01—Abstract
Summary
Summary of the 10-K filed February 21, 2012. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2011 Form 10-K shows a sharp financial turnaround.
Net income attributable to Ford was $20.2 billiona, or $4.94 per diluted share, versus $6.6 billion ($1.66) in 2010. Most of that gain came from a $12.4 billion tax benefit from releasing almost all of the valuation allowance against U.S., Canadian and Spanish deferred tax assets. Total pre-tax income was $8.7 billion, and pre-tax operating profit excluding special items was $8.8 billion.
Revenue rose to $136.3 billionb from $129.0 billion, and Automotive sales reached $128.2 billion. The operating story is strong but uneven. Ford North America earned $6.2 billion of pre-tax operating profit and carried the company.
Ford South America earned $861 millionc, Ford Europe was roughly breakeven with a $27 million loss, and Ford Asia Pacific Africa lost $92 million, partly due to the Japan and Thailand natural disasters. Automotive operating margin fell 0.7 points to 5.4%, with commodity costs a major headwind. Automotive operating-related cash flow was $5.6 billion.
Automotive net cash improved to $9.8 billiond from $1.4 billion as debt fell to $13.1 billion. Ford Credit's pre-tax profit declined to $2.4 billion, and management guided to lower Ford Credit earnings in 2012. Key risks include a pension deficit of $15.4 billion, an unresolved Medium/Heavy Truck class action with a judgment of roughly $2 billion (on appeal), stringent CARB LEV III and ZEV proposals, and European economic weakness.
Ford's credit ratings remain below investment grade at all four agencies, though several carry positive outlooks. The company guided to 2012 Automotive pre-tax operating profit and operating margin improvement, with total company pre-tax operating profit about equal to 2011.
02—Key points
Key Highlights
- Net income attributable to Ford of $20.2B ($4.94 diluted EPS) versus $6.6B ($1.66) in 2010, largely driven by a $12.4B deferred tax valuation allowance release.
- Pre-tax operating profit excluding special items of $8.8B, up $0.5B; Automotive pre-tax operating profit of $6.3B, up $1B.
- Ford North America generated $6.2B of pre-tax profit, while Europe (-$27M), Asia Pacific Africa (-$92M) and Ford Credit's decline to $2.4B weighed on results.
- Automotive gross cash of $22.9B and total Automotive debt reduced to $13.1B, moving net cash to $9.8B from $1.4B.
- Automotive operating margin fell 0.7 points to 5.4%, with commodity costs reducing margin by about 1.8 points.
- Pension underfunding of $15.4B worldwide ($9.4B U.S.), plus an approximately $2B judgment in the Medium/Heavy Truck dealer class action under appeal.
- Credit ratings remain below investment grade at all four NRSROs, though several outlooks are positive; first dividend since 2008 of $0.05 per share declared.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Ford Motor Co kept $0.15.
- Revenue$135.60B100.0%
- Cost of revenue−$113.61B83.8%
- Gross profit$21.99B16.2%
- Operating costs−$1.78B1.3%
- Operating income$20.21B14.9%
- Interest, other & tax$-00.0%
- Net income$20.21B14.9%
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 21, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $135.60B$128.95B | +5.2% |
| Cost of Revenue | $113.61B$104.45B | +8.8% |
| Gross Profit | $21.99B$24.50B | −10.2% |
| R&D Expenses | $5.30B$5.00B | +6.0% |
| SG&A Expenses | $10.88B$11.91B | −8.6% |
| Operating Expenses | $128.07B$120.49B | +6.3% |
| Operating Income | $20.21B$6.56B | +208.1% |
| Interest Expense | $4.43B$6.15B | −28.0% |
| Net Income | $20.21B$6.56B | +208.3% |
| EPS (Basic) | $5.33$1.90 | +180.5% |
| EPS (Diluted) | $4.94$1.66 | +197.6% |
| Shares Outstanding (Basic) | 3.79B3.45B | +10.0% |
| Shares Outstanding (Diluted) | 4.11B4.18B | −1.6% |
05—Questions
Frequently Asked Questions
Why did Ford's reported net income jump so much in 2011?
Most of the increase came from a $12.4 billion tax benefit as Ford released almost all of its valuation allowance against U.S., Canadian and Spanish deferred tax assets, after three years of cumulative profitability. Pre-tax income was $8.7 billion, which is a more representative measure of operating performance.
How healthy is Ford's balance sheet and liquidity?
Automotive gross cash was $22.9 billion and Automotive liquidity totaled $32.4 billion, including undrawn credit lines. Automotive debt fell to $13.1 billion from $19.1 billion. Ford Credit ended the year with about $17 billion of liquidity available for use. Ford's secured credit facility carries a borrowing base covenant and a $4 billion minimum liquidity covenant until collateral is released.
What are the biggest risks to Ford's outlook?
Key risks include intensifying price competition from industry overcapacity (about 22 million units globally), European economic weakness and the euro debt crisis, rising commodity costs, shifts in consumer demand away from larger vehicles, and tighter CARB LEV III and ZEV rules. Pension underfunding of $15.4 billion and a potentially large dealer class action judgment also pose financial risks.
What did management guide to for 2012?
Management expects Automotive pre-tax operating profit and Automotive operating margin to improve, total company pre-tax operating profit to be about equal to 2011, Ford Credit to be solidly profitable but lower than 2011, and Automotive structural cost increases of less than $2 billion. Capital spending is planned at $5.5 to $6 billion, and U.S. industry volume is projected at 13.5 to 14.5 million units.
06—Continue