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
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 OR
---------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-3950
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Ford Motor Company
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-322-3000
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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 1934 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 March 31, 1997, the Registrant had outstanding 1,119,979,990 shares
of Common Stock and 70,852,076 shares of Class B Stock.
Page 1 of 19
Exhibit index located on sequential page number 16
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
HIGHLIGHTS
----------
First Quarter
-------------------------
1997 1996
-------- --------
(unaudited)
<S> <C> <C>
Worldwide vehicle unit sales of
cars and trucks (in thousands)
- - United States 979 940
- - Outside United States 702 698
----- -----
Total 1,681 1,638
===== =====
Sales and revenues (in millions)
- - Automotive $28,925 $28,297
- - Financial Services 7,277 6,928
------- -------
Total $36,202 $35,225
======= =======
Net income (in millions)
- - Automotive $ 1,004 $ 142
- - Financial Services 465 511
------- -------
Total $ 1,469 $ 653
======= =======
Capital expenditures (in millions)
- - Automotive $ 1,613 $ 1,789
- - Financial Services 126 113
------- -------
Total $ 1,739 $ 1,902
======= =======
Automotive capital expenditures as a
percentage of sales 5.6% 6.3%
Stockholders' equity at March 31
- - Total (in millions) $27,252 $24,540
- - After-tax return on Common and
Class B stockholders' equity 22.1% 10.7%
Automotive cash and marketable securities
at March 31 (in millions) $15,967 $12,937
Automotive debt at March 31
(in millions) $ 8,202 $ 7,175
After-tax return on sales
- - U.S. Automotive 4.5% 0.3%
- - Total Automotive 3.5 0.6
Shares of Common and Class B Stock
(in millions)
- - Average number outstanding 1,190 1,168
- - Number outstanding at March 31 1,191 1,175
AMOUNTS PER SHARE OF COMMON AND
CLASS B STOCK AFTER PREFERRED
STOCK DIVIDENDS
Income assuming full dilution
- - Automotive $ 0.82 $ 0.11
- - Financial Services 0.38 0.42
------- -------
Total $ 1.20 $ 0.53
======= =======
Cash dividends $ 0.385 $ 0.35
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
VEHICLE UNIT SALES
------------------
For the Periods Ended March 31, 1997 and 1996
(in thousands)
First Quarter
-----------------------
1997 1996
------- -------
(unaudited)
<S> <C> <C>
North America
United States
Cars 367 378
Trucks 612 562
----- -----
Total United States 979 940
Canada 69 50
Mexico 18 12
----- -----
Total North America 1,066 1,002
Europe
Germany 115 118
Britain 98 118
Italy 64 56
Spain 46 48
France 36 51
Other countries 97 84
----- -----
Total Europe 456 475
Other international
Brazil 53 47
Australia 30 32
Taiwan 25 31
Argentina 17 16
Japan 10 16
Other countries 24 19
----- -----
Total other international 159 161
----- -----
Total worldwide vehicle unit sales 1,681 1,638
===== =====
</TABLE>
Vehicle unit sales 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.
