Ford Motor Company and Subsidiaries HIGHLIGHTS ----------- Fourth Quarter Full Year ------------------------- ------------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Worldwide factory sales of cars and trucks (in thousands) - - United States 1,062 941 4,276 3,824 - - Outside United States 584 512 2,363 2,141 ----- ----- ----- ----- Total 1,646 1,453 6,639 5,965 ===== ===== ===== ===== Sales and revenues (in millions) - - Automotive $27,766 $23,511 $107,137 $ 91,568 - - Financial Services 5,877 4,330 21,302 16,953 ------- ------- -------- -------- Total $33,643 $27,841 $128,439 $108,521 ======= ======= ======== ======== Net income (in millions) - - Automotive $ 1,085 $ 297 $ 3,824 $ 940 - - Financial Services 484 422 1,484* 1,589 ------- ------- -------- -------- Total $ 1,569 $ 719 $ 5,308 $ 2,529 ======= ======= ======== ======== Capital expenditures (in millions) - - Automotive $ 2,404 $ 1,985 $ 8,310 $ 6,714 - - Financial Services 65 32 236 100 ------- ------- -------- -------- Total $ 2,469 $ 2,017 $ 8,546 $ 6,814 ======= ======= ======== ======== Stockholders' equity at December 31 - - Total (in millions) $21,659 $15,574 $ 21,659 $ 15,574 - - After-tax return on Common and Class B stockholders' equity 34.5% 21.1% 33.6% 18.6% Automotive cash, cash equivalents, and marketable securities at December 31 (in millions) $12,083 $ 9,752 $ 12,083 $ 9,752 Automotive debt at December 31 (in millions) $ 7,258 $ 8,016 $ 7,258 $ 8,016 Automotive after-tax returns on sales 3.9% 1.3% 3.6% 1.1% Shares of Common and Class B Stock (in millions) - - Average number outstanding 1,020 996 1,010 986 - - Number outstanding at December 31 1,023 998 1,023 998 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS Income - - Automotive $ 1.00 $ 0.23 $ 3.50 $ 0.66 - - Financial Services 0.47 0.42 1.47 1.61 ------- ------- -------- -------- Total $ 1.47 $ 0.65 $ 4.97 $ 2.27 ======= ======= ======== ======== Income assuming full dilution $ 1.31 $ 0.60 $ 4.44 $ 2.10 Cash dividends per share of Common and Class B Stock $ 0.26 $ 0.20 $ 0.91 $ 0.80 - - - - - - *Includes a loss of $440 million related to the disposition of Granite Savings Bank (formerly First Nationwide Bank) Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-1 /TABLE Ford Motor Company and Subsidiaries VEHICLE FACTORY SALES --------------------- For the Periods Ended December 31, 1994 and 1993 (in thousands) Fourth Quarter Full Year -------------------------- -------------------------- 1994 1993 1994 1993 --------- --------- --------- --------- North America Cars - U.S. 537 458 2,077 1,950 - Canada 33 35 124 130 - Mexico 15 12 49 51 ----- ----- ----- ----- Total cars 585 505 2,250 2,131 Trucks - U.S. 525 483 2,199 1,874 - Canada 42 42 156 126 - Mexico 12 10 42 39 ----- ----- ----- ----- Total trucks 579 535 2,397 2,039 ----- ----- ----- ----- Total North America 1,164 1,040 4,647 4,170 Outside North America Germany 216 193 938 831 Britain 115 98 463 422 Spain 77 48 302 211 Australia 38 34 130 127 Taiwan 17 19 86 114 Japan 8 11 34 53 Other countries 11 10 39 37 ----- ----- ----- ----- Total outside North America 482 413 1,992 1,795 ----- ----- ----- ----- Total worldwide vehicle factory sales 1,646 1,453 6,639 5,965 ===== ===== ===== ===== Includes units manufactured by other companies and sold by Ford. Factory sales are shown by source of manufacture, except within North America. In North America, U.S. sales include exports from Canada, Mexico, and Australia. Canadian sales include exports from the U.S. and Mexico. Mexican sales include exports from the U.S. and Canada. FS-2 /TABLE Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME -------------------------------- For the Years Ended December 31, 1994, 1993 and 1992 (in millions) 1994 1993 1992 -------- -------- -------- AUTOMOTIVE Sales (Note 1) $107,137 $91,568 $84,407 Costs and expenses (Note 1) Costs of sales 96,180 85,168 81,748 Selling, administrative, and other expenses 5,131 4,968 4,434 -------- ------- ------- Total costs and expenses 101,311 90,136 86,182 Operating income/(loss) 5,826 1,432 (1,775) Interest income 665 563 653 Interest expense 721 807 860 -------- ------- ------- Net interest expense (56) (244) (207) Equity in net income of affiliated companies (Note 1) 271 127 15 Net (expense)/revenue from transactions with Financial Services (Note 18) (44) (24) 15 -------- ------- ------- Income/(loss) before income taxes and cumulative effects of changes in accounting principles - Automotive 5,997 1,291 (1,952) FINANCIAL SERVICES Revenues (Note 1) 21,302 16,953 15,725 Costs and expenses (Note 1) Interest expense 7,023 6,482 7,056 Depreciation 4,910 3,064 2,089 Operating and other expenses 4,607 3,196 2,945 Provision for credit and insurance losses 1,539 1,523 1,795 Loss on disposition of Granite Savings Bank (formerly First Nationwide Bank) (Note 16) 475 - - -------- ------- ------- Total costs and expenses 18,554 14,265 13,885 Net revenue/(expense) from transactions with Automotive (Note 18) 44 24 (15) -------- ------- ------- Income before income taxes and cumulative effects of changes in accounting principles - Financial Services 2,792 2,712 1,825 -------- ------- ------- TOTAL COMPANY Income/(loss) before income taxes and cumulative effects of changes in accounting principles 8,789 4,003 (127) Provision for income taxes (Note 6) 3,329 1,350 295 -------- ------- ------- Income/(loss) before minority interests and cumulative effects of changes in accounting principles 5,460 2,653 (422) Minority interests in net income of subsidiaries 152 124 80 -------- ------- ------- Income/(loss) before cumulative effects of changes in accounting principles 5,308 2,529 (502) Cumulative effects of changes in accounting principles (Notes 6 and 8) - - (6,883) -------- ------- ------- Net income/(loss) 5,308 2,529 (7,385) Preferred stock dividend requirements 287 288 209 -------- ------- ------- Income/(loss) attributable to Common and Class B Stock $ 5,021 $ 2,241 $(7,594) ======== ======= ======= FS-3 /TABLE Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME -------------------------------- For the Years Ended December 31, 1994, 1993, and 1992 (in millions) 1994 1993 1992 ------- ------- ------- Average number of shares of Common and Class B Stock outstanding 1,010 986 972 AMOUNTS PER SHARE OF COMMON STOCK AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS (Note 1) Income/(loss) before cumulative effects of changes in accounting principles $ 4.97 $ 2.27 $ (0.73) Cumulative effects of changes in accounting principles - - (7.08) ------- ------ ------- Income/(loss) $ 4.97 $ 2.27 $ (7.81) ======= ====== ======= Income/(loss) assuming full dilution $ 4.44 $ 2.10 $ (7.81) Cash dividends $ 0.91 $ 0.80 $ 0.80 The accompanying notes are part of the financial statements. Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-4 /TABLE Ford Motor Company and Subsidiaries CONSOLIDATED BALANCE SHEET -------------------------- (in millions) December 31, December 31, 1994 1993 ------------ ------------- ASSETS Automotive Cash and cash equivalents $ 4,481 $ 5,667 Marketable securities (Note 2) 7,602 4,085 -------- -------- Total cash, cash equivalents, and marketable securities 12,083 9,752 Receivables 2,548 2,302 Inventories (Note 4) 6,487 5,538 Deferred income taxes 3,062 2,830 Other current assets 2,006 1,226 Net current receivable from Financial Services (Note 18) 677 834 -------- -------- Total current assets 26,863 22,482 Equity in net assets of affiliated companies (Note 1) 3,554 3,002 Net property (Note 5) 27,048 23,059 Deferred income taxes 4,146 5,427 Other assets (Notes 1 and 8) 6,760 7,691 Net noncurrent receivable from Financial Services (Note 18) 0 76 -------- -------- Total Automotive assets 68,371 61,737 Financial Services Cash and cash equivalents 1,739 2,555 Investments in securities (Note 2) 6,105 8,219 Net receivables and lease investments (Note 3) 130,356 119,535 Other assets (Note 1) 12,783 6,892 -------- -------- Total Financial Services assets 150,983 137,201 -------- -------- Total assets $219,354 $198,938 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Automotive Trade payables $ 10,777 $ 8,769 Other payables 2,624 1,976 Accrued liabilities (Note 7) 11,599 10,815 Income taxes payable 316 160 Debt payable within one year (Note 9) 155 932 -------- -------- Total current liabilities 25,471 22,652 Long-term debt (Note 9) 7,103 7,084 Other liabilities (Note 7) 24,920 25,911 Deferred income taxes 948 1,089 -------- -------- Total Automotive liabilities 58,442 56,736 Financial Services Payables 2,361 1,881 Debt (Note 9) 123,713 103,960 Deposit accounts - 10,549 Deferred income taxes 2,958 2,287 Other liabilities and deferred income 7,669 5,583 Net payable to Automotive (Note 18) 677 910 -------- -------- Total Financial Services liabilities 137,378 125,170 Preferred stockholders' equity in a subsidiary company (Note 1) 1,875 1,458 Stockholders' equity Capital stock (Notes 11 and 12) Preferred Stock, par value $1.00 per share (aggregate liquidation preference of $3.4 billion) * * Common Stock, par value $1.00 per share (952 and 464 million shares issued) 952 464 Class B Stock, par value $1.00 per share (71 and 35 million shares issued) 71 35 Capital in excess of par value of stock 5,273 5,082 Foreign currency translation adjustments and other (Note 1) 189 (678) Minimum pension liability adjustment - (400) Earnings retained for use in business 15,174 11,071 -------- -------- Total stockholders' equity 21,659 15,574 -------- -------- Total liabilities and stockholders' equity $219,354 $198,938 ======== ======== The accompanying notes are part of the financial statements. - - - - - - *Less than $1 million FS-5 /TABLE Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ For the Years Ended December 31, 1994, 1993, and 1992 (in millions) 1994 1993 1992 ---------------------- ---------------------- ---------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services ---------- --------- ---------- --------- ---------- --------- Cash and cash equivalents at January 1 $ 5,667 $ 2,555 $ 3,504 $ 3,182 $ 4,958 $ 3,175 Cash flows from operating activities (Note 17) 7,542 9,087 6,862 7,145 5,753 5,762 Cash flows from investing activities Capital expenditures (8,310) (236) (6,714) (100) (5,697) (93) Proceeds from sale and leaseback of fixed assets 0 - 884 - 263 - Acquisitions of other companies 0 (485) 0 (336) 0 (461) Proceeds from sales of subsidiaries 0 715 173 0 52 0 Acquisitions of receivables and lease investments - (202,407) - (163,858) - (134,619) Collections of receivables and lease investments - 172,694 - 142,844 - 123,144 Acquisitions of daily rental vehicles, net of disposals - (924) - - - - Purchases of securities (Note 17) (412) (10,688) (100,493) (13,741) (50,437) (12,877) Sales and maturities of securities (Note 17) 511 9,649 101,927 12,426 49,629 12,169 Proceeds from sales of receivables - 3,622 - 4,794 - 6,465 Loans originated net of principal payments - (207) - (1,466) - (938) Investing activity with Financial Services 355 - (117) - 709 - Other (331) (312) (69) 389 (492) 372 -------- -------- -------- -------- -------- -------- Net cash used in investing activities (8,187) (28,579) (4,409) (19,048) (5,973) (6,838) Cash flows from financing activities Cash dividends (1,205) - (1,086) - (977) - Sale of Preferred Stock 0 - 0 - 1,104 - Issuance of Common Stock 715 - 394 - 221 - Changes in short-term debt (795) 10,314 (66) 6,065 (426) 2,739 Proceeds from issuance of other debt 158 21,885 424 22,128 1,865 13,382 Principal payments on other debt (75) (14,088) (376) (13,791) (1,598) (13,122) Financing activity with Automotive - (355) - 117 - (709) Changes in customers' deposits, excluding interest credited - (422) - (3,861) - (3,418) Receipts from annuity contracts (Note 10) - 1,124 - 821 - 703 Redemption of Hertz common and preferred stock - (145) - - - - (Note 16) Issuance of subsidiary company preferred stock - 417 - 375 - 283 Other 31 13 (124) (76) 79 (10) -------- -------- -------- -------- -------- -------- Net cash (used in)/provided by financing activities (1,171) 18,743 (834) 11,778 268 (152) Effect of exchange rate changes on cash 397 166 17 25 (220) (47) Net transactions with Automotive/ Financial Services 233 (233) 527 (527) (1,282) 1,282 -------- -------- -------- -------- -------- -------- Net (decrease)/increase in cash and cash equivalents (1,186) (816) 2,163 (627) (1,454) 7 -------- -------- -------- -------- -------- -------- Cash and cash equivalents at December 31 $ 4,481 $ 1,739 $ 5,667 $ 2,555 $ 3,504 $ 3,182 ======== ======== ======== ======== ======== ======== The accompanying notes are part of the financial statements. FS-6 /TABLE Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ---------------------------------------------- For the Years Ended December 31, 1994, 1993, and 1992 (in millions) 1994 1993 1992 -------- -------- -------- CAPITAL STOCK (Note 11) Common Stock Balance at beginning of year $ 464 $ 454 $ 448 Stock split in form of a 100% stock dividend 469 - - Issued for employee benefit plans and other 19 10 6 ------- ------- ------- Balance at end of year 952 464 454 Class B Stock Balance at beginning of year 35 35 35 Stock split in form of a 100% stock dividend 36 - - ------- ------- ------- Balance at end of year 71 35 35 Series A Preferred Stock * * * Series B Preferred Stock * * * CAPITAL IN EXCESS OF PAR VALUE OF STOCK Balance at beginning of year 5,082 4,698 3,379 Stock split in form of a 100% stock dividend (505) - - Issued for employee benefit plans and other 696 384 215 Sale of Series B Preferred Stock 0 0 1,104 ------- ------- ------- Balance at end of year 5,273 5,082 4,698 FOREIGN CURRENCY TRANSLATION ADJUSTMENTS AND OTHER (Note 1) Balance at beginning of year (1,078) (62) 838 Translation adjustments during year 800 (508) (975) Minimum pension liability adjustment 400 (400) - Other 67 (108) 75 ------- ------- ------- Balance at end of year 189 (1,078) (62) EARNINGS RETAINED FOR USE IN THE BUSINESS Balance at beginning of year 11,071 9,628 17,990 Net income/(loss) 5,308 2,529 (7,385) Cash dividends (1,205) (1,086) (977) ------- ------- ------- Balance at end of year 15,174 11,071 9,628 ------- ------- ------- Total stockholders' equity $21,659 $15,574 $14,753 ======= ======= ======= Series A Series B Common Class B Preferred Preferred Stock Stock Stock Stock ------ ------- --------- --------- SHARES OF CAPITAL STOCK Issued at December 31, 1991 448 35 0.046 0 Additions 1992 6 0 0 0.023 1993 10 0 0 0 1994 - Stock split in form of a 100% stock dividend 469 36 - - - Employee benefit plans and other 19 - - - ----- -- ----- ----- Net additions 504 36 0.046 0.023 ----- -- ----- ----- Issued at December 31, 1994 952 71 0.046 0.023 ===== == ===== ===== Authorized at December 31, 1994 3,000 265 -- In total: 30 -- - - - - - - *The balances at the beginning and end of each period were less than $1 million The accompanying notes are part of the financial statements. FS-7 /TABLE Ford Motor Company and Subsidiaries Notes to Financial Statements NOTE 1. Accounting Policies - ---------------------------- Principles of Consolidation - --------------------------- The consolidated financial statements include all significant majority-owned subsidiaries and reflect the operating results, assets, liabilities and cash flows for two business segments: Automotive and Financial Services. The assets and liabilities of the Automotive segment are classified as current or noncurrent, and those of the Financial Services segment are unclassified. Affiliates that are 20% to 50% owned, principally Mazda Motor Corporation, Autolatina and AutoAlliance International Inc., and subsidiaries where control is expected to be temporary, principally investments in certain dealerships, are generally accounted for on an equity basis. For purposes of Notes to Financial Statements, "Ford" or "the company" means Ford Motor Company and its majority-owned consolidated subsidiaries unless the context requires otherwise. Revenue Recognition - Automotive - -------------------------------- Sales are recorded by the company when products are shipped to dealers. Provisions for approved sales incentive programs normally are recognized as sales reductions at the time of revenue recognition. Provisions for sales incentive programs approved subsequent to the time that related sales were recorded are recognized when the programs are approved. Revenue Recognition - Financial Services - ---------------------------------------- Revenue from finance receivables is recognized over the term of the receivable using the interest method. Certain loan origination costs are deferred and amortized over the term of the related receivable as a reduction in financing revenue. Revenue from operating leases is recognized as scheduled payments become due. Agreements between Automotive operations and certain Financial Services operations provide for interest supplements and other support costs to be paid by Automotive operations on certain financing and leasing transactions. Financial Services operations recognize this revenue in income over the period that the related receivables and leases are outstanding; interest supplements and other support costs are recorded as sales incentives by Automotive operations. Other Costs - ----------- Advertising and sales promotion costs are expensed as incurred. Advertising costs were $1,977 million in 1994, $1,773 million in 1993 and $1,702 million in 1992. Anticipated costs related to product warranty are accrued at the time of sale. Research and development costs are expensed as incurred and were $5,214 million in 1994, $5,021 million in 1993 and $4,332 million in 1992. Income/(Loss) Per Share of Common and Class B Stock - --------------------------------------------------- Income/(loss) per share of Common and Class B Stock is calculated by dividing the income/(loss) attributable to Common and Class B Stock by the average number of shares of Common Stock and Class B Stock outstanding during the applicable period. FS-8 NOTE 1. Accounting Policies (Cont'd) - --------------------------- The company has outstanding securities, primarily Series A Preferred Stock, which could be converted to Common Stock. Other obligations, such as stock options, are considered to be common stock equivalents. The calculation of income/(loss) per share of Common and Class B Stock assuming full dilution takes into account the effect of these convertible securities and common stock equivalents when the effect is material and dilutive. Derivative Financial Instruments - -------------------------------- The company and many of its subsidiaries have entered into agreements to manage certain exposures to fluctuations in foreign exchange and interest rates. All derivative financial instruments are classified as "held for purposes other than trading"; company policy specifically prohibits the use of derivatives for speculative purposes. Ford has operations in many countries outside the U.S., and purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in subsidiaries are frequently denominated in foreign currencies. Agreements to manage foreign exchange exposure include foreign currency forward contracts, currency swaps and, to a lesser extent, foreign currency options. Gains and losses on the various agreements are recognized in income during the period of the related transactions, included in the bases of the related transactions, or, in the case of hedges of net investments in foreign subsidiaries, recognized as an adjustment to the foreign currency translation component of stockholders' equity. Financial Services operations issue debt and other payables for which the maturity and interest rate structure differs from the invested assets to ensure continued access to capital markets and to minimize overall borrowing costs. Agreements to manage interest rate fluctuations include interest-rate swap agreements. The differential paid or received on interest-rate swap agreements is recognized as an adjustment to interest expense in the period. Foreign-Currency Translation - ---------------------------- Revenues, costs and expenses of foreign subsidiaries are translated to U.S. dollars at average-period exchange rates. The effect of changes in foreign exchange rates on revenues and costs was generally unfavorable in 1994. Assets and liabilities of foreign subsidiaries are translated to U.S. dollars at end-of-period exchange rates. The effects of this translation for most foreign subsidiaries and certain other foreign currency transactions are reported in a separate component of stockholders' equity. Translation gains and losses for foreign subsidiaries that are located in highly inflationary countries or conduct a major portion of their business with the company's U.S. operations are included in income. Also included in income are gains and losses arising from transactions denominated in a currency other than the functional currency of the subsidiary involved. The effect of changes in foreign exchange rates on assets and liabilities, as described above, increased net income by $376 million in 1994 and by $419 million