Ford Announces Q2 Earnings
16 July 1997
Ford Earns Record $2.5 Billion in Second Quarter; Ford 2000 Drives Further Automotive Improvement
DEARBORN, Mich., July 16 -- Ford Motor Company's
continuing drive to transform its worldwide automotive business has led to
improved overall results and an all-time earnings record in the second
quarter.
Earnings for the second quarter of 1997 were $2.53 billion, or $2.06 per
fully diluted share of common and Class B stock, up 33 percent from the $1.903
billion, or $1.56 a share, earned in the second quarter of 1996.
"Today's results come from several years of very tough work. Thanks to
great teamwork, our strategy is continuing to pay off," said Chairman and
Chief Executive Officer Alex Trotman. "The entire Ford team -- which includes
our dealers and our suppliers -- should be proud of what we're accomplishing.
We're all encouraged, but we're not letting up one bit."
Second-quarter results include a net one-time gain of $100 million, or
eight cents a share. The net gain reflects a gain from the initial public
offering of The Hertz Corporation that is offset partially by charges
associated with realignments of manufacturing capacity and the sale of Ford's
heavy truck business.
AUTOMOTIVE OPERATIONS EARN A RECORD $1.7 BILLION
Net income from worldwide automotive operations was a record $1.735
billion in the second quarter, up from $1.108 billion in the second quarter of
1996, and the fifth consecutive quarter of improved earnings, compared with
the year-ago period. "An essential element of our balanced strategy is to
reduce total automotive operating costs, while, at the same time, introducing
new high-quality products," Trotman said.
By the end of 1997, Ford will have introduced eight all-new or
substantially redesigned cars and trucks, including ZX2, Contour SVT, Ranger
and F-250/350 pick-ups, and the Lincoln Navigator, Town Car and Continental in
North America and Puma in Europe.
Automotive earnings include one-time charges of $169 million for
manufacturing realignments and the sale of Ford's heavy truck business to
Freightliner.
"We're pleased to see automotive earnings continuing to improve," Trotman
said. "Teamwork, popular products, and putting customers first are
responsible for the progress we're making. Profits provide only one among
many indicators that tell us how well we're doing. But the continuing gains
in quality, product value and safety are what customers appreciate most."
J. D. Power and Associates' 1997 Initial Quality Survey showed that Ford's
U.S. quality rose 28 percent, the most for any manufacturer. J. D. Power also
ranked the Atlanta Assembly Plant, which builds Taurus and Sable, as equal to
the best in the world for initial quality. In frontal crash tests conducted
by the National Highway Traffic Safety Administration, Ford earned more top
safety ratings than all other manufacturers combined.
In addition, the 1997 Harbour Report found that Ford leads in U.S.
productivity in eight of 12 assembly plant segments and has two of the top ten
car assembly plants and five of the top ten truck assembly plants.
U.S. automotive operations earned a record $1.192 billion, up from
$697 million a year ago, reflecting lower total costs adjusted for volume,
improving quality, sales momentum of new products and a steady economy.
Outside the U.S., automotive operations earned $543 million, compared with
$411 million from a year ago.
In Europe, Ford earned $157 million, down $39 million from a year ago.
"We've worked hard to broaden our strong product line-up and reduce costs, but
the market in Europe remains tough for everyone," Trotman said. "Assuming
economic stability continues, we're on track to improve our results in Europe
for the full year, but we know more actions will be needed to achieve our
long-term objectives."
In South America, Ford earned $25 million, compared with a loss of
$69 million a year ago. "A strong automotive industry in Brazil and
Argentina, growing customer demand for Ford products and cost efficiencies all
are contributing to the improvement," Trotman said. "As we rebuild our
business in the region, our focus on the fundamentals is resulting in faster
progress than we first thought."
In other markets, Ford earned $361 million, including strong results from
Australia, Canada and Mexico.
FINANCIAL SERVICES ADD $795 MILLION
Ford's financial services businesses earned $795 million, equal to last
year. Both periods included non-recurring items; excluding these, results
were down $37 million.
"Overall, our financial services businesses continue to provide strong and
consistent profits to our bottom line, including record earnings from both The
Associates and Hertz," Trotman noted.
This year, results include a one-time gain of $269 million related to the
initial public offering (IPO) of 19.1 percent of Hertz. In 1996, results
included a net one-time gain of $232 million, reflecting gains from the IPO of
The Associates and the sale of some assets of USL Capital that were offset
partially by a write-down of debt and preferred shares of Budget Rent a Car.