-3-
<PAGE>
<TABLE>
<CAPTION>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
- ----------------------------
Ford Motor Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
For the Periods Ended March 31, 1997 and 1996
(in millions)
First Quarter
-------------------------
1997 1996
-------- --------
<S> <C> <C>
(unaudited)
AUTOMOTIVE
Sales $28,925 $28,297
Costs and expenses (Note 2)
Costs of sales 25,683 26,510
Selling, administrative and other expenses 1,538 1,472
------- -------
Total costs and expenses 27,221 27,982
Operating income 1,704 315
Interest income 249 184
Interest expense 194 172
------- -------
Net interest income 55 12
Equity in net (loss) of affiliated companies (144) (52)
Net expense from transactions with Financial Services (19) (20)
------- -------
Income before income taxes - Automotive 1,596 255
FINANCIAL SERVICES
Revenues 7,277 6,928
Costs and expenses
Interest expense 2,356 2,421
Depreciation 1,765 1,691
Operating and other expenses 1,500 1,428
Provision for credit and insurance losses 845 576
------- -------
Total costs and expenses 6,466 6,116
Net revenue from transactions with Automotive 19 20
------- -------
Income before income taxes - Financial Services 830 832
------- -------
TOTAL COMPANY
Income before income taxes 2,426 1,087
Provision for income taxes 898 413
------- -------
Income before minority interests 1,528 674
Minority interests in net income of subsidiaries 59 21
------- -------
Net income $ 1,469 $ 653
======= =======
Income attributable to Common and Class B Stock
after preferred stock dividends $ 1,455 $ 634
Average number of shares of Common and Class B
Stock outstanding 1,190 1,168
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK
Income $ 1.22 $ 0.54
Income assuming full dilution $ 1.20 $ 0.53
Cash dividends $ 0.385 $ 0.35
The accompanying notes are part of the financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
--------------------------
(in millions)
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS (unaudited)
Automotive
Cash and cash equivalents $ 3,299 $ 3,578
Marketable securities 12,668 11,836
-------- --------
Total cash and marketable securities 15,967 15,414
Receivables 3,375 3,133
Inventories (Note 3) 7,237 6,656
Deferred income taxes 3,195 3,296
Other current assets 2,925 3,193
Net current receivable from Financial Services 525 0
-------- --------
Total current assets 33,224 31,692
Equity in net assets of affiliated companies 2,290 2,483
Net property 33,039 33,527
Deferred income taxes 4,484 4,429
Other assets 7,385 7,527
-------- --------
Total Automotive assets 80,422 79,658
Financial Services
Cash and cash equivalents 2,499 3,689
Investments in securities 2,515 2,307
Net receivables and lease investments 161,615 161,906
Other assets 14,906 14,834
Net receivable from Automotive 0 473
-------- --------
Total Financial Services assets 181,535 183,209
-------- --------
Total assets $261,957 $262,867
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive
Trade payables $ 11,298 $ 11,735
Other payables 2,229 2,206
Accrued liabilities 16,242 16,587
Income taxes payable 977 508
Debt payable within one year 1,756 1,661
Net current payable to Financial Services 0 473
-------- --------
Total current liabilities 32,502 33,170
Long-term debt 6,446 6,495
Other liabilities 27,400 26,793
Deferred income taxes 1,199 1,225
-------- --------
Total Automotive liabilities 67,547 67,683
Financial Services
Payables 5,059 4,695
Debt 149,669 150,205
Deferred income taxes 3,619 4,338
Other liabilities and deferred income 7,606 8,504
Net payable to Automotive 525 0
-------- --------
Total Financial Services liabilities 166,478 167,742
Company-obligated mandatorily redeemable preferred securities of a subsidiary
trust holding junior subordinated debentures of the Company (Note 5) 680 680
Stockholders' equity
Capital stock
Preferred Stock, par value $1.00 per share (aggregate liquidation
preference of $671 million and $694 million) * *
Common Stock, par value $1.00 per share
(1,121 and 1,118 million shares issued) 1,121 1,118
Class B Stock, par value $1.00 per share (71 million shares issued) 71 71
Capital in excess of par value of stock 5,288 5,268
Foreign currency translation adjustments and other (559) (29)
Earnings retained for use in business 21,331 20,334
-------- --------
Total stockholders' equity 27,252 26,762
-------- --------
Total liabilities and stockholders' equity $261,957 $262,867
======== ========
- - - - - -
*Less than $1 million
The accompanying notes are part of the financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Ford Motor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
For the Periods Ended March 31, 1997 and 1996
(in millions)
First Quarter 1997 First Quarter 1996
---------------------- ----------------------
Financial Financial
Automotive Services Automotive Services
---------- --------- ---------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents at January 1 $ 3,578 $ 3,689 $ 5,750 $ 2,690
