DEARBORN, Mich., April 27, 2012 – Ford Motor Company [NYSE: F] today reported 2012 first quarter pre-tax operating profit of $2.3 billion, or 39 cents per share, and net income of $1.4 billion, or 35 cents per share, led by strong performance in North America and Ford Credit. Ford has now been profitable on a pre-tax operating basis for 11 consecutive quarters.
“Our team delivered a solid performance during the first quarter, with particularly strong results in North America, despite a challenging global external environment,” said Alan Mulally, Ford president and CEO. “We remain focused on investing for future growth and developing outstanding products with segment-leading quality, fuel efficiency, safety, smart design and value.”
The results compare to 2011 first quarter net income of $2.6 billion, or 61 cents per share, and pre-tax operating profit of $2.8 billion, or 47 cents per share, adjusted for the tax valuation allowance release. Lower wholesale volumes, reflecting in part weaker economic conditions in Europe, contributed to the decline from a year ago.
First quarter 2012 net income was affected by the impact of the higher tax expense compared to a year ago, resulting from the release of the tax valuation allowance in fourth quarter 2011. The increase in non-cash tax expense explains about half of the decrease in net income, with the balance reflecting lower operating results and increased special charges, primarily buyouts of hourly workers in the U.S. as part of the 2011 UAW agreement.
Ford finished the first quarter with Automotive gross cash of $23 billion, compared with $21.3 billion as of March 31, 2011, and $22.9 billion as of Dec. 31, 2011. Ford had total Automotive debt of $13.7 billion as of March 31, 2012, compared with $16.6 billion as of March 31, 2011, and $13.1 billion as of Dec. 31, 2011. Total Automotive liquidity at the end of the first quarter was $32.9 billion, including all available credit lines. This compares to $30.7 billion as of March 31, 2011, and $32.4 billion as of Dec. 31, 2011.
Ford generated positive Automotive operating-related cash flow of $900 million in the first quarter, the eighth consecutive quarter of positive performance. First quarter liquidity actions also included the successful amendment and extension of the company’s revolving credit facility, resulting in commitments of $9 billion through November 2015 and an additional $300 million through November 2013.
As part of the company’s long-term strategy to de-risk its global funded pension plans, Ford announced today that it will offer to about 90,000 eligible U.S. salaried retirees and U.S. salaried former employees the option to receive a voluntary lump-sum pension payment. If an individual elects to receive the lump-sum payment, the company’s pension obligation to the individual will be settled. This is the first time a program of this type and magnitude has been offered by a U.S. company for ongoing pension plans. Payouts will start later this year and will be funded from existing pension plan assets. This is in addition to the lump-sum pension payout option available to U.S. salaried future retirees as of July 1, 2012.
“Continuing to improve the underlying strength of our balance sheet remains a fundamental part of financing the One Ford plan,” said Bob Shanks, Ford executive vice president and chief financial officer. “Providing the option of a lump-sum payment to current salaried U.S. retirees and former employees will reduce our pension obligations and balance sheet volatility.”
FIRST QUARTER HIGHLIGHTS
Total Automotive pre-tax operating profit in the first quarter was $1.8 billion, a decrease of $294 million from first quarter 2011. The decrease is explained by higher costs across the regions and unfavorable exchange rates. This was offset partially by higher net pricing and lower net interest expense.
Total vehicle wholesales in the first quarter were about 1.4 million units, a decline of 45,000 units from first quarter 2011. Lower wholesales in Europe and Asia Pacific Africa were offset partially by higher wholesales in North America and South America.
Total Automotive revenue in the first quarter was $30.5 billion, down $500 million from first quarter 2011.
North America: In the first quarter, North America reported a pre-tax operating profit of $2.1 billion, compared with a profit of $1.8 billion a year ago. This was the highest quarterly profit for the region since at least 2000, when the company started reflecting North America as a separate business unit. The operating margin also improved to 11.5 percent from 10.3 percent a year ago. The increase in profits is explained by favorable volume and mix – mainly higher U.S. industry volume, higher net pricing, lower contribution costs, and lower compensation. This was offset partially by higher structural costs. Wholesales in the first quarter were 651,000 units, up 36,000 units from a year ago. Revenue in the first quarter was $18.6 billion, up $700 million from a year ago.
South America: In the first quarter, South America reported a pre-tax operating profit of $54 million, compared with a profit of $210 million a year ago. The decrease is more than explained by higher costs, primarily contribution costs, and unfavorable exchange rates. Although net pricing was favorable, the company was not able to offset exchange and economic factors to the degree it has in the past. Wholesales in the first quarter were 118,000 units, up 4,000 units from a year ago. Revenue in the first quarter was $2.4 billion, up $100 million from a year ago.
Europe: In the first quarter, Europe reported a pre-tax operating loss of $149 million, compared with a profit of $293 million a year ago. The decrease is primarily explained by lower industry volumes, lower demand for parts and accessories, and actions to reduce dealer stocks consistent with industry levels. Contribution and pension-related cost increases were offset partially by reductions in other structural costs. Wholesales in the first quarter were 372,000 units, down 60,000 units from a year ago. Revenue in the first quarter, which excludes sales at unconsolidated joint ventures, was $7.2 billion, a decline of
$1.5 billion from a year ago.
