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Ford Motor Company Annual Report 2005 34 Ford Motor Company Annual Report 2005 35
Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
Gross Cash. Automotive gross cash includes cash and cash equivalents, marketable and loaned securities and assets contained in a
short-term Voluntary Employee Beneficiary Association trust ("VEBA"), a trust which may be used to pre-fund certain types of
company paid benefits for U.S. employees and retirees. Gross cash as of December 31, 2005, 2004 and 2003 is detailed below (in
billions):
December 31,
2005 2004 2003
Cash and cash equivalents.......................................................................................................................................................................... $ 13.4 $ 10.1 $ 6.9
Marketable securities.................................................................................................................................................................................. 6.9 8.3 9.3
Loaned securities*...................................................................................................................................................................................... 3.4 1.1 5.7
Total cash, marketable securities and loaned securities .......................................................................................................................... 23.7 19.5 21.9
Short-term VEBA assets ............................................................................................................................................................................ 1.4 4.1 4.0
Gross cash ................................................................................................................................................................................................ $ 25.1 $ 23.6 $ 25.9
__________
* As part of our investment strategy, we engage in securities lending to improve the returns on our cash portfolios. See Note 5 of the Notes to the Financial
Statements for additional discussion on securities lending.
In managing our business, we classify changes in Automotive gross cash into two categories: operating-related and other (which
primarily includes pension and long-term VEBA contributions, tax refunds, capital transactions with the Financial Services sector, and
acquisitions and divestitures). Our key metric is operating-related cash flow, which best represents the ability of our Automotive
operations to generate cash. We believe the cash flow analysis reflected in the table below, which differs from a cash flow statement
presented in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), is useful to investors
because it includes cash flow elements that we consider to be related to our operating activities (e.g., capital spending) that are not
included in Net cash flows from operating activities, the most directly comparable U.S. GAAP financial measure.
Changes in Automotive gross cash for the last three years are summarized below (in billions):
2005 2004 2003
Gross cash at end of period ........................................................................................................................................................................ $ 25.1 $ 23.6 $ 25.9
Gross cash at beginning of period.............................................................................................................................................................. 23.6 25.9 25.3
Total change in gross cash ....................................................................................................................................................................... $ 1.5 $ (2.3) $ 0.6
Operating-related cash flow
Automotive income/(loss) before income taxes ...................................................................................................................................... $ (3.9) $ (0.2) $ (1.9)
Non-cash portion of special items............................................................................................................................................................ 1.2 1.1 2.0
Capital expenditures................................................................................................................................................................................. (7.1) (6.3) (7.4)
Depreciation and special tools amortization............................................................................................................................................ 8.1 6.4 5.5
Changes in receivables, inventory and trade payables (a)....................................................................................................................... 1.3 (0.4) (1.0)
Other (b) ................................................................................................................................................................................................... (1.3) 0.4 2.9
Total operating-related cash flows ...................................................................................................................................................... (1.7) 1.0 0.1
Other changes in cash
Funded pension plans/long-term VEBA contributions ........................................................................................................................... (2.7) (5.0) (4.8)
Tax refunds............................................................................................................................................................................................... 0.3 0.3 1.7
Capital transactions with Financial Services sector (c)........................................................................................................................... 2.3 4.2 3.6
Acquisitions and divestitures (d) ............................................................................................................................................................. 5.3 0.4 0.5
Dividends paid to shareholders................................................................................................................................................................ (0.7) (0.7) (0.7)
Changes in total Automotive sector debt................................................................................................................................................. (0.5) (2.4) (0.1)
Cash from Variable Interest Entity ("VIE") consolidations (e)............................................................................................................... — — 0.3
Other (f) ................................................................................................................................................................................................... (0.8) (0.1) —
Total change in gross cash ..................................................................................................................................................................... $ 1.5 $ (2.3) $ 0.6
__________
(a) In 2005, we took measures to improve our working capital, including reducing inventory (both production materials and finished vehicles) and changing the way
our European affiliates pay suppliers.
(b) Primarily expense and payment timing differences for items such as marketing, warranty, pension and OPEB.
(c) Primarily dividends received from Ford Credit, excluding proceeds from Financial Services sector divestitures paid to the Automotive sector.
(d) In 2005, primarily proceeds from the sale of Hertz and the final payment for the Land Rover acquisition.
(e) See Note 17 of the Notes to the Financial Statements for a discussion of VIEs.
(f) In 2005, primarily cash flow associated with the acquisition of ACH from Visteon (an outflow of about $700 million), dividends to minority shareholders of
consolidated subsidiaries (an outflow of about $200 million), and the net issuance of Ford Common stock under employee savings plans (an inflow of about
$200 million).