-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GtK+qXpW/AuXgG4ibiXi2PZSMmiuUedPN6eB4TeWVUYCsEsvwcoiRydBMoLW22nb wUgL2ifgXW9HIXJKisC7Ng== 0000037996-99-000041.txt : 19991115 0000037996-99-000041.hdr.sgml : 19991115 ACCESSION NUMBER: 0000037996-99-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORD MOTOR CO CENTRAL INDEX KEY: 0000037996 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380549190 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03950 FILM NUMBER: 99749933 BUSINESS ADDRESS: STREET 1: THE AMERICAN RD CITY: DEARBORN STATE: MI ZIP: 48121 BUSINESS PHONE: 3133223000 10-Q 1 THIRD QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND - -----EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES - -----EXCHANGE ACT OF 1934 For the transition period from to ---------- ----------- Commission file number 1-3950 ------ FORD MOTOR COMPANY ------------------ (Exact name of registrant as specified in its charter) Incorporated in Delaware 38-0549190 ------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) The American Road, Dearborn, Michigan 48121 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 313-322-3000 ------------ Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 193 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X|. No . --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of September 30, 1999, the Registrant had outstanding 1,137,032,916 shares of Common Stock and 70,852,076 shares of Class B Stock. Exhibit index located on sequential page number 25
Ford Motor Company and Subsidiaries HIGHLIGHTS ---------- Third Quarter Nine Months ---------------------------- --------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Worldwide vehicle unit sales of cars and trucks (in thousands) - - North America 1,050 993 3,507 3,174 - - Outside North America 549 496 1,795 1,835 ----- ----- ----- ----- Total 1,599 1,489 5,302 5,009 ----- ----- ----- ----- ----- ----- ----- ----- Sales and revenues (in millions) - - Automotive $ 31,338 $ 26,494 $ 99,192 $86,879 - - Financial Services 6,635 6,146 18,948 19,634 --------- --------- --------- --------- Total $ 37,973 $ 32,640 $ 118,140 $ 106,513 --------- --------- --------- --------- --------- --------- --------- --------- Net income (in millions) - - Automotive $ 690 $ 646 $ 4,272 $ 3,932 - - Financial Services (excl. The Associates) 424 355 1,159 964 - - The Associates - - - 177 - - Gain on spin-off of The Associates - - - 15,955 --------- --------- --------- --------- Total $ 1,114 $ 1,001 $ 5,431 $ 21,028 --------- --------- --------- --------- --------- --------- --------- --------- Capital expenditures (in millions) - - Automotive $ 1,931 $ 1,908 $ 5,024 $ 5,668 - - Financial Services 150 147 435 398 --------- --------- --------- --------- Total $ 2,081 $ 2,055 $ 5,459 $ 6,066 --------- --------- --------- --------- --------- --------- --------- --------- Automotive capital expenditures as a percentage of sales 6.2% 7.2% 5.1% 6.5% Stockholders' equity at September 30 - - Total (in millions) $ 26,921 $ 23,718 $ 26,921 $ 23,718 - - After-tax return on Common and Class B stockholders' equity 16.8% 17.2% 28.7% 28.0% Automotive net cash at September 30 (in millions) - - Cash and marketable securities $ 25,703 $ 22,911 $ 25,703 $ 22,911 - - Debt 12,819 9,822 12,819 9,822 --------- --------- --------- --------- Automotive net cash $ 12,884 $ 13,089 $ 12,884 $ 13,089 --------- --------- --------- --------- --------- --------- --------- --------- After-tax return on sales - - North American Automotive 4.5% 4.5% 6.3% 5.7% - - Total Automotive 2.2% * 2.5% 4.3% * 4.6% Shares of Common and Class B Stock (in millions) - - Average number outstanding 1,209 1,212 1,210 1,211 - - Number outstanding at September 30 1,208 1,210 1,208 1,210 Common Stock price (per share) (adjusted to reflect The Associates spin-off) - - High $58-5/8 $61-7/16 $67-7/8 $61-7/16 - - Low 46-1/4 40-5/8 46-1/4 28-15/32 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK AFTER PREFERRED STOCK DIVIDENDS Income assuming dilution - - Automotive $ 0.56 $ 0.52 $ 3.45 $ 3.16 - - Financial Services (excl. The Associates) 0.34 0.28 0.94 0.78 - - The Associates - - - 0.14 - - Premium on Series B Preferred Stock repurchase - - - (0.07) - - Gain on spin-off of The Associates - - - 12.89 --------- --------- --------- --------- Total $ 0.90 $ 0.80 $ 4.39 $ 16.90 --------- --------- --------- --------- --------- --------- --------- --------- Cash dividends $ 0.46 $ 0.42 $ 1.38 $ 1.26 _ _ _ _ _ * Total Automotive after-tax return on sales, excluding a $125 million profit reduction for Visteon postretirement health care and life insurance liabilities, was 2.6% in the third quarter of 1999 and 4.5% for the first nine months of 1999.
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Ford Motor Company and Subsidiaries VEHICLE UNIT SALES ------------------ For the Periods Ended September 30, 1999 and 1998 (in thousands) Third Quarter Nine Months ------------------------ -------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (unaudited) (unaudited) North America United States Cars 376 377 1,228 1,136 Trucks 596 545 2,015 1,770 ----- ----- ----- ----- Total United States 972 922 3,243 2,906 Canada 50 51 188 193 Mexico 28 20 76 75 ----- ----- ----- ----- Total North America 1,050 993 3,507 3,174 Europe Britain 134 105 396 396 Germany 72 78 273 301 Italy 39 31 149 149 Spain 38 27 135 109 France 37 35 129 117 Other countries 100 71 353 282 ----- ----- ----- ----- Total Europe 420 347 1,435 1,354 Other international Brazil 35 50 90 144 Australia 32 34 96 98 Taiwan 13 17 45 65 Argentina 16 22 44 81 Japan 8 6 25 20 Other countries 25 20 60 73 ----- ----- ----- ----- Total other international 129 149 360 481 ----- ----- ----- ----- Total worldwide vehicle unit sales 1,599 1,489 5,302 5,009 ----- ----- ----- ----- ----- ----- ----- -----
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. Prior period restated to correct reported unit sales. -3-
Part I. Financial Information ----------------------------- Item 1. Financial Statements - ----------------------------- Ford Motor Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME -------------------------------- For the Periods Ended September 30, 1999 and 1998 (in millions) Third Quarter Nine Months -------------------------- -------------------------- 1999 1998 1999 1998 ---------- ----------- ----------- ---------- (unaudited) (unaudited) AUTOMOTIVE Sales $31,338 $26,494 $99,192 $86,879 Costs and expenses (Note 2) Costs of sales 28,070 23,848 86,211 75,358 Selling, administrative and other expenses 2,258 1,869 6,686 6,016 ------- ------- ------- ------- Total costs and expenses 30,328 25,717 92,897 81,374 Operating income 1,010 777 6,295 5,505 Interest income 356 322 1,044 962 Interest expense 390 198 1,029 605 ------- ------- ------- ------- Net interest income/(expense) (34) 124 15 357 Equity in net income/(loss) of affiliated companies 15 23 65 31 Net expense from transactions with Financial Services (17) (56) (62) (143) ------- ------- ------- ------- Income before income taxes - Automotive 974 868 6,313 5,750 FINANCIAL SERVICES Revenues 6,635 6,146 18,948 19,634 Costs and expenses Interest expense 1,988 1,830 5,701 6,025 Depreciation 2,333 2,220 6,881 6,415 Operating and other expenses 1,206 1,114 3,304 3,783 Provision for credit and insurance losses 383 393 1,146 1,461 ------- ------- ------- ------- Total costs and expenses 5,910 5,557 17,032 17,684 Net revenue from transactions with Automotive 17 56 62 143 Gain on spin-off of The Associates (Note 5) - - - 15,955 ------- ------- ------- ------- Income before income taxes - Financial Services 742 645 1,978 18,048 ------- ------- ------- ------- TOTAL COMPANY Income before income taxes 1,716 1,513 8,291 23,798 Provision for income taxes 569 482 2,772 2,646 ------- ------- ------- ------- Income before minority interests 1,147 1,031 5,519 21,152 Minority interests in net income of subsidiaries 33 30 88 124 ------- ------- ------- ------- Net income $ 1,114 $ 1,001 $ 5,431 $21,028 ------- ------- ------- ------- ------- ------- ------- ------- Income attributable to Common and Class B Stock after preferred stock dividends $ 1,110 $ 997 $ 5,420 $20,925 Average number of shares of Common and Class B Stock outstanding 1,209 1,212 1,210 1,211 AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK Basic Income (Note 6) $ 0.92 $ 0.82 $ 4.49 $ 17.29 Diluted Income (Note 6) $ 0.90 $ 0.80 $ 4.39 $ 16.90 Cash dividends $ 0.46 $ 0.42 $ 1.38 $ 1.26
The accompanying notes are part of the financial statements. Prior period costs of sales and selling, administrative and other expenses were reclassified. -4-
