General Motors Company · NYSE:GM
General Motors — Investor Presentation (June 2015)
57 slides from General Motors's investor presentation, Jun 25, 2015
Slide 1: General Motors – Behind the Charts
General Motors – Behind the Charts June 25, 2015 Tom Timko Vice President, Controller & CAO
Slide 2: Forward Looking Statements
1 In this presentation and in related comments by our management, our use of the words “plans,” “expect,” “anticipate,” “possible,” “target,” “believe,” “commit,” “intend,” “continue,” “may,” “would,” “could,” “should,” “project,” “appears,” “potential,” “projected,” “upside,” “positioned,” “outlook
Slide 3: Agenda
2 Agenda ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix The purpose of this presentation is to highlight how GM accounts for key financial elements as well as to answer frequently asked questions
Slide 4: Agenda
3 ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix Agenda
Slide 5: Reporting – Segments
4 ¶ GM reports results through five total segments broken out between Automotive and Automotive Financing – Automotive (includes vehicle manufacturing & sales, parts & accessories, and OnStar) GM North America (GMNA) GM Europe (GME) GM International Operations (GMIO) » Includes GM International (GMI
Slide 6: Reporting – Country of Sale
5 ¶ We report revenue and profitability in the region in which we sell vehicles, parts & accessories, & services to third party customers – Improves profit and revenue visibility by market – Insightful for managerial decisions (capital allocation, sales/profitability accountability) ¶ We report our
Slide 7: Reporting – Wholesale vs. Retail
6 Wholesale Units Revenue $ GM Dealers (excludes JV sales) Wholesale Represents sales to dealers/others and correlates with GM reported revenue Retail Represents sales to end consumers and correlates with market share and global deliveries End Consumer (includes fleet/JV sales)GM/GM Dealers Retail U
Slide 8: Reporting – Wholesale vs. Retail
7 Wholesale volumes of non-consolidated joint ventures (primarily China JVs) are included in retail vehicle sales instead of wholesale vehicle sales Note: Information per p. 1-2 of the 2014 10-K *For China, end user retail data is not readily available for the industry; therefore, wholesale volumes
Slide 9: Production to Retail – An Example
8 Wholesale units don’t include rental cars sold that have guaranteed repurchase obligations; these are recorded as operating leases with lease revenue recorded over the lease period. Once a rental car is sold at auction, GM recognizes it as a wholesale unit and recognizes the majority of revenue an
Slide 10: Reporting – Joint Ventures
9 ¶ Nonconsolidated affiliates are entities in which an equity interest is maintained and the equity method of accounting is used ¶ The majority of our nonconsolidated affiliates are JVs located in China, financial results from these JVs are not consolidated into our financial statements, though rec
Slide 11: Reporting – Joint Ventures
1 0 ¶ Proportionate share of earnings of each JV is reflected as Equity income on the Income Statement ¶ The carrying amount of investments in nonconsolidated affiliates resides in Total equity in net assets of nonconsolidated affiliates on the Balance Sheet This table is presented quarterly and loc
Slide 12: Reporting – Special Items: EBIT-Adjusted
1 1 ¶ EBIT-Adjusted is our internal measure of profitability and represents earnings before interest and taxes, adjusted for “special items” ¶ A special item is defined as an event or transaction that is not a part of the normal operating cycle of ongoing operations ¶ EBIT-Adjusted is reconciled to
Slide 13: Example Special Items
1 2 Example SpecialItem? Example Special Item? Gain/loss on acquisition or disposition of a business or investment Routine restructuring activities (employee restructuring, employee separation costs, etc.) Gain/loss on extinguishment of debt Routine impairment of PP&E Certain impairments (investment
