Ford 2002 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2002 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

NOTE 7. GOODWILL AND OTHER INTANGIBLES
Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which eliminates amortization
of goodwill and certain other intangible assets, but requires annual testing for impairment (comparison of estimated fair
value to carrying value). Fair value is estimated using the present value of expected future cash flows and other valuation
measures. The Automotive sector completed the transitional impairment test in the first quarter of 2002 and the Financial
Services sector completed the transitional impairment test in the second quarter of 2002. After-tax, non-cash transition
charges were taken of $708 million in the Automotive sector, primarily relating to the impairment of goodwill in Kwik-Fit,
our former all-makes European vehicle repair business, and $294 million in the Financial Services sector, related to the
impairment of goodwill in Hertz’ industrial and construction equipment rental business. Our policy is to test annually for
impairment during the second quarter.
If SFAS No. 142 had been in effect for the year ended December 31, 2001, our earnings would have been improved due
to reduced amortization, as described below (in millions):
Net Basic Diluted
Income/ Amounts Amounts
(Loss) Per Share Per Share
Income/(loss) attributable to Common and Class B
Stock after preferred stock dividends of
$15 million — as reported $ (5,453) $ (3.02) $ (3.02)
Add: Amortization, after-tax 259* 0.14 0.14
Adjusted net income/(loss) $ (5,194) $ (2.88) $ (2.88)
* $227 million Automotive and $32 million Financial Services.
Effective July 1, 2001, we adopted SFAS No. 141, Business Combinations, which specifies the types of acquired
intangible assets to be reported separately from goodwill and those to be included in goodwill. Certain intangible assets,
primarily acquired distribution networks and technology, continue to be amortized over their useful lives, with no significant
residual value.
Changes to Automotive sector goodwill and other intangible assets were as follows (in millions):
Goodwill Other Intangibles
Amortizable Non-amortizable
December 31, 2001 balance $ 5,213 $ 1,125 $ -
Impairment (pre-tax) (939) - -
Tradename reclassification - (618) 618
Workforce reclassification 126 (126) -
Currency translation 430 55 49
Amortization and other (25) (27) (264) b/
December 31, 2002 balance $ 4,805 $ 409 a/ $ 403
a/ Gross balance of $548 million, net of accumulated amortization and other adjustments of $139 million.
b/ Primarily related to balance of non-amortizable intangibles related to the sale of Kwik-Fit (see Note 19).
Changes to Financial Services sector goodwill and other intangible assets were as follows (in millions):
Goodwill Other Intangibles
Amortizable Non-amortizable
December 31, 2001 balance $ 1,042 $ 265 $ -
Impairment (pre-tax) (294) - -
Tradename reclassification - (189) 189
Currency translation 11 2 -
Amortization and other (7) (19) -
December 31, 2002 balance $ 752 $ 59* $ 189
* Gross balance of $90 million, net of accumulated amortization of $31 million.
In addition, equity in net assets of affiliated companies included goodwill of $435 million and $465 million at December 31,
2002 and December 31, 2001, respectively. Pre-tax amortization expense for intangible assets, excluding goodwill, for the
years ended December 31, 2002 and 2001 was $40 million and $73 million, respectively. Intangible asset amortization is
forecasted to range from about $15 to $25 million per year for the next five years.
72
NOTES TO FINANCIAL STATEMENTS