Ford Motor Company and Subsidiaries CONSOLIDATED BALANCE SHEET -------------------------- (in millions) September 30, December 31, 1999 1998 --------------- ---------------- (unaudited) ASSETS Automotive Cash and cash equivalents $ 4,039 $ 3,685 Marketable securities 21,664 20,120 -------- -------- Total cash and marketable securities 25,703 23,805 Receivables 3,622 2,604 Inventories (Note 7) 7,218 5,656 Deferred income taxes 3,377 3,239 Other current assets 3,651 3,405 Current receivable from Financial Services 910 0 -------- -------- Total current assets 44,481 38,709 Equity in net assets of affiliated companies 2,514 2,401 Net property 41,356 37,320 Deferred income taxes 3,682 3,175 Other assets 12,538 7,139 -------- -------- Total Automotive assets 104,571 88,744 Financial Services Cash and cash equivalents 1,239 1,151 Investments in securities 733 968 Net receivables and lease investments 141,139 132,567 Other assets 17,723 13,227 Receivable from Automotive 1,985 888 -------- -------- Total Financial Services assets 162,819 148,801 -------- -------- Total assets $267,390 $237,545 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Automotive Trade payables $ 13,356 $ 13,368 Other payables 4,453 2,755 Accrued liabilities 20,546 16,925 Income taxes payable 1,590 1,404 Debt payable within one year 1,429 1,121 Current payable to Financial Services 0 70 -------- -------- Total current liabilities 41,374 35,643 Long-term debt 11,390 8,713 Other liabilities 33,509 30,133 Deferred income taxes 1,294 751 Payable to Financial Services 1,985 818 -------- -------- Total Automotive liabilities 89,552 76,058 Financial Services Payables 3,655 3,555 Debt 131,973 122,324 Deferred income taxes 7,217 5,488 Other liabilities and deferred income 6,487 6,034 Payable to Automotive 910 0 -------- -------- Total Financial Services liabilities 150,242 137,401 Company-obligated mandatorily redeemable preferred securities of a subsidiary trust holding solely junior subordinated debentures of the Company (Note 8) 675 677 Stockholders' equity Capital stock Preferred Stock, par value $1.00 per share (aggregate liquidation preference of $177 million) * * Common Stock, par value $1.00 per share (1,151 million shares issued) 1,151 1,151 Class B Stock, par value $1.00 per share (71 million shares issued) 71 71 Capital in excess of par value of stock 5,017 5,283 Accumulated other comprehensive income (1,861) (1,670) ESOP loan and treasury stock (865) (1,085) Earnings retained for use in business 23,408 19,659 -------- -------- Total stockholders' equity 26,921 23,409 -------- -------- Total liabilities and stockholders' equity $267,390 $237,545 -------- -------- -------- -------- - - - - - *Less than $1 million
The accompanying notes are part of the financial statements. -5-
Ford Motor Company and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS ---------------------------------------------- For the Periods Ended September 30, 1999 and 1998 (in millions) Nine Months 1999 Nine Months 1998 --------------------------- -------------------------- Financial Financial Automotive Services Automotive Services ------------- ----------- ------------- ----------- (unaudited) (unaudited) Cash and cash equivalents at January 1 $ 3,685 $ 1,151 $ 6,316 $ 1,618 Cash flows from operating activities before securities trading 11,909 7,908 11,570 11,060 Net sales/(purchases) of trading securities (1,248) (148) (3,473) (114) -------- -------- ------- -------- Net cash flows from operating activities 10,661 7,760 8,097 10,946 Cash flows from investing activities Capital expenditures (5,024) (435) (5,668) (398) Purchase of leased assets - - (110) - Acquisitions of receivables and lease investments - (61,657) - (62,031) Collections of receivables and lease investments - 40,800 - 44,147 Net acquisitions of daily rental vehicles - (2,025) - (1,854) Purchases of securities (1,681) (759) (341) (1,838) Sales and maturities of securities 1,385 988 570 1,229 Proceeds from sales of receivables and lease investments - 9,520 - 8,146 Net investing activity with Financial Services (430) - 187 - Cash paid for acquisitions (Note 4) (6,342) - - - Other 286 (4) (80) (768) -------- -------- ------- -------- Net cash used in investing activities (11,806) (13,572) (5,442) (13,367) Cash flows from financing activities Cash dividends (1,682) (3) (4,787) (4) Issuance/(Purchases) of Common Stock (265) - 207 - Preferred stock - Series B repurchase, Series A redemption - - (420) - Changes in short-term debt 36 (2,210) 518 (1,063) Proceeds from issuance of other debt 3,128 26,925 2,279 19,245 Principal payments on other debt (192) (18,796) (1,273) (14,745) Net financing activity with Automotive - 430 - (187) Spin-off of The Associates cash - - - (508) Other 340 (62) (851) (218) -------- -------- ------- -------- Net cash (used in)/provided by financing activities 1,365 6,284 (4,327) 2,520 Effect of exchange rate changes on cash (53) (197) (49) 70 Net transactions with Automotive/Financial Services 187 (187) 552 (552) -------- -------- ------- -------- Net increase/(decrease) in cash and cash equivalents 354 88 (1,169) (383) -------- -------- ------- -------- Cash and cash equivalents at September 30 $ 4,039 $ 1,239 $ 5,147 $ 1,235 -------- -------- ------- -------- -------- -------- ------- --------
The accompanying notes are part of the financial statements. -6- 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, 1998. For purposes of this report, "Ford", the "Company", "we", "our", "us" or similar references means Ford Motor Company and its majority owned subsidiaries unless the context requires otherwise. Certain amounts for prior periods were reclassified to conform with present period presentation. 2. Selected Automotive costs and expenses are summarized as follows (in millions): Third Quarter Nine Months --------------------- --------------------- 1999 1998 1999 1998 --------- -------- --------- -------- Depreciation $874 $719 $2,422 $2,078 Amortization 627 755 1,789 2,093 Dissolution of AutoEuropa Joint Venture - Effective January 1, 1999, our joint venture for the production of minivans with Volkswagen AG in Portugal (AutoEuropa) was dissolved resulting in a $255 million pre-tax gain ($165 million after-tax) in the first quarter of 1999. 3. Visteon Postretirement Adjustments - During the third quarter of 1999, actuarial valuations of postretirement health care and life insurance benefits for certain Visteon operations were completed by an external actuary. The valuations revealed that the operations' estimated liability for these benefits was under-accrued, beginning with the original recognition of these costs in 1992 when we adopted SFAS 106 "Employers' Accounting for Postretirement Benefits Other Then Pensions". We increased the affected operations' balance sheet liability to recognize the accrual shortfall. We reported the adjustment in total Automotive sector and reduced third quarter results by $125 million after-tax. Visteon reflected the adjustment in its results on a restated basis. 4. Acquisitions Purchase of AB Volvo's Worldwide Passenger Car Business "Volvo Car" - On March 31, 1999, we purchased Volvo Car for approximately $6.45 billion. The acquisition price consisted of a cash payment of approximately $2 billion on March 31, 1999, a deferred payment obligation to AB Volvo of approximately $1.6 billion due March 31, 2001, and Volvo Car automotive net indebtedness of approximately $2.9 billion. Most automotive indebtedness was repaid on April 12, 1999. The purchase price payment and automotive debt repayments were funded from our cash reserves. The acquisition has been accounted for as a purchase. The assets purchased, liabilities assumed and the results of operations, since the date of acquisition, are included in our financial statements on a consolidated basis. The purchase price for Volvo Car has been allocated, on a preliminary basis, to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of net assets acquired is approximately $2.5 billion and is being amortized on a straight-line basis over 40 years. The purchase price allocation included a write-up of inventory to fair value; the sale of this inventory in the second quarter of 1999 resulted in a one-time increase in cost of sales of $146 million after-tax. Purchase of Kwik-Fit Holdings plc - During the third quarter of 1999, we completed the purchase of all the outstanding stock of Kwik-Fit Plc ("Kwik-Fit"). Kwik-Fit is Europe's largest independent vehicle maintenance and light repair chain, with over 1,600 service centers in the United Kingdom, Ireland, and continental Europe. The acquisition price was approximately $1.6 billion and consisted of cash payments of approximately $1.4 billion and loan notes to certain Kwik-Fit shareholders of approximately $0.2 billion, redeemable beginning on April 30, 2000 and on any subsequent interest payment date. The purchase price payments were funded from our cash reserves. The acquisition has been accounted for as a purchase. The assets purchased, liabilities assumed and the results of operations, since the date of acquisition, are included in our financial statements on a consolidated basis. The purchase price for Kwik-Fit has been allocated, on a preliminary basis, to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the net assets acquired is approximately $1.5 billion and is being amortized on a straight-line basis over 30 years. -7- Ford Motor Company and Subsidiaries NOTES TO FINANCIAL STATEMENTS ----------------------------- (unaudited) 4. Acquisitions (Continued) Purchase of Plastic Omnium - On June 30, 1999, we purchased (through Visteon) Plastic Omnium's automotive interior business for approximately $500 million. The automotive interior business of Plastic Omnium has 14 facilities in four countries in Europe: France, Spain, Italy and the UK. The purchase was funded from our cash reserves. The acquisition has been accounted for as a purchase. The assets purchased, liabilities assumed and the results of operations, since the date of acquisition, are included in our financial statements on a consolidated basis. The purchase price for Plastic Omnium has been allocated, on a preliminary basis, to the assets acquired and liabilities assumed based on estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of net assets acquired is approximately $300 million and is being amortized on a straight-line basis over 20 years. Assuming the acquisitions described above had taken place on January 1, 1999 and 1998, Ford (Automotive and Financial Services) pro forma revenue, net income, and earnings per share for the third quarter and nine months ended September 30, 1999 would not be materially affected. For the third quarter and nine months ended September 30, 1998, unaudited pro forma revenue would have been $35.9 billion and $116.6 billion, respectively. Net income and earnings per share for these periods would not be materially affected. 5. Spin-off of The Associates - On March 2, 1998, our Board of Directors approved the spin-off of Associates First Capital Corporation ("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 million 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 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 the first quarter of 1998. Ford received a ruling from the U.S. Internal Revenue Service that the distribution qualified as a tax-free transaction for U.S. federal income tax purposes. The Company's results in the first quarter of 1998 include Ford's share of The Associates earnings through the record date, March 12 ($177 million, or $0.14 a share). -8- Ford Motor Company and Subsidiaries NOTES TO FINANCIAL STATEMENTS (unaudited) 6. 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 shares issuable under employee savings and compensation plans. The Company had Series A Preferred Stock convertible into Common Stock until January 9, 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):
Third Quarter 1999 Third Quarter 1998 ----------------------- ----------------------- Income Shares Income Shares ----------- ---------- ---------- ---------- Net income $1,114 1,209 $ 1,001 1,212 Preferred stock dividend requirements (4) - (4) - Issuable and uncommitted ESOP shares - (3) - (3) ------ ----- ------- ----- Basic income and shares $1,110 1,206 $ 997 1,209 Basic income per share $ 0.92 $ 0.82 Basic income and shares $1,110 1,206 $ 997 1,209 Net dilutive effect of options - 25 - 31 Convertible preferred stock and other (1) - - - ------ ----- ------- ----- Diluted income and shares $1,109 1,231 $ 997 1,240 Diluted income per share $ 0.90 $ 0.80 Nine Months 1999 Nine Months 1998 ----------------------- ----------------------- Income Shares Income Shares ----------- ---------- ---------- ---------- Net income $5,431 1,210 $21,028 1,211 Preferred stock dividend requirements (11) - (103) - Issuable and uncommitted ESOP shares - (4) - (1) ------ ----- ------- ----- Basic income and shares $5,420 1,206 $20,925 1,210 Basic income per share $ 4.49 $ 17.29 Basic income and shares $5,420 1,206 $20,925 1,210 Net dilutive effect of options - 29 - 28 Convertible preferred stock and other (1) - (1) - ------ ----- ------- ----- Diluted income and shares $5,419 1,235 $20,924 1,238 Diluted income per share $ 4.39 $ 16.90 7. Automotive Inventories are summarized as follows (in millions): September 30, December 31, 1999 1998 ------------ ----------- Raw materials, work in process and supplies $2,989 $2,887 Finished products 4,229 2,769 ------ ------ Total inventories $7,218 $5,656 ------ ------ ------ ------ U.S. inventories $2,400 $1,832 8. 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.
-9- Ford Motor Company and Subsidiaries NOTES TO FINANCIAL STATEMENTS (unaudited) 9. Comprehensive Income - Other comprehensive income includes foreign currency translation adjustments, minimum pension liability adjustments, and net unrealized gains and losses on investments in equity securities. Total comprehensive income is summarized as follows (in millions):
Third Quarter Nine Months ----------------------- ---------------------- 1999 1998 1999 1998 --------- --------- --------- -------- Net income $1,114 $1,001 $5,431 $21,028 Other comprehensive income 312 281 (191) 13 ------ ------ ------ ------- Total comprehensive income $1,426 $1,282 $5,240 $21,041 ------ ------ ------ ------- ------ ------ ------ -------
10. Segment Information - Ford has identified four primary operating segments: Automotive, Visteon, Ford Credit and Hertz. Segment selection was based upon internal organizational structure, the way in which these operations are managed and their performance evaluated by management and our Board of Directors, the availability of separate financial results and materiality considerations. Segment detail is summarized as follows (in millions):
Automotive Sector Financial Services Sector ----------------------- ----------------------------------- Total Total Third Quarter Auto- Ford Other Elims/ Auto Fin Svcs motive Visteon Credit Hertz Fin Svcs Other Sector Sector ----------- ----------- ----------- --------- ------------- ----------- ----------- ----------- 1999 - ---- Revenues External customer $ 30,645 $ 761 $ 5,034 $ 1,339 $ 258 $ (64) $ 31,338 $ 6,635 Intersegment 647 3,839 98 9 43 (4,636) 0 0 -------- ------- -------- ------- ------- -------- -------- -------- Total Revenues $ 31,292 $ 4,600 $ 5,132 $ 1,348 $ 301 $ (4,700) $ 31,338 $ 6,635 -------- ------- -------- ------- ------- -------- -------- -------- -------- ------- -------- ------- ------- -------- -------- -------- Net income $ 657 $ 155 $ 317 $ 139 $ (6) $ (148) b/ $ 690 $ 424 1998 - ---- Revenues External customer $ 26,191 $ 377 $ 4,603 $ 1,220 $ 316 $ (67) $ 26,494 $ 6,146 Intersegment 496 3,720 72 8 34 (4,330) 0 0 -------- ------- -------- ------- ------- -------- -------- -------- Total Revenues $ 26,687 $ 4,097 $ 4,675 $ 1,228 $ 350 $ (4,397) $ 26,494 $ 6,146 -------- ------- -------- ------- ------- -------- -------- -------- -------- ------- -------- ------- ------- -------- -------- -------- Net income $ 496 $ 148 $ 272 $ 119 $ (13) $ (21) $ 646 $ 355 Automotive Sector Financial Services Sector ----------------------- ----------------------------------- Total Total Nine Months Auto- Ford Other Elims/ Auto Fin Svcs motive Visteon Credit Hertz Fin Svcs Other Sector Sector ----------- ----------- ----------- ---------- ------------ ----------- ----------- ----------- 1999 - ---- Revenues External customer $ 97,787 $ 1,627 $ 14,825 $ 3,528 $ 594 $ (221) $ 99,192 $ 18,948 Intersegment 3,352 12,808 246 25 136 (16,567) 0 0 -------- ------- -------- ------- ------- -------- -------- -------- Total Revenues $101,139 $14,435 $ 15,071 $ 3,553 $ 730 $(16,788) $ 99,192 $ 18,948 -------- ------- -------- ------- ------- -------- -------- -------- -------- ------- -------- ------- ------- -------- -------- -------- Net income $ 3,749 $ 640 $ 952 $ 276 $ (15) $ (171) b/ $ 4,272 $ 1,159 Total assets $ 97,254 $11,941 $147,877 $10,159 $12,264 $(12,105) $104,571 $162,819 1998 - ---- Revenues External customer $ 86,099 $ 1,046 $ 13,881 $ 3,158 $ 2,578 $ (249) $ 86,879 $ 19,634 Intersegment 2,983 12,154 204 23 138 (15,502) 0 0 -------- ------- -------- ------- ------- -------- -------- -------- Total Revenues $ 89,082 $13,200 $ 14,085 $ 3,181 $ 2,716 $(15,751) $ 86,879 $ 19,634 -------- ------- -------- ------- ------- -------- -------- -------- -------- ------- -------- ------- ------- -------- -------- -------- Net income $ 3,352 $ 574 $ 850 $ 229 $16,103 a/$ (80) $ 3,932 $ 17,096 Total assets $ 82,305 $ 9,509 $126,623 $ 8,951 $ 9,634 $ (8,508) $ 88,242 $140,272 _ _ _ _ _
