Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor — Q3 2018 Earnings Presentation
52 slides from Ford Mtr Co Del's earnings presentation, Oct 24, 2018
Slide 1: 3Q Earnings Review
3Q Earnings Review October 24, 2018
Slide 2: Financial Highlights
Financial Highlights Company Revenue 3% Driven by strong mix in NA Company Adj. EBIT* $1.7B 4.4% $ Company Adj. EBIT Margin* Flat sequentially despite lower volume NA EBIT Margin 8.8% Driven by strong mix Ford Credit EBT $0.7B Best quarter in more than 7 years Company Adj. Op. Cash $0.1B Flow* $1.4B
Slide 3: Creating Tomorrow, Together
Creating Tomorrow, Together Our Freedom of movement drives human progress. Belief Our To become the world’s most trusted company, Aspiration designing smart vehicles for a smart world. Passion for Product & Deep Customer Insight Our Plan for Value Creation Winning Propulsion Autonomous Mobility Port
Slide 4: Strategic Highlights
Strategic Highlights Progress towards freshest industry showroom Winning • U.S. – launched new Edge and Edge ST; celebrated Job 1 for Ranger which begins shipping in 2019 • Europe – strong early order bank for newly launched Focus Portfolio • China – introduced new Ford Territory mid-size SUV deve
Slide 5: Financial Review
Bob Shanks Chief Financial Officer Financial Review
Slide 6: Company Key Metrics Summary
Company Key Metrics Summary • 3Q top line mixed with revenue THIRD QUARTER YEAR TO DATE higher than a year ago 2017 2018 H / (L) 2017 2018 H / (L) • Net income at $1B, down $0.6B Wholesales (000) 1,504 1,353 (10) % 4,858 4,508 (7) % Market Share (Pct) 6.8 % 6.3 % (0.5) ppts 7.1 % 6.5 % (0.6) ppts •
Slide 7: Company Key Financial Metrics
Company Key Financial Metrics Company Revenue (Bils) Company Adjusted EBIT Margin (Pct) 6.3% $41.3 $42.0 $38.9 4.9% 5.2% $36.5 $37.6 4.3% 4.4% 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 Company Adjusted EBIT (Bils) Company Adjusted Operating Cash Flow (Bils) $3.0
Slide 8: 3Q 2018 Company Results
3Q 2018 Company Results (Mils) $1,668 $1,402 • Auto and Ford Credit results drove net income and Company $991 adjusted EBIT $678 • Mobility reflects investments in autonomous vehicle business, as well as services development $(103) $(196) $(216) $(231) $(343) • Corporate Other includes auto Taxes /
Slide 9: 3Q 2018 Automotive EBIT By Region
3Q 2018 Automotive EBIT By Region (Mils) $1,960 • Automotive EBIT driven by NA $1,402 at 8.8% EBIT margin, highest level since 3Q 2017, despite $(558) lower volume • Operations outside NA at an EBIT loss, down $613M YoY, driven by AP and Europe; the $47 EBIT loss slightly improved from 2Q despite 6%
Slide 10: Ford Credit Key Metrics
Ford Credit Key Metrics THIRD QUARTER YEAR TO DATE 2017 2018 H / (L) 2017 2018 H / (L) Net Receivables (Bils) $ 138 $ 144 4 % $ 138 $ 144 4 % Managed Receivables* (Bils) $ 145 $ 152 5 % $ 145 $ 152 5 % Loss-to-Receivables** (LTR) 53 bps 44 bps (9) bps 51 bps 43 bps (8) bps Auction Values*** $ 17,795
Slide 11: Company Cash Flow And Balance Sheet
Company Cash Flow And Balance Sheet (Bils) 2017 2018 2017 2018 3Q 3Q YTD YTD Company Cash Flow Company Adj. Op. Cash Flow* $ (1.3) $ 0.1 $ 1.9 $ 1.3 Change in Company Cash (2.3) (1.5) (1.4) (2.9) • 3Q cash flow positive and improved from a year ago 2017 2018 Dec 31 Sep 30 • Company cash and liquidit
Slide 12: 2018 FY Company Adjusted EPS Guidance Unchanged
