01—Abstract
Summary
Summary of the 10-K/A filed March 28, 2018. Cited figures are marked; the original filing is the authoritative source.
This is Amendment No. 1 on Form 10-K/A to Ford Motor Company's 2017 Annual Report.
It does not contain Ford's own consolidated financial statements. Its sole purpose is to add the audited financial statements of Changan Ford Automobile Corporation Limited (CAF), a 50%a-owned, equity-method joint venture in China, as required by Rule 3-09 of Regulation S-X because CAF met the significant-subsidiary test for 2016. Investors should read this filing as supplemental disclosure about one important China joint venture, not as a summary of Ford's overall results.
The original 10-K, filed February 8, 2018, is the primary source for Ford's consolidated performance. CAF's 2017 results show a sharp deterioration. Total revenues fell about 15.8%b to RMB 99.7 billion from RMB 118.4 billion in 2016.
Net income attributable to CAF dropped about 33%c to RMB 12.15 billion from RMB 18.07 billion. Cost pressure and lower volumes are not broken out in the filing, but the income statement shows cost of sales falling more slowly than revenue. Operating cash flow nearly halved to RMB 12.5 billion from RMB 24.4 billion, largely because accounts payable unwound by about RMB 2.5 billion.
CAF also paid RMB 15.2 billion in dividends in 2017, a large share of its earnings, which drove its cash balance down from RMB 15.1 billion to RMB 8.7 billion. Several items support the reported earnings. The company benefited from a preferential 15%d corporate income tax rate versus the 25% statutory rate, which reduced 2017 tax expense by about RMB 1.16 billion.
Government grant income was RMB 2.8 billion. A change in the estimated useful lives and residual values of fixed assets reduced 2017 depreciation by about RMB 1.04 billion and increased net profit by about RMB 826 million. Ford should be expected to record its 50% share of CAF's equity income, so weaker CAF earnings reduce Ford's equity earnings from China, although the amount of that impact is not stated in this filing.
02—Key points
Key Highlights
- This is a 10-K/A amendment filed to add Changan Ford Automobile Corporation's audited financial statements under SEC Rule 3-09. It contains no updated Ford consolidated financials.
- CAF total revenues fell about 15.8% in 2017 to RMB 99.7 billion (about US$15 billion) from RMB 118.4 billion in 2016.
- CAF net income attributable to the joint venture declined about 33% to RMB 12.15 billion from RMB 18.07 billion, signaling a sharp earnings downturn in Ford's China JV.
- Operating cash flow fell roughly 49% to RMB 12.5 billion, largely due to a RMB 2.5 billion reduction in accounts payable, and CAF paid RMB 15.2 billion in dividends.
- A preferential 15% income tax rate (versus the 25% statutory rate) cut CAF's 2017 tax expense by about RMB 1.16 billion, and a useful-life change added about RMB 826 million to net profit.
- Ford owns 50% of CAF through an equity-method, non-controlling interest, so its share of CAF's earnings flows through Ford's equity income rather than its consolidated revenue.
- Ford's cover page shows about 3.90 billion common shares and 70.9 million Class B shares outstanding at January 31, 2018, with a market value of about $42.8 billion at $10.97 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Ford Motor Co kept $0.05.
- Revenue$156.78B100.0%
- Cost of revenue−$131.32B83.8%
- Gross profit$25.45B16.2%
- Operating costs−$20.57B13.1%
- Operating income$4.88B3.1%
- Interest, other & tax$2.85B1.8%
- Net income$7.73B4.9%
Where FY2017 revenue went
$156.78B- Cost of revenue: $131.32B, 84% of revenue
- Operating income: $4.88B, 3.1% of revenue
- R&D: $8.00B, 5.1% of revenue
- SG&A: $11.53B, 7.4% of revenue
- Other operating costs: $1.05B, 0.7% of revenue
Kept 3.1% as operating incomeOperating income $4.88B · 3.1%Other operating costs $1.05B · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2017filed March 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $156.78B$151.80B | +3.3% |
| Cost of Revenue | $131.32B$126.19B | +4.1% |
| Gross Profit | $25.45B$25.61B | −0.6% |
| R&D Expenses | $8.00B$7.30B | +9.6% |
| SG&A Expenses | $11.53B$10.97B | +5.1% |
| Operating Expenses | $151.90B$146.01B | +4.0% |
| Operating Income | $4.88B— | — |
| Interest Expense | $4.36B$894.00M | +388.1% |
| Net Income | $7.73B$4.59B | +68.5% |
| EPS (Basic) | $1.94$1.16 | +67.2% |
| EPS (Diluted) | $1.93$1.15 | +67.8% |
| Shares Outstanding (Basic) | 3.98B3.97B | +0.1% |
| Shares Outstanding (Diluted) | 4.00B4.00B | 0.0% |
05—Questions
Frequently Asked Questions
Why did Ford file this 10-K/A amendment?
Under Rule 3-09 of Regulation S-X, a 50%-or-less-owned equity-method investee must file separate audited financial statements if it meets the significant-subsidiary test. CAF met that test for fiscal 2016, so Ford added CAF's audited statements for 2015, 2016, and 2017 as Exhibit 99, along with the auditor's consent and certifications. The amendment does not change any other part of the original 10-K.
How much did CAF's earnings decline in 2017, and what drove it?
Net income attributable to CAF fell about 33%, from RMB 18.07 billion to RMB 12.15 billion. Revenue dropped about 16%, from RMB 118.4 billion to RMB 99.7 billion. Cost of sales, selling, and G&A expenses all fell, but more slowly than revenue. The filing does not explain the specific operational causes, such as volume or pricing, so the drivers should be confirmed in Ford's original 10-K or earnings materials.
Does this filing show how Ford itself performed in 2017?
No. The filing contains only CAF's financial statements and the Ford cover-page share and market value data. Ford's consolidated income statement, balance sheet, and cash flows are in the original 10-K filed February 8, 2018.
What one-time or accounting items affected CAF's 2017 results?
Several items boosted 2017 results. A reduced effective tax rate from the 15% preferential rate saved about RMB 1.16 billion, government grant income was RMB 2.8 billion, and a change in asset useful lives reduced depreciation by about RMB 1.04 billion, adding roughly RMB 826 million to net profit. Investors may want to view these as non-recurring or policy-driven support when assessing underlying earnings power.
06—Continue