Slide 14: Special Item Adjustments to Earnings
1 3 Earnings Per Share (EPS) includes special items Impact of special items for the quarter was (.30) per share After-tax impact of special items on Net Income Impact of Special Items EPS Adjusted for Special Items *Included in Operating Income Note: Impact of Special Items chart above from Q1 2015
Slide 15: Reporting – Special Items: Adjusted Auto Free Cash Flow
1 4 ¶ Adjusted Automotive Free Cash Flow is defined as our cash inflow (or outflow) from operations less cash outflows from capital expenditures, adjusted for special items ¶ Useful for investors regarding the liquidity of our automotive operations ¶ Special items for free cash flow are adjustments
Slide 16: Agenda
1 5 Agenda ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix
Slide 17: EBIT Bridge Definitions: Volume, Mix, Price, Cost
1 6 Volume: Changes in number of wholesale vehicles sold (at prior period portfolio average vehicle variable profit per unit) Vehicle variable profit drivers include gross sales, sales allowances, material costs, freight costs, and the variable portion of Policy & Warranty (“P&W”) costs and Manufact
Slide 18: Bridge Definitions: Volume and Mix
1 7 Volume: Measures the vehicle profit variance from changes in wholesale volumes (at prior comparative period portfolio average per unit) driven by changes in industry volume, market share, and dealer stocks within the specific region. Mix: Measures the vehicle profit variances resulting from chan
Slide 19: Bridge Definitions: Price
1 8 Price: Wholesale price changes are for carryover and major vehicles for Gross Revenue and Sales Allowances as well as incentive stock adjustments related to all vehicles residing within a dealer’s inventory. Carryover vehicle price changes are for economic based price changes (MSRP & Sales Allow
Slide 20: Bridge Definitions: Cost and Other
1 9 Cost: Measures the profit variance from changes in fixed costs and variable costs including carryover vehicle economic material/freight costs, all material/freight cost changes on major vehicles, P&W/recall reserve adjustments, and non-vehicle activity. Fixed costs includes fixed manufacturing,
Slide 21: Consolidated EBIT – Adjusted Walk - Example
2 0Note: EBIT- Adjusted includes GM Financial on an Earnings Before Tax - Adjusted (EBT-Adjusted) basis Consolidated EBIT – Adjusted Walk - Example Note: Bridge example above from Q3 2014 Analyst Earnings Deck
Slide 22: Agenda
2 1 Agenda ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix
Slide 23: Warranty & Recall Accounting
2 2 Wholesale Vehicle Sale Book per unit accrual to Automotive cost of sales Policy & Warranty Expense: Recall Campaign Expense GMNA: Recall Campaign Expense outside GMNA: Recall announced and total amount reasonably estimable Book total accrual to Automotive cost of sales Wholesale Vehicle Sale Boo
Slide 24: Warranty & Recall Accounting
2 3 ¶ Warranty and recall related liabilities are included on our balance sheet in Accrued liabilities and Other liabilities ¶ The following table summarizes activity for policy, product warranty, recall campaigns and courtesy transportation Note: Table located on p. 12 of the 2015 1Q 10-Q (Note 8)
Slide 25: Agenda
2 4 Agenda ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix
Slide 26: Taxes – Effective Tax Rate-Adjusted
2 5 ¶ Effective Tax Rate Adjusted (ETR-Adj.) = Tax Expense Adjusted / Earnings Before Tax Adjusted (including equity income) – GM’s ETR-Adj. guidance rate is based on the non-GAAP measures of EBT- Adjusted and Tax Expense-Adjusted – Quarterly ETR-Adj. will fluctuate as it can be impacted by tax audi
Slide 27: Taxes – Cash Taxes
