Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Company — Q2 2016 Earnings Presentation
50 slides from Ford Mtr Co Del's earnings presentation, Jul 28, 2016
Slide 1: 2Q 2016 Earnings Review
2Q 2016 EARNINGS REVIEW July 28, 2016 1
Slide 2: Business Review
Business Review Appendix Financial Headlines 3 Business Unit Guidance A1 Creating Value 4 Reconciliations to GAAP Progress This Quarter 5 Non-GAAP Financial Measures A2 Other Highlights 6 Adjusted Pre-Tax Profit A3 Business Environment 7 Adjusted Effective Tax Rate A4 Financial Review Special Items
Slide 3: Financial Headlines
FINANCIAL HEADLINES EPS Total Company Automotive Automotive Total Company Adjusted Pre-Tax Adjusted Total Company Global Segment Segment Net Income Results* EPS* Revenue Market Share Operating Margin Operating Cash Flow 2Q 2016 $2.0B $3.0B $0.52 $39.5B 7.5% 7.7% $4.2B B/(W) $0.2B $0.3B $0.02 $2.2B 0
Slide 4: Creating Value – Progress This Quarter
CREATING VALUE – PROGRESS THIS QUARTER GROWTH RETURNS ! RISK REWARDS Launched new Escape, Record Automotive Upgraded by Fitch Distributed $600 million Fusion, Fusion HEV, Segment operating of dividends to Operations outside of Fusion PHEV, MKZ and cash flow shareholders North America p
Slide 5: Other Highlights
OTHER HIGHLIGHTS Focus RS named Top Gear Ford GT returns to Le Mans and wins Lincoln and Ford improved in the Magazine’s Car of the Year in the GTE Pro category JD Power Initial Quality Study to #7 and #11 respectively Ford 1.0L EcoBoost engine voted Announced F-150 Raptor Launched Sync Connect with
Slide 6: Business Environment
BUSINESS ENVIRONMENT Elevated economic uncertainty restraining business investment, with downside risk to global growth Financial markets continuing to assess outcome of Brexit – Sterling and euro facing downward pressure; global interest rates reverting to recent lows U.S. growth improving af
Slide 7: Financial Review
FINANCIAL REVIEW
Slide 8: Key Financial Summary
KEY FINANCIAL SUMMARY 2Q YTD B / (W) B / (W) 2016 2015 2016 2015 Strong quarter Wholesales (000) 1,694 (2) 3,414 150 Revenue (Bils) $ 39.5 $ 2.2 77.2 6.0 Wholesales flat; revenue Results (Mils) Automotive Segment $ 2,832 $ (130) $ 6,296 $ 1,812 up 6% Financial Services Segment 385 (106) 884 (76) All
Slide 9: Total Company
TOTAL COMPANY 2Q 2016 ADJUSTED PRE-TAX RESULTS* (MILS) $2,832 $2,993 $2,703 Strong Automotive results driven by NA and Europe Financial Services solidly profitable $467 $385 All Other primarily net $(65) $(8) $(224) interest expense $(265) Automotive Segment Financial Automotive and Financial North
Slide 10: 2Q 2016 Key Metrics
AUTOMOTIVE SEGMENT 2Q 2016 KEY METRICS Automotive key metrics mixed from a year ago Wholesales Revenue Market Share Operating Margin Pre-Tax Results (000) (Bils) (Pct) (Pct) (Mils) Wholesales flat; revenue 1,696 1,694 $35.1 $37.0 7.8% 7.5% 8.4% 7.7% $2,962 $2,832 up 5% Global market share lower in a
Slide 11: 2Q 2016 Pre-Tax Results
AUTOMOTIVE SEGMENT 2Q 2016 PRE-TAX RESULTS (MILS) $2,962 $2,832 Industry $185 Material Excl. Commodities $ 98 Share (75) Commodities 386 Stocks (117) Warranty (239) Mix / Other 537 Freight / Other 97 Lower profit driven by Pricing $ 718 Manufacturing Incl. Vol. Related Engineering $ (52) (182) unfav