in 1993 and decreased the net loss by $132 million in 1992. These amounts included net transaction and translation gains before taxes of $574 million in 1994, $988 million in 1993 and $557 million in 1992. A majority of these gains were offset by higher costs of sales that resulted from the use of historical exchange rates for inventories sold during the period in countries with high inflation rates. Goodwill - -------- Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies and is amortized using the straight-line method principally over 40 years. Total goodwill included in Automotive and Financial Services other assets at December 31, 1994 was $2.4 billion and $3.3 billion, respectively. FS-9 NOTE 1. Accounting Policies (Cont'd) - --------------------------- The company evaluates the carrying value of goodwill for potential impairment on an ongoing basis. Such evaluations compare operating income before amortization of goodwill to the amortization recorded for the operations to which the goodwill relates. The company also considers projected future operating results, trends and other circumstances in making such evaluations. Preferred Stockholders' Equity in a Subsidiary Company - ------------------------------------------------------ Preferred stockholders' equity in a subsidiary company refers to the outstanding preferred stock of Ford Holdings, Inc. ("Ford Holdings"), a subsidiary of Ford. All the outstanding common stock of Ford Holdings, representing 75% of the combined voting power of all classes of capital stock of Ford Holdings, is owned directly or indirectly by Ford. The balance of the capital stock, consisting of preferred stock, is owned by persons other than Ford and accounts for the remaining 25% of the combined voting power. NOTE 2. Marketable and Other Securities - ---------------------------------------- The company adopted Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1994. The cumulative effect of this change in accounting principle on the company's financial statements was not material. Trading securities are recorded at fair value, with unrealized gains and losses included in income. Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and reported in a separate component of stockholders' equity net of tax. Held-to-maturity securities are recorded at amortized cost. Equity securities which do not have readily determinable fair values are recorded at cost. The bases of cost used in determining realized gains and losses are specific identification for Automotive operations and first-in, first-out for Financial Services operations. The fair value of most securities was estimated based on quoted market prices. For those securities for which there were no quoted market prices, the estimate of fair value was based on similar types of securities that are traded in the market. Expected maturities of debt securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalty. Automotive - ---------- Investments in securities at December 31, 1994 were as follows (in millions): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ------ Trading securities $7,382 $3 $56 $7,329 Available-for-sale securities - ----------------------------- Debt securities issued by foreign governments 23 0 0 23 Corporate securities 231 0 1 230 ------ -- --- ------ Total available-for-sale securities 254 0 1 253 Held-to-maturity securities Corporate securities 20 0 0 20 ------ -- --- ------ Total investments in securities $7,656 $3 $57 $7,602 ====== == === ====== FS-10 /TABLE NOTE 2. Marketable and Other Securities (Cont'd) - ---------------------------------------- All debt securities classified as available-for-sale or held-to- maturity have contractual maturities of one year or less. For trading securities, the net unrealized loss included in income during 1994 was $53 million. Proceeds from sales of available-for-sale securities were $87 million in 1994; gross losses of $2 million were realized on those sales. Included in stockholders' equity at December 31, 1994 was $188 million that represented principally the company's equity interest in the unrealized gains on securities owned by certain unconsolidated subsidiaries. Other securities classified as cash equivalents were $3.4 billion and $3.3 billion at December 31, 1994 and 1993, respectively, and consisted primarily of debt securities issued by the U.S. government and agencies and short-term time deposits. Marketable securities at December 31, 1993 totaled $4.1 billion and were recorded at cost plus accrued interest, which approximated fair value. Financial Services - ------------------ Investments in securities at December 31, 1994 were as follows (in millions): Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ------ Trading securities $ 715 $ 6 $ 10 $ 711 Available-for-sale securities - ----------------------------- Debt securities issued by the U.S. government and agencies 692 1 38 655 Municipal securities 155 1 11 145 Debt securities issued by foreign governments 106 0 10 96 Corporate securities 1,929 3 152 1,780 Mortgage-backed securities 871 0 62 809 Other debt securities 22 0 0 22 Equity securities 172 34 6 200 ------ --- ---- ------ Total available-for-sale securities 3,947 39 279 3,707 Held-to-maturity securities Debt securities issued by the U.S. government and agencies 10 0 0 10 Municipal securities 783 0 12 771 Corporate securities 570 4 27 547 ------ --- ---- ------ Total held-to-maturity securities 1,363 4 39 1,328 Total investments in securities with readily determinable fair value 6,025 $49 $328 $5,746 === ==== ====== Equity securities not practicable to fair value 324 ------ Total investments in securities $6,349 ====== FS-11 NOTE 2. Marketable and Other Securities (Cont'd) - ---------------------------------------- The amortized cost and fair value of investments in available-for-sale securities and held-to-maturity securities at December 31, 1994, by contractual maturity, were as follows (in millions): Available-for-sale Held-to-maturity ---------------------- ----------------------- Amortized Amortized Cost Fair Value Cost Fair Value --------- ---------- ---------- ----------- Due in one year or less $ 113 $ 112 $ 59 $ 58 Due after one year through five years 755 728 184 184 Due after five years through ten years 637 596 782 768 Due after ten years 1,399 1,262 338 318 Mortgage-backed securities 871 809 - - Equity securities 172 200 - - ------ ------ ------ ------ Total $3,947 $3,707 $1,363 $1,328 ====== ====== ====== ====== For trading securities, the net unrealized loss included in income during 1994 was $4 million. Proceeds from sales of available-for-sale securities were $9.1 billion in 1994; gross gains of $24 million and gross losses of $56 million were realized on those sales. The net unrealized loss net of tax included in stockholders' equity was $155 million at December 31, 1994. Other securities classified as cash equivalents were $1.4 billion and $1.6 billion at December 31, 1994 and 1993, respectively, and consisted primarily of short-term time deposits and corporate securities. At December 31, 1993, investments in debt securities were recorded at amortized cost because of the ability to hold such securities until maturity and the intent to hold them for the foreseeable future. Marketable equity securities were recorded at fair value. Investments in debt securities at December 31, 1993 were as follows (in millions): Gross Gross Book Unrealized Unrealized Value Gains Losses Fair Value --------- ---------- ---------- ---------- Debt securities issued by the U.S. government and agencies $ 974 $ 27 $ 1 $1,000 Municipal securities 126 3 0 129 Debt securities issued by foreign governments 88 4 1 91 Corporate securities 1,779 48 19 1,808 Mortgage-backed securities 2,588 39 82 2,545 Other debt securities 192 0 1 191 ------ ----- ---- ------ Total $5,747 $121 $104 $5,764 ====== ==== ==== ====== The book value and fair value of investments in debt securities at December 31, 1993, by contractual maturity, were as follows (in millions): Book Value Fair Value ------- ---------- Due in one year or less $ 96 $ 96 Due after one year through five years 1,023 1,035 Due after five years through ten years 563 580 Due after ten years 1,477 1,508 Mortgage-backed securities 2,588 2,545 ------ ------ Total $5,747 $5,764 ====== ====== FS-12 NOTE 2. Marketable and Other Securities (Cont'd) - --------------------------------------- Proceeds from sales of investments in debt securities were $11.2 billion in 1993 and $10.5 billion in 1992. In 1993, gross gains of $113 million and gross losses of $20 million were realized on those sales; gross gains of $142 million and gross losses of $86 million were realized in 1992. Other securities other than debt securities totaled $2,472 million at December 31, 1993. The estimated fair value in excess of book value of those securities which were practicable to value was $59 million at December 31, 1993. It was not practicable to calculate the fair value of certain securities totaling $660 million at December 31, 1993 because they represented preferred stocks of non-traded companies with whom the company does business and for which similar market-traded securities were not available for comparison. NOTE 3. Receivables - -------------------- Automotive - ---------- Automotive receivables are generally short-term, and book value approximates fair value. Financial Services - ------------------ Included in net receivables and lease investments at December 31 were net finance receivables, investments in direct financing leases and investments in operating leases. The investments in direct financing and operating leases relate to the leasing of motor vehicles and various types of transportation and other equipment and facilities. Net finance receivables at December 31 were as follows (in millions): 1994 1993 --------- -------- Automotive $ 87,858 $ 58,738 Real estate, mainly residential 15,560 24,152 Other 6,237 24,968 -------- -------- Total finance receivables 109,655 107,858 Loan origination costs 194 124 Unearned income (9,656) (9,037) Allowance for credit losses (1,671) (2,017) Unearned insurance premiums and unpaid insurance claims related to finance receivables (90) (139) -------- -------- Net finance receivables $ 98,432 $ 96,789 ======== ======== Fair value $ 99,609 $ 98,505 Included in finance receivables was a total of $1.3 billion for 1994 and $1.5 billion for 1993 owed by three customers with the largest receivable balances. Other finance receivables consisted primarily of commercial and consumer loans, collateralized