Cost of sales 33,532 30,956 105,803 98,634 Selling, administrative and other expenses 5,983 5,694 18,200 17,433 Interest expense 1,976 1,867 5,659 5,436 Provision for credit and insurance losses 182 326 350 853 Total costs and expenses 41,673 38,843 130,012 122,356 Automotive interest income and other non-operating income/ (expense), net 307 383 1,111 508 Automotive equity in net income/ (loss) of affiliated companies 133 57 259 197 Income/(loss) before income taxes (377) 718 1,898 5,066 Provision for/(benefit from) income taxes (140) 197 (127) 1,277 Income/(loss) before minority interests (237) 521 2,025 3,789 Minority interests in net income/(loss) of subsidiaries 54 62 196 219 Income/(loss) from continuing operations (291) 459 1,829 3,570 Income/(loss) from discontinued operations 7 (193) 45 (187) Net income/(loss) $(284) $266 $1,874 $3,383 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK Basic income/(loss) Income/(loss) from continuing operations $(0.16) $0.25 $0.99 $1.95 Income/(loss) from discontinued operations 0.01 (0.10) 0.03 (0.10) Net income/(loss) $ (0.15) $0.15 $1.02 $1.85 Diluted income/(loss) Income/(loss) from continuing operations $ (0.16) $0.24 $0.93 $1.75 Income/(loss) from discontinued operations 0.01 (0.09) 0.02 (0.09) Net income/(loss) $ (0.15) $0.15 $0.95 $1.66 Cash dividends $ 0.10 $0.10 $0.30 $0.30 FORD MOTOR COMPANY AND SUBSIDIARIES SECTOR STATEMENT OF INCOME For the Periods Ended September 30, 2005 and 2004 (in millions, except per share amounts) Third Quarter Nine Months 2005 2004 2005 2004 (unaudited) (unaudited) AUTOMOTIVE Sales $ 34,675 $ 32,797 $112,692 $108,258 Costs and expenses Cost of sales 33,532 30,956 105,803 98,634 Selling, administrative and other expenses 2,811 2,557 8,996 8,131 Total costs and expenses 36,343 33,513 114,799 106,765 Operating income/(loss) (1,668) (716) (2,107) 1,493 Interest expense 371 397 960 1,094 Interest income and other non- operating income/(expense), net 307 383 1,111 508 Equity in net income/(loss) of affiliated companies 133 57 259 197 Income/(loss) before income taxes - Automotive (1,599) (673) (1,697) 1,104 FINANCIAL SERVICES Revenues 6,181 6,324 17,848 18,459 Costs and expenses Interest expense 1,605 1,470 4,699 4,342 Depreciation 1,537 1,568 4,591 4,956 Operating and other expenses 1,635 1,569 4,613 4,346 Provision for credit and insurance losses 182 326 350 853 Total costs and expenses 4,959 4,933 14,253 14,497 Income/(loss) before income taxes - Financial Services 1,222 1,391 3,595 3,962 TOTAL COMPANY Income/(loss) before income taxes (377) 718 1,898 5,066 Provision for/(benefit from) income taxes (140) 197 (127) 1,277 Income/(loss) before minority interests (237) 521 2,025 3,789 Minority interests in net income/(loss) of subsidiaries 54 62 196 219 Income/(loss) from continuing operations (291) 459 1,829 3,570 Income/(loss) from discontinued operations 7 (193) 45 (187) Net income/(loss) $(284) $266 $1,874 $3,383 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK Basic income/(loss) Income/(loss) from continuing operations $ (0.16) $0.25 $0.99 $1.95 Income/(loss) from discontinued operations 0.01 (0.10) 0.03 (0.10) Net income/(loss) $ (0.15) $0.15 $1.02 $1.85 Diluted income/(loss) Income/(loss) from continuing operations $ (0.16) $0.24 $0.93 $1.75 Income/(loss) from discontinued operations 0.01 (0.09) 0.02 (0.09) Net income/(loss) $ (0.15) $0.15 $0.95 $1.66 Cash dividends $0.10 $0.10 $0.30 $0.30 FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) September 30, December 31, 2005 2004 (unaudited) ASSETS Cash and cash equivalents $28,200 $22,831 Marketable securities 8,614 8,946 Loaned