FORD NEWS
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For Release April 16, 7:30 a.m. EDT
IMPROVING AUTOMOTIVE OPERATIONS DRIVE FORD TO RECORD FIRST QUARTER EARNINGS OF
$1.7 BILLION, UP 15%
DEARBORN, Mich., April 16, 1998 -- Continued improvement in automotive results
raised Ford Motor Company's [NYSE: F] operating earnings for the first quarter
to $1.7 billion, or $1.36 per diluted share of common and Class B stock. The
1998 results compare with earnings of $1.5 billion, or $1.20 a diluted share in
the first quarter of 1997, and exceed the previous first quarter record of $1.6
billion set in 1989.
The operating results shown above exclude a one-time gain of $16 billion, or
$12.94 per diluted share, resulting from the spin-off of Associates First
Capital [NYSE: AFS], and a one-time earnings per share reduction of $.07 per
share resulting from the premium paid to repurchase Ford's Series B preferred
stock. Including both one-time factors, Ford's reported first quarter earnings
were $17.6 billion, or $14.23 per diluted share.
Ford has increased its year-over-year earnings for eight consecutive quarters
and posted five straight quarters in which total automotive costs have declined
(at constant volume and mix) compared with the year-earlier period. In the first
quarter, Ford's total automotive costs declined by $400 million year-over-year
(at constant volume and mix).
AUTOMOTIVE OPERATIONS
Ford's first-quarter net income from worldwide automotive operations was $1.235
billion, up $231 million from a year ago, or 23 percent. Vehicle unit sales of
cars and trucks were 1,721,000, up 40,000 units or two percent. Automotive
return on sales in the first quarter improved nine-tenths of a point to 4.3
percent worldwide. Total automotive cash was $21.3 billion at the end of the
quarter and net cash was $13.1 billion, both records.
-2-
"Ford's automotive results continue to improve because of an intense focus on
the business fundamentals. We continue to strengthen our product line, quality
is better, costs are down and major processes are being re-engineered," said
Chairman and CEO Alex Trotman.
North America: In North America, automotive operations earned $1.0 billion,
essentially flat with a year ago. North American automotive return on sales was
5.0 percent. This solid level of profitability reflects strong acceptance of new
products and continuing progress on cost and quality performance. During the
quarter, Ford accelerated production of the new F-Series Super Duty truck line.
"The underpinnings of the economic expansion in North America remain intact,
which is good news for the auto industry. In the U.S., industry volume in the
first quarter was 15.3 million units. We continue to project full-year industry
volumes to be between 15 million and 15.5 million units," Trotman said.
Europe: In Europe, which continues to be an intensely competitive market, Ford
earned $230 million, up from $105 million a year ago.
"Europe continues to be extremely challenging," Trotman said. "Industry volumes
are strong, but intense price competition has not abated. We will continue to
focus on improving quality and reducing our total costs in Europe to achieve our
1998 profit target."
South America: Ford lost $45 million in South America, compared with a loss of
$47 million a year ago.
"The successful launches of the Ka, Fiesta, Ranger, F-Series and Courier have
reestablished Ford as a major presence in South America, but economic conditions
in Brazil have reduced industry volumes," Trotman said. "Our goal remains to
breakeven in South America this year, but it will be hard to achieve."
-3-
FINANCIAL SERVICES
Financial Services earnings in the first quarter, excluding The Associates'
earnings and the one-time gain resulting from the spin-off, were $279 million,
compared with $273 million a year ago on a comparable basis.
Ford Credit earned $278 million in the first quarter, an improvement of $2
million versus last year's first quarter. Compared with the first quarter of
1997, earnings reflected improved portfolio yields, lower borrowing costs and
higher financing volumes, offset by higher depreciation expense on leased
vehicles.
"Loan volumes, operating costs and interest margins are at good levels. However,
depreciation expense for leased vehicles continues to be a drag on profits. As a
result, based on the present outlook, our goal of 10 percent or greater earnings
growth for Ford Credit in 1998 will be very difficult to achieve," Trotman said.
The Hertz Corporation [NYSE: HRZ] reported record first-quarter earnings of $35
million, versus $20 million earned in the same period a year ago. Ford's share
of Hertz' first quarter 1998 earnings was $29 million.
The Associates reported record earnings of $281 million for the first quarter,
compared with $238 million a year ago. Ford's share of The Associates earnings
was $177 million, reflecting Ford's 80.7 percent ownership stake through March
12, the record date for the spin-off. Going forward, Ford's results no longer
will include earnings of The Associates.
