01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2009 Form 10-K shows a company in transition after a severe downturn.
Net income attributable to Ford was $2.7 billiona, or $0.86 per diluted share, compared with a net loss of $14.8 billion in 2008. Total company revenue fell to $118.3 billion from $145.1 billion, reflecting lower industry volumes in the U.S. and Europe. The swing to profit was driven mainly by the non-recurrence of the $5.3 billion 2008 North America impairment, $5.8 billion of favorable structural cost changes, $5.5 billion of favorable net pricing, and $4.7 billion of net gains from debt reduction.
Pre-tax income before special items was still negative for the Automotive sector, which underscores that the profit was largely driven by one-time items. The balance sheet remains a central concern. Automotive debt stood at $34.4 billionb at year-end, and total equity was still a deficit of $6.5 billion (attributable to Ford, a deficit of $7.8 billion).
Management reduced Automotive debt by $10.1 billionc principal through tender offers, debt-for-equity exchanges, and roughly 468 million shares issued, and raised about $2.2 billion of new equity. It also secured a $5.9 billion DOE loan facility and extended its secured revolver. The UAW VEBA obligation of about $13.6 billion was settled on December 31, 2009, through notes, warrants, and assets transferred to the trust.
Liquidity was $25.5 billiond of Automotive gross cash at year-end. The company suspended its dividend, and a covenant restricts dividend payments. Looking ahead, management plans for 2010 industry volumes of 11.5 to 12.5 million units in the U.S. and 13.5 to 14.5 million in Europe.
It expects Automotive pre-tax profit excluding special items for full-year 2010 and full-year 2011, with positive operating-related cash flow. Key risks include persistent excess global capacity, pricing pressure, labor constraints from UAW and CAW contracts, dependence on Ford Credit funding, regulatory costs for emissions and fuel economy, and a pending sale of Volvo expected to close in the second quarter of 2010.
02—Key points
Key Highlights
- Net income attributable to Ford of $2.7 billion ($0.86 per diluted share) versus a 2008 net loss of $14.8 billion, a $17.5 billion improvement, driven largely by non-recurring items.
- Total revenue fell 18% to $118.3 billion from $145.1 billion as North American and European industry volumes declined sharply; global wholesale volume fell 11% to 4.8 million units.
- Automotive debt was reduced by $10.1 billion principal through tender offers, a convertible note exchange, and 468 million shares issued; Automotive debt still totals $34.4 billion, well above key competitors.
- Total equity remains a deficit of $6.5 billion, improved by about $8 billion from 2008 mainly from equity issuances, convertible conversions, and 2009 net income.
- Settled the $13.6 billion UAW retiree health care obligation on December 31, 2009, via the UAW VEBA Trust, using $7 billion of secured notes, warrants, and trust assets, with a $264 million settlement loss.
- Ford Credit returned to profitability with $2.0 billion pre-tax income and a managed leverage ratio of 7.3 to 1, but expects lower 2010 receivables of $80 to $90 billion.
- Management targets Automotive pre-tax profit excluding special items in 2010 and solid profitability in 2011, but the dividend is suspended and restricted by the secured credit agreement.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Ford Motor Co kept $0.02.
- Revenue$116.28B100.0%
- Cost of revenue−$98.87B85.0%
- Gross profit$17.42B15.0%
- Operating costs−$14.71B12.6%
- Operating income$2.71B2.3%
- Interest, other & tax$5.0M0.0%
- Net income$2.72B2.3%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $116.28B$143.58B | −19.0% |
| Cost of Revenue | $98.87B$126.62B | −21.9% |
| Gross Profit | $17.42B$16.96B | +2.7% |
| R&D Expenses | $4.70B$7.10B | −33.8% |
| SG&A Expenses | $13.03B$21.07B | −38.1% |
| Operating Expenses | $119.72B$159.30B | −24.8% |
| Operating Income | $2.71B-$14.78B | +118.4% |
| Interest Expense | $6.79B$9.74B | −30.3% |
| Net Income | $2.72B-$14.77B | +118.4% |
| EPS (Basic) | $0.91$-6.50 | +114.0% |
| EPS (Diluted) | $0.86$-6.50 | +113.2% |
| Shares Outstanding (Basic) | 2.99B2.27B | +31.6% |
| Shares Outstanding (Diluted) | 3.31B2.27B | +45.8% |
05—Questions
Frequently Asked Questions
Did Ford actually become profitable in 2009, and how much of that was from core operations?
Ford reported $2.7 billion of net income attributable to the company for 2009, but much of it came from special items. The Automotive sector recorded a pre-tax profit of $1.2 billion, which includes $4.1 billion of net special-item gains, mainly $4.7 billion from debt reduction gains. Excluding special items, Automotive pre-tax results were a loss of about $2.2 billion, so core operations remained unprofitable. Investors should treat the 2009 net income as largely driven by non-recurring gains rather than sustainable operating earnings.
How leveraged is Ford's balance sheet, and what has been done to reduce debt?
Automotive sector debt was $34.4 billion at year-end 2009, against gross cash of $25.5 billion, for a net debt of $8.9 billion. Total company equity was a deficit of $6.5 billion. In 2009 Ford reduced Automotive debt by $10.1 billion principal using $2.6 billion of cash and 468 million shares, and raised about $2.2 billion of new equity. It also entered a $5.9 billion DOE loan facility. Management says it still has significantly higher debt than key competitors and will continue to focus on generating positive operating cash flow to repay debt.
What are the main risks to Ford's 2010 outlook?
The main risks include a decline in U.S. or European industry volumes below planning assumptions of 11.5 to 12.5 million units (U.S.) and 13.5 to 14.5 million (Europe); persistent industry overcapacity of about 29 million units globally that pressures pricing; higher commodity and oil prices; and currency volatility. Ford also faces labor constraints from its UAW and CAW contracts, which expire in 2011 and 2012, and supplier financial distress. Ford Credit's funding depends on securitization markets, and the expiration of government funding programs in 2010 could limit its ability to support vehicle sales. Regulatory costs under new CAFE and GHG rules are a further risk.
Will Ford pay dividends or repurchase shares soon?
Unlikely in the near term. Ford paid no dividends in 2008 or 2009, and its secured Credit Agreement prohibits dividends on common and Class B stock, except for stock dividends and limited exceptions. The filing notes that it is unlikely to pay dividends in the foreseeable future. Ford has no publicly announced share repurchase program; the only repurchases in Q4 2009 were 22,271 shares withheld from employees for tax purposes. Ford instead issued shares through public offerings and equity distribution programs to raise capital.
06—Continue