securities 579 1,058 Finance receivables, net 91,774 109,466 Other receivables, net 5,268 5,969 Net investment in operating leases 23,007 22,652 Retained interest in sold receivables 4,415 9,166 Inventories 11,687 10,766 Equity in net assets of affiliated companies 2,594 2,835 Net property 41,887 44,549 Deferred income taxes 4,611 4,830 Goodwill and other intangible assets 6,072 6,394 Assets of discontinued/held-for-sale operations 15,535 16,346 Other assets 24,052 28,050 Total assets $268,295 $293,858 LIABILITIES AND STOCKHOLDERS' EQUITY Payables $22,991 $21,991 Accrued and other liabilities 71,382 71,078 Debt 141,738 164,545 Deferred income taxes 4,617 7,845 Liabilities of discontinued/held-for-sale operations 12,522 11,477 Total liabilities 253,250 276,936 Minority interests 1,058 877 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 4,956 5,321 Accumulated other comprehensive income/(loss) (2,454) 1,258 Treasury stock (1,031) (1,728) Earnings retained for use in business 12,497 11,175 Total stockholders' equity 13,987 16,045 Total liabilities and stockholders' equity $268,295 $293,858 FORD MOTOR COMPANY AND SUBSIDIARIES SECTOR BALANCE SHEET (in millions) September 30, December 31, 2005 2004 (unaudited) ASSETS Automotive Cash and cash equivalents $9,096 $10,142 Marketable securities 7,900 8,291 Loaned securities 579 1,058 Total cash, marketable and loaned securities 17,575 19,491 Receivables, net 3,297 2,894 Inventories 11,687 10,766 Deferred income taxes 3,397 3,837 Other current assets 7,599 8,916 Total current assets 43,555 45,904 Equity in net assets of affiliated companies 1,748 1,907 Net property 41,545 42,904 Deferred income taxes 10,436 10,894 Goodwill and other intangible assets 6,054 6,374 Assets of discontinued/held-for-sale operations 22 188 Other assets 9,744 9,455 Total Automotive assets 113,104 117,626 Financial Services Cash and cash equivalents 19,104 12,689 Investments in securities 714 655 Finance receivables, net 93,745 112,541 Net investment in operating leases 23,007 22,652 Retained interest in sold receivables 4,415 9,166 Goodwill and other intangible assets 18 20 Assets of discontinued/held-for-sale operations 15,513 16,158 Other assets 7,936 12,285 Receivable from Automotive 1,592 2,753 Total Financial Services assets 166,044 188,919 Intersector elimination (1,592) (2,753) Total assets $ 277,556 $ 303,792 LIABILITIES AND STOCKHOLDERS' EQUITY Automotive Trade payables $ 17,254 $ 16,026 Other payables 4,114 4,269 Accrued and other liabilities 27,497 29,700 Deferred income taxes 2,330 2,514 Debt payable within one year 981 977 Current payable to Financial Services 1,214 1,382 Total current liabilities 53,390 54,868 Long-term debt 17,255 17,458 Other liabilities 37,675 37,058 Deferred income taxes 1,862 3,042 Liabilities of discontinued/held-for-sale operations 10 46 Payable to Financial Services 378 1,371 Total Automotive liabilities 110,570 113,843 Financial Services Payables 1,623 1,696 Debt 123,502 146,110 Deferred income taxes 9,686 9,709 Other liabilities and deferred income 6,210 6,834 Liabilities of discontinued/held-for-sale operations 12,512 11,431 Total Financial Services liabilities 153,533 175,780 Minority interests 1,058 877 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 4,956 5,321 Accumulated other comprehensive income/(loss) (2,454) 1,258 Treasury stock (1,031) (1,728) Earnings retained for use in business 12,497 11,175 Total stockholders' equity 13,987 16,045 Intersector elimination (1,592) (2,753) Total liabilities and stockholders' equity $277,556 $303,792 FORD MOTOR COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the