01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2010 Form 10-K shows a company in recovery mode.
Net income attributable to Ford was $6.6 billiona ($1.66 diluted EPS) versus $2.7 billion in 2009, on Automotive sector sales of $119.3 billion and Automotive pre-tax income of $4.1 billion (including $1.2 billion of special-item charges). Total company pre-tax income was $7.1 billion. Ford North America drove the improvement, with pre-tax income of $5.4 billion on higher volume, net pricing, and market share gains (U.S. combined share rose to 16.4%).
The balance sheet improved materially. Automotive debt fell $14.5 billion to $19.1 billionb, and Automotive gross cash ($20.5 billion) exceeded Automotive debt, producing a $1.4 billion net cash position versus $8.7 billion of net debt a year earlier. Stockholders' equity moved from a $7.8 billion deficit to a $642 million deficit, largely from earnings and conversion of convertible notes into about 274 million shares.
Ford Credit was also profitable ($3.1 billionc pre-tax), though its earnings were boosted by lower credit losses and lease depreciation that management expects to partly reverse in 2011. Key risks remain.
Ford's credit ratings are still below investment grade (upgraded in January and February 2011), the company carries a $15.7 billiond deferred tax valuation allowance, U.S. and worldwide pension plans were underfunded by $6.7 billion and $11.5 billion, and future CAFE and GHG rules could force product restrictions. Management guided to higher 2011 pre-tax operating profit and Automotive operating-related cash flow, while noting commodity and structural cost pressures.
02—Key points
Key Highlights
- Net income attributable to Ford of $6.6 billion ($1.66 diluted EPS) in 2010, up from $2.7 billion ($0.86) in 2009.
- Automotive debt reduced by $14.5 billion to $19.1 billion; Automotive gross cash of $20.5 billion gave a $1.4 billion net cash position versus $8.7 billion net debt in 2009.
- Ford North America pre-tax income of $5.4 billion, driven by higher volume, favorable net pricing, and U.S. combined market share rising to 16.4% (up 1.1 points).
- Total equity deficit narrowed to $642 million from $7.8 billion, aided by earnings and about $4 billion of equity issued through note conversions and share sales.
- Credit ratings upgraded in early 2011 by Fitch, S&P and Moody's outlook changes, but Ford and Ford Credit remain below investment grade.
- Large valuation allowance of $15.7 billion against deferred tax assets means reported tax rates stay low until it is released, possibly as early as the second half of 2011.
- Pension underfunding of $6.7 billion (U.S.) and $11.5 billion (worldwide) and tighter future fuel economy and GHG regulation are the main structural risks flagged.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Ford Motor Co kept $0.05.
- Revenue$128.95B100.0%
- Cost of revenue−$104.45B81.0%
- Gross profit$24.50B19.0%
- Operating costs−$17.94B13.9%
- Operating income$6.56B5.1%
- Interest, other & tax−$4.0M0.0%
- Net income$6.56B5.1%
Where FY2010 revenue went
$128.95B- Cost of revenue: $104.45B, 81% of revenue
- Net income: $6.56B, 5.1% of revenue
- R&D: $5.00B, 3.9% of revenue
- SG&A: $11.91B, 9.2% of revenue
- Other operating costs: $1.03B, 0.8% of revenue
Kept 5.1% as net incomeNet income $6.56B · 5.1%Other operating costs $1.03B · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $128.95B$116.28B | +10.9% |
| Cost of Revenue | $104.45B$98.87B | +5.6% |
| Gross Profit | $24.50B$17.42B | +40.7% |
| R&D Expenses | $5.00B$4.70B | +6.4% |
| SG&A Expenses | $11.91B$13.03B | −8.6% |
| Operating Expenses | $120.49B$119.72B | +0.6% |
| Operating Income | $6.56B$2.71B | +141.9% |
| Interest Expense | $6.15B$6.79B | −9.4% |
| Net Income | $6.56B$2.72B | +141.3% |
| EPS (Basic) | $1.90$0.91 | +108.8% |
| EPS (Diluted) | $1.66$0.86 | +93.0% |
| Shares Outstanding (Basic) | 3.45B2.99B | +15.3% |
| Shares Outstanding (Diluted) | 4.18B3.31B | +26.1% |
05—Questions
Frequently Asked Questions
How profitable was Ford in 2010 and what drove the improvement?
Ford earned $6.6 billion attributable to the company in 2010, versus $2.7 billion in 2009. Automotive pre-tax income excluding special items rose to $5.3 billion from a $1.9 billion loss, driven by about $3.4 billion of favorable volume and mix, $3.1 billion of net pricing (mainly North America), and about $900 million of currency benefit, partly offset by about $1 billion of higher costs and $400 million of higher net interest expense.
Is Ford's balance sheet healthier now?
Yes. Automotive debt fell from $33.6 billion to $19.1 billion during 2010, and Automotive gross cash of $20.5 billion exceeded that debt, creating net cash of $1.4 billion compared with net debt of $8.7 billion a year earlier. Total stockholders' equity deficit improved to $642 million. Annual interest expense is expected to drop by about $1.2 billion after the debt reductions and the planned March 2011 redemption of $3 billion in trust preferred-related debentures.
What are the biggest risks to Ford's outlook?
Key risks include a decline in U.S. or European industry sales, rising commodity and fuel prices, intense price competition from industry overcapacity, and supplier distress. Ford also faces pension obligations that are underfunded by $6.7 billion (U.S.) and $11.5 billion (worldwide), union contracts that restrict plant closures (UAW agreement expires September 2011), and stricter emissions and fuel economy rules, including a steep 2012-2016 CAFE/GHG ramp and possible conflicting state and federal standards after 2017.
How is Ford Credit performing and what could change?
Ford Credit earned $3.1 billion pre-tax in 2010, up from $2.0 billion, mainly from a lower provision for credit losses and lower lease depreciation as used-vehicle values recovered. Management expects Ford Credit to be profitable in 2011 but at a lower level, because the lease depreciation benefit and credit loss reserve releases will not repeat at the same size (roughly $1.2 billion of lower pre-tax profit). Its credit ratings remain below investment grade, so it still relies heavily on securitization funding.
When might Ford start paying higher taxes or report a large one-time earnings boost?
Ford's effective tax rate is currently low because a $15.7 billion valuation allowance offsets most U.S. deferred tax assets. Management said sustained profitability could lead to reversing almost all of that allowance as early as the second half of 2011. The reversal would create a large one-time tax benefit in that quarter, which Ford intends to report as a special item rather than in operating earnings per share. Cash tax payments are expected to stay low for several years even after the reversal.
06—Continue