Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Company — Q1 2018 Earnings Presentation
55 slides from Ford Mtr Co Del's earnings presentation, Apr 25, 2018
Slide 1: 1Q Earnings Review
1Q Earnings Review April 25, 2018
Slide 2: Quarter Highlights
Quarter Highlights Leadership in Trucks and SUVs Revenue growth NA launch of all-new Expedition and Lincoln Navigator; increasing production to meet surging customer demand Continued strength in F-150, Super Duty and SUVs Solid Company EBIT First-ever Ranger Raptor in Asia Pacific Strong
Slide 3: Transformation Objectives; New Near-Term Targets
Transformation Objectives; New Near-Term Targets Near-Term Targets Objectives 2018 2020 EBIT TARGET Fitness: Identify and MARGIN Trough 8% ACCELERATED TO 2020 FROM 2022 capture improvements in cost and efficiencies; reduce capital intensity of Fitness business ROIC Trough High Teens Focus capita
Slide 4: Focusing Capital On High-Margin, High-Growth Businesses
Focusing Capital On High-Margin, High-Growth Businesses ROIC (%) HIGHLY ACCRETIVE + Circle size = 2017 +/- EBIT (Bils) • Taking the necessary actions, 50% with urgency, to optimize 150% of Company portfolio and drive profitable 40% EBIT growth with appropriate returns 30% High Performing • Shifting
Slide 5: Fitness: Improved Operating Leverage
Fitness: Improved Operating Leverage Examples Engineering / Product Marketing & Optimize Development Sales digital Marketing & Improve • One third of $11.5 billion in Sales media ROI benefits captured by 2020 $11.5B Cost & • Supports acceleration of 8% Efficiencies Optimize Company EBIT margin targe
Slide 6: Fitness: Capital Efficiency
Fitness: Capital Efficiency Cumulative Examples: $34B Reduction Manufacturing $5B • Target reduction in cumulative capital spend of $5 billion over Re-use of equipment and Plan period tools • Spend reaches high point of $7.5 billion in 2018, then declines Common modules to $29B account for 70 percen
Slide 7: Smart Choices for Value Creation
Smart Choices for Value Creation Our Freedom of movement drives human progress. Belief Our To become the world’s most trusted mobility company, Aspiration designing smart vehicles for a smart world. • Taking appropriate action to drive profitable growth and Passion for Product & Deep Customer Insigh
Slide 8: Financial Review
Bob Shanks Chief Financial Officer Financial Review
Slide 9: Company Key Metrics Summary
Company Key Metrics Summary • Top line mixed with revenue higher than a year ago FIRST QUARTER 2017 2018 H / (L) • Volume lower due to China unconsolidated operations; Wholesales (000) 1,703 1,662 (2.0) % consolidated operations higher Market Share (Pct) 7.1 % 6.5 % (0.6) ppts • Net income at $1.7B,
Slide 10: Company Key Financial Trends
Company Key Financial Trends Company Revenue (Bils) Company Adjusted EBIT Margin (Pct) $41.3 $42.0 $39.1 $39.9 7.0% $36.5 6.4% 6.3% 4.9% 5.2% 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Company Adjusted EBIT (Bils) Company Operating Cash Flow (Bils) $3.0 $2.0 $2.2
Slide 11: 1Q 2018 Company Results (Mils)
1Q 2018 Company Results (Mils) $2,185 $1,732 $1,736 • Auto and Ford Credit results drove Company adjusted EBIT; EBIT losses at Mobility and Corporate Other $641 • Interest On Debt about $23 unchanged from year ago $(102) $(86) $(183) • Special items minor and about $(289) the same as a year ago Taxe
Slide 12: 1Q 2018 Automotive EBIT By Region (Mils)
1Q 2018 Automotive EBIT By Region (Mils) $1,935 $1,732 • Auto EBIT driven by NA with Europe also profitable $(203) • Operations outside NA at an EBIT loss in total, $248M worse than a year ago driven by AP $119 • YoY decline in Auto EBIT driven by AP, NA and Europe $(54) $(119) $(149) North South Mi
Slide 13: Automotive Key Metrics