2 6 ¶ Cash Tax Rate = Cash Paid for Income Taxes / Earnings Before Tax Adjusted (including equity income) Taxes – Cash Taxes Expect Cash Tax Rate to remain low 575 727 947 2012 2013 2014 Cash Taxes Paid* ($Mils) Cash Tax Rate ~7% ~8% ~15% * Information per p. 115 of the 2014 10-K (Note 26)
Slide 28: Taxes – Deferred Tax Asset (DTA)
2 7 ¶ Net Operating Losses (NOLs) & Credits: $14.1B – $7.6B relates to the U.S. ¶ Capitalized Research Expenses: $8.6B – Relates entirely to the U.S. and reverses over the next nine years ¶ Tax position provides benefit / shield to offset future earnings – ($14.1B + $8.6B) / 35% = $65B Taxes – Defer
Slide 29: Taxes – Valuation Allowances
2 8 ¶ European businesses had deferred tax asset valuation allowances of $4.4B as of March 31, 2015 – Based on improving business results in Europe, significant portions of the valuation allowances may be reversed – In the quarter in which the valuation allowances are reversed, we will record a sign
Slide 30: Agenda
2 9 Agenda ? Reporting ? Understanding the EBIT Bridge ? Warranty & Recall Accounting ? Taxes ? Automotive Cash Flow Considerations ? Appendix
Slide 31: Adjusted Automotive Free Cash Flow – Example
3 0* Excludes impact of non-cash special items Adjusted Automotive Free Cash Flow – Example Equipment on operating leases is composed of vehicle sales to daily rental car companies with a guaranteed repurchase obligation Comprised of dealer/customer allowances, deposits from rental car companies, em
Slide 32: Automotive Cash Flow Considerations
3 1 ¶ GM has favorable cash conversion cycle, particularly in GMNA, due to the differences in collection and payment days – Typically, source of cash as sales volumes grow and use of cash as they shrink – Our $20B target cash provides for the working capital unwind in a recession ¶ Key drivers of ch
Slide 33: Q&A
Q&A GENERAL MOTORS
Slide 34: Appendix
3 3 Appendix ? Understanding the Earnings Deck & Key Performance Metrics ? Income Statement Considerations ? Balance Sheet Considerations ? Capital Allocation Framework ? GM Financial
Slide 35: Key Performance Metrics
3 4 ¶ Global Deliveries: Total global retail sales (includes fleet and JV sales) ¶ Global Market Share: Based on retail vehicle sales volume; excludes certain markets where the U.S has trade embargoes ¶ Total Net Revenue: Includes Automotive and GM Financial revenue ¶ Net Income to Common Stockholde
Slide 36: Performance Metrics – Example
3 5 Performance Metrics – Example **See Adjusted Automotive Free Cash Flow reconciliation on slide 21 of Q1 2015 Analyst Earnings Deck ***See ROIC reconciliation on slide S5 of Q1 2015 Analyst Earnings Deck Note: EBIT-Adjusted includes GM Financial on an Earnings Before Tax - Adjusted (EBT-Adjusted)
Slide 37: Appendix
3 6 Appendix ? Understanding the Earnings Deck & Key Performance Metrics ? Income Statement Considerations ? Balance Sheet Considerations ? Capital Allocation Framework ? GM Financial
Slide 38: Revenue Recognition – Automotive
3 7 Revenue Recognition – Automotive ¶ Automotive net sales and revenue are primarily composed of revenue generated from the sale of vehicles – Includes non-vehicle related revenues from parts & accessories and OnStar ¶ Vehicle sales are recorded when title and all risks and rewards of ownership hav
Slide 39: Rental Car Sales
3 8 ¶ A significant portion of the sales to daily rental car companies are recorded as operating leases under U.S. GAAP with no recognition of revenue at the date of initial delivery due to guaranteed repurchase obligations Rental Car Company Rental Vehicle Auction 1 3 4 Process: 1. GM sells rental
Slide 40: Rental Car Accounting for Rentals with Repurchase Agreement
3 9 At conclusion of agreement and/or vehicle return During term of agreement At Inception Operating Lease Revenue and Depreciation Expense Recognized Retail delivery is reported Vehicle returned to GM and sold at auction Wholesale Delivery Reported Revenue / COGS Recognition True Up for Actual vs.