loans, credit card receivables, general corporate obligations and accrued interest. Also included in other finance receivables at December 31, 1994 and 1993 were $3.4 billion and $2.4 billion, respectively, of accounts receivable purchased by certain Financial Services operations from Automotive operations. Contractual maturities of automotive and other finance receivables are as follows (in millions): 1995 - $49,084; 1996 - $18,444; 1997 - $12,841; thereafter - $13,726. Experience indicates that a substantial portion of the portfolio generally is repaid before the contractual maturity dates. The fair value of most receivables was estimated by discounting future cash flows using an estimated discount rate which reflected the credit, interest rate and prepayment risks associated with similar types of instruments. For receivables with short maturities, the book value approximated fair value. Sales of finance receivables increased net income by $15 million in 1994, $60 million in 1993 and $7 million in 1992. FS-13 NOTE 3. Receivables (Cont'd) - ------------------- Investments in direct financing leases at December 31 were as follows (in millions): 1994 1993 Minimum lease rentals $ 8,321 $ 7,382 Estimated residual values 3,715 2,764 Lease origination costs 70 69 Unearned income (2,299) (2,010) Allowance for credit losses (185) (133) ------- ------- Net investments in direct financing leases $ 9,622 $ 8,072 ======= ======= Minimum direct financing lease rentals (including executory costs of $36 million) are contractually due as follows (in millions): 1995 - $2,736; 1996 - $1,998; 1997 - $1,282; 1998 - $740; thereafter - $1,601. Investments in operating leases at December 31 were as follows (in millions): 1994 1993 -------- -------- Vehicles and other equipment, at cost $28,050 $18,589 Lease origination costs 38 23 Accumulated depreciation (5,425) (3,736) Allowance for credit losses (361) (202) ------- ------- Net investments in operating leases $22,302 $14,674 ======= ======= Future minimum rentals on operating leases are contractually due as follows (in millions): 1995 - $4,533; 1996 - $1,807; 1997 - $220; 1998 - $56; thereafter - $108. Depreciation expense on operating leases reflects primarily the straight-line method over the term of the leases and was as follows (in millions): 1994 - $4,231; 1993 - $2,984; 1992 - $2,000. Allowances for credit losses are established as required based on historical experience. Other factors that affect collectibility also are evaluated, and additional amounts may be provided. Finance receivables and lease investments are charged to the allowances for credit losses when an account is deemed to be uncollectible, taking into consideration the financial condition of the borrower, the value of the collateral, recourse to guarantors and other factors. Recoveries on finance receivables and lease investments previously charged off as uncollectible are credited to the allowances for credit losses. Changes in the allowances for credit losses were as follows (in millions): 1994 1993 1992 ------- ------- ------- Beginning balance $2,352 $2,257 $2,078 Additions 988 1,019 1,218 Net losses (826) (903) (993) Other changes (297) (21) (46) ------ ------ ------ Ending balance $2,217 $2,352 $2,257 ====== ====== ====== Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan", was issued in May 1993 and amended in October 1994 by Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - - Income Recognition and Disclosures". The Standards require that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. The company will adopt these standards as of January 1, 1995, and the effect is not expected to be material. FS-14 NOTE 4. Inventories - Automotive - --------------------------------- Inventories at December 31 were as follows (in millions): 1994 1993 ------ ------ Raw materials, work in process and supplies $3,192 $2,937 Finished products 3,295 2,601 ------ ------ Total inventories $6,487 $5,538 ====== ====== U.S. Inventories $2,917 $2,575 Inventories are stated at the lower of cost or market. The cost of most U.S. inventories is determined by the last-in, first-out ("LIFO") method. The cost of the remaining inventories is determined primarily by the first-in, first-out ("FIFO") method. If the FIFO method had been used instead of the LIFO method, inventories would have been higher by $1,383 million and $1,342 million at December 31, 1994 and 1993, respectively. NOTE 5. Net Property, Depreciation and Amortization - Automotive - ----------------------------------------------------------------- Net property at December 31 was as follows (in millions): 1994 1993 --------- --------- Land $ 359 $ 360 Buildings and land improvements 6,939 5,923 Machinery, equipment and other 33,551 29,655 Construction in progress 1,685 1,551 -------- -------- Total land, plant and equipment 42,534 37,489 Accumulated depreciation (22,738) (20,691) -------- -------- Net land, plant and equipment 19,796 16,798 Unamortized special tools 7,252 6,261 -------- -------- Net property $ 27,048 $ 23,059 ======== ======== Property, equipment, and special tools are stated at cost, less accumulated depreciation. Assets placed in service before January 1, 1993 are depreciated using an accelerated method that results in accumulated depreciation of approximately two-thirds of asset cost during the first half of the asset's estimated useful life. Assets placed in service after December 31, 1992 are depreciated using the straight-line method of depreciation. This change in accounting principle was made to reflect improvements in the design and flexibility of manufacturing machinery and equipment and improvements in maintenance practices. These improvements have resulted in more uniform productive capacities and maintenance costs over the useful life of an asset, and straight-line depreciation is preferable in these circumstances. Depreciation and amortization expenses were as follows (in millions): 1994 1993 1992 ------ ------ ------ Depreciation $2,297 $2,392 $2,569 Amortization 2,129 2,012 2,097 ------ ------ ------ Total $4,426 $4,404 $4,666 ====== ====== ====== On average, buildings and land improvements are depreciated based on a 30-year life; automotive machinery and equipment are depreciated based on a 14-year life. Special tools are amortized over periods of time representing the productive use of those tools. When plant and equipment are retired, the general policy is to charge the cost of those assets, reduced by net salvage proceeds, to accumulated depreciation. Maintenance, repairs and rearrangement costs are expensed as incurred and were $2,377 million in 1994, $1,934 million in 1993 and $1,872 million in 1992. Expenditures that increase the value or productive capacity of assets are capitalized. Preproduction costs related to new facilities are expensed as incurred. FS-15 NOTE 6. Income Taxes - --------------------- Income/(loss) before income taxes and cumulative effects of changes in accounting principles for U.S. and foreign operations, excluding equity in net income of affiliated companies, was as follows (in millions): 1994 1993 1992 ------ ------- -------- U.S. $6,944 $4,152 $ 889 Foreign 1,574 (276) (1,031) ------ ------ ------- Total income/(loss) before income taxes $8,518 $3,876 $ (142)* ====== ====== ====== - - - - - *Excludes cumulative effects of changes in accounting principles The provision for income taxes was as follows (in millions): 1994 1993 1992 ------ ------ ------ Currently payable/(refundable) U.S. federal $1,640 $1,259 $(122) Foreign 690 169 427 State and local 165 123 104 ------ ------ ----- Total currently payable 2,495 1,551 409 Deferred tax liability/(benefit) U.S. federal 827 (161) 434 Foreign (71) (106) (499) State and local 78 66 (49) ------ ------ ----- Total deferred 834 (201) (114) ------ ------ ----- Total provision $3,329 $1,350 $ 295* ====== ====== ===== - - - - - - *Excludes cumulative effects of changes in accounting principles The provision includes estimated taxes payable on that portion of retained earnings of subsidiaries expected to be received by the company. No provision was made with respect to $3.3 billion of retained earnings at December 31, 1994 which have been invested by foreign subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax liability for the undistributed foreign earnings. A reconciliation of the provision for income taxes compared with the amounts at the U.S. statutory tax rate is shown below (in millions): 1994 1993 1992 ------ ------ ------ Tax provision/(credit) at U.S. statutory rate of 35% for 1994 and 1993 and 34% for 1992 $2,981 $1,357 $ (48) Effect of: Foreign taxes over U.S. tax rate 68 219 263 State and local income taxes 158 118 36 Rate adjustments on U.S. and foreign deferred taxes - (199) - Income not subject to tax or subject to tax at reduced rates (62) (70) (112) Other 184 (75) 156 ------ ------ ----- Provision for income taxes $3,329 $1,350 $ 295* ====== ====== ===== Effective Tax Rate 39.1% 34.8% - - - - - - - *Excludes cumulative effects of changes in accounting principles The company adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," as of January 1, 1992. The adoption of SFAS 109 changed the method of accounting for income taxes from the deferred method using Accounting Principles Board Opinion No. 11 ("APB 11") to an asset and liability approach. The cumulative effect of this change in accounting principle decreased the net loss in 1992 by $657 million. FS-16 NOTE 6. Income Taxes (Cont'd) - -------------------- Under SFAS 109, deferred income taxes reflect the estimated tax effect of temporary differences between assets and liabilities for financial reporting purposes and those amounts as measured by tax laws and regulations. The components of deferred income tax assets and liabilities at December 31 were as follows (in millions): 1994 1993 ------- ------- Deferred Tax Assets - ------------------- Employee benefit plans $ 5,951 $ 5,839 Dealer and customer allowances and claims 3,375 3,243 Net operating loss carryforwards 1,152 1,378 Allowance for credit losses 821 858 Alternative minimum tax 318 129 Depreciation and amortization (excludes leasing transactions) 39 30 All other 1,198 1,093 Valuation allowances (159) (174) ------- ------- Total deferred tax assets 12,695 12,396 Deferred Tax Liabilities Leasing transactions 3,935 3,166 Depreciation and amortization (excludes leasing transactions) 2,804 2,574 Employee benefit plans 1,443 697 All other 1,336 1,157 ------- ------- Total deferred tax liabilities 9,518 7,594 ------- ------- Net deferred tax assets $ 3,177 $ 4,802 ======= ======= Net foreign operating loss carryforwards for tax purposes were $3.2 billion at December 31, 1994. A substantial portion of these losses has an indefinite carryforward period; the remaining losses have expiration dates beginning in 1996. For financial statement purposes, the tax benefit of operating losses is recognized as a deferred tax asset, subject to appropriate valuation allowances. The company evaluates the tax benefits of operating loss carryforwards on an ongoing basis. Such evaluations include a review of historical and consideration of projected future operating results, the eligible carryforward period and other circumstances. NOTE 7. Liabilities - Automotive - --------------------------------- Current Liabilities - ------------------- Included in accrued liabilities at December 31 were the following (in millions): 1994 1993 ------- ------- Dealer and customer allowances and claims $ 6,716 $ 6,645 Employee benefit plans 1,786 1,415 Postretirement benefits other than pensions 688 674 Salaries, wages, and employer taxes 598 594 Other 1,811 1,487 ------- ------- Total accrued liabilities $11,599 $10,815 ======= ======= Noncurrent Liabilities - ---------------------- Included in other liabilities at December 31 were the following (in millions): 1994 1993 ------- ------- Postretirement benefits other than pensions $14,025 $13,288 Dealer and customer allowances and claims 6,044 5,170 Employee benefit plans 2,232 2,353 Unfunded pension obligation 362 2,873 Minority interests in net assets of subsidiaries 118 161 Other 2,139 2,066 ------- ------- Total other liabilities $24,920 $25,911 ======= ======= FS-17 NOTE 8. Employee Retirement Benefits - ------------------------------------- Employee Retirement Plans - ------------------------- The company has two principal retirement plans in the U.S. The Ford- UAW Retirement Plan covers hourly employees represented by the UAW, and the General Retirement Plan covers substantially all other employees of the company and several finance subsidiaries in the U.S. The hourly plan provides noncontributory benefits related to employee service. The salaried plan provides similar noncontributory benefits and contributory benefits related to pay and service. Other U.S. and non-U.S. subsidiaries have separate plans which generally provide similar types of benefits covering their employees. The company and its subsidiaries also have defined benefit plans applicable to certain executives which are not funded. The company's policy for funded plans is to contribute annually, at a minimum, amounts required by applicable law, regulations and union agreements. Plan assets consist principally of investments in stocks, government and other fixed income securities and real estate. The various plans generally are funded, except in Germany, where this has not been the custom, and as noted above; in those cases, an unfunded liability is recorded. In 1994, the company contributed $1.7 billion to its U.S. plans and $300 million to its non-U.S. plans. The company's pension expense, including Financial Services, was as follows (in millions): 1994 1993 1992 ---------------------- ---------------------- ---------------------- Non- Non- Non- U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans U.S. Plans ---------- ---------- ---------- ---------- ---------- ---------- Benefits attributed to employees' service $ 526 $ 236 $ 419 $ 181 $ 342 $ 213 Interest on projected benefit obligation 1,639 677 1,517 667 1,437 698 Return on assets: Actual (gain)/loss (74) 137 (2,264) (1,370) (1,465) (865) Deferred gain/(loss) (1,928) (759) 389 677 (204) 190 ------- ------- ------- ------- ------- Recognized (gain) (2,002) (622) (1,875) (693) (1,669) (675) Net amortization and other 452 151 259 169 228 180 ------- ------- ------- ------- ------- ------ Net pension expense $ 615 $ 442 $ 320 $ 324 $ 338 $ 416 ======= ======= ======= ======= ======= ====== Pension expense increased in 1994 as a result of lower discount rates for both U.S. and non-U.S. plans, compared with 1993. In addition, amendments made in September 1993 to the Ford-UAW Retirement Plan and the General Retirement Plan provided benefit improvements that increased net U.S. expense in 1994. FS-18 NOTE 8. Employee Retirement Benefits (Cont'd) - ------------------------------------- The status of these plans at December 31 was as follows (in millions): 1994 1993 ------------------------------ ------------------------------ Assets in Accum. Assets in Accum. Excess of Benefits Excess of Benefits Accum. in Excess Total Accum. in Excess Total Benefits of Assets Plans Benefits of Assets Plans --------- --------- -------- --------- --------- -------- U.S. Plans - ---------- Plan assets at fair value $23,264 $ 132 $23,396 $12,122 $10,779 $22,901 Actuarial present value of: Vested benefits $17,217 $ 404 $17,621 $ 8,708 $ 9,962 $18,670 Accumulated benefits 20,256 453 20,709 9,700 12,603 22,303 Projected benefits 21,404 541 21,945 10,896 12,767 23,663 Plan assets in excess of/(less than) projected benefits $ 1,860 $ (409) $ 1,451 $ 1,226 $(1,988) $ (762) Unamortized (net asset)/net transition obligation a/ (164) 12 (152) (760) 563 (197) Unamortized prior service cost b/ 2,134 86 2,220 538 2,053 2,591 Unamortized net (gains)/losses c/ (717) 56 (661) (159) 297 138 ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) 3,113 (255) 2,858 845 925 1,770 Adjustment required to recognize minimum liability d/ - (77) (77) - (2,771) (2,771) ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) recognized in the balance sheet $ 3,113 $ (332) $ 2,781 $ 845 $(1,846) $(1,001) ======= ======= ======= ======= ======= ======= Plan assets in excess of/(less than) accumulated benefits $ 3,008 $ (321) $ 2,687 $ 2,422 $(1,824) $ 598 Assumptions: Discount rate at year-end 8.25% 7.0% Average rate of increase in compensation 5.5 % 5.5% Long-term rate of return on assets 9.0 % 9.5% Non-U.S. Plans - -------------- Plan assets at fair value $ 7,018 $ 950 $ 7,968 $ 5,806 $ 1,815 $ 7,621 Actuarial present value of: Vested benefits $ 5,318 $ 2,895 $ 8,213 $ 4,538 $ 3,888 $ 8,426 Accumulated benefits 5,419 3,053 8,472 4,619 4,092 8,711 Projected benefits 6,321 3,240 9,561 5,333 4,484 9,817 Plan assets in excess of/(less than) projected benefits $ 697 $(2,290) $(1,593) $ 473 $(2,669) $(2,196) Unamortized (net asset)/net transition obligation a/ 32 241 273 (209) 461 252 Unamortized prior service cost b/ 227 248 475 267 232 499 Unamortized net (gains)/losses c/ (81) (25) (106) (88) 863 775 ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) 875 (1,826) (951) 443 (1,113) (670) Adjustment required to recognize minimum liability d/ - (284) (284) - (1,164) (1,164) ------- ------- ------- ------- ------- ------- Prepaid pension asset/(liability) recognized in the balance sheet $ 875 $(2,110) $(1,235) $ 443 $(2,277) $(1,834) ======= ======= ======= ======= ======= ======= Plan assets in excess of/(less than) accumulated benefits $ 1,599 $(2,103) $ (504) $ 1,187 $(2,277) $(1,090) Assumptions: Discount rate at year-end 8.3% 7.2% Average rate of increase in compensation 5.2% 5.1% Long-term rate of return on assets 9.0% 9.5% - - - - - - a/ The balance of the initial difference between assets and obligation deferred for recognition over a 15 year period. b/ The prior service effect of plan amendments deferred for recognition over remaining service. c/ The deferred gain or loss resulting from investments, other experience and changes in assumptions. d/ An adjustment to reflect the unfunded accumulated benefits -- at year-end 1994 this amount is offset by an intangible asset; at year-end 1993, the unfunded liability in excess of $3,250 million was recorded net of deferred taxes as a $400 million reduction in stockholders' equity. FS-19 NOTE 8. Employee Retirement Benefits (Cont'd) - ------------------------------------- Postretirement Health Care and Life Insurance Benefits - ------------------------------------------------------ The company and certain of its subsidiaries sponsor unfunded plans to provide selected health care and life insurance benefits for retired employees. The company's U.S. and Canadian employees may become eligible for those benefits if they retire while working for the company; however, benefits and eligibility rules may be modified from time to time. The estimated cost for postretirement health care benefits is accrued over periods of employee service on an actuarially determined basis, in accordance with the requirements of Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions". In adopting SFAS 106, the company elected to recognize immediately the prior-year unaccrued accumulated postretirement benefit obligation, resulting in an adverse effect on income of $7,540 million in the first quarter of 1992. The charge reflected an unaccrued retiree benefit obligation of $12 billion, offset partially by projected tax benefits of $4.5 billion. Net postretirement benefit expense, including Financial Services, was as follows (in millions): 1994 1993 1992 ------ ------ ----- Benefits attributed to employees' service $ 263 $ 240 $ 235 Interest on accumulated benefit obligation 1,088 1,207 1,129 Net amortization (32) - - ------ ------ ------ Net postretirement benefit expense $1,319 $1,447 $1,364 ====== ====== ====== Retiree benefit payments $ 639 $ 654 $ 641 The status of these plans at December 31 was as follows (in millions): 1994 1993 -------- -------- Accumulated postretirement benefit obligation: Retirees $ 6,720 $ 8,147 Active employees eligible to retire 2,282 2,725 Other active employees 4,266 5,984 ------- ------- Total accumulated obligation 13,268 16,856 Unamortized prior service cost a/ 321 387 Unamortized net gains/(losses) b/ 1,440 (2,880) ------- ------- Accrued liability $15,029 $14,363 ======= ======= Assumptions: Discount rate 8.75% 7.5% Present health care cost trend rate 5.9 % 9.7% Ultimate trend rate in ten years 5.5 % 5.5% Weighted-average trend rate 6.6 % 6.8% - - - - - - a/The prior service effect of plan amendments deferred for recognition over remaining service to retirement eligibility. b/The deferred gain or loss resulting from experience and changes in assumptions deferred for recognition over remaining service to retirement. Changing the assumed health care cost trend rates by one percentage point would change the aggregate service and interest cost components of net postretirement benefit expense for 1994 by $180 million and the accumulated postretirement benefit obligation at