2018 FY Company Adjusted EPS Guidance Unchanged Company Business Units Key Metric 2018 Guidance Region / Segment 2018 EBIT Guidance Modestly higher than Revenue Automotive Lower than 2017 due to Asia Pacific and Europe 2017 North America Lower than 2017 Adjusted EPS* $1.30 - $1.50 South America Abou
Slide 13: Questions & Answers
Questions & Answers
Slide 14: Creating Tomorrow, Together: Closing Remarks
• We are moving with urgency to Creating Tomorrow, Together execute against our strategy Our • This quarter showed early signs Freedom of movement drives human progress. Belief of our success on this front Our To become the world’s most trusted company, • We maintained a strong Aspiration designing
Slide 15: Supplemental Materials Financial Review
Supplemental Materials Financial Review
Slide 16: 3Q 2018 Company Revenue YoY Bridge
3Q 2018 Company Revenue YoY Bridge (Bils) • Company revenue up 3% driven by favorable mix, especially in North America Net 3Q 2017 Volume Mix Pricing Exchange Other 3Q 2018 16
Slide 17: Automotive Key Metrics
Automotive Key Metrics • 3Q Automotive top line mixed, with revenue higher; EBIT and THIRD QUARTER YEAR TO DATE EBIT margin lower 2017 2018 H / (L) 2017 2018 H / (L) • Global SAAR estimated to be Global SAAR (Mils) 97.0 94.3 (3) % 93.3 95.6 2 % 3% lower YoY Market Share (Pct) 6.8 % 6.3 % (0.5) ppts
Slide 18: Automotive 3Q 2018 EBIT YoY Bridge
Automotive 3Q 2018 EBIT YoY Bridge (Mils) Exchange $(212) China JVs (279) Other 38 • Automotive EBIT down $477M YoY • Decline more than explained by Industry $ (203) Share (130) performance in AP, mainly Stocks 165 Commodities $(403) China Mix / Other 1,281 Warranty (382) Other Contribution Cost (45
Slide 19: North America Key Metrics
• 3Q NA key metrics mixed North America Key Metrics • NA SAAR about flat with U.S. down about 1% THIRD QUARTER YEAR TO DATE • Market share down slightly, 2017 2018 H / (L) 2017 2018 H / (L) mainly due to cars, offset SAAR (Mils) 21.3 21.2 (0) % 21.3 21.4 0 % partially by gains in utilities, U.S. 17.
Slide 20: North America 3Q 2018 EBIT YoY Bridge
North America 3Q 2018 EBIT YoY Bridge (Mils) Exchange $ 69 Other 213 • NA EBIT up $136M YoY driven by strongly positive mix due to Industry $ (172) continued focus on Share (87) Commodities $(290) high-margin products Stocks 161 Warranty (351) Mix / Other 1,197 Other Contribution Cost (176) Structur
Slide 21: South America Key Metrics
South America Key Metrics • 3Q SA top-line metrics down YoY, with EBIT about flat and THIRD QUARTER YEAR TO DATE EBIT margin lower 2017 2018 H / (L) 2017 2018 H / (L) • SA SAAR up 2% with growth of 13% in Brazil and a reduction of SAAR (Mils) 4.3 4.4 2 % 4.1 4.5 10 % 26% in Argentina; Brazil higher
Slide 22: South America 3Q 2018 EBIT YoY Bridge
South America 3Q 2018 EBIT YoY Bridge (Mils) Commodities $ (66) Other Inflationary Cost (129) Other 71 • SA EBIT flat YoY as favorable market factors about offset by adverse exchange and higher commodity and other inflationary costs Exchange $(98) Other (17) Volume / Net 3Q 2017 Mix Pricing Cost Oth
Slide 23: Europe Key Metrics
• 3Q top-line metrics mixed YoY; Europe Key Metrics financial metrics down THIRD QUARTER YEAR TO DATE • Europe SAAR about flat 2017 2018 H / (L) 2017 2018 H / (L) • Europe market share down SAAR (Mils) 21.0 21.1 0 % 20.7 21.4 3 % primarily due to Turkey Market Share (Pct) 7.3 % 7.0 % (0.3) ppts 7.5
