Ford Motor Company — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. Ford manufactures and sells vehicles and parts, and provides vehicle financing through Ford Credit. The filing also reports fourth-quarter results; annual figures below are for the full year.
Financial performance and liquidity
| Metric | 2011 | 2010 |
|---|---|---|
| Total sales and revenues | $136.3 billion | $129.0 billion |
| Income before income taxes | $8.7 billion | $7.1 billion |
| Net income attributable to Ford | $20.2 billion | $6.6 billion |
| Diluted earnings per share | $4.94 | $1.66 |
| Consolidated cash from operating activities | $9.8 billion | $11.5 billion |
| Total debt at year-end | $99.5 billion | $104.0 billion |
| Total equity at year-end | $15.1 billion | $(0.6) billion |
- Automotive revenue was $128.2 billion; Financial Services revenue was $8.1 billion. Automotive adjusted pre-tax operating profit, excluding special items and central “Other Automotive,” was about $6.3 billion, up from $5.3 billion. Ford’s reported Automotive operating margin was 5.4%, down 0.7 percentage points year over year.
- Ford Credit pre-tax profit was $2.4 billion, down from $3.1 billion. Its year-end managed receivables were $84.6 billion and managed leverage was 8.3-to-1.
- Automotive gross cash was $22.9 billion and Automotive liquidity was $32.4 billion, including available credit lines. Automotive net cash was $9.8 billion, compared with $1.4 billion a year earlier. Automotive debt fell to $13.1 billion; Financial Services debt was $86.6 billion.
- Automotive operating-related cash flow, a company-defined non-GAAP measure, was $5.6 billion, versus $4.4 billion. Automotive capital expenditures were $4.3 billion. Consolidated operating cash flow declined despite higher Automotive operating-related cash flow.
- The filing reports total assets of $178.3 billion in the consolidated balance sheet; the selected-data table reports $179.2 billion. The supplied filing text does not reconcile this difference.
Material changes versus 2010
- Revenue grew about 5.7%, and pre-tax income increased about 21.4%. Automotive gains were supported by market factors and lower net interest expense, but higher commodities, other costs, and unfavorable exchange weighed on results.
- Net income was boosted substantially by a $12.4 billion tax benefit from releasing almost all of the valuation allowance against deferred tax assets. The reported $20.2 billion net income therefore does not represent the underlying pre-tax improvement alone.
- Ford’s worldwide pension plans were underfunded by $15.4 billion at year-end, versus $11.5 billion in 2010, primarily reflecting lower discount rates. Ford planned about $3.8 billion of pension contributions and direct benefit payments in 2012.
- Ford’s U.S. market share edged up to 16.5% from 16.4%; its share in the 19 tracked European markets declined to 8.3% from 8.4%. Ford sold approximately 5.695 million vehicles wholesale worldwide.
Outlook, risks, and unusual items
- For 2012, management expected U.S. industry sales of 13.5–14.5 million vehicles and European sales of 14–15 million in its tracked markets. It forecast higher Automotive pre-tax operating profit and margin, lower but solid Ford Credit pre-tax profit, and roughly unchanged total-company pre-tax operating profit. Planned capital spending was $5.5–$6.0 billion.
- Management expected North America to improve, South America to remain profitable at a somewhat lower level, Europe to remain challenging, and Asia Pacific Africa to grow and return to profitability. Global industry sales were projected at about 80 million vehicles, with a broad 75–85 million range.
- Key risks include European economic and sovereign-debt uncertainty, intense competition and excess capacity, commodity and currency volatility, shifts in vehicle mix and fuel prices, supplier or production disruptions, pension funding needs, regulation and recall costs, and Ford Credit’s access to funding and exposure to credit losses and lease residual values.
- Unusual items included the $12.4 billion deferred-tax valuation-allowance release and a $401 million pre-tax gain on contributing Ford’s Russian operations to the FordSollers joint venture. Ford’s fourth-quarter net income attributable to Ford was $13.6 billion, primarily reflecting the tax benefit.
- A court entered an approximately $2.0 billion judgment in a truck-dealer class action; Ford appealed. Separately, Ford estimated reasonably possible losses in excess of accruals for material matters of up to about $3.4 billion in aggregate. The filing says outcomes are uncertain.
Most important facts for investors to verify
- How much of reported earnings and deferred tax assets are supported by sustainable operating results, and what restrictions affect use of tax attributes?
- Whether Ford can sustain Automotive margins and cash generation amid higher commodity costs, planned investment, and uncertain regional demand.
- The timing and cash requirements of pension contributions, given the $15.4 billion worldwide pension deficit and planned 2012 funding.
- Ford Credit’s funding access, managed leverage, credit-loss trends, lease returns, and residual-value performance.
- Developments in the approximately $2.0 billion dealer-class-action judgment, the disclosed litigation exposure, and any other significant contingencies.