Ford 2005 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2005 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 108

  • 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
  • 107
  • 108

Notes to the Financial Statements
NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
impact primarily relates to interest rate swaps, which are included in evaluating Ford Credit's overall risk management objective,
and the revaluation of foreign currency derivatives, which are substantially offset by the revaluation on foreign denominated debt.
Total Company
Summary of OCI Activity. The following table summarizes activity in OCI excluding foreign currency translation adjustments
on net investment hedges for both the Automotive and Financial Services sectors during the years ended December 31
(in millions):
2005 2004 2003
Beginning of year: net unrealized gain/(loss) on derivative financial instruments ..........................................................
.
$ 1,240 $ 1,302 $ 313
Increase/(decrease) in fair value of derivatives .................................................................................................................
.
(661) 961 1,072
(Gains)/losses reclassified from OCI.................................................................................................................................
.
(553) (1,023) (83)
End of year: net unrealized gain/(loss) on derivative financial instruments.....................................................................
.
$ 26 $ 1,240 $ 1,302
We expect to reclassify for Automotive and Financial Services sectors existing net gains of $71 million from OCI to net
income during the next twelve months as the underlying exposures are realized.
Fair Value of Derivative Instruments. The fair value of derivatives reflects the price that a third party would be willing to pay
or receive in armʼs length transactions and includes mark-to-market adjustments to reflect the effects of changes in the related
index. The following tables summarize the estimated fair value of our derivative financial instruments, taking into consideration
the effects of legally enforceable netting agreements, at December 31:
2005 2004
Notional
(in billions)
Fair Value
Assets
(in millions)
Fair Value
Liabilities
(in millions)
Notional
(in billions)
Fair Value
Assets
(in millions)
Fair Value
Liabilities
(in millions)
Automotive Sector
Total derivative financial instruments .................................. $ 62 $ 1,578 $ 1,207 $ 71 $ 3,128 $ 911
Financial Services Sector
Foreign currency swaps, forwards and options .................... $ 24 $ 1,126 $ 789 $ 31 $ 4,201 $ 1,076
Interest rate swaps ................................................................. 125 1,657 96 135 3,074 180
Impact of netting agreements................................................ — (205) (205) — (345) (345)
Total derivative financial instruments ................................ $ 149 $ 2,578 $ 680 $ 166 $ 6,930 $ 911
NOTE 21. OPERATING CASH FLOWS
The reconciliation of Net income/(loss) to cash flows from operating activities is as follows (in millions):
Revised-See Note 1
2005 2004 2003
Automotive
Financial
Services Automotive
Financial
Services Automotive
Financial
Services
Net income/(loss) ............................................................................................ $ (1,889) $ 3,913 $ 262 $ 3,225 $ (1,465) $ 1,960
(Income)/loss of discontinued operations...................................................... (6) (41) 227 (81) 141 2
Cumulative effects of changes in accounting principles............................... 251 — — — 264 —
Depreciation and special tools amortization.................................................. 8,133 5,854 6,397 6,618 5,458 8,771
Amortization of intangibles ........................................................................... 49 6 26 10 24 11
Net losses/(earnings) from equity investments in excess of dividends
received........................................................................................................ (135) — 3 — (2) —
Provision for credit/insurance losses ............................................................. — 483 — 1,212 — 2,248
Foreign currency adjustments........................................................................ 36 — 1 — 160 —
(Gain)/loss on sale of business ...................................................................... — (1,099) 16 (66) — (53)
Stock option expense ..................................................................................... 103 13 105 14 154 19
Cash changes in operating assets and liabilities was as follows: ..................
Provision for deferred income taxes............................................................ (976) 1,763 2,469 1,502 732 1,274
Decrease/(increase) in accounts receivable and other assets ...................... (2,060) 1,002 (1,649) 4,279 (1,804) 1,229
Decrease/(increase) in inventory ................................................................. (76) — (112) — (505) —
Increase/(decrease) in accounts payable and accrued and other
liabilities....................................................................................................... 2,234 (2,581) (7,052) (928) (1,970) 1,078
Net sales/(purchases) of trading securities.................................................. (579) (50) 5,600 92 1,630 524
Other............................................................................................................... 351 121 676 (285) 106 (576)
Cash flows from operating activities of continuing operations....................... $ 5,436 $ 9,384 $ 6,969 $ 15,592 $ 2,923 $ 16,487
Ford Motor Company Annual Report 2005 86 Ford Motor Company Annual Report 2005 87