a/ Includes $15,955 non-cash gain (not taxed) on spin-off of The Associates in the first quarter of 1998 (Note 5). b/ Includes $125 million after-tax charge related to postretirement health care and life insurance adjustments at certain Visteon operations (Note 3). "Other Financial Services" data is an aggregation of miscellaneous smaller Financial Services Sector business components, including Ford Motor Land Development Corporation, Ford Leasing Development Company, Ford Leasing Corporation, and Granite Management Corporation, and certain unusual transactions (footnoted). Also included is data for The Associates, which was spun-off from Ford in 1998. "Eliminations/Other" data includes intersegment eliminations and minority interest calculations. Interest income for the operating segments in the Financial Services Sector is reported as "Revenue". Included in the Visteon segment's external customer revenues are sales to outside fabricators for inclusion in components sold to Ford's Automotive segment. -10- [PricewaterhouseCoopers LLP letterhead] REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Ford Motor Company We have reviewed the accompanying consolidated balance sheet of Ford Motor Company and its subsidiaries as of September 30, 1999, the related consolidated statement of income for each of the three-month and nine-month periods ended September 30, 1999 and 1998, and the condensed consolidated statement of cash flows for the nine-month periods ended September 30, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1998, and the related consolidated statements of income, stockholders' equity, and of cash flows for the year then ended (not presented herein), and in our report dated January 21, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1998, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP Detroit, Michigan October 14, 1999 -11- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------ OVERVIEW Our third quarter 1999 results and financial condition discussed below include the third quarter 1999 results and financial condition of AB Volvo's worldwide passenger car business ("Volvo Car"), which we purchased on March 31, 1999. Our worldwide net income was $1,114 million in the third quarter of 1999, or $0.90 per diluted share of Common and Class B Stock. These earnings include a non-recurring profit reduction of $125 million, or $0.10 per diluted share, to adjust postretirement healthcare and life insurance liabilities of our Visteon automotive systems operations, reflecting an actuarial valuation completed during the third quarter of 1999. (See Note 3 of the Notes to Financial Statements.) In the third quarter of 1998, earnings were $1,001 million, or $0.80 per diluted share. Our worldwide sales and revenues were $38 billion in the third quarter of 1999, up $5.3 billion from a year ago. The increase in sales and revenues reflects primarily the contribution from recent acquisitions and a richer vehicle mix. Vehicle unit sales of cars and trucks were 1,599,000, up 110,000 units. Stockholders' equity was $26.9 billion at September 30, 1999, up $3.5 billion from December 31, 1998. THIRD QUARTER RESULTS OF OPERATIONS Results of our operations by business sector for the third quarter of 1999 and 1998 are shown below (in millions).
Third Quarter Net Income/(Loss) -------------------------------------- 1999 O/(U) 1999 1998 1998 ------------ ------------ ----------- Automotive Sector $ 690 $ 646 $ 44 Financial Services Sector 424 355 69 ------ ------ ---- Total Company $1,114 $1,001 $113 ------ ------ ---- ------ ------ ----
Automotive Sector - ----------------- Worldwide earnings for our Automotive sector were $690 million in the third quarter of 1999, including the $125 million adjustment for retiree benefits, on sales of $31.3 billion. Earnings in the third quarter of 1998 were $646 million on sales of $26.5 billion. Adjusted for constant volume and mix, total automotive costs were down $300 million compared with the third quarter of 1998. Details of third quarter Automotive sector earnings are shown below (in millions).
Third Quarter Net Income/(Loss) -------------------------------------- 1999 O/(U) 1999 1998 1998 ------------ ------------ ----------- North American Automotive $1,004 $ 900 $ 104 Automotive Outside North America - Europe (171) (273) 102 - South America (72) (44) (28) - Other 54 63 (9) ----- ----- ----- Total Automotive Outside North America (189) (254) 65 Visteon postretirement adjustment (125) - (125) ------ ----- ----- Total Automotive Sector $ 690 $ 646 $ 44 ------ ----- ----- ------ ----- -----
-12- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- Automotive sector earnings in North America were $1,004 million in the third quarter of 1999 on sales of $22.7 billion. In the third quarter of 1998, earnings were $900 million on sales of $20.2 billion. The increase in earnings reflects primarily improved sales volume and mix of light trucks and luxury cars, offset partially by costs of $88 million for employee separation programs. The after-tax return on sales for our North American Automotive sector was 4.5% in the third quarter of 1999, unchanged from a year ago. In the third quarter of 1999, approximately 4.5 million new cars and trucks were sold in the United States, up 700,000 units from a year ago. Our share of those unit sales was 23.1% in the third quarter of 1999, down 2.7 percentage points from a year ago. The decline in market share reflects primarily capacity constraints on several key products due to the strong United States market and General Motors Corporation's recovery from last year's labor strike. Our Automotive sector losses in Europe were $171 million in the third quarter of 1999, compared with a loss of $273 million a year ago. The improved results reflect lower costs and improved share of premium vehicle segments, offset partially by lower share for Ford-branded vehicles. Based on the present forecast, we do not expect to achieve our 1999 milestone for Europe to improve operating earnings year-over-year. In the third quarter of 1999, approximately 4.1 million new cars and trucks were sold in Europe, up 100,000 units from a year ago. Our share of those unit sales was 11.1% in the third quarter of 1999, up 1.1 percentage points from a year ago. Our market share increase is more than accounted for by the addition of Volvo Car sales. The European market remains fiercely competitive as a result of industry overcapacity and we will continue to work to balance our capacity with demand. We must continue to strengthen the Ford brand and leverage our Volvo and Jaguar brands to grow their volume and profitability. We are committed to improve our business in Europe, but it will take at least 2 to 3 years before we achieve acceptable returns. Our Automotive sector in South America had losses of $72 million in the third quarter of 1999, compared with losses of $44 million a year ago. The deterioration in earnings reflects primarily lower industry volume driven by the weak economy in Brazil, the largest vehicle market in the region, and lower market share in Brazil. In the third quarter of 1999, approximately 359,000 new cars and trucks were sold in Brazil, compared with 405,000 a year ago. Our share of those unit sales was 8.7% in the third quarter of 1999, down 4.3 percentage points from a year ago. The decline in market share reflects primarily model changeover for the Fiesta and Courier, and increased competition from new and existing manufacturers who are aggressively competing for the lower industry volume. Our Visteon operations, included in our Automotive sector, earned $155 million on revenues of $4,600 million in the third quarter of 1999. Earnings in the third quarter of 1998 were $148 million, on revenues of $4,097 million. These earnings exclude the effect of the adjustment for retiree benefits, which has been reflected retroactively in Visteon's financial statements. The earnings increase compared with last year reflects primarily improved volume and mix, and material cost reductions, offset partially by revenue reductions, unfavorable foreign currency exchange effects, and higher interest expense. Visteon's after-tax return on sales in the third quarter of 1999 was 3.6%, unchanged from a year ago. -13- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- Financial Services Sector - ------------------------- Earnings of our Financial Services sector consist primarily of two segments, Ford Credit and Hertz. Details of third quarter Financial Services sector earnings are shown below (in millions).