December 31, 1994 by $1.6 billion. FS-20 NOTE 9. Debt - ------------- The fair value of debt was estimated based on quoted market prices or current rates for similar debt with the same remaining maturities. Automotive - ---------- Debt at December 31 was as follows (in millions): Weighted Average Interest Rate* Book Value ------------------- ------------------- Maturity 1994 1993 1994 1993 --------- -------- -------- -------- -------- Debt payable within one year Short-term debt 10.0% 7.1% $ 112 $ 887 Long-term debt payable within one year 43 45 ------ ------ Total debt payable within one year 155 932 Long-term debt 1996-2043 9.0% 9.0% 7,103 7,084 ------ ------ Total debt $7,258 $8,016 ====== ====== Fair value $7,492 $9,044 - - - - - - *Excludes the effect of interest-rate swap agreements Long-term debt at December 31, 1994 included maturities as follows (in millions): 1995 - $43 (included in current liabilities); 1996 - $932; 1997 - $599; 1998 - $1,210; 1999 - $350; thereafter - $4,012. Included in long-term debt at December 31, 1994 and 1993 were obligations of $6,567 million and $6,568 million, respectively, with fixed interest rates and $536 million and $516 million, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1994 and 1993 were $994 million and $970 million, respectively. Agreements to manage exposures to fluctuations in interest rates, which include primarily interest-rate swap agreements and futures contracts, did not materially change the overall weighted-average rate on long-term debt and effectively decreased the obligations subject to variable interest rates to $465 million at December 31, 1994. Financial Services - ------------------ Debt at December 31 was as follows (in millions): Weighted Average Interest Rate* Book Value ------------------- ------------------- Maturity 1994 1993 1994 1993 --------- -------- -------- -------- -------- Debt payable within one year - ---------------------------- Unsecured short-term debt $ 2,990 $ 2,852 Commercial paper 51,008 37,793 Other short-term debt 2,301 3,111 -------- -------- Total short-term debt 5.9% 3.9% 56,299 43,756 Long-term debt payable within one year 9,310 12,304 -------- -------- Total debt payable within one year 65,609 56,060 Long-term debt - -------------- Secured indebtedness 1996-2005 6.7% 8.0% 98 1,821 Unsecured senior indebtednes Notes and bank debt 1996-2048 7.1% 7.1% 54,248 41,471 Debentures 1996-2010 7.8% 9.4% 560 916 Unamortized (discount) (61) (55) -------- -------- Total unsecured senior indebtedness 54,747 42,332 Unsecured subordinated indebtedness Notes 1996-2021 9.2% 8.9% 3,159 3,634 Debentures 1996-2009 8.1% 8.1% 141 142 Unamortized (discount) (41) (29) -------- -------- Total unsecured subordinated indebtedness 3,259 3,747 -------- -------- Total long-term debt 58,104 47,900 -------- -------- Total debt $123,713 $103,960 ======== ======== Fair value $122,252 $107,233 - - - - - - *Excludes the effect of interest-rate swap agreements FS-21 NOTE 9. Debt (Cont'd) - ------------- Information concerning short-term borrowings (excluding long-term debt payable within one year) is as follows (in millions): 1994 1993 1992 -------- -------- ------- Average amount of short-term borrowings $50,106 $38,353 $33,993 Weighted-average short-term interest rates per annum (average year) 4.6% 3.8% 5.2% Average remaining term of commercial paper at December 31 27 days 29 days 29 days Long-term debt at December 31, 1994 included maturities as follows (in millions): 1995 - $9,310; 1996 - $12,086; 1997 - $13,106; 1998 - $9,871; 1999 - $9,883; thereafter - $13,158. Included in long-term debt at December 31, 1994 and 1993 were obligations of $45.9 billion and $40.7 billion, respectively, with fixed interest rates and $12.2 billion and $7.2 billion, respectively, with variable interest rates (generally based on LIBOR or other short-term rates). Obligations payable in foreign currencies at December 31, 1994 and 1993 were $12.2 billion and $12.9 billion, respectively. These obligations were issued primarily to fund foreign business operations. Agreements to manage exposures to fluctuations in interest rates include primarily interest-rate swap agreements. These agreements decreased the overall weighted-average rate on long-term debt to 7.1%, compared with 7.2% excluding these agreements, and effectively decreased the obligations subject to variable interest rates to $7.2 billion at December 31, 1994. The weighted-average interest rate on short-term debt decreased to 5.6%, compared with 5.9% excluding these agreements. Support Facilities - ------------------ At December 31, 1994, Ford (parent company only) had long-term contractually committed credit agreements in the U.S. under which $5.9 billion is available from various banks at least through June 30, 1999. The entire $5.9 billion may be used, at Ford's option, by either Ford or Ford Credit. These facilities were unused at December 31, 1994. Outside the U.S., Ford had additional long-term contractually committed credit-line agreements of $2.5 billion. These facilities are available in varying amounts from 1995 through 1999; $21 million were in use at December 31, 1994. At December 31, 1994, Financial Services had $33.8 billion of contractually committed support facilities (including the $5.9 billion of the Ford credit agreements) for use in the U.S.; less than 1% of these facilities, excluding the Ford credit agreements, were in use. An additional $8.9 billion of contractually committed support facilities were available outside the U.S. at December 31, 1994; $1.4 billion of these were in use. NOTE 10. Annuity Contracts - Financial Services - ------------------------------------------------ The liability for annuity contracts, included in other liabilities, was $2,722 million at December 31, 1994 and $1,598 million at December 31, 1993, and reflected deposits received and interest credited, less related withdrawals. The weighted-average interest rate on annuity contracts outstanding at December 31, 1994 and 1993 was 6.3% and 6.2%, respectively. Interest rates offered are initially guaranteed for periods of either one or five years. Interest credited to annuity account balances is recognized as expense; surrender charges are recognized as a reduction of interest credited to annuitants. The fair value of annuity contracts at December 31, 1994 and 1993 approximated book value because the contractual interest rate due holders is reset annually for more than 97% of contracts outstanding. FS-22 NOTE 11. Capital Stock - ----------------------- On April 14, 1994, the company's Board of Directors declared a 2-for- 1 stock split in the form of a 100% stock dividend on the company's Common Stock and Class B Stock effective June 6, 1994. Share data have been restated to reflect the split, where appropriate. At December 31, 1994, all general voting power was vested in the holders of Common Stock and the holders of Class B Stock, voting together without regard to class. At that date, the holders of Common Stock were entitled to one vote per share and, in the aggregate, had 60% of the general voting power; the holders of Class B Stock were entitled to such number of votes per share as would give them, in the aggregate, the remaining 40% of the general voting power, as provided in the company's Certificate of Incorporation. The Certificate provides that all shares of Common Stock and Class B Stock share equally in dividends (other than dividends declared with respect to any outstanding Preferred Stock), except that any stock dividends are payable in shares of Common Stock to holders of that class and in Class B Stock to holders of that class. Upon liquidation, all shares of Common Stock and Class B Stock are entitled to share equally in the assets of the company available for distribution to the holders of such shares. Information concerning the Preferred Stock of the company is as follows: Series A Preferred Stock Series B Preferred Stock -------------------------------------- ---------------------------------------- Year issued 1991 1992 Shares issued 46,000 shares 22,800 shares Shares sold 46,000,000 Depositary Shares, each 45,600,000 Depositary Shares, each representing 1/1,000 of a share of representing 1/2,000 of a share of Series A Cumulative Convertible Series B Cumulative Preferred Stock Preferred Stock Dividends $4.20 per year per Depositary Share $2.0625 per year per Depositary Share Conversion Shares can be converted any time None into shares of Common Stock of the company at a rate equivalent to 3.2654 shares of Common Stock for each Depositary Share (equivalent to a conversion price of $15.3121 per share of Common Stock). Redemption Not redeemable prior to Not redeemable prior to December 7, 1997 December 1, 2002. On and after December 7, 1997, the On and after December 1, 2002, and stock is redeemable for cash at the upon satisfaction of certain company's option, in whole or in conditions, the stock is redeemable part, initially at an amount equi- for cash at the option of Ford, in valent to $51.68 per Depositary whole or in part, at a redemption Share and thereafter at prices price equivalent to $25 per Depositary declining to $50 per Depositary Share, plus an amount equal to the sum Share on and after December 1, 2001, of all accrued and unpaid dividends. plus, in each case, an amount equal to the sum of all accrued and unpaid dividends. Liquidation preference $50 per Depositary Share $25 per Depositary Share and shares outstanding $2.3 billion and 45,946 shares $1.1 billion and 22,800 shares at December 31, 1994 outstanding outstanding The Series A and Series B Preferred Stock rank (and any other outstanding Preferred Stock of the company would rank) senior to the Common Stock and Class B Stock in respect of dividends and liquidation rights. FS-23 NOTE 12. Stock Options - ----------------------- The company has stock options outstanding under the 1985 Stock Option Plan and the 1990 Long-term Incentive Plan. These plans were approved by the stockholders. Information concerning stock options, restated to reflect the 2-for-1 stock split, is as follows (shares in millions): 1994 1993 1992 ------ ------ ------ Option price of new grants a/ $29.06 $28.84 $18.50 and $28.63 Shares subject to option - ------------------------ Outstanding at beginning of period 37.4 41.1 33.0 New grants 9.5 7.1 9.6 Exercised b/ (2.6) (6.7) (1.0) Surrendered upon exercise of stock appreciation rights (0.9) (3.9) (0.5) Terminated and expired (0.1) (0.2) * ----- ----- ------ Outstanding at end of period 43.3 c/ 37.4 41.1 