• Auto top-line metrics mixed Automotive Key Metrics YoY; financial metrics lower FIRST QUARTER • Global SAAR up 7%; all regions higher. Largest increase in AP, 2017 2018 H / (L) mainly China Global SAAR (Mils) 89.1 95.5 7 % • Global market share lower; primarily China, U.S. and U.K. Market Share (P
Slide 14: Automotive 1Q 2018 EBIT YoY Bridge (Mils)
Automotive 1Q 2018 EBIT YoY Bridge (Mils) • Auto EBIT $443M lower YoY due to higher commodity cost and unfavorable exchange Exchange $(240) China JVs (136) • Higher volume reflects Other 20 favorable stock changes in NA • Mix adverse due to unfavorable Industry $ 224 product mix in NA Share (442) St
Slide 15: North America Key Metrics
• NA topline metrics up YoY; North America Key Metrics financial metrics lower FIRST QUARTER • NA SAAR and U.S. SAAR up slightly 2017 2018 H / (L) • NA market share lower due to SAAR (Mils) 21.4 21.6 1 % U.S. retail, primarily Escape U.S. 17.4 17.6 1 % and Fusion, and planned lower rental sales Mark
Slide 16: North America 1Q 2018 EBIT YoY Bridge (Mils)
North America 1Q 2018 EBIT YoY Bridge (Mils) Exchange $ (83) Parts & Accessories 23 • NA EBIT down $195M, more Other 36 than explained by higher commodities Industry $ 167 • Higher volume due to favorable Share (373) Stocks 569 stock changes driven by Focus Commodities $(318) Mix (44) Other Contribu
Slide 17: U.S. – New Products Delivering What Customers Want
U.S. – New Products Delivering What Customers Want FRESHER VEHICLE PORTFOLIO TRUCKS COMMERCIAL VEHICLES SIGNIFICANT PRODUCT • F-Series has highest transaction price and • Three of top four best-selling vans in the U.S. REFRESH highest share in its segment • Revealed new Transit Connect with all-new
Slide 18: South America Key Metrics
• Most metrics improved YoY as economic recoveries in Brazil South America Key Metrics and Argentina gain traction FIRST QUARTER • SA SAAR up 18%, with Brazil up YoY for 4th consecutive 2017 2018 H / (L) quarter SAAR (Mils) 3.9 4.6 18 % • SA market share down due to Brazil 2.0 2.5 25 % markets outsi
Slide 19: South America 1Q 2018 EBIT YoY Bridge (Mils)
South America 1Q 2018 EBIT YoY Bridge (Mils) Industry $55 Share (4) Stocks 16 Mix 9 • SA loss narrowed $88M due to Other (9) higher net pricing and volume • Cost up due to continued high local inflation and commodities Commodities $(36) Other Inflationary Costs (56) Other (9) Volume / Net 1Q 2017 Mi
Slide 20: Europe Key Metrics
• Europe key metrics mixed YoY, Europe Key Metrics including decline in financial metrics FIRST QUARTER • Europe SAAR up 6%, although 2017 2018 H / (L) U.K. down 3% – 5th quarterly consecutive YoY decline SAAR (Mils) 20.5 21.7 6 % • Europe market share down due Market Share (Pct) 8.0 % 7.6 % (0.4) p
Slide 21: Europe 1Q 2018 EBIT YoY Bridge (Mils)
• Europe EBIT $90M lower due to Europe declines in all factors other than 1Q 2018 EBIT YoY Bridge (Mils) net pricing • Although wholesales unchanged, volume adverse due to U.K. Commodities $(113) • Unfavorable mix includes lower Other Contribution Cost 20 diesel mix, consistent with Structural Cost
Slide 22: Europe – SUV And CV Growth; Product Renaissance Underway
Europe – SUV And CV Growth; Product Renaissance Underway FRESHER VEHICLE PORTFOLIO FOCUS FORD SUV SALES • All-new Focus in dealerships by summer • Record EcoSport and Kuga sales in February • Technology: Internet connectivity, Co-Pilot360 • 1Q sales up 15% Significant suite of driver assist technolo
Slide 23: Middle East & Africa Key Metrics
Middle East & Africa Key Metrics • MEA topline metrics lower YoY; key financial metrics improved FIRST QUARTER • MEA SAAR up 3%; down 9% in 2017 2018 H / (L) markets where we participate SAAR (Mils) 3.7 3.8 3 % • MEA market share lower due mainly to Southern Africa Market Share (Pct) 3.8 % 3.2 % (0.