Slide 12: 2Q 2016 Key Metrics – North America
AUTOMOTIVE SEGMENT – NORTH AMERICA 2Q 2016 KEY METRICS Strong quarter with Wholesales Revenue Market Share Operating Margin Pre-Tax Results operating margin at 11.3% (000) (Bils) (Pct) (Pct) (Mils) Wholesales and revenue 816 815 $23.3 $23.8 14.4% 14.4% 12.2% 11.3% $2,838 $2,703 flat to slightly high
Slide 13: 2Q 2016 Pre-Tax Results – North America
AUTOMOTIVE SEGMENT – NORTH AMERICA 2Q 2016 PRE-TAX RESULTS (MILS) Lower profit driven by higher Ford and industry $2,838 incentives $2,703 Industry $ (6) Commodities $ 342 Share Stocks 132 (188) Warranty Freight / Other (191) 91 Mix remained strong, Mix / Other 373 Pricing $ 323 Engineering $ (69) d
Slide 14: 2Q 2016 Key Metrics – South America
AUTOMOTIVE SEGMENT – SOUTH AMERICA 2Q 2016 KEY METRICS Metrics declined as external conditions remain Wholesales Revenue Market Share Operating Margin Pre-Tax Results (000) (Bils) (Pct) (Pct) (Mils) challenging Top line lower due to 10.0% 98 8.7% industry and exchange 83 $1.5 $1.3 (12.4)% $(185) Mar
Slide 15: 2Q 2016 Pre-Tax Results – South America
AUTOMOTIVE SEGMENT – SOUTH AMERICA 2Q 2016 PRE-TAX RESULTS (MILS) $132 $52 Higher loss mainly due to $(52) $(51) inflation and weaker local $(185) $(161) currencies net of pricing $(265) Industry $(30) plus lower volume Share (50) Stocks 52 $(80) Mix / Other (24) Cost performance continued to be fav
Slide 16: 2Q 2016 Key Metrics – Europe
AUTOMOTIVE SEGMENT – EUROPE 2Q 2016 KEY METRICS Wholesales* Revenue Market Share Operating Margin Pre-Tax Results Strong performance in (000) (Bils) (Pct) (Pct) (Mils) most key metrics 430 7.6% 7.5% 5.8% $8.1 389 $467 Top line improved by $7.0 double digits Europe SAAR higher 2.3% $161 Market share
Slide 17: 2Q 2016 Pre-Tax Results – Europe
AUTOMOTIVE SEGMENT – EUROPE 2Q 2016 PRE-TAX RESULTS (MILS) $306 Industry $ 90 Share (31) $467 Stocks 49 Mix / Other 182 Material Excl. Commodities $153 Record profit driven by Commodities 70 Warranty / Freight / Other (50) favorable market factors, $290 including strongly $173 $161 favorable mix and
Slide 18: 2Q 2016 Key Metrics – Middle East & Africa
AUTOMOTIVE SEGMENT – MIDDLE EAST & AFRICA 2Q 2016 KEY METRICS Weaker external environment – low oil Wholesales Revenue Market Share Operating Margin Pre-Tax Results prices, weak currencies, (000) (Bils) (Pct) (Pct) (Mils) political strife – drove key 44 $1.0 38 $0.9 4.6% 4.4% metrics lower Share dec
Slide 19: 2Q 2016 Key Metrics – Asia Pacific
AUTOMOTIVE SEGMENT – ASIA PACIFIC 2Q 2016 KEY METRICS Loss due to lower China market performance, Wholesales* Revenue Market Share Operating Margin Pre-Tax Results higher cost and weaker (000) (Bils) (Pct) (Pct) (Mils) yuan $2.8 3.9% 7.9% $194 349 328 $2.4 3.6% Wholesales lower due to planned 8 week
Slide 20: 2Q 2016 China Market Share – Asia Pacific
