Ford Earns $1 Billion in Q3, Up 10 Percent
14 October 1998
Ford Earns $1 Billion in Third Quarter, Up 10 Percent; Tenth Consecutive Quarter of Earnings Improvement
DEARBORN, Mich., Oct. 14 -- Ford Motor Company
today reported third quarter earnings of $1 billion, or 80 cents per diluted
share of common and Class B stock, up 10 percent on a comparable basis --
Ford's tenth consecutive quarter of year-over-year profit improvement.
Third quarter 1997 earnings comparable with the current quarter were
$906 million, or 73 cents per diluted share. This excludes Ford's share of
the third quarter 1997 earnings of Associates First Capital which
was $219 million. The Associates was spun-off to Ford shareholders in the
second quarter of 1998. (Ford's reported third quarter 1997 earnings
including The Associates were $1.1 billion, or 91 cents per diluted share.)
For the first nine months of 1998, Ford earned a record $4.9 billion, or
$3.94 per diluted share (excluding earnings from The Associates, a one-time
non-cash gain of $16 billion, or $12.89 per diluted share, resulting from the
spin-off of The Associates, and a one-time earnings per share reduction of
$.07 per share resulting from the premium paid to repurchase Ford's Series B
preferred stock). In the first nine months of 1997, Ford earned $4.5 billion,
or $3.67 per diluted share (excluding earnings from The Associates).
"As Ford 2000 has taken root, it has given us a glimpse of what we can
accomplish for our customers and shareholders," said Alex Trotman, chairman
and CEO. "We have exciting new products, and are continuing to improve
quality and lower our total costs. We have strengthened our balance sheet,
increased our dividend, and year-to-date, our total return to shareholders has
outperformed the market by a wide margin. We believe we are well positioned
heading into 1999."
AUTOMOTIVE OPERATIONS
Net income from worldwide automotive operations was $646 million in the
third quarter of 1998, compared with $634 million in the third quarter of
1997. For the first nine months of 1998, net income from automotive
operations was $3.9 billion, compared with net income of $3.4 billion in the
year-ago period.
After-tax return on sales (ROS) improved to 2.5 percent in the third
quarter, up 0.2 points. For the first nine months, ROS was 4.6 percent,
compared with an ROS of 3.7 percent in the first nine months of 1997.
Total costs were down $600 million in the quarter, marking Ford's seventh
consecutive quarter in which total costs were lower at constant volume and
mix, compared with the year-ago period. In the first nine months of 1998,
Ford reduced its total costs by $1.9 billion at constant volume and mix. The
company set a 1998 full-year target of reducing costs by $1 billion.
"While some regions of the world face very challenging economic
situations, the fundamentals for the automotive industry in the U.S., our
largest market, continue to be solid," Trotman said. "A firm job market,
relatively high consumer confidence levels and low borrowing costs are all
positive factors. In addition, the Federal Reserve has ample room to lower
interest rates to compensate for the adverse effects of global economic
volatility sparked by the crisis in Asia."
North America: Automotive earnings were a record $900 million, compared
with $620 million a year ago, up 45 percent. These results reflect improved
quality, lower costs and higher market share in the U.S., compared with a year
ago. Nine-month earnings were a record $3.6 billion, versus $3.1 billion in
the same period a year ago.
Ford's third quarter ROS in North America was 4.5 percent, up 1.4 points.
For the first nine months, ROS was 5.7 percent, versus 4.8 percent last year.
Ford is on track to beat its 1998 milestone which is to earn a 5 percent ROS
in North America.
"Ford's combined U.S. car and truck sales set a third quarter record,
driven by improvements in sales to retail customers," Trotman said. "This
fall, we are launching a number of products that will build on our momentum,
including the 1999 Ford Taurus and Mercury Sable, the only sedans and station
wagons priced under $20,000 to earn the U.S. government's five-star safety
rating for the driver and front seat passenger sides."
Five stars indicate the best crash protection for vehicles of similar
weight. Other 1999 Ford models with the double five star rating are the Ford
Crown Victoria, Mercury Grand Marquis and the redesigned Ford Windstar, now
available with dual power sliding doors.
Other new 1999 models include the low-emissions Ford Expedition, Explorer
and Windstar, Mercury Mountaineer, and Lincoln Navigator. The Navigator and
Expedition also have adjustable accelerator and brake pedals which allow
drivers to achieve an optimal driving position. Also new for 1999 are the
Ford Mustang and Mercury Villager, which is now available with dual sliding
doors.
Europe: Automotive results were a loss of $273 million in the third
quarter of 1998, compared with a loss of $147 million in the year-ago period.
The decline reflects higher costs associated with the Focus launch and lower
export sales, partially offset by cost reductions.
For the first nine months of 1998, automotive earnings in Europe were
$267 million, compared with $115 million in the year-ago period. Ford's 1998
business milestone for Europe is to post a profit for the year.
"This month marks the launch of the all-new Ford Focus in Europe, the
first derivative of a platform that will showcase the synergies promised by
Ford 2000," Trotman said. "The Focus will be an excellent business equation
for Ford, and it will deliver great value to customers."
The Focus will be launched in North America in the Fall of 1999, and later
in markets around the world.
South America: Automotive results were a loss of $44 million in the third
quarter of 1998, compared with earnings of $133 million a year ago. For the
first nine months of 1998, Ford lost $75 million in South America, compared
with earnings of $111 million in the same period a year ago.
"We don't expect to meet our target of breaking even for the year as a
result of the weak economy of Brazil, Ford's largest vehicle market and
production base in South America," Trotman said.