Slide 24: Middle East & Africa 1Q 2018 EBIT YoY Bridge (Mils)
Middle East & Africa 1Q 2018 EBIT YoY Bridge (Mils) • MEA loss improved $21M YoY • All factors improved except volume and mix Volume / Net 1Q 2017 Mix Pricing Cost Other 1Q 2018 Market Factors $(14) 24
Slide 25: Asia Pacific Key Metrics
• Other than revenue, all AP key Asia Pacific Key Metrics metrics down YoY due to China FIRST QUARTER • AP SAAR up 4.3M units; China 2017 2018 H / (L) up 3.2M units SAAR (Mils) 39.6 43.8 11 % • AP market share lower due to China 23.4 26.6 14 % China passenger vehicle Market Share (Pct) 3.3 % 2.7 % (
Slide 26: Asia Pacific 1Q 2018 EBIT YoY Bridge (Mils)
Asia Pacific 1Q 2018 EBIT YoY Bridge (Mils) Industry $ 28 Share (37) Stocks 16 • AP EBIT YoY decline of $267M Mix 26 due mainly to China – lower Other (60) equity income from China JVs and lower net pricing, mainly $148 China JVs $(136) Exchange (26) industry-related, for Ford and Other (17) Lincoln
Slide 27: Asia Pacific – Progress On 2025 Growth Plan Starts In Second Half
Asia Pacific – Progress On 2025 Growth Plan Starts In Second Half FRESHER VEHICLE PORTFOLIO CHINA MARKETS OUTSIDE OF CHINA • New Escort and all-new Focus built in China • Best 1Q sales in non-China markets* • First two Quick Lane stores open – plan for 100 by • Improving business performance in Indi
Slide 28: Mobility Key Metrics And 1Q 2018 EBIT YoY Bridge (Mils)
Mobility Key Metrics And 1Q 2018 EBIT YoY Bridge (Mils) Key Metrics FIRST QUARTER • Mobility EBIT loss increased by $38 million; reflects increased 2017 2018 H / (L) investments in AV development EBIT (Mils) $ (64) $ (102) $ (38) • Loss includes one-time investment gain at Smart Mobility of about $5
Slide 29: Mobility – Gaining Traction And Piloting Human-Centered AV Services
Mobility – Gaining Traction And Piloting Human-Centered AV Services GAINING TRACTION AV BUSINESS MOBILITY APP • Launched AV business operations in • FordPass and Miami-Dade County Lincoln Way • Set up first AV terminal for fleet management industry-leading OEM INDUSTRY LEADING OEM APP consumer app i
Slide 30: Ford Credit Key Metrics
Ford Credit Key Metrics FIRST QUARTER 2017 2018 H / (L) Net Receivables (Bils) $ 133 $ 148 11 % • Strong 1Q EBT up 33% YoY Managed Receivables* (Bils) $ 140 $ 156 11 % • Receivables up globally, led by Loss-to-Receivables** (LTR) 54 bps 51 bps (3) bps retail financing in all segments Auction Values*
Slide 31: Ford Credit 1Q 2018 EBT YoY (Mils)
Ford Credit 1Q 2018 EBT YoY (Mils) • YoY EBT improvement of $160M • All factors positive, except Other due to derivatives market Residual Losses $80 Supplemental Depreciation (30) valuation Derivatives Market Valuation $ (49) • Volume and mix higher due to Operating Costs & Other 11 global receivabl
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 $17,665 $17,385 $17,365 $17,325 • Lease share continues to be $17,090 $16,935 below industry reflecting Ford 31% 30% 31% 29% 28% 28
Slide 33: Company Cash Flow (Bils)
Company Cash Flow (Bils) 1Q 2017 1Q 2018 Company Adjusted EBIT* $ 2.5 $ 2.2 Excluding: Ford Credit EBT (0.5) (0.6) • Positive 1Q Company operating Subtotal $ 2.0 $ 1.6 cash flow driven by EBIT, favorable working capital and Capital spending $ (1.7) $ (1.8) Depreciation and tooling amortization 1.2 1