AUTOMOTIVE SEGMENT – ASIA PACIFIC 2Q 2016 CHINA MARKET SHARE* Year over Year By Month 5.3% 4.5% 4.7% 4.4% 4.1% 4.3% (0.5) (0.4) (0.9) ppts ppts ppts 2Q 2015 2Q 2016 Industry Mix / Performance 1Q April May June Segmentation Memo: YoY Pricing Ford (7.9)% (6.5)% (5.3)% Industry (7.1) (6.1) (5.2) * Pres
Slide 21: 2Q 2016 Pre-Tax Results – Asia Pacific
AUTOMOTIVE SEGMENT – ASIA PACIFIC 2Q 2016 PRE-TAX RESULTS (MILS) Manufacturing Incl. Vol. Related $(23) $194 Engineering (79) Spending Related (23) Industry $ 170 Other 21 Most factors unfavorable Share (143) Stocks Mix / Other (46) 11 Warranty Material / Other $(48) 19 YOY $32 Total cost increase d
Slide 22: Financial Services Segment – Ford Credit
FINANCIAL SERVICES SEGMENT – FORD CREDIT 2Q 2016 KEY METRICS U.S. Retail and Lease Net Receivables Managed Receivables* Pre-Tax Results Average Placement Over-60-Day Loss-to-Receivables Delinquencies (LTR) Receivables growth as (Bils) (Bils) (Mils) FICO (Pct) (Pct) expected $134 740 741 $128 $118 $5
Slide 23: 2Q 2016 Pre-Tax Results – Ford Credit
FINANCIAL SERVICES SEGMENT – FORD CREDIT 2Q 2016 PRE-TAX RESULTS (MILS) $506 Receivables growth drove $400 Charge-offs $(34) Insurance Derivatives Market Valuation $(34) (15) volume and mix Reserve (31) Other (8) Residual Gains / (Losses) $(16) Credit losses normalizing Supplemental Depreciation (65
Slide 24: U.S. Automotive Financing Trends
FINANCIAL SERVICES SEGMENT – FORD CREDIT U.S. AUTOMOTIVE FINANCING TRENDS Lease Share of Retail Sales Retail Contract Placement Terms Average Retail Term FMCC lease share Industry* 32% 31% Retail ≥73 Months Mix declined, more than 29% 67 mo. 28% 27% 28% 26% 63 mo. 64 mo. 63 mo. 64 mo. 64 mo. industr
Slide 25: Cash Flow
AUTOMOTIVE SEGMENT CASH FLOW (Bils) 2Q 2016 YTD 2016 Cash at end of period $ 27.2 $ 27.2 Cash at beginning of period 24.3 23.6 Change in Cash $ 2.9 $ 3.6 Automotive Segment pre-tax profits $ 2.8 $ 6.3 Record quarterly and 1H Capital spending Depreciation and tooling amortization (1.7) 1.1 (3.2) 2.2
Slide 26: Balance Sheet Summary
BALANCE SHEET SUMMARY (Bils) 2016 2015 June 30 Dec. 31 Automotive Segment Total cash, cash equivalents and marketable securities $ 27.2 $ 23.6 Available credit lines* 11.0 10.9 Auto cash and liquidity Total liquidity $ 38.2 $ 34.5 balances strong Debt $ 13.1 $ 12.8 Cash net of debt 14.1 10.8 Ford Cr
Slide 27: Industry and GDP Planning Assumptions
INDUSTRY AND GDP PLANNING ASSUMPTIONS GDP Growth (Pct) Industry (Mils) H / (L) H / (L) 2015 2016 Prior 2015 2016 Prior Global industry volume gains in 2016 driven by Global 3.0%* 2.9 – 3.3%* 88.2 90.0 – 92.0 China and Europe U.S. 2.4% 1.9 – 2.3% 17.8 17.4 – 17.9 Outlook for industry volume revised f
Slide 28: First Half vs. Second Half
FIRST HALF VS. SECOND HALF 2H seasonally weaker than Total Company Adjusted Pre-Tax Results (Bils) 1H. Factors driving further weakness this year: $6.8 Super Duty launch – major impact in 3Q Higher commodities / exchange headwinds Brexit risks Non-repeat for 1H favorable one-timers 1H 2016 2
Slide 29: Full Year Outlook
FULL YEAR OUTLOOK Business Unit Outlook Comments North America Higher Ford and industry incentives; lower U.S. retail industry South America On track Europe Improved cost performance net of Brexit Middle East & Africa Lower industry volume and related stock changes Asia Pacific Lower net pricing and