Cash flows from operating activities before securities trading 3,161 2,342 2,916 3,014
Net (purchases)/sales of trading securities (832) 37 (197) 281
------- -------- ------- --------
Net cash flows from operating activities 2,329 2,379 2,719 3,295
Cash flows from investing activities
Capital expenditures (1,613) (126) (1,789) (113)
Acquisitions of receivables and lease investments - (26,481) - (28,164)
Collections of receivables and lease investments - 21,192 - 20,949
Net acquisitions of daily rental vehicles - (528) - (989)
Purchases of securities 0 (1,054) (10) (3,433)
Sales and maturities of securities 0 793 0 3,217
Proceeds from sales of receivables and lease investments - 807 - 1,775
Net investing activity with Financial Services 364 - (3) -
Other 78 151 (97) 209
------- -------- ------- --------
Net cash used in investing activities (1,171) (5,246) (1,899) (6,549)
Cash flows from financing activities
Cash dividends (472) (7) (428) -
Issuance of Common Stock 23 - 40 -
Changes in short-term debt (101) 1,033 (158) 34
Proceeds of other debt 210 3,842 14 6,126
Principal payments on other debt (64) (3,839) (3) (3,462)
Net financing activity with Automotive - (364) - 3
Other 0 106 1 43
------- -------- ------- --------
Net cash (used in)/provided by financing activities (404) 771 (534) 2,744
Effect of exchange rate changes on cash (35) (92) (28) (48)
Net transactions with Automotive/Financial Services (998) 998 66 (66)
------- -------- ------- --------
Net (decrease)/increase in cash and cash equivalents (279) (1,190) 324 (624)
------- -------- ------- --------
Cash and cash equivalents at March 31 $ 3,299 $ 2,499 $ 6,074 $ 2,066
== ======= ======== ======= ========
The accompanying notes are part of the financial statements.
</TABLE>
-6-
<PAGE>
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,
1996. For purposes hereof, "Ford" or the "Company" means Ford Motor Company
and its majority owned subsidiaries unless the context requires otherwise.
Certain amounts for prior periods have been reclassified to conform with
1997 presentations, including additional elimination of intercompany sales.
2. Selected Automotive costs and expenses are summarized as follows
(in millions):
<TABLE>
<CAPTION>
First Quarter
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
Depreciation $683 $636
Amortization 787 764
</TABLE>
3. Automotive inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials, work in process and supplies $3,831 $3,374
Finished products 3,406 3,282
------ ------
Total inventories $7,237 $6,656
====== ======
U.S. inventories $2,795 $2,280
</TABLE>
4. Company-Obligated Mandatorily Redeemable Preferred Securities of a
Subsidiary Trust - The sole asset of Ford Motor Company Capital Trust I
(the "Trust"), which is the obligor on the Preferred Securities of such
Trust, is $632 million principal amount of 9% Junior Subordinated
Debentures due 2025 of Ford Motor Company.
-7-
<PAGE>
[Coopers & Lybrand L.L.P. letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Ford Motor Company
We have reviewed the consolidated balance sheet of Ford Motor Company and
Subsidiaries at March 31, 1997 and the related consolidated statement of income
and condensed consolidated statement of cash flows for the periods set forth in
the Ford Motor Company Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997. 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 financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated
January 27, 1997, we expressed an unqualified opinion on those consolidated
financial statements.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
April 16, 1997
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
OVERVIEW
The company's worldwide net income was $1,469 million in first quarter 1997, or
$1.20 per share of Common and Class B Stock (fully diluted), compared with $653
million, or $0.53 per share (fully diluted) in first quarter 1996. The company's
worldwide sales and revenues were $36.2 billion, up $1 billion from a year ago.
Vehicle unit sales of cars and trucks were 1,681,000, up 43,000 units.
Stockholders' equity was $27.3 billion at March 31, 1997, up $490 million
compared with December 31, 1996.
During first quarter 1997, the company announced several adjustments to
capacity: eliminating a shift at its Halewood plant in Britain; idling the
passenger car system at its Lorain, Ohio assembly plant; and, in Brazil, closing
two foundries and an engine plant and downsizing the Ipiranga Truck Plant. Ford
also announced steps to improve product mix by discontinuing Ford Aspire, Probe,
Thunderbird and Aerostar, and Mercury Cougar. A one-time charge relating to most
of these actions will be reflected in second quarter results.
Although first quarter results were favorable, there are a number of cautionary
factors going forward -- rising U.S. interest rates, the value of the yen,
overall European market conditions, and increasing competition worldwide could
affect results unfavorably in the balance of the year.