# # #
-4-
SUMMARY OF FIRST QUARTER 1998 COMPARED WITH 1997
Overview
- --------
- - Total company operating earnings were a record $1.691 billion, compared
with $1.469 billion.
- - Diluted operating earnings per share were $1.36, compared with $1.20.
- - Worldwide sales and revenues were $36.6 billion, compared with $37.3
billion.
- - Stockholders' equity was $21.5 billion, compared with $27.3 billion.
Automotive
- ----------
- - Net income from worldwide automotive operations was $1.235 billion,
compared with $1 billion in the first quarter of 1997.
- - North American automotive operations earned $1.01 billion, compared with
$1.02 billion.
- - Outside North America, automotive operations earned $225 million, compared
with a loss of $16 million.
- - Worldwide vehicle unit sales were 1,721,000 compared with 1,681,000.
- - Combined car and truck share in the U.S. was 24.5 percent, compared with
25.1 percent.
- - Combined car and truck share in Europe was 11.5 percent, compared with
11.5 percent.
Financial Services
- ------------------
- - Financial Services earnings were $456 million, excluding the one-time gain
of $15.955 billion related to the spin-off of The Associates, compared
with $465 million.
- - Ford Credit earned $278 million, compared with $276 million.
- - The Associates reported a record $281 million, compared with $238 million
a year ago. Ford's share was $177 million through March 12.
- - Hertz earned a record $35 million, compared to $20 million. Ford's share
was $29 million.
Automotive Balance Sheet
- ------------------------
- - Net cash was a record $13.1 billion, compared with $7.8 billion.
- - Cash and marketable securities was a record $21.3 billion, compared with
$16 billion.
- - Debt was $8.2 billion, compared with $8.2 billion.
- - Capital spending was $2.1 billion, compared with $1.6 billion.
# # #
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
First Quarter
----------------------------
1998 1997
------------ ------------
(unaudited)
Worldwide vehicle unit sales of cars and trucks
(in thousands)
- North America 1,059 1,066
- Outside North America 662 615
----- -----
Total 1,721 1,681
===== =====
Sales and revenues (in millions)
- Automotive $ 29,076 $ 30,037
- Financial Services 7,508 7,277
--------- ---------
Total $ 36,584 $ 37,314
========= =========
Net income (in millions)
- Automotive $ 1,235 $ 1,004
- Financial Services (including income of
The Associates through March 12, 1998) 456 465
--------- ---------
Subtotal 1,691 1,469
- Gain on spin-off of The Associates 15,955 -
--------- ---------
Total $ 17,646 $ 1,469
========= =========
Capital expenditures (in millions)
- Automotive $ 2,101 $ 1,613
- Financial Services 98 126
--------- ---------
Total $ 2,199 $ 1,739
========= =========
Automotive capital expenditures as a percentage
of sales 7.2% 5.4%
Stockholders' equity at March 31
- Total (in millions) $ 21,497 $ 27,252
- After-tax return on Common and Class B
stockholders' equity 24.8% 22.1%
Automotive net cash at March 31
(in millions)
- Cash and marketable securities $ 21,277 $ 15,967
- Debt 8,178 8,202
--------- ---------
Automotive net cash $ 13,099 $ 7,765
========= =========
After-tax return on sales
- North American Automotive 5.0% 4.9%
- Total Automotive 4.3% 3.4%
Shares of Common and Class B Stock (in millions)
- Average number outstanding 1,210 1,190
- Number outstanding at March 31 1,213 1,191
Common Stock price (per share)
(adjusted to reflect The Associates spin-off)
- High $43-7/8 $23-3/8
- Low 28-15/32 20-35/64
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
AFTER PREFERRED STOCK DIVIDENDS
Income assuming dilution
- Automotive $ 0.99 $ 0.82
- Financial Services (including income of
The Associates through March 12, 1998) 0.37 0.38
--------- ---------
Subtotal 1.36 1.20
- Premium on Series B Preferred Stock repurchase (0.07) -
- Gain on spin-off of The Associates 12.94 -
--------- ---------
Total $ 14.23 $ 1.20
========= =========
Cash dividends $ 0.42 $ 0.385
FS-1
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended March 31, 1998 and 1997
(in thousands)
First Quarter
---------------------
1998 1997
--------- --------
(unaudited)
North America
United States
Cars 391 367
Trucks 564 612
----- -----
Total United States 955 979
Canada 76 69
Mexico 28 18
----- -----
Total North America 1,059 1,066
Europe
Britain 142 98
Germany 106 115
Italy 70 64
France 39 36
Spain 37 46
Other countries 100 97
----- -----
Total Europe 494 456
Other international
Brazil 42 41*
Argentina 30 29*
Australia 30 30
Taiwan 29 25
Japan 8 10
Other countries 29 24
----- -----
Total other international 168 159