Third Quarter Net Income/(Loss) -------------------------------------- 1999 O/(U) 1999 1998 1998 ----------- ----------- ----------- Ford Credit $317 $272 $45 Hertz 139 119 20 Minority interests, Eliminations, and Other (32) (36) 4 ---- ---- --- Total Financial Services Sector $424 $355 $69 ---- ---- --- ---- ---- --- Memo: Ford's share of earnings in Hertz $113 $ 96 $17
Ford Credit's consolidated net income in the third quarter of 1999 was $317 million, up $45 million or 16% from 1998. The increase in earnings reflects primarily higher financing volumes, improved credit loss performance and lower effective tax rates, offset partially by costs related to employee separation programs. Earnings at Hertz in the third quarter of 1999 were $139 million (of which $113 million was Ford's share), compared with earnings of $119 million (of which $96 million was Ford's share) a year ago. FIRST NINE MONTHS RESULTS OF OPERATIONS Results of our operations by business sector for the first nine months of 1999 and 1998 are shown below (in millions).
Nine Months Net Income/(Loss) -------------------------------------- 1999 O/(U) 1999 1998 1998 ------------ ------------ ----------- Automotive Sector $4,272 $ 3,932 $ 340 Financial Services Sector (excluding The Associates) 1,159 964 195 Gain on Spin-Off of The Associates - 15,955 (15,955) The Associates (net of Minority Interest) - 177* (177) ------ ------- -------- Total Company $5,431 $21,028 $(15,597) ------ ------- -------- ------ ------- -------- _ _ _ _ _ * Through March 12, 1998
Our worldwide earnings in the first nine months of 1999 were $5,431 million. Earnings in the first nine months of 1998 were $21,028 million. This includes Ford's share of the income from The Associates of $177 million and a one-time, non-cash gain of $15,955 million related to the spin-off of The Associates. Worldwide sales and revenues in the first nine months of 1999 were $118.1 billion, up $11.6 billion from a year ago. Vehicle unit sales of cars and trucks were 5,302,000, up 293,000 units. -14- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- Automotive Sector - ----------------- Worldwide earnings for our Automotive sector were $4,272 million in the first nine months of 1999, on sales of $99.2 billion. Earnings in the first nine months of 1998 were $3,932 million on sales of $86.9 billion. The earnings improvement reflects primarily lower costs and improved sales volume and mix, offset partially by lower net interest income and non-recurring items netting to a $106 million reduction in earnings. The non-recurring items reflect a $165 million gain from the sale of our interest in AutoEuropa to Volkswagen AG in the first quarter of 1999, more than offset by a $146 million one-time inventory-related profit reduction for Volvo Car in the second quarter of 1999, and a $125 million Visteon-related postretirement adjustment in the third quarter of 1999. Automotive sector earnings in the first nine months of 1999 and 1998 are shown below (in millions).
Nine Months Net Income/(Loss) ---------------------------------------- 1999 O/(U) 1999 1998 1998 ------------ ------------ ------------ North American Automotive $4,561 $3,565 $ 996 Automotive Outside North America - Europe 83 267 (184) - South America (357) (75) (282) - Other 110 175 (65) ----- ------ ----- Total Automotive Outside North America (164) 367 (531) Visteon postretirement adjustment (125) - (125) ----- ------ ----- Total Automotive Sector $4,272 $3,932 $ 340 ----- ------ ----- ----- ------ -----
Automotive sector earnings in North America were $4,561 million in the first nine months of 1999, up $996 million from the first nine months of 1998. The increase reflects primarily increased sales volume, an improved mix of light trucks and luxury cars, and lower material cost, offset partially by lower net interest income and costs related to employee separation programs. The North American Automotive after-tax return on sales was 6.3% in the first nine months of 1999, up 6/10 of a percentage point from a year ago. In the first nine months of 1999, approximately 13.3 million new cars and trucks were sold in the United States, up 1.3 million units from a year ago. Our share of those unit sales was 24% in the first nine months of 1999, down 7/10 of a percentage point from a year ago. The decrease in market share reflects primarily capacity constraints on several key products due to the strong United States market and General Motors Corporation's recovery from last year's labor strike. Automotive sector earnings in Europe in the first nine months of 1999 were $83 million, down $184 million from the first nine months a year ago. The deterioration is explained by lower market share for Ford-branded vehicles, primarily Mondeo and Fiesta, and unfavorable vehicle mix, offset partially by lower total costs and improved share of the premium vehicle segments. In the first nine months of 1999, approximately 13.2 million new cars and trucks were sold in Europe, up 750,000 units from a year ago. Our share of those unit sales was 10.7% in the first nine months of 1999, unchanged from a year ago. -15- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- Automotive sector losses in South America were $357 million in the first nine months of 1999, compared with a loss of $75 million in the first nine months a year ago. The deterioration reflects primarily the same factors as those described in the discussion of third quarter results of operations. In the first nine months of 1999, approximately 964,000 new cars and trucks were sold in Brazil, compared with 1,210,000 a year ago. Our share of those unit sales was 9.4% in the first nine months of 1999, down 4.1 percentage points from a year ago. The decline in market share reflects primarily shortages of dealer stocks because of an earlier carrier strike and increased competition from new and existing manufacturers who are aggressively competing for the lower industry volume. Visteon earned $640 million on revenues of $14,435 million in the first nine months of 1999, compared with $574 million on revenues of $13,200 million in the first nine months a year ago. The increase in earnings reflects primarily improved volume and mix, material and manufacturing cost reductions, offset partially by revenue reductions and unfavorable foreign currency exchange effects. The after-tax return on sales was 4.5% in the first nine months of 1999, up 2/10 of a percentage point from a year ago. Financial Services Sector - ------------------------- Financial Services sector earnings in the first nine months of 1999 and 1998 are shown below (in millions).
Nine Months Net Income/(Loss) --------------------------------------- 1999 O/(U) 1999 1998 1998 ------------ ------------ ----------- Ford Credit $ 952 $ 850 $ 102 Hertz 276 229 47 Minority interests, Eliminations, and Other (69) (115) 46 ------ ------ -------- Financial Services (excluding The Associates) 1,159 964 195 The Associates - 177* (177) Gain on Spin-off of The Associates - 15,955 (15,955) ------ ------- -------- Total Financial Services Sector $1,159 $17,096 $(15,937) ------ ------- -------- ------ ------- -------- Memo: Ford's share of earnings in Hertz $ 224 $ 185 $ 39 _ _ _ _ _ * Through March 12, 1998
Ford Credit's consolidated net income for the first nine months of 1999 was $952 million, up $102 million or 12% from a year ago. The increase in earnings reflects primarily higher financing volumes, improved credit loss performance and lower effective tax rates, offset partially by lower net financing margins. LIQUIDITY AND CAPITAL RESOURCES Automotive Sector - ----------------- At September 30, 1999, our Automotive sector had $25.7 billion of cash and marketable securities, up $1.9 billion from December 31, 1998. Automotive capital expenditures, including the effect of adopting the accounting change for the capitalization of computer software (Statement of Position 98-1), totaled $5 billion in the first nine months of 1999, down $700 million from the first nine months of 1998. -16- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- At September 30, 1999, our Automotive sector had total debt of $12.8 billion, compared with $9.8 billion at December 31, 1998. The increase in debt is more than explained by long-term debt issuances totaling $3.3 billion. Automotive debt was 32% of our total capitalization (that is, the sum of our stockholders' equity and Automotive debt) at the end of the third quarter of 1999, two percentage points above the percentage of Automotive debt to total capitalization at December 31, 1998. At September 30, 1999, Ford had long-term contractually committed global credit agreements under which $8.6 billion is available from various banks; 86% are available through June 30, 2004. The entire $8.6 billion may be used, at our option, by any affiliate of Ford; however, any borrowing by an affiliate will be guaranteed by Ford. We also have the ability to transfer on a nonguaranteed basis $8.3 billion of such credit lines in varying portions to Ford Credit and FCE Bank plc (formerly known as Ford Credit Europe plc). In addition, at September 30, 1999, $297 million of contractually committed credit facilities were available to various Automotive sector affiliates outside the U.S. Approximately $142 million of these facilities were in use at September 30, 1999. Financial Services Sector - ------------------------- At September 30, 1999, our Financial Services sector had cash and cash equivalents totaling $1.2 billion, unchanged from December 31, 1998. Net receivables and lease investments were $141.1 billion at September 30, 1999, up $8.5 billion from December 31, 1998. Total debt was $132 billion at September 30, 1999, up $9.6 billion from December 31, 1998. Outstanding commercial paper at September 30, 1999 totaled $41 billion at Ford Credit, and $1.5 billion at Hertz, with an average remaining maturity of 33 days and 31 days, respectively. At September 30, 1999, Financial Services Sector had a total of $27.2 billion of contractually committed support facilities (excluding the $8.3 billion available under Ford's global credit agreements). Of these facilities, $23 billion are contractually committed global credit agreements under which $18.3 billion and $4.7 billion are available to Ford Credit and FCE Bank plc, respectively, from various banks; 54% and 66%, respectively of such facilities are available through June 30, 2004. The entire $18.3 billion may be used, at Ford Credit's option, by any subsidiary of Ford Credit, and the entire $4.7 billion may be used, at FCE Bank plc's option, by any subsidiary of FCE Bank plc. Any borrowings by such subsidiaries will be guaranteed by Ford Credit or FCE Bank plc, as the case may be. At September 30, 1999, $71 million of the Ford Credit global facilities were in use and $235 million of the FCE Bank plc global facilities were in use. Other than the global credit agreements, the remaining portion of the Financial Services Sector support facilities at September 30, 1999 consisted of $2.5 billion of contractually committed support facilities available to Hertz in the U.S. and $1.7 billion of contractually committed support facilities available to various affiliates outside the U.S.; at September 30, 1999, approximately $0.9 billion of these facilities were in use. Furthermore, banks provide $1,475 million of liquidity facilities to support the asset-backed commercial paper program of a Ford Credit sponsored special purpose entity. NEW ACCOUNTING STANDARDS New Standards - ------------- Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued by the Financial Accounting Standards Board in June 1998. