Ford Motor Company — 2013 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing, not a standalone fourth-quarter report. Ford operates an Automotive business and Ford Credit financial services business; it sold approximately 6.33 million vehicles wholesale worldwide and employed about 181,000 people.
Financial performance
| Metric | 2013 | 2012 |
|---|---|---|
| Total revenue | $146.9 billion | $133.6 billion |
| Income before tax, reported | $7.0 billion | $7.7 billion |
| Pre-tax results excluding special items | $8.6 billion | $8.0 billion |
| Net income attributable to Ford | $7.2 billion | $5.7 billion |
| Diluted earnings per share | $1.76 | $1.42 |
| Consolidated operating cash flow | $10.4 billion | $9.0 billion |
| Automotive operating-related cash flow | $6.1 billion | $3.4 billion |
| Automotive operating margin | 5.4% | 5.3% |
| Total debt at year-end | $114.7 billion | $105.1 billion |
Automotive revenue rose 10% to $139.4 billion; Automotive pre-tax income was $5.3 billion as reported, including special items. Excluding special items and Other Automotive, management reported Automotive pre-tax results of about $6.9 billion, up from $6.3 billion. Ford Credit reported $1.7 billion of pre-tax income, versus $1.7 billion in 2012.
Automotive capital spending was $6.6 billion. Automotive gross cash was $24.8 billion and net cash was $9.1 billion at year-end; available Automotive liquidity was $36.2 billion, including unused revolving credit. Automotive debt was $15.7 billion, while Financial Services debt was $99.0 billion. Ford Credit reported $21.4 billion of liquidity available for use and managed leverage of 8.5:1.
Changes and notable items
- Higher Automotive volume and favorable market factors supported improved underlying results, while higher costs—particularly structural costs—and unfavorable currency effects partly offset gains.
- North America earned a record $8.8 billion pre-tax; Europe reduced its pre-tax loss to $1.6 billion; South America recorded a $34 million loss; and Asia Pacific Africa earned $415 million.
- Net income included a $147 million income-tax benefit. Ford identified $2.2 billion of tax benefits as special items, including recognition of European deferred tax assets and releases of U.S. state and local valuation allowances. Fourth-quarter net income of $3.0 billion included $2.1 billion of favorable tax special items; fourth-quarter pre-tax income was $968 million.
- Pre-tax special items totaled $1.6 billion of charges, including $856 million for personnel and dealer-related actions and $594 million for the U.S. salaried pension lump-sum program. Europe restructuring costs were a significant component of separation charges.
- Worldwide pension plans were underfunded by $9.0 billion at year-end, down from $18.7 billion a year earlier, primarily reflecting higher discount rates and contributions. Ford contributed $5.0 billion to funded plans in 2013.
Outlook, commentary and risks
For 2014, Ford projected total-company pre-tax profit excluding special items of $7 billion to $8 billion. It expected Automotive revenue about equal to 2013, a lower Automotive operating margin, and substantially lower Automotive operating-related cash flow. Ford planned approximately $7.5 billion of annual capital spending, with variation by year, and targeted reducing Automotive debt to about $10 billion by mid-decade.
- North America was expected to remain strongly profitable, but below 2013, with an 8%–9% operating margin. Ford cited launch-related downtime, higher costs and slightly unfavorable pricing.
- Ford expected Europe’s losses to narrow, including about $400 million of 2014 restructuring costs, and remained on track for Europe to reach profitability in 2015. South America was expected to be about breakeven, with material currency and operating risks in Venezuela and Argentina.
- Ford Credit expected 2014 pre-tax profit about equal to 2013 and year-end managed receivables of approximately $110 billion. Management anticipated continued normalization of credit losses and lower returns from runoff of higher-yielding assets.
- Key risks include industry downturns, intense pricing competition and excess capacity, currency and commodity volatility, product quality and recalls, regulatory costs, supplier or labor disruptions, pension funding needs, and Ford Credit’s funding, credit-loss and vehicle residual-value exposures.
- Contingencies include Brazilian tax and incentive disputes, a customs-duty challenge involving Transit Connect imports, asbestos claims, and other litigation. Ford estimated reasonably possible loss in excess of accruals for material matters at up to approximately $2.9 billion, primarily for indirect tax and customs matters.
Important facts for investors to verify
- Separate reported earnings from underlying results: reconcile special charges, tax benefits and the unusually strong fourth-quarter net income.
- Review Automotive and Financial Services debt and liquidity separately; much of Ford Credit’s debt is supported by securitized assets that are not available to satisfy other obligations.
- Assess whether planned product launches, higher capital spending and the Europe turnaround can be delivered without materially weakening cash flow.
- Monitor pension funding assumptions and contributions, along with Ford Credit’s credit losses, lease returns and auction values.
- Track developments in Venezuela and Argentina, Brazilian tax disputes, Transit Connect customs duties, and the disclosed litigation exposure.
The filing reports that the financial statements were audited and that internal control over financial reporting was effective as of December 31, 2013.