10-Q & 10-K/A Filed with SEC
Ford Motor Co
14 November 2006
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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-quarter
10-Q Report and an amended 2005 10-K Report to restate its previously reported
financial results from 2001 through 2005 to correct accounting for certain
derivative transactions under Paragraph 68 of the Statement of Financial
Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and
Hedging Activities. As part of the restatement, the company also reversed
certain immaterial accounting adjustments and recorded them in the proper
period.
For the third quarter and first nine months of 2006, the company reported a net
loss of $5.2 billion and $7 billion, respectively; this is an improvement of
about $550 million and $250 million, respectively, from the preliminary results
released on Oct. 23. The improvement primarily reflected the effect of the
change in accounting for certain Ford Motor Credit Company (Ford Credit)
interest rate swaps under Paragraph 68 of SFAS 133 and the impact of that change
on the valuation allowance for deferred tax assets. Complete income statements,
balance sheets, and statements of cash flow for the three months and nine months
ended 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 2001
through 2005. Amended Form 10-Qs for the first and second quarter of 2006 will
be filed with the SEC by Nov. 20.
The restatement's cumulative impact on net income was an increase of about $850
million. The change in accounting for the Ford Credit interest rate swaps did
not affect the economics of the derivative transactions involved, nor have any
impact on Ford Motor Company's cash.
Ford restated its results after discovering that certain interest rate swaps
that Ford Credit had entered into did not satisfy the specific requirements of
Paragraph 68 of SFAS 133 that would have exempted these transactions from
periodic assessments of their effectiveness. One of the general requirements of
SFAS 133 is that hedge accounting is appropriate only for those hedging
relationships that a company expects will be highly effective in achieving
offsetting changes in fair value or cash flows attributable to the risk being
hedged. Although Ford Credit's interest rate swaps were and continue to be
highly effective economic hedges, the company determined that nearly all of
these transactions did not meet Paragraph 68's exemption requirements. SFAS 133
precludes the company from retroactively testing the effectiveness of these
transactions in order to continue to apply hedge accounting.
As a result, the restatement of the company's financial results reflects changes
in fair value of these hedging instruments as derivative gains and losses during
the affected periods, without recording any offsetting change in the value of
the debt they were hedging.
Changes in the fair value of interest rate swaps are driven primarily by changes
in interest rates. Ford Credit has long-term interest rate swaps with large
notional balances, many of which are 'receive-fixed, pay-float' interest rate
swaps. These types of swaps increase in value when interest rates decline, and
decline in value when interest rates rise. As a result, changes in interest
rates can cause substantial volatility in the fair values that must now be
recognized in earnings. For 2001 and 2002, when interest rates were trending
lower, Ford is now recognizing large derivative gains in its restated financial
statements. The upward trend in interest rates from 2003 through 2005 caused the
interest rate swaps to decline in value, resulting in the recognition of
derivative losses for these periods.
'After a review of our internal controls, we determined a material weakness did
exist with relation to SFAS 133. That material weakness has been fully
remediated with the completion of this restatement,' said Don Leclair, Ford's
executive vice president and chief financial officer. 'Our hedging strategy
going forward will continue to be effective at reducing our exposure to economic
risks.'
As noted above, the restatement also includes out-of-period adjustments that
were previously evaluated, both individually and in the aggregate, and
determined to be immaterial to the company's originally-filed financial
statements. As part of the restatement, these immaterial adjustments are being
reversed 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 six
continents. With about 300,000 employees and more than 100 plants worldwide, the
company's core and affiliated automotive brands include Aston Martin, Ford,
Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related
services include Ford Credit.
This information is provided by RNS
The company news service from the London Stock Exchange
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