Ford 2003 Annual Report Download - page 51

2003 ANNUAL REPORT 49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
Shown in the table below is a reconciliation between financial statement Cash flows from operating activities before
securities trading and operating-related cash flows, (calculated as shown in the table above), for the last three years
(in billions):
2003 2002 2001
Cash flows from operating activities before securities trading a/ $ 1.3 $ 9.5 $ 7.4
Items included in operating-related cash flow
Capital expenditures (7.4) (6.8) (6.3)
Net transactions between Automotive and
Financial Services sectors b/ 1.2 (0.1) 0.6
Other, primarily exclusion of cash flow from
short-term VEBA contribution/(draw-down) 1.9 (0.2) (0.7)
Operating-related cash flows $ (3.0) $ 2.4 $ 1.0
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a/ As shown in our Sector Statement of Cash Flows for the Automotive sector.
b/ Primarily payables and receivables between the sectors in the normal course of business, as shown in our Sector Statement of Cash Flows
for the Automotive sector.
Debt and Net Cash —At December 31, 2003, our Automotive sector had total senior debt of $15.0 billion compared with
$14.2 billion a year ago. The debt increase primarily reflects the adoption of Financial Accounting Standards Board (“FASB”)
Interpretation No. 46 (“FIN 46”), which requires the consolidation of certain entities. For a discussion of the adoption of FIN 46,
see Note 13 of the Notes to Financial Statements. At December 31, 2003, our Automotive sector had net cash (defined as
gross cash less total senior debt) of $10.9 billion, compared with $11.1 billion and $3.9 billion at the end of 2002 and
2001, respectively.
In 2003, we retired about $900 million of relatively high-cost debt through open-market repurchases and through redemptions.
We expect to repurchase a similar amount in 2004.
At December 31, 2003, Ford Motor Company Capital Trust I and Ford Motor Company Capital Trust II (the “Trusts”) together had
outstanding an aggregate $5.7 billion of trust preferred securities. The dividend and liquidation preferences on these securities
are paid from interest and principal payments on our junior subordinated debentures held by the Trusts in an aggregate principal
amount of $5.8 billion. Effective July 1, 2003, the junior subordinated debentures are classified as Subordinated debt on our
balance sheet as the result of the adoption of FIN 46. This reclassification did not impact the status of the holders of our senior
debt relative to holders of the subordinated debentures or the trust preferred securities. For additional discussions related to the
Trusts, see Notes 12 and 15 of the Notes to Financial Statements.
On January 2, 2004, we redeemed our outstanding junior subordinated debentures held by Trust I. This had the effect of
reducing total Automotive subordinated debt by $688 million. The debt is classified as Debt payable within one year on our
balance sheet as of December 31, 2003.
The weighted average maturity of our total long-term debt (including subordinated debt), substantially all of which is fixed-rate
debt, is approximately 26 years with about $2.7 billion maturing by December 31, 2008. The weighted average maturity of total
debt (long-term and short-term including subordinated debt) is approximately 25 years. For additional information on debt, see
Note 12 of the Notes to Financial Statements.
Credit Facilities — At December 31, 2003, the Automotive sector had $7.0 billion of contractually committed credit agreements
with various banks, of which $6.9 billion were available for use. For further discussion of our committed credit facilities, see
Note 12 of the Notes to Financial Statements.
FINANCIAL SERVICES SECTOR
FORD CREDIT
Debt and Cash — Ford Credit’s total debt was $149.7 billion at December 31, 2003, up $9.4 billion compared with a year
ago, reflecting primarily asset-backed commercial paper that was previously off-balance sheet debt of FCAR. Ford Credit’s
outstanding unsecured commercial paper at December 31, 2003 totaled $6.1 billion, down $2.1 billion compared with a year ago
and down $36.2 billion compared with year-end 2000. The reduction since 2000 primarily reflects the lowering of Ford Credit’s
short-term credit ratings over that time period as discussed below under “Debt Ratings.” The lower short-term credit rating has
made Ford Credit’s commercial paper largely ineligible for investment by money market mutual funds under Rule 2a-7 of the
Investment Company Act of 1940, as amended. To partially offset this reduction in Ford Credit’s outstanding unsecured
commercial paper, asset-backed commercial paper issued through Ford Credit’s FCAR and Motown NotesSM programs
increased substantially beginning in 2001.
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