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires -17- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) - ------------------------------------------------------------------------------- recognition of all derivatives as either assets or liabilities on the balance sheet and measurement of those instruments at fair value. If certain conditions are met, a derivative may be designated specifically as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment referred to as a fair value hedge, (b) a hedge of the exposure to variability in cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a forecasted transaction. We anticipate having each of these types of hedges, and we will comply with the requirements of SFAS 133 when we adopt it. Based on the May 1999 announcement by the Financial Accounting Standards Board to delay the implementation date by one year, we expect to adopt SFAS 133 beginning January 1, 2001. We have not yet determined the effect of adopting SFAS 133. OTHER FINANCIAL INFORMATION PricewaterhouseCoopers LLP, our independent public accountants, performed a limited review of the financial data presented on pages 2 through 10 inclusive. The review was performed in accordance with standards for such reviews established by the American Institute of Certified Public Accountants. The review did not constitute an audit; accordingly, PricewaterhouseCoopers LLP did not express an opinion on the aforementioned data. The financial data include any material adjustments or disclosures proposed by PricewaterhouseCoopers LLP as a result of their review. -18- Part II. Other Information -------------------------- Item 1. Legal Proceedings - -------------------------- Product Liability Matters - ------------------------- Bronco Rollover Jury Verdict. (Previously discussed under Product Liability Matters in the Legal Proceedings section of Ford's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (the "Second Quarter 10-Q Report").) On September 16, 1999, the trial court granted Ford's motion for a new trial as to punitive damages, overturning the $290 million punitive award. The court denied Ford's motion as to compensatory damages. We plan to appeal, seeking a new trial as to all issues. Class Actions - ------------- Flat Glass. (Previously discussed under Class Actions in the Legal Proceedings section of Ford's Annual Report on Form 10-K for year ended December 31, 1998 (the "10-K Report").) Pilkington, AFG Industries and Guardian Industries have entered into a tentative settlement agreement with plaintiffs in the consolidated case. The tentative accord requires these entities to pay $53.7 million in settlement. Ford and PPG Industries are the only remaining defendants. On October 6, 1999, the court heard oral argument concerning plaintiff's motion for class certification. On November 5, 1999, the trial judge granted plaintiffs' motion for class certification and certified two subclasses: (1) all individuals and entities who, between August 1, 1995, and December 31, 1995, purchased flat glass products in the U.S. from defendants, and (2) all individuals and entities who, between August 1, 1991 and December 31, 1995, purchased from defendants fabricated automotive replacement glass for domestic makes of cars in the U.S. We plan to appeal this ruling. Paint. (Previously discussed under Class Actions in the Legal Proceedings section of the 10-K Report.) There are three purported class actions currently pending against Ford alleging defects in the paint process used on several million vehicles in various model years from 1983 through 1997: Sheldon, pending in Texas state court, Nienhuis, pending in Illinois state court, and Judy, recently filed in California state court. (In the Landry case, a previously reported paint class action pending in Louisiana, the trial court refused to certify a class and the Court of Appeals refused to hear an interlocutory appeal from this order before trial. In the Clayman case, another previously reported paint class action filed in Pennsylvania state court, the trial court granted Ford's motion to dismiss.) Plaintiffs in these purported class action cases allege claims for fraud, breach of warranty, and violations of consumer protection statutes because the paint on their vehicles peeled. They contend that their paint is defective because Ford did not use spray primer between the high-build electrocoat ("HBEC") and the color coat. The lack of spray primer allegedly causes the adhesion of the color coat to the HBEC to deteriorate after extended exposure to ultraviolet radiation from sunlight. Plaintiffs also allege that Ford knew of the defect and they seek punitive as well as compensatory damages. In Judy, Plaintiffs also seek "disgorgement" of the profits Ford allegedly gained from using the defective paint process. Ford's motion to dismiss is pending in Judy. In Nienhuis, Plaintiff is seeking leave to voluntarily dismiss his complaint (although his attorneys might also seek leave to substitute another named plaintiff). As previously reported, the trial court in Sheldon certified two subclasses of Texas residents for trial, the Texas Court of Appeals affirmed, and the Texas Supreme Court granted review. We expect a decision from the Texas Supreme Court at any time. Ford/Citibank Visa. (Previously discussed under Class Actions in the Legal Proceedings section of the 10-K Report.) On October 29, 1999, the federal court dismissed the consolidated proceedings for lack of jurisdiction and sent each action back to the state court in which it originated. We have appealed this ruling. -19- Item 1. Legal Proceedings (Continued) - ------------------------- Ignition Switch. (Previously discussed under Class Actions in the Legal Proceedings section of the 10-K Report.) Most of the non-incident class actions consolidated for pretrial proceedings in New Jersey have been voluntarily dismissed; only one remains (Rick), and Plaintiff in that case is seeking to amend his complaint to strike the class action allegations. In addition, Plaintiffs have agreed to dismiss the two non-incident class actions pending in California (Stern and Carr). One non-incident class action remains pending in Illinois (Fisher); we have filed a motion for summary judgment in that case. In the one remaining incident class, Snodgrass, Plaintiffs have filed a renewed motion to certify a class. That motion will be heard on November 19, 1999. In the related subrogation actions filed by State Farm and the California State Automobile Association Inter-insurance Bureau in California, and consolidated for pretrial proceedings in New Jersey, final rulings on Ford's motions to dismiss have effectively been deferred until after the cases have been remanded to California. We expect those cases to be remanded in the near future. Lease Agreement Disclosure. (Previously discussed under Class Actions in the Legal Proceedings sections of the 10-K Report, Ford's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (the "First Quarter 10-Q Report") and the Second Quarter 10-Q Report.) A Michigan state court dismissed a purported class action alleging that Ford Credit and Primus leasing contracts improperly failed to disclose acquisition and administrative fees that are included in the amount of a customer's monthly lease payment. Air Bag. (Previously discussed under Class Actions in the Legal Proceedings sections of the 10-K Report and the First Quarter 10-Q Report.) The last remaining airbag class action has been dismissed without prejudice. Lease Residual. (Previously discussed under Class Actions sections of the 10-K Report.) Ford Credit and each of the individual plaintiffs have settled the individual claims arising out of Shore v. Ford Credit. The trial court in Higginbotham v.Ford Credit granted summary judgment against the Plaintiff and in favor of Ford Credit on all but one claim, and Plaintiff subsequently agreed to dismiss all of her remaining claims against Ford and Ford Credit. However, the Plaintiff is now attempting to reactivate her purported class statewide class action against Ford Credit in Florida and to relitigate the issues decided against her in Illinois. We are optimistic that the federal court in Florida will not permit this. Windstar Transmission. (Previously discussed under Class Actions in the Legal Proceedings sections of the First Quarter 10-Q Report and in the Second Quarter 10-Q Report.) On October 27, 1999, the trial court dismissed the non-California plaintiffs, dismissed all except one count (false advertising), and ruled that any class that might later be certified will be limited to owners who experienced a malfunction. The dismissals are without prejudice, and plaintiffs have 20 days to again amend their complaint. It is therefore possible (but not likely) that some claims could be reinstated. These