01—Abstract
Summary
Summary of the 10-K filed March 16, 1995. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 1994 results marked a sharp recovery, with record worldwide net income of $5.308 billiona ($4.97 per share, or $4.44 fully diluted) on sales and revenues of $128.4 billion, up 18% from 1993.
The Automotive segment earned $3.824 billionb on sales of $107.1 billion, versus $940 million in 1993, driven mainly by higher U.S. industry volume, improved margins, and a strong turnaround in Europe. Factory unit sales rose 11% to 6.639 million vehicles. Financial Services earned $1.484 billion, down $105 million, but that decline reflects a $440 million after-tax charge tied to the disposition of First Nationwide Bank; excluding that charge, Financial Services results were record-level, led by Ford Credit, The Associates and USL Capital.
The filing also highlights a weakening U.S. share position and several risk factors. Ford's U.S. car share fell to 21.8%c and its combined U.S. car-and-truck share slipped to 25.2%, while Japanese transplants are expanding U.S. production. Management flagged the unfavorable expected impact of the Mexican peso devaluation, the planned dissolution of the Autolatina joint venture with Volkswagen by year-end 1995, and pending regulatory issues including California LEV standards, CAFE increases, and EITF revenue-recognition guidance that could defer substantial revenue.
Litigation exposure is significant, including roughly $1 billiond in restraint-system claims and $911 million in Bronco II rollover claims. Balance-sheet strength improved markedly: stockholders' equity rose to $21.7 billion from $15.6 billion, and Automotive cash and marketable securities reached $12.1 billion while Automotive debt fell to $7.3 billion (25% of total capitalization, down from 34%). Ford's debt is rated "a1" by Moody's and "A+" by S&P, and the company paid $0.91 per share in dividends for the year.
02—Key points
Key Highlights
- Record 1994 net income of $5.308 billion, or $4.97 per share ($4.44 fully diluted), versus $2.529 billion ($2.27 per share) in 1993
- Sales and revenues of $128.4 billion, up 18% year over year; factory unit sales of 6.639 million vehicles, up 11%
- Automotive net income of $3.824 billion versus $940 million in 1993, with improved U.S. margins and a sharp European turnaround (European operations excluding Jaguar earned $388 million versus a $407 million loss)
- Financial Services net income of $1.484 billion, down $105 million, due to a $440 million after-tax charge on the First Nationwide Bank sale; Ford Credit posted record earnings of $1.313 billion
- Automotive cash and marketable securities of $12.1 billion, and Automotive debt reduced to $7.3 billion (25% of total capitalization, down from 34%)
- Stockholders' equity increased to $21.7 billion from $15.6 billion; cash dividends of $0.91 per share, up from $0.80
- Key risks include declining U.S. car share (21.8%), Japanese transplant expansion, Mexican peso devaluation impact, Autolatina dissolution, and substantial product liability claims (about $1 billion in restraint-system and $911 million in Bronco II damages sought)
03—Questions
Frequently Asked Questions
How profitable was Ford in 1994 compared with 1993?
Ford's 1994 net income was a record $5.308 billion ($4.97 per share) versus $2.529 billion ($2.27 per share) in 1993, an increase of roughly 110%. Fully diluted EPS rose to $4.44 from $2.10. The improvement was driven mainly by higher U.S. industry volume, better margins, and improved European operations.
What drove the improvement in Ford's Automotive segment?
Automotive net income rose to $3.824 billion from $940 million on sales of $107.1 billion. U.S. Automotive earned $3.04 billion on higher production tied to industry growth (15.4 million units vs. 14.2 million), favorable material costs, manufacturing efficiencies, and lower marketing costs. Operations outside the U.S. earned $784 million, versus a $542 million loss in 1993.
Did the First Nationwide Bank sale materially affect results?
Yes, but largely as a one-time item. The sale of substantially all assets of First Nationwide Bank (now Granite Savings Bank) to First Madison Bank on September 30, 1994 produced a $440 million after-tax charge in Q1 1994 for unrecovered goodwill and reserves. Management says Granite has not historically had a significant effect on operating results, and Ford retained about $1.2 billion of lower-quality commercial real estate assets that will be liquidated over time. First Madison also holds an option, through November 1996, to require repurchase of up to $500 million in nonperforming assets, guaranteed by Ford.
What are the major risks to Ford's outlook?
Key risks include: declining U.S. car market share (21.8%) amid Japanese transplant expansion; Mexican peso devaluation, with industry volume expected to fall substantially in 1995; dissolution of the Autolatina joint venture in Brazil and Argentina by year-end 1995, with uncertain earnings impact; possible EITF rules that could defer substantial revenue from dealer-lease transactions (without cash flow impact); tougher California and EU emissions standards; possible CAFE increases; and significant product liability and class-action litigation, including restraint-system, Bronco II rollover, and paint-defect claims.
How strong is Ford's balance sheet and dividend position?
The balance sheet strengthened considerably. Total stockholders' equity reached $21.7 billion, up from $15.6 billion. Automotive debt fell $0.7 billion to $7.3 billion, and Automotive cash and marketable securities rose to $12.1 billion. Ford's senior long-term debt is rated a1 by Moody's and A+ by S&P. Cash dividends increased to $0.91 per share in 1994 from $0.80 in 1993, and Ford has committed credit facilities of about $5.9 billion in the U.S. that were unused at year-end.
04—Continue