RESULTS OF OPERATIONS
The company's net income for worldwide Automotive operations in the first
quarter 1997 and 1996 was as follows (in millions):
Net Income/(Loss)
---------------------
1997 1996
------ ------
U.S. Automotive $ 836 $ 48
Automotive Outside U.S.
- Europe 105 73
- South America (47) (60)
- Other 110 81
------ ----
Total Automotive Outside U.S. 168 94
------ ----
Total Automotive $1,004 $142
====== ====
The company's net income for worldwide Financial Services operations in first
quarter 1997 and 1996 was as follows (in millions):
Net Income/(Loss)
---------------------
1997 1996
------ ------
Ford Credit $276 $339
The Associates 238* 192
USL Capital - 40
Hertz 20 9
Minority Interests, Eliminations and Other (69) (69)
---- ----
Total Financial Services $465 $511
==== ====
- - - - -
*Ford's share was $192 million
FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
Automotive Operations
- ---------------------
Ford's worldwide Automotive operations earned $1,004 million in first quarter
1997 on sales of $28.9 billion, compared with $142 million in first quarter 1996
on sales of $28.3 billion. Overall, the increase reflected primarily improved
earnings in all regions.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
Earnings for Automotive operations in the U.S. were up $788 million in first
quarter 1997 compared with a year ago. The increase reflected primarily higher
margins resulting from cost reductions and vehicle mix improvements. U.S.
Automotive after-tax return on sales was 4.5% in first quarter 1997, up 4.2
points from a year ago.
The U.S. economy continued to grow at a moderate rate in first quarter 1997,
with interest rates and inflation at comparatively low levels. The
seasonally-adjusted annual selling rate for the U.S. car and truck industry was
15.9 million units in the first quarter, up from 15.7 million units in first
quarter 1996. The company expects car and truck industry sales in 1997 to be
about equal to 1996. Ford's combined U.S. car and truck share was 25.1%, down
7/10 of a point from a year ago, reflecting lower sales of models that will be
discontinued later this year, and about equal to full year 1996.
The improvement for Automotive operations in Europe, compared with a year ago,
reflected primarily cost reductions and lower taxes. The European automotive
industry continues to be extremely competitive as a result of excess capacity;
this trend is expected to continue in 1997 and beyond.
The seasonally-adjusted annual selling rate for the European car and truck
industry was 14.5 million units in first quarter 1997, about equal to first
quarter 1996. Ford's combined European car and truck market share was 11.4%,
down 7/10 of a point from a year ago, reflecting the highly competitive market,
and down 4/10 of a point from full year 1996.
The loss in first quarter 1997 incurred by Automotive operations in South
America was lower than the loss a year ago. The improvement reflected primarily
higher volume. Losses in South America are expected to continue in 1997, as
modernization of the product line in Brazil and Argentina is completed. Ford
will have several new products (the Ka, Fiesta, Escort and Ranger) available for
sale throughout most of 1997.
Financial Services Operations
- -----------------------------
Earnings for Financial Services operations were down $46 million in first
quarter 1997, compared with record earnings a year ago. The reduction reflects
the absence of earnings from USL Capital, substantially all of the assets of
which were sold last year, and a decline in earnings at Ford Credit.
Ford Credit's earnings were down $63 million from a year ago, reflecting
primarily higher credit losses and loss reserve requirements, the effect of
Ford's restructuring of its financial services operations, and higher taxes.
Higher levels of earning assets and improved operating cost performance were
partial offsets. Ford Credit's earnings in the first quarter include a majority
ownership (78%) of Ford Credit Europe, and results for first quarter 1996 have
been restated to reflect this ownership change. Credit losses as a percent of
average net finance receivables (including net investment in operating leases)
were 0.86% in first quarter 1997, compared with 0.63% in the first quarter a
year ago, reflecting an increase in repossession rates and higher losses per
repossession. Higher loss reserves reflect anticipation of actual losses
continuing above prior years' levels. Net financing margins remained essentially
unchanged; improved yields and lower borrowing costs were offset by increased
depreciation expense for leased vehicles, reflecting primarily
lower-than-anticipated residual values on off-lease vehicles.