rulings greatly improve our prospects for opposing class certification. Retail Lessee Insurance Coverage. (Previously discussed under Class Actions in the Legal Proceedings section of the Second Quarter 10-Q Report.) Ford has filed a motion for summary judgment based on the policy language and the intentions of the parties. Seat Backs. (Previously discussed under Class Actions in the Legal Proceedings section of the Second Quarter 10-Q Report.) A fifth statewide class action has been filed in New Hampshire. Motions to dismiss have been or will be filed in all five cases. Lifetime Service Guarantee. (Previously discussed under Class Actions in the Legal Proceedings section of the 10-K Report.) Plaintiffs' motion to certify a class will be heard by the trial court on November 15, 1999. -20- Item 1. Legal Proceedings (Continued) - -------------------------- Environmental Matters - --------------------- CCA Lawsuit (Previously discussed under Environmental Matters in the Legal Proceedings section of the 10-K Report). CCA has informed us that it intends to withdraw its appeal. Waste Disposal. The United States Environmental Protection Agency ("EPA") has initiated a civil enforcement action against Ford as a result of Ford Venezuela's shipment of industrial wastes from its Valencia Assembly Plant in Venezuela for disposal in Texas. Ford also has received a subpoena and been notified that it is the subject of a grand jury investigation based on the same facts. Ford Venezuela shipped the industrial waste to the U.S. for disposal under the more stringent U.S. disposal requirements because of the unavailability of adequate disposal facilities in Venezuela and to ensure proper disposal of the waste. Although Ford believes that the subject waste is properly classified as non-hazardous under U.S. environmental laws, the EPA contends that even if the wastes do not exhibit any hazardous characteristics, they nevertheless may be the product of a process that is automatically deemed hazardous under applicable regulations. If Ford is determined to have violated EPA regulations regarding the disposal of hazardous wastes, Ford could be required to pay substantial fines which could exceed $100,000. It is impossible at this point in the proceedings to determine what amount, if any, Ford may be required to pay. Permit Modification. Ford has received a letter of violation from the Michigan Department of Environmental Quality alleging that our Rawsonville Plant located in Michigan failed to obtain a necessary permit modification in connection with a change in raw material used at the facility. At the agency's request, Ford has submitted a permit modification application. The failure to obtain the permit modification could result in a fine in excess of $100,000. Settlement discussions between Ford and the agency are ongoing. Ohio Assembly Plant. On September 30, 1999, the EPA filed a complaint and compliance order against Ford, alleging violations of the Resource Conservation and Recovery Act ("RCRA") at Ford's Ohio Assembly Plant. The complaint included a proposed civil penalty. The most significant count in the complaint alleges that Ford failed to monitor certain paint process equipment at the plant for air emissions, in violation of RCRA requirements. Ford disputes the EPA's allegations, including factual assertions and interpretations of law, and has requested a hearing to contest the charges made in the complaint. Ford expects to prevail in the challenge to the EPA's complaint. However, if Ford is unsuccessful, liability in this case may exceed $100,000. Other Matters - ------------- OFCCP Proceeding. (Previously discussed under Other Matters in the Legal Proceedings section of the 10-K Report.) A tentative settlement has been reached with OFCCP. The settlement addresses all pending compliance investigations commenced by OFCCP, including the Kentucky matter. The tentative accord requires the Company to pay $3.8 million in settlement and to hire 75 hourly workers (without retroactive seniority) scattered among nine manufacturing facilities within three years. Item 5. Other Information - ------------------------= Governmental Standards - ---------------------- Mobile Source Emissions Control. (Previously discussed in the Governmental Standards section of the 10-K Report and in the Second Quarter 10-Q Report.) In October, the EPA proposed new post-2004 emissions standards for "heavy-duty" trucks (8,500 - 14,000 lbs. gross vehicle weight). These proposed standards are likely to pose technical challenges and may affect the competitive position of full-line vehicle manufacturers such as Ford. -21- Item 5. Other Information (Continued) - ------------------------- Other Information - ----------------- We have entered into a new collective bargaining agreement with the United Automobile Workers ("UAW") that will expire on September 14, 2003. The new UAW agreement will increase Ford's labor costs in respect of employees represented by the UAW by an average of about 5.5% per year over the term of the contract. We also have entered into a new collective bargaining agreement with the Canadian Automobile Workers ("CAW") that will expire on September 21, 2002. The new CAW agreement will increase Ford's labor costs in respect of employees represented by the CAW by an average of about 6% per year over the term of the contract. All local CAW contracts are settled, but our management at several of our plants in the United States are continuing to negotiate to resolve local issues with the UAW. In addition, we will be negotiating new collective bargaining agreements with labor unions in Europe later this year. A work stoppage could occur as a result of these negotiations, which, if protracted, could substantially adversely affect Ford's profits. As part of the new UAW agreement, we also agreed that in connection with any spin-off, sale or other transfer of our Visteon operations: (1) all of our employees who are represented by the UAW and who work at a Visteon facility on the date of such spin-off, sale or transfer will remain Ford employees indefinitely and will continue to be covered under our master agreement with the UAW; (2) Visteon or its successor will continue to use the services of such employees after any such spin-off, sale or transfer; (3) Visteon or its successor will agree to adopt a collective bargaining agreement for hourly employees hired by it after any such spin-off, sale or transfer that has terms identical to the terms of the current master agreement between Ford and the UAW and the next two immediately succeeding master agreements between Ford and the UAW; and (4) Visteon or its successor will be required to provide any UAW-represented employees hired by it during the terms of the three master agreements mentioned above with wages, benefits and other terms and conditions of employment that are identical to those required to be provided from time to time by Ford to its UAW-represented employees for the duration of such employee's employment with, and retirement from, Visteon or such successor. -22-
Supplemental Schedule Ford Motor Company CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY --------------------------------------------- (in millions) Ford Capital B.V. September 30, December 31, 1999 1998 ---------------- -------------- (unaudited) Current assets $ 654 $ 621 Noncurrent assets 2,412 2,388 ------ ------ Total assets $3,066 $3,009 ------ ------ ------ ------ Current liabilities $ 613 $ 394 Noncurrent liabilities 2,240 2,430 Minority interests in net assets of subsidiaries 15 15 Stockholder's equity 198 170 ------ ------ Total liabilities and stockholder's equity $3,066 $3,009 ------ ------ ------ ------
Third Quarter Nine Months --------------------- ---------------------- 1999 1998 1999 1998 -------- --------- -------- --------- (unaudited) (unaudited) Sales and other revenue $514 $478 $1,896 $1,757 Operating income/(loss) (27) 49 104 79 Income/(Loss) before income taxes (33) 49 71 79 Net income/(loss) (15) 42 46 56
Ford Capital B.V., a wholly owned subsidiary of Ford Motor Company, was established primarily for the purpose of raising funds through the issuance of commercial paper and debt securities. Ford Capital B.V. also holds shares of the capital stock of Ford Nederland B.V., Ford Motor Company (Belgium) N.V., Ford Motor Company A/S (Denmark), Ford Poland S.A., and Ford Distribution Sp. z.o.o., Ltd. Substantially all of the assets of Ford Capital B.V., other than its ownership interests in subsidiaries, represent receivables from Ford Motor Company or its consolidated subsidiaries. -23- Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits -------- Please refer to the Exhibit Index on page 25. (b) Reports on Form 8-K ------------------- The Registrant filed the following Current Reports on Form 8-K during the quarter ended September 30, 1999: Current Report on Form 8-K dated July 15, 1999 included information relating to Ford's issuance of 7.45% Notes due July 16, 2031 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FORD MOTOR COMPANY ---------------------------------------- (Registrant) Date: November 11, 1999 By: /s/ W. A. Swift ---------------------------------- W. A. Swift Vice President - Corporate Controller (principal accounting officer) -24-
EXHIBIT INDEX ------------- Designation Description ------------------------- ----------------------------------------------------------------------------------------- Exhibit 10 Amendment to Ford Motor Company Deferred Compensation Plan, effective as of October 29, 1999 Exhibit 12 Ford Motor Company and Subsidiaries Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. Exhibit 15 Letter of PricewaterhouseCoopers LLP, Independent Public Accountants, dated November 11, 1999, relating to Financial Information. Exhibit 27.1 Financial Data Schedule, Automotive Sector, for the Nine Months Ended September 30, 1999 (included with electronic EDGAR filing only). Exhibit 27.2 Financial Data Schedule, Financial Services Sector, for the Nine Months Ended September 30, 1999 (included with electronic EDGAR filing only). Exhibit 27.3 Financial Data Schedule, Conglomerate Totals, for the Nine Months Ended September 30, 1999 (included with electronic EDGAR filing only).