Slide 24: Europe 3Q 2018 EBIT YoY Bridge
Europe 3Q 2018 EBIT YoY Bridge (Mils) • Europe EBIT down $192M YoY due to weakness in Turkey and Commodities $ (30) Russia, along with all-new Other Contribution Cost (172) Focus launch-related costs Structural Cost (1) Exchange $(93) Turkey JV (64) Other (36) Volume / Net 3Q 2017 Mix Pricing Cost O
Slide 25: Middle East & Africa Key Metrics
• 3Q top-line metrics down YoY. Middle East & Africa Key Metrics Financial metrics improved; EBIT a 3Q record THIRD QUARTER YEAR TO DATE 2017 2018 H / (L) 2017 2018 H / (L) • MEA SAAR unchanged; down 9% in markets where we SAAR (Mils) 3.5 3.5 - % 3.6 3.7 3 % participate Market Share (Pct) 3.9 % 3.2
Slide 26: Middle East & Africa 3Q 2018 EBIT YoY Bridge
Middle East & Africa 3Q 2018 EBIT YoY Bridge (Mils) • MEA EBIT up $103M YoY driven by lower costs and favorable market factors Commodities $(11) Other Contribution Cost 37 Structural Cost 47 Volume / Net 3Q 2017 Mix Pricing Cost Other 3Q 2018 Market Factors $36 26
Slide 27: Asia Pacific Key Metrics
• All 3Q metrics lower YoY; Asia Pacific Key Metrics China the key driver THIRD QUARTER YEAR TO DATE • AP SAAR down 6%, driven by 2017 2018 H / (L) 2017 2018 H / (L) a 10% decline in China SAAR (Mils) 46.8 44.0 (6) % 43.4 44.6 3 % • AP market share lower due to China 29.6 26.5 (10) % 26.8 27.1 1 % C
Slide 28: Asia Pacific 3Q 2018 EBIT YoY Bridge
Asia Pacific 3Q 2018 EBIT YoY Bridge (Mils) Exchange $ (87) China JVs (279) JV Royalties (52) Other (2) • AP EBIT down $522M YoY – $480M in China and $42M in other markets • All factors unfavorable Volume / Net 3Q 2017 Mix Pricing Cost Other 3Q 2018 Market Factors $(50) 28
Slide 29: China 3Q 2018 EBIT YoY Bridge
China 3Q 2018 EBIT YoY Bridge (Mils) • 3Q China operations an EBIT loss of $378M, down $480M YoY • Decline due to lower volume and net pricing in China JVs and unfavorable market factors for Explorer and Lincoln imports Net Equity Income $(279) • Lower volume at the China JVs Royalties (67) drove lo
Slide 30: Mobility Key Metrics And 3Q 2018 EBIT YoY Bridge
Mobility Key Metrics And 3Q 2018 EBIT YoY Bridge (Mils) Key Metrics THIRD QUARTER YEAR TO DATE 2017 2018 H / (L) 2017 2018 H / (L) EBIT (Mils) $ (72) $ (196) $ (124) $ (199) $ (479) $ (280) • Mobility EBIT reflects increased investment in our AV business development and mobility 3Q 2018 EBIT YoY Bri
Slide 31: Ford Credit 3Q 2018 EBT YoY Bridge
Ford Credit 3Q 2018 EBT YoY Bridge (Mils) Residual Losses $50 • Ford Credit EBT $78M higher YoY Supplemental Depreciation 38 • Improvement reflects favorable lease residual performance due to higher auction values; also reflects favorable volume and mix Volume / Financing Credit Lease 3Q 2017 Mix Ma
Slide 32: Ford Credit U.S. Automotive Financing Trends
Ford Credit U.S. Automotive Financing Trends Lease Share of Retail Sales (Pct) Lease Return Vol. (000) and Auction Values** Ford Credit Industry* 36-Month Return Volume $18,760 $18,290 $17,795 $17,545 $17,460 $17,425 30% 31% 30% 28% 28% 29% • 3Q lease share lower 80 71 71 70 61 68 sequentially and b
Slide 33: Company Cash Flow
Company Cash Flow (Bils) THIRD QUARTER YEAR TO DATE 2017 2018 2017 2018 Company Adjusted EBIT* $ 2.3 $ 1.7 $ 7.6 $ 5.5 Excluding: Ford Credit EBT (0.6) (0.7) (1.7) (2.0) Subtotal $ 1.7 $ 1.0 $ 5.9 $ 3.6 Capital spending $ (1.7) $ (2.0) $ (4.9) $ (5.6) Depreciation and tooling amortization 1.3 1.4 3.