Record earnings at The Associates reflected primarily higher levels of earning
assets, lower operating costs and improved net interest margins, offset
partially by higher credit losses. Credit losses as a percent of average net
finance receivables were 2.31% in the first quarter, compared with 1.74% a year
ago. The Associates believes the higher levels of credit losses may continue.
Record earnings at Hertz reflected primarily higher revenues in U.S. car rental
operations.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Automotive Operations
- ---------------------
Automotive cash and marketable securities were $16 billion at March 31, 1997, up
$553 million from December 31, 1996. The company paid $472 million in cash
dividends on its Common Stock, Class B Stock and Preferred Stock during the
first three months of 1997.
Automotive capital expenditures were $1.6 billion in the first three months of
1997, down $176 million from the same period a year ago. For full year 1997,
Ford's capital spending is expected to be at essentially similar levels compared
with 1996; however, as a percentage of sales, spending is expected to be at
similar or lower levels.
Automotive debt at March 31, 1997 totaled $8.2 billion, which was 23% of total
capitalization (stockholders' equity and Automotive debt), essentially unchanged
from year-end 1996.
At March 31, 1997, Ford had long-term contractually committed global credit
agreements under which $8.4 billion is available from various banks at least
through June 30, 2001. The entire $8.4 billion may be used, at Ford's option, by
any affiliate of Ford; however, any borrowing by an affiliate will be guaranteed
by Ford. Ford also has the ability to transfer on a nonguaranteed basis the
entire $8.4 billion in varying portions to Ford Credit and Ford Credit Europe.
In addition, at March 31, 1997, Ford Brasil Ltda. had $377 million of
contractually committed credit facilities with various banks ranging in maturity
from April 1997 to March 1998. These facilities were unused at March 31, 1997.
Financial Services Operations
- -----------------------------
Financial Services cash and investments in securities totaled $5 billion at
March 31, 1997, down $982 million from December 31, 1996.
Net receivables and lease investments were $161.6 billion at March 31, 1997,
down $291 million from December 31, 1996.
Total debt was $149.7 billion at March 31, 1997, down $536 million from December
31, 1996.
Outstanding commercial paper at March 31, 1997 totaled $38.1 billion at Ford
Credit, $17.9 billion at The Associates, and $2.4 billion at Hertz, with an
average remaining maturity of 26 days, 22 days, and 24 days, respectively.
At March 31, 1997, Financial Services had a total of $42 billion of
contractually committed support facilities (excluding the $8.4 billion available
under Ford's global credit agreements). Of these facilities, $24.2 billion are
contractually committed global credit agreements under which $19.6 billion and
$4.6 billion are available to Ford Credit and Ford Credit Europe, respectively,
from various banks; 62% and 76%, respectively, of such facilities are available
through June 30, 2001. The entire $19.6 billion may be used, at Ford Credit's
option, by any subsidiary of Ford Credit, and the entire $4.6 billion may be
used, at Ford Credit Europe's option, by any subsidiary of Ford Credit Europe.
Any borrowings by such subsidiaries will be guaranteed by Ford Credit or Ford
Credit Europe, as the case may be. At March 31, 1997, $76 million of the Ford
Credit global facilities were in use and $637 million of the Ford Credit Europe
global facilities were in use. Other than the global credit agreements, the
remaining portion of the Financial Services support facilities at March 31, 1997
consisted of $16 billion of contractually committed support facilities available
to various affiliates in the U.S. and $1.8 billion of contractually committed
support facilities available to various affiliates outside the U.S.; at March
31, 1997, approximately $1.1 billion of these facilities were in use.
Furthermore, banks provide $1.6 billion of liquidity facilities to support the
asset-backed commercial paper program of a Ford Credit sponsored special purpose
entity.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
- ------------------------------------------------------------------------
ACCOUNTING CHANGES
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share", was issued by the Financial Accounting Standards Board in February 1997.
Adoption of SFAS 128, effective for periods ending after December 15, 1997, is
not expected to have a material effect on reported earnings.