-25- EX-10 2 EXHIBIT 10 Exhibit 10 AMENDMENT TO FORD MOTOR COMPANY DEFERRED COMPENSATION PLAN -------------------------- (Effective as of October 29, 1999) Paragraph (f) of Section 4 is amended to read as follows: "(f) Deferrals of Awards Under AIC Plan and Other Similar Plans. Notwithstanding anything contained in the Plan to the contrary, subject to any limitations determined under paragraph (a) or paragraph (e) of this Section 4, U.S. employees who receive an award payable only in cash under the AIC Plan, the RPM Plan, the ARC Plan, the PRIMUS Management Incentive Plan, the Fairlane Credit Management Incentive Plan, the National Recovery Center Management Incentive Plan, the AMI Leasing, Inc. Executive Incentive Plan or the AMI Leasing, Inc. Management Incentive Plan are eligible to defer payment under the Plan from 1% to 100%, in 1% increments, of such amount net of applicable taxes, but not less than $1,000, provided that such employees are actively employed by the Company in salary grade 11 or above or the equivalent at the time of the election to defer. Unless otherwise determined by the Compensation and Option Committee, deferrals of cash awards under the AIC Plan, the RPM Plan, the ARC Plan, the PRIMUS Management Incentive Plan, the Fairlane Credit Management Incentive Plan, the National Recovery Center Management Incentive Plan, the AMI Leasing, Inc. Executive Incentive Plan or the AMI Leasing, Inc. Management Incentive Plan shall be subject to the same terms and conditions of the Plan that apply to deferrals of awards of supplemental compensation under the SC Plan. For purposes of the Plan, any references to awards or payments of supplemental compensation shall be deemed to cover cash awards or cash payments under the AIC Plan, the RPM Plan, the ARC Plan, the PRIMUS Management Incentive Plan, the Fairlane Credit Management Incentive Plan, the National Recovery Center Management Incentive Plan, the AMI Leasing, Inc. Executive Incentive Plan and the AMI Leasing, Inc. Management Incentive Plan." EX-12 3 EXHIBIT 12
Exhibit 12 Ford Motor Company and Subsidiaries CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS ---------------------------------------------------------------------------------------- (in millions) Nine Months For the Years Ended December 31 ------- ----------------------------------------------------------- 1999 1998 1997 1996 1995 1994 Earnings Income before income taxes $ 8,291 $25,396 $10,939 $ 6,793 $ 6,705 $ 8,789 Equity in net (income)/loss of affiliates plus dividends from affiliates (21) 78 121 36 179 (182) Adjusted fixed charges a/ 7,008 9,215 10,911 10,801 10,556 8,122 ------- ------- ------- ------- ------- ------- Earnings $15,278 $34,689 $21,971 $17,630 $17,440 $16,729 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Combined Fixed Charges and Preferred Stock Dividends Interest expense b/ $ 6,764 $ 8,919 $10,570 $10,464 $10,121 $ 7,787 Interest portion of rental expense c/ 202 245 309 300 396 265 Preferred stock dividend requirements of majority owned subsidiaries and trusts d/ 41 55 55 55 199 160 ------- ------- ------- ------- ------- ------- Fixed charges 7,007 9,219 10,934 10,819 10,716 8,212 Ford preferred stock dividend requirements e/ 17 122 82 95 459 472 ------- ------- ------- -------- ------- ------- Total combined fixed charges and preferred stock dividends $ 7,024 $ 9,341 $11,016 $10,914 $11,175 $ 8,684 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Ratios Ratio of earnings to fixed charges 2.2 3.8 f/ 2.0 1.6 1.6 2.0 Ratio of earnings to combined fixed charges and preferred stock dividends 2.2 3.7 f/ 2.0 1.6 1.6 1.9
- - - - - - a/ Fixed charges, as shown above, adjusted to exclude the amount of interest capitalized during the period and preferred stock dividend requirements of majority owned subsidiaries and trusts. b/ Includes interest, whether expensed or capitalized, and amortization of debt expense and discount or premium relating to any indebtedness. c/ One-third of all rental expense is deemed to be interest. d/ Preferred stock dividend requirements of Ford Holdings, Inc. (1995 - 1993) increased to an amount representing the pre-tax earnings which would be required to cover such dividend requirements based on Ford's effective income tax rates. Beginning in Fourth Quarter 1995, includes requirements related to company-obligated mandatorily redeemable preferred securities of a subsidiary trust. e/ Preferred stock dividend requirements of Ford Motor Company increased to an amount representing the pre-tax earnings which would be required to cover such dividend requirements based on Ford Motor Company's effective income tax rates. f/ Earnings used in calculation of this ratio include the $15,955 million gain on the spin-off of The Associates. Excluding this gain, the ratio is 2.0. EX-15 4 EXHIBIT 15 Exhibit 15 November 11, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Ford Motor Company Registration Statements Nos. 2-95018, 2-95020, 33-9722, 33-14951, 33-19036, 33-36043, 33-36061, 33-39402, 33-50087, 33-50194, 33-50238, 33-54275, 33-54283, 33-54344, 33-54348, 33-54735, 33-54737, 33-56785, 33-58255, 33-58785, 33-61107, 33-64605, 33-64607, 333-02735, 333-20725, 333-27993, 333-28181, 333-46295, 333-47443, 333-47445, 333-47733, 333-47735, 333-52399, 333-58695, 333-58697, 333-58701, 333-65703, 333-70447, 333-74313, 333-86127, 333-87619 on Form S-8, and 333-67209 on Form S-3 Commissioners: We are aware that our report dated October 14, 1999 on our review of interim financial information of Ford Motor Company (the "Company") as of and for the period ended September 30, 1999 and included in the Company's Quarterly Report on Form 10-Q for the quarter then ended is incorporated by reference in the afore referenced Registration Statements. Very truly yours, /s/ PricewaterhouseCoopers LLP Detroit, Michigan EX-27.1 5 EXHIBIT 27.1 - AUTOMOTIVE SECTOR WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 Automotive Sector - This schedule contains summary financial information extracted from Ford's financial statements for the three and nine month periods ended and at September 30, 1999 and is qualified in its entirety by reference to such financial statements. 0000037996 FORD MOTOR COMPANY 1,000,000 9-MOS DEC-31-1999 SEP-30-1999 4,039 21,664 3,622 120 7,218 44,481 90,042 48,686 104,571 41,374 11,390 0 0 0 0 0 99,192 99,192 86,211 92,897 0 0 1,029 6,313 0 0 0 0 0 0 0 0
EX-27.2 6 EXHIBIT 27.2 - FDS FINANCIAL SERVICES SECTOR
5 Financial Services Sector - This schedule contains summary financial information extracted from Ford's financial statements for the three and nine month periods ended and at September 30, 1999 and is qualified in its entirety by reference to such financial statements. The error message indicated on this FDS is a result of the EDGAR system's inability to accept multiple Article 5 Financial Data Schedules. Accordingly, the error message should be ignored. 0000037996 FORD MOTOR COMPANY 1,000,000 9-MOS DEC-31-1999 SEP-30-1999 1,239 733 141,139 0 0 0 0 0 162,819 0 131,973 0 0 0 0 0 18,948 18,948 0 17,032 0 1,146 5,701 1,978 0 0 0 0 0 0 0 0
EX-27.3 7 EXHIBIT 27.3 - FDS CONGLOMERATE TOTAL
CT Conglomerate Totals - This schedule contains summary financial information extracted from Ford's financial statements for the three and nine month periods ended and at September 30, 1999 and is qualified in its entirety by reference to such financial statements. 0000037996 FORD MOTOR COMPANY 1,000,000 9-MOS DEC-31-1999 SEP-30-1999 267,390 0 0 1,222 25,699 267,390 118,140 2,772 5,431 0 0 0 5,431 4.49 4.39
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