Last year's results also included record earnings of $41 million from USL
Capital; essentially, the remainder of USL Capital's assets were sold later in
1996.
Ford Credit earned $279 million, down from $376 million a year ago. The
decline stems from increased credit losses and higher depreciation expenses on
leased vehicles, reflecting industry trends.
The Associates set a quarterly record of $245 million, compared with
$200 million last year. Ford's share of The Associates second-quarter 1997
earnings was $197 million.
Hertz reported record second-quarter earnings of $54 million, compared
with $40 million in the second quarter of 1996. Ford's share of Hertz'
second-quarter earnings was $45 million.
SUMMARY OF SECOND QUARTER 1997 COMPARED WITH 1996
Overview
* Total earnings were $2.5 billion, compared with $1.9 billion in the
second quarter of 1996. The results include a net one-time gain of
$100 million consisting of a gain from the initial public offering of The
Hertz Corporation that was offset partially by charges for realignments of
manufacturing capacity and the sale of Ford's heavy truck business.
* Fully diluted earnings per share were $2.06, compared with $1.56.
* Worldwide sales and revenues were $40.3 billion, compared with
$39 billion.
* Stockholders' equity was $29.1 billion, compared with $25.8 billion.
Automotive
* Net income from worldwide automotive operations was $1.7 billion,
compared with $1.1 billion.
* Net income from U.S. automotive operations was $1.2 billion, compared
with $697 million.
* Net income from automotive operations outside the U.S. was $543 million,
compared with $411 million.
* Worldwide return on sales was 5.3 percent. In the U.S., return on sales
was 5.5 percent.
* Worldwide vehicle unit sales were 1,879,000, compared with 1,810,000.
* Combined car and truck share in the U.S. was 25.6 percent, compared with
24.8 percent.
* Combined car and truck share in Europe was 11.6 percent, compared with
12 percent.
Financial Services
* Financial services earned $795 million, equal to last year.
* Ford Credit earned $279 million, compared with $376 million.
* The Associates earned a record $245 million, compared with $200 million.
* Hertz earned a record $54 million, compared with $40 million.
Automotive Balance Sheet
* Net cash was $9.9 billion, compared with $8.4 billion.
* Cash and marketable securities were $18.2 billion, compared with
$15.2 billion.
* Debt was $8.3 billion, compared with $6.8 billion.
* Capital spending was $1.9 billion, compared with $1.8 billion.
Ford Motor Company and Subsidiaries
Highlights
Second Quarter First Half
1997 1996 1997 1996
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and truck (in thousands)
- United States 1,110 1,067 2,089 2,007
- Outside United States 769 743 1,471 1,441
Total 1,879 1,810 3,560 3,448
Sales and revenues (in millions)
- Automotive $32,805 $31,762 $61,730 $60,059
- Financial Services 7,460 7,211 14,737 14,139
Total $40,265 $38,973 $76,467 $74,198
Net income (in millions)
- Automotive $ 1,735 $ 1,108 $ 2,739 $ 1,250
- Financial Services 795 795 1,260 1,306
Total $ 2,530 $ 1,903 $ 3,999 $ 2,556
Capital expenditures (in millions)
- Automotive $ 1,872 $ 1,779 $ 3,485 $ 3,568
- Financial Services 140 87 266 200
Total $ 2,012 $ 1,866 $ 3,751 $ 3,768
Automotive capital expenditures as a
percentage of sales 5.7% 5.6% 5.6% 5.9%
Stockholders' equity at June 30
- Total (in millions) $29,113 $25,840 $29,113 $25,840
- After-tax return on Common and
Class B stockholders' equity 36.5% 30.9% 29.5% 21.0%
Automotive cash and marketable
securities at June 30
(in millions) $18,184 $15,240 $18,184 $15,240
Automotive debt at June 30
(in millions) $ 8,319 $ 6,828 $ 8,319 $ 6,828
After-tax return on sales
- U.S. Automotive 5.5% 3.5% 5.1% 2.0%
- Total Automotive 5.3 3.5 4.5 2.1
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,193 1,178 1,191 1,173
- Number outstanding at June 30 1,194 1,182 1,194 1,182
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming full dilution
- Automotive $ 1.41 $ 0.91 $ 2.22 $ 1.02
- Financial Services $ 0.65 $ 0.65 $ 1.03 $ 1.08
Total $ 2.06 $ 1.56 $ 3.25 $ 2.10
Cash dividends $ 0.42 $ 0.35 $0.805 $ 0.70
SOURCE Ford Motor Company