INITIAL PUBLIC OFFERING OF COMMON STOCK OF HERTZ CORPORATION
In April 1997, Hertz completed an initial public offering of its common stock
representing an 18.5% interest in Hertz (the "IPO"). Substantially all of the
net proceeds from the IPO was used to reduce short-term indebtedness (commercial
paper) of Hertz. Hertz had increased its outstanding commercial paper to repay
an intercompany debt owed to Ford in the amount of $460 million. A gain from the
IPO will be reflected in Ford's second quarter results.
OTHER FINANCIAL INFORMATION
Coopers & Lybrand L.L.P., Ford's independent public accountants, performed a
limited review of the financial data presented on pages 4 through 7 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, Coopers & Lybrand L.L.P. did
not express an opinion on the aforementioned data. The financial data include
any material adjustments or disclosures proposed by Coopers & Lybrand L.L.P. as
a result of their review.
-12-
<PAGE>
Part II. Other Information
--------------------------
Item 1. Legal Proceedings
- --------------------------
In April 1997, Ford became the subject of an administrative enforcement
proceeding before a Department of Labor administrative law judge challenging
Ford's compliance with obligations imposed by Executive Order 11246, as amended,
in connection with Ford's federal government contracts. Executive Order 11246
prohibits employment discrimination by government contractors and
subcontractors. In this proceeding, the Office of Federal Contract Compliance
Programs ("OFCCP") claims that, during 1993, Ford's Kentucky Truck Plant used a
hiring process for entry-level laborer positions that discriminated against
female applicants. OFCCP further claims that Ford failed to make available
required records and otherwise cooperate fully with the agency during a
compliance review that was begun in early 1993. OFCCP is seeking orders from the
court canceling Ford's contracts with the federal government and debarring Ford
from future federal government contract work, in addition to an order awarding
back pay to the "affected class of women". If OFCCP prevails, Ford's results of
operations could be substantially adversely affected.
Also filed in April 1997 was a new purported class action lawsuit involving the
Bronco II. This lawsuit was filed in federal court in the Southern District of
West Virginia and purports to represent a class of former plaintiffs in formerly
pending Bronco II personal injury cases. Plaintiffs allege that Ford and a Ford
expert on the design history of the Bronco II conspired to fraudulently conceal
documents that would establish (a) that Ford paid such expert to offer false
testimony in favor of Ford regarding the design of the Bronco II, and (b) that
Ford knew the design of the Bronco II rendered the vehicle unstable and prone to
rollover under normal driving conditions. Plaintiffs seek compensatory and
punitive damages, prejudgment interest, costs, and attorneys' fees. If the
plaintiffs were to prevail in this lawsuit, Ford could be required to pay
substantial damages.
Finally, two purported class actions relating to airbags were also filed in
April 1997. These lawsuits, which are in state courts in Louisiana and Texas,
allege that motor vehicle airbags are defective because they cause injury to
children and small adults. The actions are brought on behalf of (a) all
residents of Louisiana and Texas, who purchased airbag-equipped automobiles and
(b) purchasers throughout the United States who purchased such vehicles in
Louisiana or Texas. These actions are brought against the following defendants:
Volvo of North America, Inc., General Motors Corporation, Ford Motor Company,
Chrysler Corporation, Spinato Chrysler Plymouth, Inc. d/b/a Bergeron Volvo,
other corporations whose identities are unknown (e.g., all other automobile
manufacturers), and all unidentified automobile dealers throughout the states of
Louisiana and Texas. Plaintiffs' claims in both cases are based on the
anticipated action by the National Highway Traffic Safety Administration
("NHTSA") to allow deactivation of airbags at the owners' request. Plaintiffs
claim that it will be necessary to have the airbags deactivated pursuant to the
guidelines established by NHTSA to ensure occupant safety, and that they will
have been deprived of a purported safety device for which they paid. Plaintiffs
seek damages including recovery of the cost of the airbags. Were plaintiffs to
prevail in these lawsuits, Ford could be required to pay substantial damages.