----- -----
Total worldwide vehicle unit sales 1,721 1,681
===== =====
Vehicle unit sales generally are reported worldwide on a "where sold" basis
and include sales of all Ford-badged units, as well as units manufactured
by Ford and sold to other manufacturers
*Adjusted to reflect change in reporting practice
FS-2
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended March 31, 1998 and 1997
(in millions)
First Quarter
-------------------------
1998 1997
----------- ----------
(unaudited)
AUTOMOTIVE
Sales $29,076 $30,037
Costs and expenses (Note 2)
Costs of sales 25,584 26,795
Selling, administrative and other expenses 1,686 1,538
------- -------
Total costs and expenses 27,270 28,333
Operating income 1,806 1,704
Interest income 322 249
Interest expense 199 194
------- -------
Net interest income 123 55
Equity in net loss of affiliated companies (10) (144)
Net expense from transactions with
Financial Services (48) (19)
------- -------
Income before income taxes - Automotive 1,871 1,596
FINANCIAL SERVICES
Revenues 7,508 7,277
Costs and expenses
Interest expense 2,370 2,356
Depreciation 2,037 1,765
Operating and other expenses 1,583 1,500
Provision for credit and insurance losses 708 845
------- -------
Total costs and expenses 6,698 6,466
Net revenue from transactions with Automotive 48 19
Gain on spin-off of The Associates (Note 3) 15,955 -
------- -------
Income before income taxes - Financial Services 16,813 830
------- -------
TOTAL COMPANY
Income before income taxes 18,684 2,426
Provision for income taxes 972 898
------- -------
Income before minority interests 17,712 1,528
Minority interests in net income of subsidiaries 66 59
------- -------
Net income $17,646 $ 1,469
======= =======
Income attributable to Common and Class B Stock
after preferred stock dividends $17,551 $ 1,455
Average number of shares of Common and Class B
Stock outstanding 1,210 1,190
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Basic income (Note 4) $ 14.48 $ 1.23
Diluted income (Note 4) $ 14.23 $ 1.20
Cash dividends $ 0.42 $ 0.385
The accompanying notes are part of the financial statements.
FS-3
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
March 31, December 31,
1998 1997
---------------- --------------
(unaudited)
ASSETS
Automotive
Cash and cash equivalents $ 6,804 $ 6,316
Marketable securities 14,473 14,519
-------- --------
Total cash and marketable securities 21,277 20,835
Receivables 2,993 3,097
Inventories (Note 5) 6,340 5,468
Deferred income taxes 3,174 3,249
Other current assets 3,703 3,782
Net current receivable from Financial Services 0 416
-------- --------
Total current assets 37,487 36,847
Equity in net assets of affiliated companies 1,874 1,951
Net property 35,438 34,594
Deferred income taxes 3,643 3,712
Other assets 7,062 7,975
-------- --------
Total Automotive assets 85,504 85,079
Financial Services
Cash and cash equivalents 1,424 1,618
Investments in securities 1,117 2,207
Net receivables and lease investments 124,062 176,416
Other assets 11,128 13,777
Net receivable from Automotive 3 0
-------- --------
Total Financial Services assets 137,734 194,018
-------- --------
Total assets $223,238 $279,097
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 11,850 $ 11,997
Other payables (Note 3) 5,428 2,557
Accrued liabilities 17,539 16,250
Income taxes payable 1,366 1,358
Debt payable within one year 801 1,129
Net current payable to Financial Services 3 0
-------- --------
Total current liabilities 36,987 33,291
Long-term debt 7,377 7,047
Other liabilities 28,663 28,899
Deferred income taxes 1,203 1,210
-------- --------
Total Automotive liabilities 74,230 70,447
Financial Services
Payables 3,975 4,539
Debt 113,375 160,071
Deferred income taxes 4,430 4,347
Other liabilities and deferred income 5,053 7,865
Net payable to Automotive 0 416
-------- --------
Total Financial Services liabilities 126,833 177,238
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding solely junior subordinated debentures of the Company (Note 6) 678 678
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation preference
of $177 million and $637 million) * *
Common Stock, par value $1.00 per share (1,144 and 1,132 million shares issued) 1,144 1,132
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,225 5,564
Accumulated other comprehensive income (1,416) (1,228)
ESOP loan and other (346) (39)
Earnings retained for use in business 16,819 25,234
-------- --------
Total stockholders' equity 21,497 30,734
-------- --------
Total liabilities and stockholders' equity $223,238 $279,097
======== ========
The accompanying notes are part of the financial statements.
