14th Nov 2006 14:17
Ford Motor Co14 November 2006 Contact: Media: Equity Investment Fixed Income Shareholder Inquiries: Becky Sanch Community: Investment Community: 1.800.555.5259 or 1.313.594.4410 Raj Modi Rob Moeller 1.313.845.8540 [email protected] 1.313.323.8221 1.313.621.0881 [email protected] [email protected] [email protected] Ford Files Forms 10-Q and 10-K/A With SEC; Completes Restatement of 2001-2005 Financial Results DEARBORN, Mich., Nov. 14 /PRNewswire-FirstCall/ -- Ford Motor Company (NYSE: F)today filed with the Securities and Exchange Commission its 2006 third-quarter10-Q Report and an amended 2005 10-K Report to restate its previously reportedfinancial results from 2001 through 2005 to correct accounting for certainderivative transactions under Paragraph 68 of the Statement of FinancialAccounting Standards (SFAS) 133, Accounting for Derivative Instruments andHedging Activities. As part of the restatement, the company also reversedcertain immaterial accounting adjustments and recorded them in the properperiod. For the third quarter and first nine months of 2006, the company reported a netloss of $5.2 billion and $7 billion, respectively; this is an improvement ofabout $550 million and $250 million, respectively, from the preliminary resultsreleased on Oct. 23. The improvement primarily reflected the effect of thechange in accounting for certain Ford Motor Credit Company (Ford Credit)interest rate swaps under Paragraph 68 of SFAS 133 and the impact of that changeon the valuation allowance for deferred tax assets. Complete income statements,balance sheets, and statements of cash flow for the three months and nine monthsended Sept. 30, 2006, are included in the Form 10-Q filed today with the SEC.The company also filed today a Form 10- K/A for the year ended Dec. 31, 2005,which includes amended financial statements for each of the years ended Dec. 31,2003, 2004 and 2005, and selected financial data for each of the years 2001through 2005. Amended Form 10-Qs for the first and second quarter of 2006 willbe filed with the SEC by Nov. 20. The restatement's cumulative impact on net income was an increase of about $850million. The change in accounting for the Ford Credit interest rate swaps didnot affect the economics of the derivative transactions involved, nor have anyimpact on Ford Motor Company's cash. Ford restated its results after discovering that certain interest rate swapsthat Ford Credit had entered into did not satisfy the specific requirements ofParagraph 68 of SFAS 133 that would have exempted these transactions fromperiodic assessments of their effectiveness. One of the general requirements ofSFAS 133 is that hedge accounting is appropriate only for those hedgingrelationships that a company expects will be highly effective in achievingoffsetting changes in fair value or cash flows attributable to the risk beinghedged. Although Ford Credit's interest rate swaps were and continue to behighly effective economic hedges, the company determined that nearly all ofthese transactions did not meet Paragraph 68's exemption requirements. SFAS 133precludes the company from retroactively testing the effectiveness of thesetransactions in order to continue to apply hedge accounting. As a result, the restatement of the company's financial results reflects changesin fair value of these hedging instruments as derivative gains and losses duringthe affected periods, without recording any offsetting change in the value ofthe debt they were hedging. Changes in the fair value of interest rate swaps are driven primarily by changesin interest rates. Ford Credit has long-term interest rate swaps with largenotional balances, many of which are "receive-fixed, pay-float" interest rateswaps. These types of swaps increase in value when interest rates decline, anddecline in value when interest rates rise. As a result, changes in interestrates can cause substantial volatility in the fair values that must now berecognized in earnings. For 2001 and 2002, when interest rates were trendinglower, Ford is now recognizing large derivative gains in its restated financialstatements. The upward trend in interest rates from 2003 through 2005 caused theinterest rate swaps to decline in value, resulting in the recognition ofderivative losses for these periods. "After a review of our internal controls, we determined a material weakness didexist with relation to SFAS 133. That material weakness has been fullyremediated with the completion of this restatement," said Don Leclair, Ford'sexecutive vice president and chief financial officer. "Our hedging strategygoing forward will continue to be effective at reducing our exposure to economicrisks." As noted above, the restatement also includes out-of-period adjustments thatwere previously evaluated, both individually and in the aggregate, anddetermined to be immaterial to the company's originally-filed financialstatements. As part of the restatement, these immaterial adjustments are beingreversed and recorded in the appropriate periods. Effect of Restatement Net Income/(Loss) * 2001 2002 2003 2004 2005 (Bils.) (Bils.) (Bils.) (Bils.) (Bils.) Previously Reported Net Income $(5.5) $(1.0) $0.5 $3.5 $2.0 Total Change in Net Income/(Loss) 0.7 1.9 (0.3) (0.5) (0.6) Net Income after Restatement $(4.8) $0.9 $0.2 $3.0 $1.4 * Including Special Items About Ford Motor Company: Ford Motor Company, a global automotive industry leader based in Dearborn,Mich., manufactures and distributes automobiles in 200 markets across sixcontinents. With about 300,000 employees and more than 100 plants worldwide, thecompany's core and affiliated automotive brands include Aston Martin, Ford,Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-relatedservices include Ford Credit. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FDM Group