Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Company — Ford University 2016
36 slides from Ford Mtr Co Del's conference presentation, Jul 15, 2016
Slide 1: Ford University
FORD UNIVERSITY July 15, 2016
Slide 2: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 3: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 4: Changes in Sector and Segment Reporting
CHANGES IN SECTOR AND SEGMENT REPORTING What We Are Changing Beginning with our second quarter results, we are making changes to our reporting in our 10-Q financial statements – Our 10-Q will only have consolidated financial statements, similar to how our competitors show results – Automotive and
Slide 5: Change in Segments
CHANGE IN SEGMENTS Financial Services Automotive Sector Sector Middle Prior North South Europe East & Asia Other Special FMCC Other America America Pacific Segment Segment Segment Segment Africa Segment Auto Items Segment FSG Segment Structure New Segment All Other Financial Structure Automotive Spe
Slide 6: Impact to Automotive Key Metrics Slide
IMPACT TO AUTOMOTIVE KEY METRICS SLIDE Title now reflects new Automotive Segment Slide: 1Q 2016 Ford Motor Company 10-Q and Earnings Announcement No change to Wholesales, Revenue, Market Share, and Operating Margin metrics Automotive Sector Pre-tax Results (as shown) included Other Automotive;
Slide 7: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES Non-GAAP Measure Most Comparable GAAP Measure Total Company Adjusted Pre-tax Result Net income attributable to Ford Adjusted Earnings Per Share Earnings Per Share Adjusted Effective Tax Rate Effective Tax Rate Ford Credit Managed Receivables Net Finance Receivables
Slide 8: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 9: Variance Analysis – Overview
VARIANCE ANALYSIS – OVERVIEW Slide: Ford Motor Company, 1Q 2016 Earnings Review YoY changes in pre-tax results excluding special items focus on six causal factors: – Volume / Mix – Net Pricing – Contribution Cost – Structural Cost – Exchange – Other China JV results included in all 6 causal fact
Slide 10: Variance Analysis – Volume and Mix
VARIANCE ANALYSIS – VOLUME AND MIX Slide: Ford Motor Company, 1Q 2016 Earnings Review Volume is the change in wholesale volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks Mix is the change in product mix, including m
Slide 11: Variance Analysis – Net Pricing
VARIANCE ANALYSIS – NET PRICING Slide: Ford Motor Company, 1Q 2016 Earnings Review Net Pricing is calculated at present- year volume, mix and exchange Net Pricing changes are driven by the following: – Pricing – changes in wholesale prices to dealers – Incentives – marketing incentive programs,
Slide 12: Variance Analysis – Contribution Cost
VARIANCE ANALYSIS – CONTRIBUTION COST Slide: Ford Motor Company, 1Q 2016 Earnings Review Contribution cost is calculated at present-year volume, mix and exchange Measures per-unit changes in cost categories that vary with volume. These include: – Material (incl. commodities) – Warranty expense –
Slide 13: Variance Analysis – Structural Cost
VARIANCE ANALYSIS – STRUCTURAL COST Slide: Ford Motor Company, 1Q 2016 Earnings Review Structural cost variances are driven by absolute changes in cost categories that do not have a directly proportionate relationship to volumes measured at present-year exchange Cost categories include: – Manufa
Slide 14: Variance Analysis – Exchange & Other
VARIANCE ANALYSIS – EXCHANGE & OTHER Slide: Ford Motor Company, 1Q 2016 Earnings Review Exchange includes transactional and translational changes in foreign exchange and hedging Other includes a variety of items, such as parts and services profits, royalties, government incentives and performanc
Slide 15: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 16: Cash Flow
CASH FLOW Automotive operating cash flow represents Slide: Ford Motor Company, 1Q Earnings – 2Q Proforma the ability of the automotive business to generate cash and includes: – Automotive Segment pre-tax profits – Net capital spending – Changes in working capital – All Other and Timing differences
Slide 17: Key Drivers of Changes to Working Capital
KEY DRIVERS OF CHANGES TO WORKING CAPITAL Elements of Working Capital Key Drivers Production Volumes: customer demand, Payables seasonality for plant shutdowns, launch schedules Supplier payment terms changes Finished vehicle inventory, including units in-transit Inventory Work-in-Process an
Slide 18: Key Drivers of Timing Differences
KEY DRIVERS OF TIMING DIFFERENCES Drivers Effects Profit Cash Flow Warranty Wholesale or reserve Upon service of vehicle adjustment Marketing – incentive, rebates, etc. Wholesale or reserve Retail sale adjustment Performance compensation Throughout year First Quarter of following year Joint venture
