Ford Motor Company 2015 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2015. This is an annual filing, not a standalone quarterly report; selected fourth-quarter results are also provided. Ford operates an Automotive business and Ford Credit, its vehicle-financing and leasing subsidiary. It reported approximately 199,000 employees, 67 plants, and 6.635 million vehicles sold at wholesale worldwide.
Financial results and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Total revenue | $149.6 billion | $144.1 billion |
| Income before income taxes, GAAP | $10.3 billion | $1.2 billion |
| Net income attributable to Ford | $7.4 billion | $1.2 billion |
| Diluted earnings per share | $1.84 | $0.31 |
| Automotive pre-tax results, excluding special items | $8.8 billion | $5.5 billion |
| Automotive operating margin | 6.8% | 4.6% |
| Ford Credit pre-tax profit | $2.1 billion | $1.9 billion |
| Net cash provided by operating activities, consolidated | $16.2 billion | $14.5 billion |
Automotive revenue was $140.6 billion, up from $135.8 billion; Financial Services revenue was $9.0 billion, up from $8.3 billion. Ford’s 2015 GAAP tax provision was $2.9 billion, an effective tax rate of 28.1%.
- Automotive cash and liquidity: Automotive cash was $23.6 billion, versus $21.7 billion in 2014; Automotive liquidity was $34.5 billion, including available credit lines. Automotive net cash was $10.8 billion.
- Cash flow and investment: Automotive operating-related cash flow, a non-GAAP measure, was $7.3 billion, versus $3.6 billion. Automotive capital spending was $7.1 billion. Consolidated cash and cash equivalents were $14.3 billion at year-end.
- Debt: Total debt was $132.9 billion, comprising $12.8 billion Automotive debt and $120.0 billion Financial Services debt. Ford Credit’s managed receivables were $127 billion and its managed leverage was 9.5:1.
- Pension: Worldwide defined-benefit pension plans were underfunded by $8.2 billion at year-end.
Material changes versus 2014
- Automotive pre-tax results excluding special items rose by $3.3 billion; wholesale volume increased 5%, and Automotive revenue rose 4% (9% at constant exchange rates).
- North America earned $9.3 billion before tax, up 26%. Europe returned to profitability, earning $259 million, compared with a $598 million loss. Asia Pacific reported a record $765 million pre-tax profit, up 29%.
- South America remained loss-making: its pre-tax loss narrowed to $832 million from $1.164 billion, while industry conditions deteriorated.
- Ford Credit pre-tax profit increased to $2.1 billion, supported by receivables growth; higher credit losses partially offset the improvement.
- GAAP earnings comparisons are affected by the 2015 retrospective pension-accounting change and significant 2014 special charges. Ford adopted immediate recognition of pension and OPEB remeasurement gains and losses; this changed reported earnings but not cash flows or pension funding requirements.
Fourth-quarter results and unusual items
For fourth-quarter 2015, total-company pre-tax income was $1.9 billion, compared with a $4.0 billion loss in fourth-quarter 2014. Ford-attributable net income was $1.9 billion, versus a $2.5 billion loss. Segment revenue totals imply approximately $40.3 billion of fourth-quarter 2015 revenue, compared with approximately $35.9 billion a year earlier.
- Fourth-quarter 2015 included a $698 million pension and OPEB remeasurement loss and a $346 million tax benefit related to retroactively reinstated U.S. tax legislation.
- Fourth-quarter 2014 included a $4.1 billion pension and OPEB remeasurement loss and an $800 million Venezuela accounting charge, as well as separation-plan charges during the year.
- In 2015, Ford consolidated its Russian Ford Sollers joint venture, sold its stake in Blue Diamond Truck, and recognized a $150 million pre-tax gain associated with the Nemak IPO.
Outlook, risks, and contingencies
Management’s 2016 outlook called for total-company pre-tax profit and operating EPS to be equal to or higher than 2015, excluding special items. Automotive revenue and operating margin were expected to be at least level with 2015, while Automotive operating-related cash flow was expected to be strong but lower. Ford expected North America profit to be about equal to 2015, South America losses to increase, and Europe, Middle East & Africa, Asia Pacific, and Ford Credit results to improve or be at least level, as specified in the filing. Planned 2016 capital spending was about $7.7 billion; pension contributions and payments to unfunded plans were expected to total about $1.8 billion.
- Management cited intense competition and global excess capacity, foreign-exchange volatility, economic and geopolitical uncertainty, and possible shifts away from higher-margin trucks and larger vehicles.
- Risks include vehicle quality, warranty and recall costs; increasingly stringent safety, emissions, and fuel-economy rules; supplier interruptions; labor constraints; cybersecurity; and Ford Credit’s funding, credit-loss, and lease-residual risks.
- Ford disclosed unresolved Brazilian tax assessments tied to incentives and a customs dispute over Transit Connect import duties. It estimated reasonably possible loss in excess of accruals for material matters, principally indirect-tax and customs matters, at up to about $2.3 billion.
- The EPA issued notices alleging air-permit violations at Ford’s Chicago Assembly and Dearborn Truck plants; potential monetary sanctions had not been determined. Ford also described asbestos, environmental, product-liability, and other legal matters.
- Regulatory mandates for zero-emission vehicles and fuel economy could require costly technology investment or limit sales of some vehicles. Ford stated that compliance with future standards depends on technology, consumer demand, and market conditions.
Important facts for investors to verify
- Reconcile GAAP earnings with the company’s results excluding special items, particularly the pension-accounting change and the unusually large 2014 charges.
- Review the assumptions behind the 2016 outlook, including regional demand, vehicle mix, currency rates, and the forecast for higher South America losses.
- Assess Ford Credit’s leverage, funding access, credit-loss trends, and used-vehicle residual-value assumptions.
- Track pension funding status and expected cash contributions, alongside planned capital spending and Automotive liquidity.
- Follow the Brazilian tax and Transit Connect customs disputes, EPA notices, and warranty and recall exposure; the filing does not specify a clear final resolution or cost for these matters.