-13-
<PAGE>
<TABLE>
<CAPTION>
Supplemental Schedule
Ford Motor Company
CONDENSED FINANCIAL INFORMATION OF SUBSIDIARY
---------------------------------------------
(in millions)
March 31, December 31,
Ford Capital B.V. 1997 1996
- ----------------- ------------ ------------
(unaudited)
<S> <C> <C>
Current assets $2,002 $1,660
Noncurrent assets 3,083 3,491
------ ------
Total assets $5,085 $5,151
====== ======
Current liabilities $1,461 $1,116
Noncurrent liabilities 3,136 3,544
Minority interests in net
assets of subsidiaries 18 18
Stockholder's equity 470 473
------ ------
Total liabilities and
stockholder's equity $5,085 $5,151
====== ======
</TABLE>
<TABLE>
<CAPTION>
First Quarter First Quarter
1997 1996
------------- -------------
(unaudited)
<S> <C> <C>
Sales and other revenue $744 $822
Operating income/(loss) 34 (3)
Income/(loss) before income taxes 21 (17)
Net income/(loss) 8 (29)
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.
-14-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
Please refer to the Exhibit Index on page 16.
(b) Reports on Form 8-K
The Registrant filed the following Current Reports on Form 8-K during
the quarter ended March 31, 1997:
Current Report on Form 8-K dated January 9, 1997 included
information relating to Ford's review of strategic options with
respect to Hertz.
Current Report on Form 8-K dated January 29, 1997 included
information relating to Ford's 1996 financial results.
Current Report on Form 8-K dated February 3, 1997 included the
consolidated financial statements of Ford and its subsidiaries
for the year ended December 31, 1996.
Current Report on Form 8-K dated February 19, 1997 included
information relating to Ford's planned sale of its heavy-truck
business to Freightliner Corporation.
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: May 8, 1997 By: /s/ W. J. Cosgrove
------------------ ----------------------
W. J. Cosgrove
Corporate Controller
(principal accounting officer)
-15-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Sequential
Page Number
Designation Description at Which Found
- ------------ ---------------------------------------------------------- --------------
<S> <C> <C>
Exhibit 11 Ford Motor Company and Subsidiaries Computation of Primary 17
and Fully Diluted Earnings Per Share in Accordance with
Opinion 15 of the Accounting Principles Board.
Exhibit 12 Ford Motor Company and Subsidiaries Calculation of Ratio of 18
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
Exhibit 15 Letter of Coopers & Lybrand L.L.P., Independent Public 19
Accountants, dated May 8, 1997 relating to Financial
Information.
</TABLE>
-16-
<TABLE>
<CAPTION>
Exhibit 11
Ford Motor Company and Subsidiaries
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
-----------------------------------------------------------
IN ACCORDANCE WITH OPINION 15 OF THE ACCOUNTING PRINCIPLES BOARD
----------------------------------------------------------------
First Quarter 1997 First Quarter 1996
------------------------------- --------------------------------
Income Income
Attributable Attributable
Avg. Shares to Common Avg. Shares to Common
of Common and Class B Stock of Common and Class B Stock
and Class B ----------------- and Class B -----------------
Stock Per Stock Per
Outstanding Total Share Outstanding Total Share
----------- ------- ------- ----------- ------- -------
(Mils.) (Mils.) (Mils.) (Mils.)
<S> <C> <C> <C> <C> <C> <C>
Preliminary Earnings Per Share Calculation 1,190 $1,455 $1.22 1,168 $634 $0.54
I. Primary Earnings Per Share
--------------------------
- Assuming exercise of options 49 44
- Assuming purchase of shares with proceeds of options (35) (29)
- Assuming issuance of shares contingently issuable 2 2
- Assuming conversion of subsidiary stock options and
convertible debt 0 0
- Uncommitted ESOP shares (5) (4)
----- ------ ----- ----
Net Common Stock Equivalents 11 0 13 0
----- ------ ----- ----
Primary Earnings Per Share Calculation 1,201 $1,455 $1.21 a/ 1,181 $634 $0.54 a/
===== ====== ===== ===== ==== =====
II. Fully Diluted Earnings Per Share
Primary Earnings Per Share Calculation 1,201 $1,455 $1.21 1,181 $634 $0.54
- Assuming conversion of convertible preferred stock 12 4 b/ 26 8 b/
- Reduction in shares assumed to be purchased
with option proceeds c/ 0 4
----- ------ ----- ----
Fully Diluted Earnings Per Share Calculation 1,213 $1,459 $1.20 1,211 $642 $0.53
===== ====== ===== ===== ==== =====
- - - - - -
a/ The effect of common stock equivalents and/or other dilutive securities was
not material in this period; therefore, the amount presented on the income
statement is the Preliminary Earnings Per Share Calculation.