Slide 19: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 20: Warranty Overview
WARRANTY OVERVIEW Description Warranty Elements Description Full vehicle coverage Base Coverages Extended coverage for selected components, e.g., Powertrain Safety Recalls Field Service Actions Emission Recalls Other Product Campaigns Customer Roadside Assistance Satisfaction Actions T
Slide 21: Base Coverages
BASE COVERAGES History Accrual Reserve Adequacy Historical warranty claims Initial Accrual Conduct quarterly reserve are used in the development reviews to: of lifetime warranty cost per Cost Per Unit – Ensure lifetime Cost Per Unit unit estimates are aligned with actual The cost per unit ca
Slide 22: Field Service Actions
FIELD SERVICE ACTIONS History Accrual Reserve Adequacy An average of the most recent Initial Accrual Conduct review of approved seven model years of history to Field Service Action programs develop Cost Per Unit Cost Per Unit Evaluate reserve to verify 2017 Model Year Cost Per Unit adequat
Slide 23: Agenda
Agenda Ford Changes in Sector and Segment Reporting Use of Non-GAAP Financial Measures Variance Analysis Cash Flow and Working Capital Changes Warranty Reserves Ford Credit Lease Accounting & Profit Reporting Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) As
Slide 24: Lease Accounting Example
LEASE ACCOUNTING EXAMPLE WITH NO RESIDUAL GAIN / LOSS Generally, depreciation for leases is the sum of base Lease Accounting Example: Acquisition Cost = MSRP $ 30,000 and supplemental depreciation, net of Contract Lease-end Value (LEV) 15,600 (52% MSRP) residual support Ford Credit Projected Residua
Slide 25: Lease Accounting Example with Residual Loss
LEASE ACCOUNTING EXAMPLE WITH RESIDUAL LOSS Auction value projections are assessed quarterly Lease Accounting Example: and changes are made accordingly Acquisition Cost = MSRP $ 30,000 Contract Lease-end Value (LEV) 15,600 (52% MSRP) In this example, the projected residual is lowered Ford Credit
Slide 26: Variance Analysis – Lease Residual (Mils)
VARIANCE ANALYSIS – LEASE RESIDUAL (MILS) Slide: Ford Motor Credit Company, 1Q 2016 Earnings Review Lease Residual performance is reported at prior period exchange rates. It reflects Residual Gains and Losses plus Change in Accumulated Supplemental Depreciation Lease Residual performance is affe
Slide 27: Q&A
Q&A 27
Slide 28: 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 29: Appendix
Appendix Non-GAAP Financial Measures Return On Invested Capital (ROIC) Asia Pacific Structure 29
Slide 30: Non-GAAP Financial Measures That Supplement GAAP Measures
NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES We use non-GAAP financial measures listed below for operational and financial decision making and to assess Company business performance. These non-GAAP measures are intended to be considered by users as supplemental information to their equi
Slide 31: Return on Invested Capital Calculation
RETURN ON INVESTED CAPITAL CALCULATION (Bils) 2014 2015 Approach Net Operating Profit After Tax (NOPAT) Reflects an “all-in” after-tax measure providing Pre-Tax Profit (Incl. Special Items) $ 1.2 $ 10.3 a true return on total capital employed Add Back: Costs Related to Invested Capital Focus is
Slide 32: Ford Return on Invested Capital
FORD RETURN ON INVESTED CAPITAL After-Tax Five-Year Average ROIC* (Pct.) 25% 16% 11% 0% (6)% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 * Based on Ford ROIC methodology ROIC Healthy And Higher Than Cost Of Capital In Majority Of Last Twen
Slide 33: Ford & Competitors Return on Invested Capital
FORD & COMPETITORS RETURN ON INVESTED CAPITAL After-Tax Five-Year Average ROIC* (Pct.) 16% Ford BMW 15% 12% VW 11% Toyota 4% Fiat Group / FCA (1)% GM (5)% 2010 2011 2012 2013 2014 2015 * Based on Ford ROIC methodology. For Fiat Group and GM, cumulative ROIC since 2009 reflecting post-bankruptcy (201
Slide 34: Ford Asia Pacific Financial Results
FORD ASIA PACIFIC FINANCIAL RESULTS China Rest of AP Ford China JVs Ford Costs Ford and Non-China Asia -- & Income Lincoln Asia Pacific Ford Related Vehicles Pacific Equity to JVs Imported Markets Share of for Sale in Note: Costs include Net engineering for Ford global platforms; China Income income
Slide 35: Ford Joint Ventures in China
FORD JOINT VENTURES IN CHINA Changan Ford Changan Ford Ford discloses net income from China Automobile Jiangling Motors Mazda Engine JVs, i.e., after-tax net income at Ford’s Corporation (CAF) Company (JMC) Company (CFME) equity share; 2015 net income $1.5B JV net income reflects component Non-P
Slide 36: Ford Joint Ventures in China
FORD JOINT VENTURES IN CHINA Slide: Ford Motor Company, 1Q 2016 Earnings Review JV results are reflected in these AP key metrics: – Wholesales – Market Share – Operating Margin – Pre-Tax Results JV results are not included in Revenue A7 36