Ford 2002 Annual Report Download - page 45

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 2002, we had non-cash one-time charges of $1.7 billion, reflecting primarily impairment of goodwill and other intangible assets
under SFAS 142, Goodwill and Other Intangible Assets (which eliminates amortization of goodwill and certain other intangible
assets, but requires annual testing for impairment), losses on the sales of Kwik-Fit and other businesses, and restructuring
charges in our Ford-brand European Automotive operations and Premier Automotive Group operations.
Timing differences between the recognition of certain expenses or revenue reductions and their corresponding cash payments
are recognized in operating related cash flows. In 2002, these differences and other miscellaneous items improved our operating
related cash flows by $3.8 billion, denoted as “Other” in the table above. These timing differences arise primarily from accrual
of health care, marketing, warranty and additional service action costs before the corresponding cash payments are required
to be made.
In 2002, we spent $6.8 billion for Automotive sector capital goods, such as machinery, equipment, tooling and facilities. This was
up $500 million from 2001, reflecting primarily increased spending on new products consistent with our product-led revitalization.
Capital expenditures were 5.0% of sales in 2002, up 0.2 percentage points from a year ago.
During 2002, we received $4.9 billion of net proceeds from the issuance of our 6.5% Cumulative Convertible Trust Preferred
Securities and about $2.6 billion of income tax refunds. These two factors alone explain substantially all of the $7.6 billion
increase in our gross cash balances during 2002.
Capital transactions with the Financial Services sector improved cash flow by $400 million, reflecting primarily dividends from
Ford Credit, net of a $700 million cash contribution from Ford indirectly to Ford Credit in January 2002.
Shown in the table below is a reconciliation between operating related cash flow above and financial statement cash flows from
operating activities before securities trading (in billions):
Full Year
2002 2001
Operating related cash flows $2.8 $1.4
Items Ford includes in operating related cash flow
Capital transactions with Financial Services sector (0.4) (0.4)
Capital expenditures 6.8 6.3
Net transactions between Automotive and Financial Services sectors* 0.1 (0.6)
Other, primarily exclusion of cash in-flows from VEBA draw-down 0.2 0.8
Total reconciling items 6.7 6.1
Cash flows from operating activities before securities trading $ 9.5 $7.5
* Primarily payables and receivables between the sectors in the normal course of business,
as shown in our sector statement of cash flows.
Debt and Net Cash–At December 31, 2002, our Automotive sector had total debt of $14.2 billion, up $400 million from a year
ago. The weighted average maturity of our long-term debt, substantially all of which is fixed-rate debt, is approximately 27 years
with about $1.1 billion maturing by December 31, 2007. The weighted average maturity of total debt (long-term and short-term)
is approximately 26 years. At December 31, 2002, our Automotive sector had net cash (defined as gross cash less total debt)
of $11.1 billion, compared with $3.9 billion and $8.1 billion at the end of 2001 and 2000, respectively.
Credit Facilities–At December 31, 2002, the Automotive sector had $7.8 billion of contractually committed credit agreements
with various banks; eighty-eight percent of the total facilities are committed through June 30, 2007. Ford has the ability to
transfer on a non-guaranteed basis $7.2 billion of these credit lines to Ford Credit or FCE Bank, plc, Ford Credit's European
operation (“FCE”). All of our global credit facilities are free of material adverse change clauses and restrictive financial covenants
(for example, debt-to-equity limitations, minimum net worth requirements and credit rating triggers that would limit out ability
to borrow). Approximately $100 million of these facilities were in use at December 31, 2002.
Other Securities–Ford Motor Company Capital Trust I and Ford Motor Company Capital Trust II together have outstanding an
aggregate $5.7 billion of trust preferred securities as described in Note 14 of the Notes to our Financial Statements. These
securities are not included in the total debt amounts discussed above. In addition, during the fourth quarter of 2002, we
redeemed our Series B Cumulative Preferred Stock for an aggregate redemption price of $177 million.