Slide 34: Other Highlights
Other Highlights NORTH AMERICA EUROPE MOBILITY • Transit U.S. sales were up 28%, with 35,051 • Ford brand #1 in commercial vehicle sales in • GoRide contracted with Detroit Medical vans sold – a record third quarter sales 3Q, with Transit the top-selling nameplate Center to provide its non-emergency
Slide 35: Cautionary Note On Forward-Looking Statements
Cautionary Note On Forward-Looking Statements Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptio
Slide 36: Appendix Additional Materials
APPENDIX ADDITIONAL MATERIALS Special Items A1 2018 Results A2 2017 Results A3 Adjusted Return on Invested Capital A4 Revised Reporting – Adjusted ROIC A5 Shareholder Distributions A6 RECONCILIATIONS TO GAAP Adjusted EBIT A7 Adjusted Operating Cash Flow A8 Adjusted Operating Cash Flow – Trailing 5 Q
Slide 37: Company Special Items
Company Special Items (Mils) 3Q YTD Memo: 2017 2018 2017 2018 FY 2017 Pension and OPEB gain / (loss) Year end net pension and OPEB remeasurement $ - $ - $ - $ - $ (162) Other pension remeasurement - - - 26 - Pension curtailment - - - 15 354 Total Pension and OPEB gain / (loss) $ - $ - $ - $ 41 $ 192
Slide 38: 2018 Results
2018 Results (Mils) 2018 1Q 2Q 3Q YTD North America $ 1,935 $ 1,753 $ 1,960 $ 5,648 South America (149) (178) (152) (479) Europe 119 (73) (245) (199) Middle East & Africa (54) 49 47 42 Asia Pacific (119) (394) (208) (721) Automotive $ 1,732 $ 1,157 $ 1,402 $ 4,291 Mobility (102) (181) (196) (479) Fo
Slide 39: 2017 Results
2017 Results (Mils) 2017 1Q 2Q 3Q 4Q Full Year North America $ 2,130 $ 2,332 $ 1,824 $ 1,771 $ 8,057 South America (237) (177) (150) (189) (753) Europe 209 122 (53) 89 367 Middle East & Africa (75) (49) (56) (66) (246) Asia Pacific 148 167 314 30 659 Automotive $ 2,175 $ 2,395 $ 1,879 $ 1,635 $ 8,08
Slide 40: Adjusted Return On Invested Capital Calculation
Adjusted Return On Invested Capital Calculation (Bils) Four Quarters Four Quarters Ending 3Q 2017 Ending 3Q 2018 Adjusted Net Operating Profit After Cash Tax (Bils) (Bils) Net income attributable to Ford $ 4.4 $ 6.3 Add: Non-controlling interest 0.0 0.0 Less: Income tax (0.7) 0.1 Add: Cash tax (0.7)
Slide 41: Revised Reporting – Adjusted ROIC
Revised Reporting – Adjusted ROIC (Bils) 2013 2014 2015 2016 2017 Adjusted Net Operating Profit After Cash Tax (Bils) (Bils) (Bils) (Bils) (Bils) Net income attributable to Ford $ 11.9 $ 1.3 $ 7.3 $ 4.6 $ 7.7 Add: Non-controlling interest (0.0) (0.0) (0.0) 0.0 0.0 Less: Income tax (2.4) (0.0) (2.9)
Slide 42: Shareholder Distributions
Shareholder Distributions (Bils) Supplemental Dividend $18.4 Anti-Dilutive Share Repurchases Regular Dividends $1.7 $2.9 • 2018 planned distributions of $3.1B for a total of $18.4B for 2012 - 2018 • Paid a third quarter regular dividend of 15¢ per share $13.8 $3.5 $2.7 $3.1 $2.3 $1.0 $0.6 $2.4 $1.7
Slide 43: Company Net Income Reconciliation To Adjusted EBIT
Company Net Income Reconciliation To Adjusted EBIT (Mils) 3Q YTD Memo: 2017 2018 2017 2018 FY 2017 Net income / (Loss) attributable to Ford (GAAP) $ 1,572 $ 991 $ 5,211 $ 3,793 $ 7,731 Income / (Loss) attributable to non-controlling interests 7 2 22 14 26 Net income / (Loss) $ 1,579 $ 993 $ 5,233 $