Slide 30: 2016 Company Guidance
2016 COMPANY GUIDANCE 2015 FY 2016 FY Memo: 2016 1H Results Guidance Status Results Total Company Adjusted Pre-Tax Results* $10.8B ≥ 2015 $6.8B Adjusted EPS* $1.93 ≥ 2015 $1.20 Net Risks Automotive Segment Revenue $140.6B ≥ 2015 $72.2B Automotive Segment Operating Margin 6.8% ≥ 2015 8.7% Strong, but
Slide 31: Profit Improvement Actions
PROFIT IMPROVEMENT ACTIONS Matching production to demand, which will reduce manufacturing costs Accelerating company-wide cost-attack plan – building on $1.6 billion improvement already delivered vs. 1H plan Implementing improved go-to-market plans in U.S. and China – which will deliver revenu
Slide 32: Key Takeaways
KEY TAKEAWAYS 1. Achieved strong results for 2Q, including best-ever 2Q pre-tax profit in Europe 2. Increased revenue; wholesale volume flat and global market share lower 3. Delivered best-ever quarterly Auto operating cash flow 4. Continued strong cash and liquidity; distributed $600 million of div
Slide 33: Q&A
Q&A July 28, 2016 Go Further
Slide 34: Risk Factors
RISK FACTORS 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 assumptions by our management and involve
Slide 35: Appendix
APPENDIX
Slide 36: 2016 Business Unit Guidance
2016 BUSINESS UNIT GUIDANCE 2015 FY 2016 FY Memo: 2016 1H Results Guidance Status Results Automotive North America $9,345M ≈ 2015 Risk $5,783M Operating Margin 10.2% 9.5% or Higher Risk 12.1% South America $(832)M Loss > 2015 On Track $(521)M Europe 259M > 2015 Opportunity 901M Middle East & Africa
Slide 37: 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 38: Net Income Reconciliation to Adjusted Pre-Tax Profit
TOTAL COMPANY NET INCOME RECONCILIATION TO ADJUSTED PRE-TAX PROFIT (Mils) 2Q YTD Memo: 2015 2016 2015 2016 FY 2015 Net income / (loss) attributable to Ford (GAAP) $ 2,160 $ 1,970 $ 3,313 $ 4,422 $ 7,373 Income / (Loss) attributable to non-controlling interests 1 2 2 5 (2) Net income $ 2,161 $ 1,972
Slide 39: Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate
TOTAL COMPANY EFFECTIVE TAX RATE RECONCILIATION TO ADJUSTED EFFECTIVE TAX RATE 2016 Memo: 2Q YTD FY 2015 Pre-Tax Results (Mils) Pre-tax results (GAAP) $ 2,875 $ 6,526 $ 10,252 Less: Impact of special items (118) (304) (548) Adjusted Pre-tax results (Non-GAAP) $ 2,993 $ 6,830 $ 10,800 Taxes (Mils) (P
Slide 40: Special Items
TOTAL COMPANY SPECIAL ITEMS (Mils, except amounts per share data) 2Q YTD Memo: 2015 2016 2015 2016 FY 2015 Pre-tax Special Items Separation-related actions $ -- $ (102) $ -- $ (276) $ -- Japan / Indonesia market closure -- (5) -- (17) -- Nemak IPO -- -- -- -- 150 Pension & OPEB remeasurement gains /
Slide 41: Earnings Per Share Reconciliation to Adjusted Earnings Per Share
TOTAL COMPANY EARNINGS PER SHARE RECONCILIATION TO ADJUSTED EARNINGS PER SHARE 2016 2Q YTD Diluted After-Tax Results (Mils) Diluted After-tax results (GAAP) $ 1,970 $ 4,422 Less: Impact of Pre-tax and tax special items (119) (371) Adjusted Net Income (Non-GAAP) $ 2,089 $ 4,793 Basic and Diluted Shar