Outstanding but not exercisable (21.3) (19.3) (19.5) ----- ----- ------ Exercisable at end of period 22.0 18.1 21.6 ===== ===== ====== Shares authorized for future grants (as of December 31)d/ 0 0 0 - - - - - - *Less than 50,000 shares. a/ Fair market value of Common Stock at dates of grant. b/ At option prices ranging from $9.09 to 28.84 during 1994, $9.09 to $25.84 during 1993, from $3.52 to $15.34 during 1992. c/ Including 10.0 and 33.3 million shares under the 1985 and 1990 Plans, respectively, at option prices ranging from $9.09 to $29.06 per share. d/ In addition, up to 1% of the issued Common Stock as of December 31 of any year may be made available for stock options and other plan awards in the next succeeding calendar year. That limit may be increased up to 2% in any year, with a corresponding reduction in shares available for grants in future years. No further grants may be made under the 1985 Plan. Grants may be made under the 1990 Plan through April 2000. In general, options granted under the 1985 Plan and options granted to date under the 1990 Plan become exercisable 25% after one year from the date of grant, 50% after two years, 75% after three years and in full after four years. Options under both Plans expire after 10 years. Certain options outstanding under the plans were granted with an equal number of accompanying stock appreciation rights which may be exercised in lieu of the options. Under the Plans, a stock appreciation right entitles the holder to receive, without payment, the excess of the fair market value of the Common Stock on the date of exercise over the option price, either in Common Stock or cash or a combination. In addition, grants of Contingent Stock Rights were made with respect to 709,800 shares in 1994, 2,327,200 shares in 1993, and 1,264,800 shares in 1992 under the 1990 Long-Term Incentive Plan (not included in the table above). The number of shares ultimately awarded will depend on the extent to which the Performance Target specified in each Right is achieved, the individual performances of the recipients and other factors, as determined by the Compensation and Option Committee of the Board of Directors. FS-24 NOTE 13. Litigation and Claims - ------------------------------- Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in the future against the company and its subsidiaries, including those arising out of alleged defects in the company's products, governmental regulations relating to safety, emissions and fuel economy, financial services, intellectual property rights, product warranties and environmental matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive, or antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation programs, sanctions, or other relief which, if granted, would require very large expenditures. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance. It is reasonably possible that some of the matters discussed in the foregoing paragraph could be decided unfavorably to the company or the subsidiary involved and could require the company or such subsidiary to pay damages or make other expenditures in amounts or a range of amounts that at December 31, 1994 cannot reasonably be estimated. Although the final resolution of any such matters could have a material effect on the company's consolidated financial results for a particular reporting period, the company believes that, based on its analysis, any resulting liability should not materially affect the company's consolidated financial position at December 31, 1994. NOTE 14. Commitments and Contingencies - --------------------------------------- At December 31, 1994, the company had the following minimum rental commitments under non-cancelable operating leases (in millions): 1995 - $713; 1996 - $610; 1997 - $538; 1998 - $250; 1999 - $222; thereafter - $653. These amounts include rental commitments related to the sales and leasebacks of certain Automotive machinery and equipment. The company and certain of its subsidiaries have entered into agreements with various banks to introduce credit card programs that offer rebates which can be applied against the purchase or lease of Ford cars or trucks. The maximum amount of rebates available to qualified cardholders at December 31, 1994 and 1993 was $2.3 billion and $1.7 billion, respectively. The company has provided for the estimated net cost of these programs as a sales incentive based on the estimated number of participants who will ultimately purchase vehicles. Certain Financial Services subsidiaries make credit lines available to holders of their credit cards. At December 31, 1994 and 1993, the unused portion of available credit was approximately $10.3 billion and $9.9 billion, respectively, and is revocable under specified conditions. The fair value of unused credit lines and the potential risk of loss was not considered to be significant. FS-25 NOTE 15. Financial Instruments - ------------------------------- The company adopted Statement of Financial Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" as of December 31, 1994. Estimated fair value amounts have been determined using available market information and various valuation methods depending on the type of instrument. In evaluating the fair value information, considerable judgement is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Balance Sheet Financial Instruments - ----------------------------------- Information about specific valuation techniques and related fair value detail is provided throughout the footnotes. The table below provides book value and fair value amounts (in millions) and a cross reference to the applicable Note. December 31, 1994 December 31, 1993 ----------------------- ----------------------- Book Fair Book Fair Fair Value Value Value Value Value Reference ---------- -------- ---------- -------- ---------- Automotive - ---------- Cash & cash equivalents $ 4,481 $ 4,481 $ 5,667 $ 5,667 Note 17 Marketable securities 7,602 7,602 4,085 4,085 Note 2 Receivables 2,548 2,548 2,302 2,302 Note 3 Debt 7,258 7,492 8,016 9,044 Note 9 Financial Services - ------------------ Cash & cash equivalents $ 1,739 $ 1,739 $ 2,555 $ 2,555 Note 17 Marketable securities 5,781 5,746 7,559 7,635 Note 2 Receivables 98,432 99,609 96,789 98,505 Note 3 Debt 123,713 122,252 103,960 107,223 Note 9 Annuity contracts* 2,722 2,722 1,598 1,598 Note 10 - - - - - - * Included in Financial Services other liabilities and deferred income on the balance sheet. Foreign Currency Instruments - ---------------------------- The fair value of foreign currency instruments generally was estimated using current market prices provided by outside quotation services. At December 31, 1994, the fair value of net receivable contracts was $298 million, and the fair value of net payable contracts was $108 million. At December 31, 1993, the fair value for all agreements was a net receivable of $149 million. At December 31, 1994, foreign currency instruments had a deferred gain of $220 million. In the unlikely event that a counterparty fails to meet the terms of a foreign currency agreement, the company's market risk is limited to the exchange rate differential. In the case of currency swaps, the company's market risk also may include an interest rate differential. At December 31, 1994 and 1993, the total amount of the company's foreign currency forward contracts (contracts purchased and sold) and currency swaps and options outstanding was $12.6 billion and $10.9 billion, respectively, maturing primarily through 1997. Interest-Rate Instruments - ------------------------- The fair value of interest-rate instruments is the estimated amount the company would receive or pay to terminate the agreement. Fair value is calculated using information provided by outside quotation services, taking into account current interest rates and the current credit-worthiness of the swap parties. At December 31, 1994, the fair value of net receivable contracts was $458 million, and the fair value of net payable contracts was $602 million. At December 31, 1993, the fair value for all agreements was a net receivable of $512 million. In the unlikely event that a counterparty fails to meet the terms of an interest-rate agreement, the company's exposure is limited to the interest rate differential. At December 31, 1994 and 1993, the underlying principal amounts on which the company has interest-rate swap agreements outstanding aggregated $53.8 billion and $36.1 billion, respectively, maturing primarily through 1999. FS-26 NOTE 15. Financial Instruments (Cont'd) - ----------------------------- Other Instruments - ----------------- In addition, the company and its subsidiaries have entered into a variety of other financial agreements which contain potential risk of loss. These agreements include limited guarantees under sales of receivables agreements, financial guarantees, letters of credit, interest rate caps and floors, and government security repurchase agreements. Neither the amounts of these agreements nor the potential risk of loss was considered to be significant at December 31, 1994. Note 16. Significant Acquisitions and Dispositions of Subsidiaries - ------------------------------------------------------------------- Acquisition of the Hertz Corporation - ------------------------------------ On March 8, 1994, Ford purchased from Commerzbank Aktiengesellschaft, a German bank, additional shares of common stock of Hertz aggregating 5% of the total outstanding voting stock, thereby bringing Ford's ownership of the total voting stock of Hertz to 54% from 49%. On April 29, 1994, Ford acquired 20% of Hertz' common stock from Park Ridge Limited Partnership, and Hertz redeemed the common stock (26%) and preferred stock of Hertz owned by AB Volvo for $145 million. These transactions resulted in Hertz becoming a wholly-owned subsidiary of Ford. In addition, a $150 million subordinated promissory note of Hertz held by Ford Credit was exchanged for $150 million of preferred stock of Hertz. Prior to these transactions, Hertz had been accounted for on an equity basis as part of the Automotive segment. Hertz' operating results, assets, liabilities and cash flows are now consolidated as part of the Financial Services segment. In 1994, Financial Services net income included $92 million for Hertz. In 1993, Automotive net income included $26 million for Hertz. Sale of First Nationwide Bank - ----------------------------- On September 30, 1994, substantially all of the assets of First Nationwide Bank, a Federal Savings Bank, since known as Granite