Ford 2003 Annual Report Download - page 77

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2003 ANNUAL REPORT 75
NOTES TO FINANCIAL STATEMENTS
The following table illustrates the effect on net income and earnings per share if the fair value method had been applied to all
unvested outstanding stock option awards in each year (in millions):
2003 2002 2001
Income/(loss) attributable to Common and Class B
Stock after Preferred Stock dividends, as reported $ 495 $ (995) $ (5,468)
Add: Employee stock option expense included in
reported net income, net of related tax effects 112 --
Deduct: Total employee stock option expense
determined under fair value method for all
awards, net of related tax effects (112) (179) (162)
Pro forma net income/(loss) $ 495 $ (1,174) $ (5,630)
Amounts per share:
Basic — as reported $ 0.27 $ (0.55) $ (3.02)
Basic — pro forma 0.27 (0.65) (3.11)
Diluted — as reported $ 0.27 $ (0.54) $ (3.02)
Diluted — pro forma 0.27 (0.64) (3.11)
TRANSACTIONS BETWEEN AUTOMOTIVE AND FINANCIAL SERVICES SECTORS
Intersector transactions occur in the ordinary course of business. The Company and Ford Motor Credit Company (“Ford Credit”)
formally documented certain long-standing business practices in a 2001 agreement. Additional details on certain transactions
and the effect on each sector’s balance sheet at December 31 is shown below (in billions):
2003 2002
Financial Financial
Automotive Services Automotive Services
Finance receivables, net a/ $ 2.9 $ 2.5
Net investment in operating leases b/ 4.1 4.0
Other assets c/ 1.2 1.5
Intersector non-current receivables/(payables) d/ $ (3.2) 3.2 $ (4.8) 4.8
Intersector current receivables/(payables) e/ (0.1) 0.1 1.1 (1.1)
a/ Automotive receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit.
b/ Primarily Automotive vehicles used by Hertz for rental ($3.2 billion in 2003 and $3.0 billion in 2002) and Ford Credit vehicles leased to employees of the
Company ($0.9 billion in 2003 and $1.0 billion in 2002).
c/ Primarily used vehicles purchased by Ford Credit on behalf of the Company pursuant to Automotive’s obligation to repurchase such vehicles from daily
rental car companies, including Hertz. These vehicles are subsequently sold at auction by Ford Credit.
d/ Primarily amounts due Ford Credit from Automotive under a tax sharing agreement.
e/ Net result of all other transactions including receivables of Ford Credit from Automotive’s consolidated dealerships and a tax sharing agreement between
Automotive and Hertz.
Periodically, Ford Credit receives interest supplements and other support cost payments from Automotive for providing special
vehicle financing for low-interest-rate marketing programs. Ford Credit records these transactions as revenue over the life of the
contract. Amounts recorded as revenue by the Financial Services sector, and billed to the Automotive sector, were $3.5 billion
in 2003, $3.7 billion in 2002, and $4.1 billion in 2001.
The Automotive sector records the estimated costs for these sales incentive programs as described above under
“Marketing Incentives.”
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