Asia Pacific Africa: In the first quarter, Asia Pacific Africa reported a pre-tax operating loss of
$95 million, compared with a profit of $33 million a year ago. The decline reflects higher costs associated with continued investment for future growth that precede the benefit of new products across the region. This was exacerbated, to some extent, by a slower-than-planned launch of the new global Ranger pickup truck from the company’s facilities in Thailand and South Africa. Wholesales in the first quarter were 217,000 units, down 25,000 units from a year ago. Revenue in the first quarter, which excludes sales at unconsolidated joint ventures, was $2.3 billion, up $200 million from a year ago.
Other Automotive: In the first quarter, Other Automotive reported a loss of $106 million, compared with a loss of $249 million a year ago. The improvement reflects lower interest expense related to the company’s 2011 debt reduction actions, and the non-recurrence of market valuation losses associated with Ford’s investment in Mazda.
FINANCIAL SERVICES SECTOR
For the first quarter, the Financial Services sector reported a pre-tax operating profit of $456 million, compared with a profit of $706 million a year ago.
Ford Motor Credit Company: In the first quarter, Ford Credit reported a pre-tax operating profit of
$452 million, compared with a profit of $713 million a year ago. The decrease, which is in line with expectations, is primarily explained by fewer lease terminations, which resulted in fewer vehicles sold at a gain.
Ford remains focused on delivering the key aspects of the One Ford plan, which are unchanged:
As previously announced, Ford revised its guidance for the U.S. and European industries and U.S. market share from the estimates provided at the 2011 fourth quarter earnings announcement. Ford expects U.S. full year industry volume to be in the range of 14.5 million to 15 million vehicles. The company expects European full year industry sales in the 19 markets Ford tracks to be about 14 million units. Both estimates include medium and heavy trucks.
The company expects its full year market share in the U.S. to be lower than 2011, as planned capacity increases will lag demand. Ford continues to expect market share in Europe to be about equal compared to 2011. Ford’s market share in 2011 was 16.5 percent in the U.S. and 8.3 percent in Europe.
Ford’s full year outlook on quality is mixed. The company expects its performance in Europe, South America and Asia Pacific Africa to improve from 2011, and the U.S. to be about the same as last year.
Ford confirmed that its total company pre-tax operating profit is expected to be about equal to 2011. The company expects pre-tax operating profit in the second half to be slightly higher than the first half due to the cadence of its many product launches and capacity actions. The company also is on track to deliver strong Automotive operating-related cash flow for the year.
Ford reported that its North America operation is expected to achieve significantly higher full year pre-tax profit and operating margin compared with 2011, which will be the key enabler for the company to achieve about the same level of pre-tax profit for 2012 as in 2011.
Ford also continues to expect its South America operation will generate solid profitability for full year 2012, although lower than in 2011; new global products will be launched in the region that will positively impact results primarily in the second half of the year. At the same time, there is some uncertainty in the region, including new trade agreements, the details and impact of which are still being evaluated.
The company continues to expect Ford Europe to incur a full year loss in the range of $500 million to $600 million, with its European operation benefiting from the launch of new products in addition to the completion of stock reduction actions and continued cost reductions that will positively affect results primarily in the second half of the year.
Despite a first quarter loss, Ford Asia Pacific Africa is expected to be profitable for the full year, with increasing volumes as the launch of the Ranger pickup progresses, new production capacity comes on line in China and Thailand, and other new product launches occur in the balance of the year.
Overall, Ford remains on track with its financial metrics for 2012:
Ford expects capital expenditures in 2012 to be $5.5 billion to $6 billion as it continues to invest in product and growth plans.
Ford continues to work closely with its suppliers on a daily basis regarding the potential shortage of nylon resins. The company has not had and does not expect any production disruptions.
“We continue to expect 2012 to be a solid year marked by ongoing progress on our commitment to deliver great products, invest for global growth, build a strong business, and provide profitable growth for all,” said Mulally. “We have both challenges and opportunities ahead, but we remain singularly focused on realizing the full potential of the global scale and operating margin benefits inherent in our One Ford plan.”
Ford’s planning assumptions and key metrics and near-term production volumes are shown below:
+ The financial results discussed herein are presented on a preliminary basis; final data will be included in Ford’s Quarterly Report on Form 10-Q for the period ended March 31, 2012. The following information applies to the information throughout this release:
++ Excludes special items.
+++ Excludes special items and “Income/(Loss) attributable to non-controlling interests.” See tables following “Safe Harbor/Risk Factors” for the nature and amount of these special items and reconciliation to GAAP.
Safe Harbor/Risk Factors
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
Ford cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Ford's forward-looking statements speak only as of the date of initial issuance, and Ford does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. For additional discussion of these risks, see “Item 1A . Risk Factors” of Ford's Annual Report on Form 10-K for the year ended December 31, 2011.
CONFERENCE CALL DETAILS
Ford Motor Company [NYSE:F] releases its preliminary first quarter 2012 financial results at 7 a.m. EDT today. The following briefings will be conducted after the announcement:
Listen-only presentations and supporting materials will be available on the Internet at www.shareholder.ford.com. Representatives of the news media and the investment community participating by teleconference will have the opportunity to ask questions following the presentations.
Access Information – Friday, April 27
Earnings Call: 9 a.m. EDT
Toll Free: 877.703.6106
Earnings Passcode: “Ford Earnings”
Fixed Income: 11 a.m. EDT
Toll Free: 866.318.8620
Fixed Income Passcode: “Ford Fixed Income”
Replays – Available after 2 p.m. the day of the event through Friday, May 4
Toll Free: 888.286.8010
Fixed Income: 33395660
About Ford Motor Company
Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles across six continents. With about 166,000 employees and about 70 plants worldwide, the company’s automotive brands include Ford and Lincoln. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford’s products, please visit www.ford.com.