01—Abstract
Summary
Summary of the 10-K filed February 19, 2013. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2012 Form 10-K (filed February 19, 2013) shows a company that remained solidly profitable but with a sharply lower bottom line than 2011.
Total revenue was $134.3 billiona (down from $136.3 billion), and pre-tax profit was $7.7 billion versus $8.7 billion. Net income attributable to Ford fell to $5.7 billion from $20.2 billion, a decline driven mainly by the non-repeat of the roughly $12.4 billion tax valuation allowance release recorded in 2011. Excluding special items, Automotive pre-tax profit was $6.3 billion, flat year over year, and the Automotive operating margin was 5.3%.
Ford North America was the clear profit engine, while Ford Europe posted a substantial loss and Ford South America and Asia Pacific Africa were roughly breakeven or small losses. The balance sheet and liquidity picture improved. Automotive gross cash rose to $24.3 billion and total Automotive liquidity to $34.5 billionb, and Automotive net cash was about $10 billion.
Shareholders' equity attributable to Ford reached $15.9 billionc, and the company paid its first meaningful dividends ($0.15 per share declared for 2012). Ford regained investment-grade ratings at some agencies, and in January 2013 it issued $2 billion of 4.75% notes due 2043. Key risks include a large unfunded pension deficit of about $18.7 billion worldwide, a $2 billion-plus European restructuring that management expects to produce a roughly $2 billion pre-tax loss in Europe in 2013, and a tightening regulatory environment for fuel economy and zero-emission vehicles.
Looking ahead, management guided to total Company pre-tax profit of about $8 billiond in 2013, with Ford North America's margin near 10%, South America about breakeven, and Asia Pacific Africa about breakeven. Automotive operating-related cash flow is expected to rise to a higher level than 2012's $3.4 billion, even with planned capital spending of about $7 billion. Investors should weigh the strong North American turnaround and healthier balance sheet against the European losses, pension obligations, and the cyclical and structural pressures in mature markets.
02—Key points
Key Highlights
- Total revenue of $134.3 billion in 2012, down about 1.5% from $136.3 billion, with Automotive revenue of $126.6 billion and Financial Services revenue of $7.7 billion.
- Net income attributable to Ford fell to $5.7 billion ($1.42 diluted EPS) from $20.2 billion ($4.94 diluted EPS) in 2011, mainly because 2011 included a roughly $12.4 billion tax valuation allowance release that did not recur.
- Pre-tax profit was $7.7 billion including special items ($8.0 billion excluding them). Automotive pre-tax profit excluding special items was $6.3 billion, flat year over year, with an Automotive operating margin of 5.3%.
- Ford North America generated pre-tax profit of $8.3 billion, while Ford Europe posted a pre-tax loss of $1.8 billion, driven by weak industry volumes in the 19 tracked European markets, which fell about 10% in 2012.
- Automotive gross cash of $24.3 billion and total Automotive liquidity of $34.5 billion at year-end; Automotive net cash was about $10 billion, and the company issued $2 billion of 4.75% notes due 2043 in January 2013.
- Unfunded worldwide pension deficit of $18.7 billion at year-end 2012, up from $15.4 billion, driven by lower discount rates; Ford expects to contribute about $5 billion to funded plans in 2013.
- 2013 guidance calls for total Company pre-tax profit of about $8 billion, Ford North America operating margin of about 10%, Ford Europe pre-tax loss of about $2 billion, and Automotive operating-related cash flow above 2012's $3.4 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Ford Motor Co kept $0.04.
- Revenue$133.56B100.0%
- Cost of revenue−$113.04B84.6%
- Gross profit$20.52B15.4%
- Operating costs−$14.86B11.1%
- Operating income$5.67B4.2%
- Interest, other & tax−$52.0M0.0%
- Net income$5.61B4.2%
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 19, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $133.56B$135.60B | −1.5% |
| Cost of Revenue | $113.04B$113.61B | −0.5% |
| Gross Profit | $20.52B$21.99B | −6.7% |
| R&D Expenses | $5.50B$5.30B | +3.8% |
| SG&A Expenses | $11.53B$10.88B | +5.9% |
| Operating Expenses | $127.76B$128.07B | −0.2% |
| Operating Income | $5.67B$20.21B | −72.0% |
| Interest Expense | $3.83B$4.43B | −13.6% |
| Net Income | $5.61B$20.21B | −72.2% |
| EPS (Basic) | $1.47$5.33 | −72.4% |
| EPS (Diluted) | $1.41$4.94 | −71.5% |
| Shares Outstanding (Basic) | 3.81B3.79B | +0.6% |
| Shares Outstanding (Diluted) | 4.01B4.11B | −2.3% |
05—Questions
Frequently Asked Questions
Why did Ford's net income fall so sharply in 2012 even though operating profit was roughly stable?
The 2011 net income of $20.2 billion included a non-recurring tax benefit of about $11.5 billion, reflecting the release of most of the valuation allowance against U.S., Canadian, and Spanish deferred tax assets. In 2012 the company recorded a $2.1 billion tax provision, so net income fell to $5.7 billion even though pre-tax profit declined only modestly, from $8.7 billion to $7.7 billion.
How healthy is Ford's liquidity position at the end of 2012?
Automotive gross cash rose to $24.3 billion from $22.9 billion, and total Automotive liquidity, including undrawn credit lines, reached $34.5 billion. Financial Services liquidity available for use was $19.7 billion. Automotive debt was about $14.3 billion, and management targets roughly $10 billion of Automotive debt by mid-decade.
What are the biggest risks to Ford's outlook?
The main risks are European losses and restructuring costs, with Ford planning to close three European plants affecting about 6,200 positions; a large pension and retiree health care burden, with an $18.7 billion worldwide pension deficit and about $6.8 billion of OPEB obligations; intensifying price competition from excess global capacity of about 26 million units; and stringent fuel economy and zero-emission vehicle rules, including California's ZEV mandate for 2018 to 2025 model years. Exposure to Venezuela's currency controls and South American trade frictions adds further uncertainty.
Is Ford returning capital to shareholders?
Yes, though modestly. Ford reinstated a dividend in 2012, paying $0.05 per share quarterly for total cash dividends declared of $0.15 per share (about $573 million). A January 2013 declaration set a $0.10 per share first-quarter 2013 dividend. The company also completed an anti-dilutive share repurchase program in 2012, buying back 11.7 million shares for $125 million.
Which parts of Ford's business are driving growth versus losses?
Ford North America drove results, with 2012 U.S. retail share down 0.7 points but strong profitability, and the company expects the segment's pre-tax profit to rise further in 2013 with an operating margin near 10%. Asia Pacific Africa and South America are expected to be roughly breakeven in 2013, while Europe is the principal drag and is expected to lose about $2 billion before a recovery targeted for 2014 onward. Ford Credit's pre-tax profit fell to $1.7 billion from $2.4 billion, and it is guided to be about flat in 2013.
06—Continue