Slide 44: Net Cash From Operating Activities Reconciliation To Adjusted Operating Cash Flow
Company Net Cash Provided By / (Used In) Operating Activities Reconciliation To Adjusted Operating Cash Flow (Mils) 3Q YTD 2017 2018 2017 2018 Company net cash provided by / (used in) operating activities (GAAP) $ 4,998 $ 5,179 $ 14,949 $ 13,665 Less: Items not included in Company Adjusted Operating
Slide 45: Reconciliation To Adjusted Operating Cash Flow Trailing Five Quarters
Reconciliation To Adjusted Operating Cash Flow Trailing Five Quarters (Mils) 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 Company net cash provided by / (Used in) operating activities (GAAP) $ 4,998 $ 3,147 $ 3,514 $ 4,972 $ 5,179 Less: Items Not Included in Company Adjusted Operating Cash Flows Ford Cre
Slide 46: Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share
Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share 3Q YTD 2017 2018 2017 2018 Diluted After-Tax Results (Mils) Diluted after-tax results (GAAP) $ 1,572 $ 991 $ 5,211 $ 3,793 Less: Impact of pre-tax and tax special items (170) (183) (363) (197) Adjusted net income – diluted (Non
Slide 47: Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate
Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate 2018 Memo: 3Q YTD FY 2017 Pre-Tax Results (Mils) Income / (Loss) before income taxes (GAAP) $ 1,094 $ 4,362 $ 8,159 Less: Impact of special items (231) (250) (289) Adjusted earnings before taxes (Non-GAAP) $ 1,325 $ 4,612 $ 8,4
Slide 48: Ford Credit Total Net Receivables Reconciliation To Managed Receivables
Ford Credit Total Net Receivables Reconciliation To Managed Receivables (Bils) 2016 2017 2017 2018 Dec 31 Sep 30 Dec 31 Sep 30 Ford Credit finance receivables, net (GAAP)* $ 96.2 $ 103.9 $ 108.4 $ 107.9 Net investment in operating leases (GAAP)* 27.2 26.9 26.7 27.6 Consolidating adjustments** 6.8 6.
Slide 49: Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage
Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage (Bils) 2017 2017 2018 Sep 30 Dec 31 Sep 30 Leverage Calculation Total debt* $ 132.4 $ 137.8 $ 138.2 Adjustments for cash** (11.3) (11.8) (12.1) Adjustments for derivative accounting*** (0.2) - 0.6 Total adjusted debt $ 120.9
Slide 50: Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measures That Supplement GAAP Measures We use both GAAP and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. The non-GAAP measures listed below are intended to be considered by users as supplemental
Slide 51: Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measures That Supplement GAAP Measures • Company Adjusted Operating Cash Flow (Most Comparable GAAP Measure: Net Cash Provided By / (Used In) Operating Activities) – Measure of Company’s operating cash flow excluding Ford Credit’s operating cash flows. The measure contains element
Slide 52: Definitions And Calculations
Definitions And Calculations Automotive Records • References to Automotive records for EBIT margin and business units are since at least 2009 Wholesales and Revenue • Wholesale unit volumes include all Ford and Lincoln badged units (whether produced by Ford or by an unconsolidated affiliate) that ar