Slide 42: Total Net Receivables Reconciliation to Managed Receivables
FINANCIAL SERVICES SEGMENT – FORD CREDIT TOTAL NET RECEIVABLES RECONCILIATION TO MANAGED RECEIVABLES Dec. 31, Jun. 30, Dec. 31, Jun. 30, (Bils) 2014 2015 2015 2016 Finance receivables, net $ 86.9 $ 89.5 $ 96.8 $ 101.3 Net investment in operating leases 21.5 23.4 25.1 26.8 Total net receivables* (GAA
Slide 43: Financial Statement Leverage Reconciliation to Managed Leverage
FINANCIAL SERVICES SEGMENT – FORD CREDIT FINANCIAL STATEMENT LEVERAGE RECONCILIATION TO MANAGED LEVERAGE Dec. 31, Mar. 31, Jun. 30, (Bils) 2015 2016 2016 Leverage Calculation Total debt* $ 119.6 $ 127.4 $ 126.3 Adjustments for cash** (11.2) (14.9) (11.6) Adjustments for derivative accounting*** (0.5
Slide 44: Debt
AUTOMOTIVE SEGMENT DEBT (Bils) 2015 2016 Dec. 31 Mar. 31 June 30 Public unsecured debt $ 6.4 $ 6.4 $ 6.4 U.S. Department of Energy 3.8 3.7 3.5 Other debt (including international) 2.6 2.9 3.2 Total Automotive debt $ 12.8 $ 13.0 $ 13.1 Memo: Automotive debt payable within one year $ 1.8 $ 1.9 $ 2.4 A
Slide 45: China Unconsolidated Affiliates
AUTOMOTIVE SEGMENT – ASIA PACIFIC CHINA UNCONSOLIDATED AFFILIATES 2Q YTD Memo: 2015 2016 2015 2016 FY 2015 China Unconsolidated Affiliates Wholesales (000) 273 231 562 541 1,123 Ford Equity Income (Mils)* $ 411 $ 296 $ 771 $ 740 $ 1,515 China JV Net Income Margin 17.3% 16.1% 16.6% 16.3% 15.6% * Ford
Slide 46: 2Q Industry SAAR
AUTOMOTIVE SEGMENT 2Q INDUSTRY SAAR Units (mils) 2Q YTD 2015 2016 B / (W) 2015 2016 B / (W) North America 21.1 21.5 0.4 20.9 21.5 0.6 U.S. 17.6 17.5 (0.1) 17.3 17.5 0.2 South America 4.2 3.6 (0.6) 4.4 3.6 (0.8) Brazil 2.6 2.0 (0.6) 2.8 2.1 (0.7) Europe 19.0 19.7 0.7 19.0 19.9 0.9 Middle East & Afric
Slide 47: 2Q Market Share
AUTOMOTIVE SEGMENT 2Q MARKET SHARE (Percent) 2Q YTD 2015 2016 B / (W) 2015 2016 B / (W) Total Share of Total Industry North America 14.4% 14.4% -- ppts 14.2% 14.5% 0.3 ppts U.S. 15.0 15.3 0.3 14.9 15.4 0.5 South America 10.0 8.7 (1.3) 9.8 8.5 (1.3) Brazil 10.9 8.5 (2.4) 10.7 8.6 (2.1) Europe 7.6 7.5
Slide 48: Production Volumes
AUTOMOTIVE SEGMENT PRODUCTION VOLUMES (000) 2Q 2016 3Q 2016 O / (U) O / (U) Key drivers of 3Q YOY: Units 2015 Units 2015 North America 843 28 710 (82) NA lower – matching production to demand South America 79 (15) 87 2 and Super Duty launch Europe 432 29 295 (82) EU lower – matching Middle East
Slide 49: Dealer Stocks – Selected Markets
AUTOMOTIVE SEGMENT - SELECTED MARKETS DEALER STOCKS (000) U.S. Brazil Europe 21 MEA China 2Q June 30, 2016 728 21 247 65 144 March 31, 2016 755 19 230 70 169 Stock Change H / (L) (27) 2 17 (5) (25) 2Q Prior Year June 30, 2015 611 29 189 68 163 March 31, 2015 619 35 187 73 155 Stock Change H / (L) (8
Slide 50: Definitions and Calculations
DEFINITIONS AND CALCULATIONS Automotive Records References to Automotive records for operating cash flow, operating margin and business units are since at least 2000 Wholesales and Revenue Wholesale unit volumes include all Ford and Lincoln badged units (whether produced by Ford or by an unconso