Periods Ended September 30, 2005 and 2004 (in millions) Nine Months 2005 2004 (unaudited) Cash and cash equivalents at January 1 $ 22,831 $ 22,598 Cash flows from operating activities Net cash flows from operating activities 20,103 19,887 Cash flows from investing activities Capital expenditures (5,462) (4,896) Acquisitions of retail and other finance receivables and operating leases (42,026) (47,416) Collections of retail and other finance receivables and operating leases 37,760 40,124 Net acquisitions of daily rental vehicles (2,775) (2,739) Purchases of securities (4,743) (7,597) Sales and maturities of securities 3,863 7,285 Proceeds from sales of retail and other finance receivables and operating leases 15,144 4,661 Proceeds from sale of businesses 2,245 537 Cash paid for acquisitions (1,617) (30) Other 576 (348) Net cash (used in)/provided by investing activities 2,965 (10,419) Cash flows from financing activities Cash dividends (552) (549) Net sales/(purchases) of Common Stock 250 (127) Changes in short-term debt (6,177) 8,700 Proceeds from issuance of other debt 20,237 12,544 Principal payments on other debt (31,076) (34,490) Other (5) (49) Net cash (used in)/provided by financing activities (17,323) (13,971) Effect of exchange rate changes on cash (376) (6) Net increase/(decrease) in cash and cash equivalents 5,369 (4,509) Cash and cash equivalents at September 30 $ 28,200 $ 18,089 FORD MOTOR COMPANY AND SUBSIDIARIES CONDENSED SECTOR STATEMENT OF CASH FLOWS For the Periods Ended September 30, 2005 and 2004 (in millions) Nine Months 2005 Nine Months 2004 Automotive Financial Automotive Financial Services Services (unaudited) (unaudited) Cash and cash equivalents at January 1 $10,142 $12,689 $6,855 $15,743 Cash flows from operating activities Net cash flows from operating activities 4,535 7,757 5,045 11,867 Cash flows from investing activities Capital expenditures (5,109) (353) (4,597) (299) Acquisitions of retail and other finance receivables and operating leases - (42,026) - (47,416) Collections of retail and other finance receivables and operating leases - 36,560 - 38,844 Net (acquisitions)/collections of wholesale receivables - 5,272 - 298 Net acquisitions of daily rental vehicles - (2,775) - (2,739) Purchases of securities (4,343) (400) (6,811) (786) Sales and maturities of securities 3,239 624 6,635 650 Proceeds from sales of retail and other finance receivables and operating leases - 15,144 - 4,661 Proceeds from sales of wholesale receivables - 3,739 - 3,957 Proceeds from sale of businesses 204 2,041 125 412 Cash paid for acquisitions (1,617) - (30) - Net investing activity with Financial Services 2,486 - 3,277 - Other 451 125 10 (358) Net cash (used in)/provided by investing activities (4,689) 17,951 (1,391) (2,776) Cash flows from financing activities Cash dividends (552) - (549) - Net sales/(purchases) of Common Stock 250 - (127) - Changes in short-term debt (3) (6,174) (279) 8,979 Proceeds from issuance of other debt 253 19,984 406 12,138 Principal payments on other debt (682) (30,394) (2,112) (32,378) Net financing activity with Automotive - (2,486) - (3,277) Other (4) (1) (17) (32) Net cash (used in)/provided by financing activities (738) (19,071) (2,678) (14,570) Effect of exchange rate changes on cash 14 (390) (9) 3 Net transactions with Automotive/Financial Services (168) 168 92 (92) Net increase/(decrease) in cash and cash equivalents (1,046) 6,415 1,059 (5,568) Cash and cash equivalents at September 30 $ 9,096 $ 19,104 $ 7,914 $ 10,175Certain amounts in prior year's financial statements have been reclassified to conform with current year presentation.