Savings Bank (the "Bank"), were sold to, and substantially all of the Bank's liabilities were assumed by, First Madison Bank, FSB ("First Madison"). The Bank is a wholly-owned subsidiary of Granite Management Corporation (formerly First Nationwide Financial Corporation) ("Granite"), which in turn is a wholly-owned subsidiary of Ford. The company recognized in First Quarter 1994 earnings a pre-tax charge of $475 million ($440 million after taxes) related to the disposition of the Bank, reflecting the non-recovery of goodwill and reserves for estimated losses on assets to be retained or repurchased by Granite. These assets will be liquidated over time as market conditions permit. The tax effect of this transaction takes into account differences between the book and tax basis of certain assets for which deferred taxes were not required to be provided under SFAS No. 109, "Accounting for Income Taxes". The company's income statement includes the results of operations of Granite through March 31, 1994. The net assets of Granite at December 31, 1994 are included in the balance sheet under Financial Services - Other Assets. Historically, Granite (including the Bank) has not had a significant effect on Ford's operating results. FS-27 NOTE 17. Cash Flows - -------------------- The reconciliation of net income/(loss) to cash flows from operating activities is as follows (in millions): 1994 1993 1992 --------------------- --------------------- -------------------- Financial Financial Financial Automotive Services Automotive Services Automotive Services ---------- --------- ---------- --------- ---------- --------- Net income/(loss) $3,824 $1,484 $ 940 $1,589 $(8,628) $1,243 Adjustments to reconcile net income/(loss) to cash flows from operating activities: Cumulative effects of changes in accounting principles - - - - 7,094 (211) Depreciation and amortization 4,426 4,910 4,404 3,064 4,666 2,089 (Earnings)/losses of affiliated companies in excess of dividends remitted (171) (2) (21) (9) 16 51 Provision for credit and insurance losses - 1,539 - 1,523 - 1,795 Foreign currency adjustments (384) - (650) - (362) - Net purchases of trading securities (Note 2) (3,616) (41) - - - - Provision/(credit) for deferred income taxes 424 410 (796) 595 (447) 333 Changes in assets and liabilities: (Increase)/decrease in accounts receivable and other current assets (1,096) - 34 - 103 - (Increase)/decrease in inventory (894) - (275) - 380 - Increase in accounts payable and accrued and other liabilities 4,949 1,077 3,735 594 2,617 295 Other 80 (290) (509) (211) 314 167 ------- ------- ------- ------- ------- ------- Cash flows from operating activities $7,542 $9,087 $6,862 $7,145 $ 5,753 $5,762 ======= ======= ======= ======= ======= ======= The company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents. The book value of these investments approximates fair value because of the short maturity. Cash flows resulting from futures contracts, forward contracts and options that are accounted for as hedges of identifiable transactions are classified in the same category as the item being hedged. With the adoption of SFAS 115 in 1994, the purchases and sales of trading securities are included in cash flows from operating activities. The purchases and sales of available-for- sale and held-to-maturity securities are included in cash flows from investing activities. Cash paid for interest and income taxes was as follows (in millions): 1994 1993 1992 ------ ------ ------ Interest $7,718 $6,969 $8,255 Income taxes 2,042 1,522 31 NOTE 18. Segment Information - ---------------------------- The company operates in two principal business segments: Automotive and Financial Services. The Automotive segment consists of the design, manufacture, assembly and sale of cars, trucks and related parts and accessories. The Financial Services segment consists primarily of financing operations, insurance operations, and vehicle and equipment leasing operations. Intersegment transactions represent principally transactions occurring in the ordinary course of business, borrowings and related transactions between entities in the Financial Services and Automotive segments, and interest and other support under special vehicle financing programs. These arrangements are reflected in the respective business segments. Intercompany sales among geographic areas consist primarily of vehicles, parts and components manufactured by the company and various subsidiaries and sold to different entities within the consolidated group. Transfer prices for these transactions are established by agreement between the affected entities. FS-28 NOTE 18. Segment Information (Cont'd) - ---------------------------- Financial information segregated by major geographic area is as follows (in millions): Automotive - ---------- 1994 1993 1992 --------- --------- --------- Sales to unaffiliated customers United States $ 73,008 $ 61,559 $ 51,918 Europe* 21,784 18,507 21,579 All other 12,345 11,502 10,910 -------- -------- -------- Total $107,137 $ 91,568 $ 84,407 ======== ======== ======== Intercompany sales among geographic areas United States $ 11,206 $ 8,721 $ 6,978 Europe* 1,709 1,690 1,717 All other 11,811 9,791 10,120 -------- -------- -------- Total $ 24,726 $ 20,202 $ 18,815 ======== ======== ======== Total sales United States $ 84,214 $ 70,280 $ 58,896 Europe* 23,493 20,197 23,296 All other 24,156 21,293 21,030 Elimination of intercompany sales (24,726) (20,202) (18,815) -------- -------- -------- Total $107,137 $ 91,568 $ 84,407 ======== ======== ======== Operating income/(loss) United States $ 4,190 $ 1,677 $ (582) Europe* 935 (402) (924) All other 701 157 (269) -------- -------- -------- Total $ 5,826 $ 1,432 $ (1,775) ======== ======== ======== Net income/(loss) before cumulative effects of changes in accounting principles United States $ 3,040 $ 1,482 $ (405) Europe* 388 (407) (647) All other 396 (135) (482) -------- -------- -------- Total $ 3,824 $ 940 $ (1,534) ======== ======== ======== Assets at December 31 United States $ 45,554 $ 39,666 $ 34,334 Europe* 13,514 13,452 13,414 All other 20,231 18,248 17,534 Net receivables from Financial Services 677 910 1,437 Elimination of intercompany receivables (11,605) (10,539) (9,549) -------- -------- -------- Total $ 68,371 $ 61,737 $ 57,170 ======== ======== ======== Capital expenditures (facilities, machinery and equipment and tooling) United States $ 5,428 $ 4,289 $ 3,018 Europe* 1,236 1,376 1,857 All other 1,646 1,049 822 -------- -------- -------- Total $ 8,310 $ 6,714 $ 5,697 ======== ======== ======== - - - - - - *Excludes Jaguar Financial Services - ------------------ 1994 1993 1992 --------- --------- --------- Revenues United States $ 17,356 $ 14,102 $ 12,514 Europe 2,336 1,673 2,051 All other 1,610 1,178 1,160 -------- -------- -------- Total $ 21,302 $ 16,953 $ 15,725 ======== ======== ======== Income before income taxes and cumulative effects of changes in accounting principles** United States $ 2,185 $ 2,311 $ 1,452 Europe 419 285 266 All other 188 116 107 -------- -------- -------- Total $ 2,792 $ 2,712 $ 1,825 ======== ======== ======== - - - - - - **Financial Services Activities do not report operating income; income before income taxes is representative of operating income. FS-29 NOTE 18. Segment Information (Cont'd) - ---------------------------- Net income before cumulative effects of changes in accounting principles United States $ 1,119 $ 1,340 $ 919 Europe 277 187 68 All other 88 62 45 -------- -------- -------- Total $ 1,484 $ 1,589 $ 1,032 ======== ======== ======== Assets at December 31 United States $124,118 $117,290 $104,749 Europe 16,507 12,132 11,512 All other 10,358 7,779 7,114 -------- -------- -------- Total $150,983 $137,201 $123,375 ======== ======== ======== Note 19. Summary Quarterly Financial Data (Unaudited) - ----------------------------------------------------- (in millions except amounts per share) 1994 1993 ------------------------------------- ------------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- -------- ------- ------- ------- Automotive Sales $26,070 $28,375 $24,926 $27,766 $22,686 $25,264 $20,107 $23,511 Operating income/(loss) 1,559 1,966 989 1,312 505 787 (242) 382 Financial Services Revenues 4,332 5,397 5,696 5,877 4,077 4,155 4,391 4,330 Income before income taxes 196 911 896 789 670 654 732 656 Total Company Net income $ 904a/ $ 1,711 $ 1,124 $ 1,569 $ 572 $ 775 $ 463b/ $ 719c/ Preferred stock dividend requirements 72 72 72 72 72 72 72 71 ------- ------- ------- ------- ------- ------- ------- ------- Income attributable to Common and Class B Stock $ 832 $ 1,639 $ 1,052 $ 1,497 $ 500 $ 703 $ 391 $ 648 ======= ======== ======= ======= ======= ======= ======= ======= AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDSd/ Income $ 0.83 $ 1.63 $ 1.04 $ 1.47 $ 0.51 $ 0.72 $ 0.40 $ 0.65 ======= ======= ======= ======= ======= ======= ======= ======= Income assuming full dilution $ 0.75 $ 1.44 $ 0.93 $ 1.31 $ 0.48 $ 0.65 $ 0.38 $ 0.60 Dividends $ 0.20 $ 0.225 $ 0.225 $ 0.26 $ 0.20 $ 0.20 $ 0.20 $ 0.20 - - - - - - a/ Includes a loss of $440 million related to the disposition of Granite Savings Bank (formerly First Nationwide Bank) b/ Includes a one-time tax reduction of $140 million to reflect revaluation of U.S. deferred tax balances, offset partially by restructuring charges at Jaguar ($65 million). c/ Includes restructuring charges at Jaguar ($109 million) and Ford of Australia ($57 million), partially offset by the favorable one-time effect of a reduction in German tax rates ($59 million) and a gain on the sale of part of Ford's North American automotive seating and seat trim business ($73 million). d/ The sum of the per-share amounts in 1994 and 1993 is different than the amounts reported for the full year because of the effect that sales of the company's stock had on average shares for those periods. Share data have been restated to reflect the 2-for-1 stock split that became effective June 6, 1994. FS-30 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Ford Motor Company We have audited the consolidated balance sheet of Ford Motor Company and Subsidiaries at December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ford Motor Company and Subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Notes 6 and 8 to the consolidated financial statements, the company changed its methods of accounting for postretirement benefits other than pensions and income taxes in 1992. COOPERS & LYBRAND L.L.P. 400 Renaissance Center Detroit, Michigan 48243 313-446-7100 January 27, 1995