b/ Reflects the elimination of preferred dividends upon conversion.
c/ Incremental effect of dividing assumed option proceeds by the ending price,
rather than the average price, of Common Stock for each period when the
ending price exceeds the average price.
</TABLE>
-17-
<TABLE>
<CAPTION> Exhibit 12
Ford Motor Company and Subsidiaries
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
----------------------------------------------------------------------------------------
(in millions)
First For the Years Ended December 31
Quarter ---------------------------------------------------
1997 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings
Income/(loss) before income taxes and
cumulative effects of changes in
accounting principles $2,426 $ 6,793 $ 6,705 $ 8,789 $ 4,003 $ (127)
Equity in net loss/(income) of affiliates
plus dividends from affiliates 155 36 179 (182) (98) 26
Adjusted fixed charges a/ 2,651 10,801 10,556 8,122 7,648 8,113
------ ------- ------- ------- ------- ------
Earnings $5,232 $17,630 $17,440 $16,729 $11,553 $8,012
====== ======= ======= ======= ======= ======
Combined Fixed Charges and
Preferred Stock Dividends
Interest expense b/ $2,564 $10,464 $10,121 $ 7,787 $ 7,351 $7,987
Interest portion of rental expense c/ 75 300 396 265 266 185
Preferred stock dividend requirements of
majority owned subsidiaries and trusts d/ 14 55 199 160 115 77
------ ------- ------- ------- ------- ------
Fixed charges 2,653 10,819 10,716 8,212 7,732 8,249
Ford preferred stock dividend requirements e/ 22 95 459 472 442 317
------ ------- ------- ------- ------- ------
Total combined fixed charges
and preferred stock dividends $2,675 $10,914 $11,175 $ 8,684 $ 8,174 $8,566
====== ======= ======= ======= ======= ======
Ratios
Ratio of earnings to fixed charges 2.0 1.6 1.6 2.0 1.5 f/
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.0 1.6 1.6 1.9 1.4 g/
- - - - -
a/ Fixed charges, as shown below, 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.
(applicable for 1992 through 1995) 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 for all periods except 1992. The U.S. statutory rate of 34%
was used for 1992. 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's effective income tax rates for all periods except 1992. The
U.S. statutory rate of 34% was used for 1992.
f/ Earnings inadequate to cover fixed charges by $237 million.
g/ Earnings inadequate to cover combined fixed charges and preferred
stock dividends by $554 million.
</TABLE>
-18-
EXHIBIT 15
[Coopers & Lybrand L.L.P. letterhead]
Ford Motor Company
The American Road
Dearborn, Michigan
Re: Ford Motor Company Registration Statement Nos. 2-95018, 2-95020,
33-9722, 33-14951, 33-19036, 33-36043, 33-36061, 33-39402, 33-50087,
33-50194, 33-50238, 33-54304, 33-54344, 33-54348, 33-54275, 33-54283,
33-54735, 33-54737, 33-55847, 33-56785, 33-58255, 33-58785, 33-58861,
33-61107, 33-62227, 33-64605, 33-64607, 333-02401 and 333-02735 on
Form S-8; 33-32641, 33-40638, 33-43085, and 333-14297 on Form S-3
We are aware that our report dated April 16, 1997 accompanying the unaudited
interim financial information of Ford Motor Company for the periods ended March
31, 1997 and 1996 and included in the Ford Motor Company Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 will be incorporated by reference
in the Registration Statements. Pursuant to Rule 436(c) under the Securities Act
of 1933, this report should not be considered a part of the Registration
Statements prepared or certified by us within the meaning of Sections 7 and 11
of that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
May 8, 1997
-19-