Visteon: The earnings of Visteon Automotive Systems, Ford's automotive
systems and components enterprise, are included in the company's current and
historical automotive results.
In the third quarter of 1998, Visteon earned $150 million, compared with
$114 million a year ago. For the first nine months of 1998, Visteon earned
$580 million, versus $470 million in the same period a year ago.
FORD CREDIT
Earnings in the third quarter of 1998 were $272 million, up $14 million or
5 percent, from the third quarter of 1997. The improvement in earnings was
due to lower credit losses and higher financing volumes, offset partially by
lower net financing margins. Lower net financing margins are a result of
higher depreciation expense on leased vehicles. Earnings in the first nine
months of 1998 were $850 million, versus $813 million a year ago, up
5 percent.
"Ford Credit's earnings growth is presently below the full-year milestone
we set in January, but its results have improved in each of the first three
quarters of this year, relative to 1997," Trotman said. "Achieving 10 percent
earnings growth for 1998 remains our objective."
HERTZ
The Hertz Corporation earned a record $119 million in the
third quarter of 1998, compared with $93 million a year ago. Ford's share of
Hertz' third quarter 1998 earnings was $96 million. In the first nine months
of 1998, Hertz earned $229 million; Ford's share was $185 million.
SUMMARY OF THIRD QUARTER 1998 COMPARED WITH 1997
Overview
* Earnings were $1,001 million, versus $906 million on a comparable
basis.
* Diluted earnings per share were 80 cents, compared with 73 cents per
share.
* Worldwide sales and revenues were $32,640 million, compared with
$36,096 million.
* Stockholders' equity was $23,718 million, compared with $29,677
million.
Automotive
* Net income from worldwide automotive operations was $646 million,
compared with $634 million. After-tax return on sales was 2.5 percent,
up 0.2 points.
* Worldwide vehicle unit sales were 1,489,000, compared with 1,596,000.
* Net income in North America was a record $900 million, compared with
$620 million. Combined car and truck share in the U.S. was 25.9
percent, compared with 24.6 percent.
* In Europe, Ford lost $273 million, compared with a loss of $147
million. Combined car and truck share in Europe was 10.1 percent,
compared with 11.3 percent.
* In South America, Ford lost $44 million, compared with earnings of $133
million. Combined car and truck share in Brazil was 13 percent,
compared with 15.7 percent.
* Visteon Automotive Systems earned $150 million, compared with $114
million.
Ford Credit
* Ford Credit earned $272 million, compared with $258 million.
Hertz
* Hertz earned a record $119 million; Ford's share was $96 million.
Third quarter 1997 earnings were $93 million.
Automotive Balance Sheet
* Cash and marketable securities were a record $22,911 million, compared
with $19,320 million.
* Debt was $9,822 million, compared with $8,207 million.
* Net cash was $13,089 million, compared with $11,113 million.
* Capital spending was $1,908 million, compared with $2,268 million.
Ford Motor Company and Subsidiaries
HIGHLIGHTS
Third Quarter Nine Months
1998 1997 1998 1997
(unaudited) (unaudited)
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- North America 993 1,033 3,174 3,314
- Outside North America 496 563 1,835 1,842
Total 1,489 1,596 5,009 5,156
Sales and revenues (in millions)
- Automotive $26,494 $28,196 $86,879 $91,038
- Financial Services 6,146 7,900 19,634 22,637
Total $32,640 $36,096 $106,513 $113,675
Net income (in millions)
- Automotive $646 $634 $3,932 $3,373
- Financial Services 355 272 964 1,143
(excl. The Associates)
Subtotal 1,001 906 4,896 4,516
- The Associates - 219 177 608
- Gain on spin-off of
The Associates - - 15,955 -
Total $1,001 $1,125 $21,028 $5,124
Capital expenditures (in millions)
- Automotive $1,908 $2,268 $5,668 $5,753
- Financial Services 147 147 398 413
Total $2,055 $2,415 $6,066 $6,166
Automotive capital expenditures as a
percentage of sales 7.2% 8.0% 6.5% 6.3%
Stockholders' equity at September 30
- Total (in millions) $23,718 $29,677 $23,718 $29,677
- After-tax return on Common and
Class B stockholders' equity 17.2% 15.4% 28.0% 24.6%
Automotive net cash at September 30
(in millions)
- Cash and marketable
securities $22,911 $19,320 $22,911 $19,320
- Debt 9,822 8,207 9,822 8,207
Automotive net cash $13,089 $11,113 $13,089 $11,113
After-tax return on sales
- North American Automotive 4.5% 3.1% 5.7% 4.8%
- Total Automotive 2.5% 2.3% 4.6% 3.7%
Shares of Common and Class B Stock
(in millions)
- Average number outstanding 1,212 1,198 1,211 1,193
- Number outstanding at
September 30 1,210 1,200 1,210 1,200
Common Stock price (per share)
(adjusted to reflect The Associates
spin-off)
- High $61-7/16 $30-13/16 $61-7/16 $30-13/16
- Low 40-5/8 25-33/64 28-15/32 20-3/64
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming dilution
- Automotive $0.52 $0.51 $3.16 $2.74
- Financial Services 0.28 0.22 0.78 0.93
(excl. The Associates)
Subtotal 0.80 0.73 3.94 3.67
- The Associates - 0.18 0.14 0.50
- Premium on Series B Preferred Stock
repurchase - - (0.07) -
- Gain on spin-off of The Associates - - 12.89 -
Total $0.80 $0.91 $16.90 $4.17
Cash dividends $0.42 $0.42 $1.26 $1.225