Slide 34: Company Balance Sheet And Liquidity (Bils)
Company Balance Sheet And Liquidity (Bils) 2017 2018 Company excl. Ford Credit Dec 31 Mar 31 Company Cash* $ 26.5 $ 27.6 Liquidity 37.4 38.6 • Company cash and liquidity Debt $ 16.5 $ 16.4 balances strong Cash Net Of Debt 10.0 11.2 • Expect by April 26 to extend Company Balance Sheet Underfunded Sta
Slide 35: 2018 FY Outlook
2018 FY Outlook Company Guidance Business Units EBIT B / (W) Key Metric 2018 Guidance Key Drivers 2017 Modestly higher than Automotive / Asia Pacific and North America Revenue 2017 North America Higher commodities and spending related Adjusted EPS* $1.45 - $1.70 South America Improved market factors
Slide 36: Questions & Answers
Questions & Answers
Slide 37: Smart Choices for Value Creation
Smart Choices for Value Creation Our Freedom of movement drives human progress. Belief • Decisive action to drive Our To become the world’s most trusted mobility company, profitable growth and maximize Aspiration designing smart vehicles for a smart world. returns Passion for Product & Deep Customer
Slide 38: 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 39: Appendix
APPENDIX SUPPLEMENTAL DATA Shareholder Distributions A1 Return on Invested Capital A2 Special Items A3 U.S. Transaction Prices, Incentives, Days Supply and Retail Sales A4 Revised Reporting – 2015 / 2016 A5 Revised Reporting – 2017 A6 Revised Reporting – ROIC A7 RECONCILIATIONS TO GAAP Adjusted EBIT
Slide 40: Shareholder Distributions (Bils)
Shareholder Distributions (Bils) Supplemental Dividend $18.3 Anti-Dilutive Share Repurchases Regular Dividends $1.7 $2.8 • 2018 planned distributions of about $3B for a total of $18.3B for 2012 - 2018 • Paid a first quarter regular dividend of 15¢ per share and a supplemental dividend of $13.8 13¢ p
Slide 41: Return On Invested Capital Calculation (Bils)
Return On Invested Capital Calculation (Bils) Four Quarters Four Quarters Ending 1Q 2017 Ending 1Q 2018 Net Operating Profit After Tax (NOPAT) Net income attributable to Ford $ 3.7 $ 7.9 Add: Non-controlling interest 0.0 0.0 Less: Income tax (1.6) 0.1 Add: Cash taxes (0.7) (0.7) Less: Interest on de
Slide 42: Company Special Items (Mils)
Company Special Items (Mils) 1Q Memo: 2017 2018 FY 2017 Pension and OPEB gain / (loss) Year end net pension and OPEB remeasurement loss $ - $ - $ (162) Other pension remeasurement gain - 26 - Pension curtailment gain - 15 354 Separation-related actions (22) (9) (297) Other Items San Luis Potosi plan
Slide 43: U.S. Transaction Prices, Incentives and Days Supply
U.S. Transaction Prices, Incentives and Days Supply First Quarter Ford Industry YoY Average Transaction Price* $ 1,646 $ 879 YoY Incentive Change as Pct. Of Vehicle Price* (0.2) - U.S. Gross Days Supply 84 68 * Source: J.D. Power PIN ISR data – cash / APR / lease (blended) transaction; industry data
Slide 44: Revised Reporting – 2015 And 2016 (Mils)
Revised Reporting – 2015 And 2016 (Mils) 2015 2016 Full Year 1Q 2Q 3Q 4Q Full Year North America $ 9,500 $ 3,178 $ 2,813 $ 1,383 $ 2,008 $ 9,382 South America (800) (249) (257) (287) (284) (1,077) Europe 350 461 495 168 194 1,318 Middle East & Africa 45 (10) (61) (148) (66) (285) Asia Pacific 827 24