- - - - -
*Less than $1 million
FS-4
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended March 31, 1998 and 1997
(in millions)
First Quarter 1998 First Quarter 1997
---------------------------- ---------------------------
Financial Financial
Automotive Services Automotive Services
------------- ------------ ------------- -----------
(unaudited) (unaudited)
Cash and cash equivalents at January 1 $ 6,316 $ 1,618 $ 3,578 $ 3,689
Cash flows from operating activities before securities trading 3,138 4,463 3,161 2,342
Net sales/(purchases) of trading securities 108 (113) (832) 37
------- -------- ------- -------
Net cash flows from operating activities 3,246 4,350 2,329 2,379
Cash flows from investing activities
Capital expenditures (2,101) (98) (1,613) (126)
Purchase of leased assets (110) - - -
Acquisitions of receivables and lease investments - (27,772) - (26,481)
Collections of receivables and lease investments - 19,289 - 21,192
Net acquisitions of daily rental vehicles - (611) - (528)
Purchases of securities (123) (569) 0 (1,054)
Sales and maturities of securities 62 491 0 793
Proceeds from sales of receivables and lease investments - 2,368 - 807
Net investing activity with Financial Services 403 - 364 -
Other 269 (661) 78 151
------- -------- ------- -------
Net cash used in investing activities (1,600) (7,563) (1,171) (5,246)
Cash flows from financing activities
Cash dividends (519) (1) (472) (7)
Issuance of Common Stock 93 - 23 -
Preferred stock - Series B repurchase, Series A redemption (420) - - -
Changes in short-term debt 76 1,882 (101) 1,033
Proceeds from issuance of other debt 337 7,996 210 3,842
Principal payments on other debt (812) (5,650) (64) (3,839)
Net financing activity with Automotive - (403) - (364)
Spin-off of The Associates cash - (508) - -
Other (323) 53 0 106
------- --------- ------- -------
Net cash (used in)/provided by financing activities (1,568) 3,369 (404) 771
Effect of exchange rate changes on cash (9) 69 (35) (92)
Net transactions with Automotive/Financial Services 419 (419) (998) 998
------- -------- - ------- -------
Net increase/(decrease) in cash and cash equivalents 488 (194) (279) (1,190)
-------- -------- ------- -------
Cash and cash equivalents at March 31 $ 6,804 $ 1,424 $ 3,299 $ 2,499
======= ======== ======= =======
The accompanying notes are part of the financial statements.
FS-5
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
1. Financial Statements - The financial data presented herein are unaudited,
but in the opinion of management reflect those adjustments necessary for a
fair presentation of such information. Results for interim periods should
not be considered indicative of results for a full year. Reference should
be made to the financial statements contained in the registrant's Annual
Report on Form 10-K (the "10-K Report") for the year ended December 31,
1997. For purposes hereof, "Ford" or the "Company" means Ford Motor Company
and its majority owned subsidiaries unless the context requires otherwise.
Certain amounts for prior periods are reclassified, if required, to conform
with 1998 presentations.
2. Selected Automotive costs and expenses are summarized as follows (in
millions):
First Quarter
--------------------
1998 1997
-------- --------
Depreciation $680 $683
Amortization 718 787
3. Spin-off of The Associates - On March 2, 1998, the Board of Directors of
the Company approved the spin-off of The Associates by declaring a dividend
on Ford's outstanding shares of Common and Class B Stock consisting of
Ford's 80.7% interest (279.5 millions shares) in The Associates. The Board
of Directors also declared a dividend in cash on shares of Company stock
held in U.S. employee savings plans equal to the market value of The
Associates stock to be distributed per share of the Company's Common and
Class B Stock. Both the spin-off dividend and the cash dividend were paid
on April 7, 1998 to stockholders of record on March 12, 1998.