Slide 41: Rental Car Accounting – Equipment on Operating Leases
4 0 Rental Car Accounting for Rentals sold with repurchase agreement Note: Equipment on Operating Leases Table located on p. 73 of the 2014 10-K (Note 7) Includes deposits from rental car companies Note: Cash flows from Operating activities Table located on p. 41 of the 2014 10-K (Item 7) ¶ Balance
Slide 42: Cost Breakout – Automotive
4 1 ¶ Largest automotive related expenses are cost of sales and selling, general and administrative expense (SG&A) ¶ Automotive cost of sales – Material cost typically makes up ~2/3 of the total amount – Labor costs, depreciation and amortization, engineering, and policy, product warranty and recall
Slide 43: Appendix
4 2 Appendix ? Understanding the Earnings Deck & Key Performance Metrics ? Income Statement Considerations ? Balance Sheet Considerations ? Capital Allocation Framework ? GM Financial
Slide 44: Key Automotive Balance Sheet Items
4 3 Key Automotive Balance Sheet Items (1) Excludes uncommitted facilities (2) March 31, 2014 and 2015 balances are rolled forward and do not reflect remeasurement (3) Non-U.S. represents GM Automotive Only. Excludes $0.1B GMF Pension liability Note: Key Automotive Balance Sheet Items Example above
Slide 45: Automotive Debt
4 4 Automotive Debt Senior Unsecured Notes Amount Coupon Maturity $1,500M 3.500% 2018 $1,500M 4.875% 2023 $500M 4.000% 2025 $750M 5.000% 2035 $1,500M 6.250% 2043 $1,250M 5.200% 2045 ($ billions) Senior Unsecured Notes 7.0 Subsidiary Debt 1.2 Capital Leases 1.0 Total Debt 9.1 Global Credit Facilities
Slide 46: Pension Obligation Downsized & Derisked
4 5 Pension Obligation Downsized & Derisked Note: Additional disclosure about pensions available on p. 85-94 of the 2014 10-K (Note 15) Results may not foot due to rounding Global and U.S. Pension Status No significant cash call in the medium term ¶ No expected material mandatory U.S. contributions
Slide 47: Other Post-Employment Benefits (OPEB)
4 6 ¶ Hourly and salaried OPEB plans provide postretirement life insurance to certain U.S. retirees and eligible dependents and postretirement health coverage to some U.S. retirees and eligible dependents ¶ Certain of the non-U.S. subsidiaries have postretirement benefit plans, although most partici
Slide 48: Equity – Warrants
4 7 ¶ In July 2009 we issued two tranches of warrants, each to acquire 136 million shares of common stock to Motors Liquidation Company, and one tranche of warrants to acquire 46 million shares of common stock to the New VEBA ¶ MLC warrants are included in fully diluted share count ¶ Upon exercise,
Slide 49: Appendix
4 8 Appendix ? Understanding the Earnings Deck & Key Performance Metrics ? Income Statement Considerations ? Balance Sheet Considerations ? Capital Allocation Framework ? GM Financial
Slide 50: Disciplined Capital Allocation Framework
4 9 Transparent and disciplined capital allocation framework driving shareholder value Reinvest in Business to Drive Growth and 20+% ROIC Maintain $20B Target Cash Maintain Investment Grade Balance sheet All Available Free Cash Flow to Shareholders Disciplined Capital Allocation Framework
Slide 51: Established Cash Target of $20B
5 0 ~$20B Minimum Operating Cash Average Recession (2 years) ~$5-6B Change in Net Working Capital ~$5B Interest and Dividends Minimum Cash for Steady State Operating Needs ~5% of Revenue ~$8B ~$5B Annual Steady State Seasonality ~$3B Overseas ¶ EBITDA funds capital spending during average recession
Slide 52: Capital Allocation Process
5 1 Capital Discipline Business Plan Commitments Performance vs. Commitments Aligned to Executive Compensation >20% ROIC Target ¶ Annual business plan process ¶ Identify upside drivers and downside risks ¶ Individual program review ¶ Performance vs. commitment ¶ ROIC optimization ¶ Project prioritiz
Slide 53: ROIC – Example
5 2 ROIC – Example Note: ROIC Example above from Q1 2015 Analyst Earnings Deck
Slide 54: Appendix
5 3 Appendix ? Understanding the Earnings Deck & Key Performance Metrics ? Income Statement Considerations ? Balance Sheet Considerations ? Capital Allocation Framework ? GM Financial
Slide 55: GM Financial – Reporting
5 4 ¶ GM Financial (GMF) is consolidated with GM – GMF’s results are adjusted in GM’s financial statements to: 1. Include the effect of GM’s tax attributes on GMF’s deferred taxes and income tax provisions, and 2. Eliminate the effect of intercompany transactions between GMF and the other members of
Slide 56: GM Financial – Financial Highlights
5 5 GM Financial – Financial Highlights ¶ GM provides additional information on the key financial statements within the Financial Highlights document published quarterly and annually on Form 8-K in conjunction with the 10-Q and 10-K, respectively – GM and GM Financial are shown separately for the Co
Slide 57: Where To Find…
5 6 Where To Find… Announcements and Events http://www.gm.com/company/investors/announcements-events.html Annual report http://www.gm.com/annualreport Earnings Releases http://www.gm.com/company/investors/earning-releases.html Investor News http://www.gm.com/company/investors/latest-news.html Presen