Slide 45: Revised Reporting – 2017 (Mils)
Revised Reporting – 2017 (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 $
Slide 46: Revised Reporting – ROIC (Bils)
Revised Reporting – ROIC (Bils) 2013 2014 2015 2016 2017 Net Operating Profit After Tax (NOPAT) 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) (2.2) (0.4) Add: Cash taxes (0.5) (0.5) (0.6) (0.7
Slide 47: Company Net Income Reconciliation To Adjusted EBIT (Mils)
Company Net Income Reconciliation To Adjusted EBIT (Mils) 1Q Memo: 2017 2018 FY 2017 Net income / (Loss) attributable to Ford (GAAP) $ 1,592 $ 1,736 $ 7,731 Income / (Loss) attributable to non-controlling interests 7 9 26 Net income / (Loss) $ 1,599 $ 1,745 $ 7,757 Less: (Provision for) / Benefit fr
Slide 48: Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate
Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate Memo: 1Q 2018 FY 2017 Pre-Tax Results (Mils) Income / (Loss) before income taxes (GAAP) $ 1,919 $ 8,159 Less: Impact of special items 23 (289) Adjusted earnings before taxes (Non-GAAP) $ 1,896 $ 8,448 Taxes (Mils) (Provision fo
Slide 49: Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share
Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share 1Q 2017 1Q 2018 Diluted After-Tax Results (Mils) Diluted after-tax results (GAAP) $ 1,592 $ 1,736 Less: Impact of pre-tax and tax special items 9 19 Adjusted net income – diluted (Non-GAAP) $ 1,583 $ 1,717 Basic and Diluted Sha
Slide 50: Net Cash From Operating Activities Reconciliation To Company Operating Cash Flow
Company Net Cash Provided By / (Used in) Operating Activities Reconciliation To Company Operating Cash Flow (Mils) 1Q 2017 2018 Company net cash provided by / (Used in) operating activities (GAAP) $ 4,336 $ 3,514 Less:Items not included in Company operating cash flows Ford Credit operating cash flow
Slide 51: Ford Credit Total Net Receivables Reconciliation To Managed Receivables (Bils)
Ford Credit Total Net Receivables Reconciliation To Managed Receivables (Bils) 2017 2017 2018 Mar 31 Dec 31 Mar 31 Ford Credit finance receivables, net (GAAP)* $ 99.3 $ 108.4 $ 111.8 Net investment in operating leases (GAAP)* 26.4 26.7 26.7 Consolidating adjustments** 7.3 7.6 9.2 Total net receivabl
Slide 52: Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage (Bils)
Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage (Bils) 2017 2017 2018 Mar 31 Dec 31 Mar 31 Leverage Calculation Total debt* $ 129.2 $ 137.8 $ 142.0 Adjustments for cash** (11.3) (11.8) (11.8) Adjustments for derivative accounting*** (0.2) - 0.3 Total adjusted debt $ 117.7
Slide 53: 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 54: Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measures That Supplement GAAP Measures • Ford Credit Managed Receivables – (Most Comparable GAAP Measure: Net Finance Receivables plus Net Investment in Operating Leases) – Measure of Ford Credit’s Total net receivables, excluding unearned interest supplements and residual support
Slide 55: 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