Holders of Ford Common and Class B Stock on the record date received
0.262085 shares of The Associates common stock for each share of Ford
stock, and participants in U.S. employee savings plans on the record date
received $22.12 in cash per share of Ford stock, based on the
volume-weighted average price of The Associates stock of $84.3849 per share
on April 7, 1998. The total value of the distribution (including the $3.2
billion cash dividend) was $26.8 billion or $22.12 per share of Ford stock.
As a result of the spin-off of The Associates, Ford realized a gain of
$15,955 million based on the fair value of The Associates as of the record
date, March 12, 1998, in first quarter 1998. Ford has received a ruling
from the U.S. Internal Revenue Service that the distribution qualifies as a
tax-free transaction for U.S. federal income tax purposes.
The Company's results in first quarter 1998 include Ford's share of The
Associates earnings through the record date, March 12 ($177 million). The
balance sheet at March 31, 1998 no longer includes The Associates. Other
payables includes a $3.2 billion dividend payable generated by the cash
dividend to participants in U.S. employee savings plans.
4. Income Per Share of Common and Class B Stock - Basic income per share of
Common and Class B Stock is calculated by dividing the income attributable
to Common and Class B Stock by the average number of shares of Common and
Class B Stock outstanding during the applicable period, adjusted for
issuable shares and uncommitted ESOP shares.
The company had Series A Preferred Stock convertible to Common Stock until
January 8, 1998. Other obligations, such as stock options, are considered
to be dilutive potential common stock. The calculation of diluted income
per share of Common and Class B Stock takes into account the effect of
dilutive potential common stock.
Income per share of Common and Class B Stock was as follows (in millions,
except per share amounts):
First Quarter 1998 First Quarter 1997
----------------------- ----------------------
Income Shares Income Shares
----------- ---------- ---------- ----------
Net income $17,646 1,210 $1,469 1,190
Preferred stock dividend requirements (95) - (14) -
Issuable and uncommitted ESOP shares - 2 - (3)
------- ----- ------ -----
Basic income and shares $17,551 1,212 $1,455 1,187
Basic income per share $ 14.48 $ 1.23
----------------------
Basic income and shares $17,551 1,212 $1,455 1,187
Net dilutive effect of options - 20 - 14
Convertible preferred stock and other 0 1 4 12
------- ----- ------ -----
Diluted income and shares $17,551 1,233 $1,459 1,213
Diluted income per share $ 14.23 $ 1.20
------------------------
FS-6
Ford Motor Company and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
5. Automotive inventories are summarized as follows (in millions):
March 31, December 31,
1998 1997
-------------- --------------
Raw materials, work in process and supplies $3,357 $2,875
Finished products 2,983 2,593
------ ------
Total inventories $6,340 $5,468
====== ======
U.S. inventories $2,617 $1,993
6. Company-Obligated Mandatorily Redeemable Preferred Securities of a
Subsidiary Trust - The sole asset of Ford Motor Company Capital Trust I
(the "Trust"), which is the obligor on the Preferred Securities of such
Trust, is $632 million principal amount of 9% Junior Subordinated
Debentures due 2025 of Ford Motor Company.
7. Changes in stockholders' equity for the three months ended March 31, 1998
were as follows (in millions):
Earnings Capital
Retained Accum. in Excess
for Use Other of Par
in the Compr. Capital Value of
Total Business Income Other Stock Stock
-------------- --------------- ------------- ------------ ------------ ------------
Balance at January 1 $ 30,734 $ 25,234 $(1,228) $ (39) $1,203 $5,564
Comprehensive income
Net income 17,646 17,646
Other comprehensive income (188) (188)
--------
Total comprehensive income 17,458
Common stock issued for Series A Preferred
Stock conversion, employee benefit plans
and other 93 12 81
Associates spin-off to Ford Common
stockholders (22,298) (22,298)
Associates spin-off cash distribution to
savings plans (3,242) (3,242)
Preferred stock - Series B repurchase and
Series A redemption (420) (420)
ESOP loan and other (309) (2) (307)
Quarterly cash dividends (519) (519)
-------- -------- ------- ----- ------ ------
Balance at March 31 $ 21,497 $ 16,819 $(1,416) $(346) $1,215 $5,225
========= ========= ======= ===== ====== ======
FS-7