Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Company — Investor Day (March 2015)
33 slides from Ford Mtr Co Del's investor day presentation, Mar 13, 2015
Slide 1: Ford University
FORD UNIVERSITY Stuart Rowley Vice President and Controller March 13, 2015
Slide 2: Ford University Agenda
FORD UNIVERSITY Agenda for today’s discussion: • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes Appendix • Reference materials • Reconciliations to GAAP Also posted on the Investor Relations website are the
Slide 3: Agenda
AGENDA • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes SLIDE 2
Slide 4: Warranty Overview
WARRANTY OVERVIEW Elements Description Base Coverage • Full vehicle coverage • Extended coverage for selected components -- e.g., Powertrain Field Service Action • Safety Recalls • Emission Recalls • Other Product Campaigns Customer Satisfaction Action • Roadside Assistance • Transportation Assistan
Slide 5: Base Coverages
BASE COVERAGES History Accrual Reserve Adequacy • Historical warranty • Initial Accrual • Conduct quarterly claims are used in the reserve reviews to: development of lifetime Cost Per Unit warranty cost per unit − Ensure lifetime Cost estimates Per Unit are aligned Wholesale Volume with actual claim
Slide 6: Field Service Actions
FIELD SERVICE ACTIONS History Accrual Reserve Adequacy • Average seven model • Initial Accrual • Conduct review of years of history to Cost Per Unit approved Field Service develop Cost Per Unit Action programs Wholesale Volume • 2015 Model Year Cost • Evaluate reserve levels Per Unit is an average r
Slide 7: Global Warranty -- 2014 10-K
GLOBAL WARRANTY -- 2014 10-K Global Full Year 2013 2014 (Mils.) (Mils.) Beginning Balance $ 3,657 $ 3,927 Payments made during the period (2,302) (2,850) $ (548) Changes in accrual related to warranties 2,025 2,108 issued during the period Changes in accrual related to pre-existing 625 1,746 $ 1,121
Slide 8: Agenda
AGENDA • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes SLIDE 7
Slide 9: Ford in China
FORD IN CHINA Ford “Joint Ventures” in China CAF JMC CFME Ford Lincoln Non-Premium Trucks and Engine Non-Premium Premium Passenger Commercial Production Passenger Passenger Local Local Local Import Import Manufacture Manufacture Manufacture Equity Equity Equity Investment Investment Investment 100%
Slide 10: Ford "Joint Ventures" in China
FORD “JOINT VENTURES” IN CHINA CAF JMC CFME Ford Share Ford Share Ford Share of Net of Net of Net Income Income Income Starting With 2014 Results, Ford Began Disclosing The Aggregate Net Income of Our Chinese Joint Ventures; For Full Year 2014, It Was $1.3 Billion SLIDE 9
Slide 11: Ford Asia Pacific Financial Results
FORD ASIA PACIFIC FINANCIAL RESULTS China Ford Ford Non- JV Costs and China Ford Entities and Lincoln Asia Asia -- Ford Income Imports Pacific Pacific Share of Related for Markets Net to JVs China Income Disclosed Disclosed Ford Asia Pacific Profit Includes China Joint Venture Entities, Ford Costs R
Slide 12: Agenda
AGENDA • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes SLIDE 11
Slide 13: Venezuela Accounting Change
VENEZUELA ACCOUNTING CHANGE • Venezuelan exchange control regulations have resulted in a lack of exchangeability between the Venezuelan bolivar and the U.S. dollar • Dividend payments have been restricted for many years • Combined with other Venezuelan regulations, parts availability has been constr
Slide 14: Venezuela Accounting Change
VENEZUELA ACCOUNTING CHANGE Prior Accounting One-Time Change Present Accounting Consolidation Method of Change in Method of Cost Method of Accounting Accounting Accounting • Used until year-end 2014 • Effective Dec. 31, 2014 • Used in 2015 and beyond • All Venezuelan revenues, • $800 million pre-tax
Slide 15: Agenda
AGENDA • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes SLIDE 14
Slide 16: 2014 Automotive Cash Flow
2014 AUTOMOTIVE CASH FLOW* Full Year (Bils.) Gross cash at end of period $ 21.7 Gross cash at beginning of period 24.8 Change in gross cash $ (3.1) Automotive pre-tax profits** $ 4.5 Capital spending (7.4) Depreciation and tooling amortization 4.3 Changes in working capital (0.3) Other / Timing diff
Slide 17: 2014 Automotive Operating-Related Cash Flow
2014 AUTOMOTIVE OPERATING-RELATED CASH FLOW Quarter Full First Second Third Fourth* Year* (Bils.) (Bils.) (Bils.) (Bils.) (Bils.) Automotive pre-tax profits** $ 0.9 $ 2.2 $ 0.7 $ 0.7 $ 4.5 Capital spending $ (1.5) $ (1.9) $ (1.8) $ (2.2) $ (7.4) Depreciation and amortization 1.0 1.0 1.1 1.2 4.3 Net
Slide 18: Calendarization Factors -- Production and Cash Flow Seasonality
CALENDARIZATION FACTORS -- PRODUCTION AND CASH FLOW SEASONALITY* Global Production Volume** Operating-Related Cash Flow First Second Third Fourth Quarter Quarter Quarter Quarter * Based on average data from the past five years ** Scale adjusted to highlight quarterly seasonality Generally, Operating
Slide 19: Key Drivers of Changes to Working Capital
KEY DRIVERS OF CHANGES TO WORKING CAPITAL Elements of Key Drivers Working Capital • Production Volumes: – Customer demand Receivables – Seasonality for plant shutdowns – Launch schedules • Vehicle production mix Inventory • In-transit vehicles (exported between countries) • Variability in government
Slide 20: Key Drivers of Timing Differences
KEY DRIVERS OF TIMING DIFFERENCES Drivers Effects Profit Cash Flow • Warranty – Base Coverage Wholesale or reserve Upon service of vehicle adjustment (e.g., 2 - 3 years or longer) – Field Service Action Wholesale or upon Upon service of vehicle approval • Marketing -- incentive, Wholesale Retail sal
Slide 21: Agenda
AGENDA • Warranty Reserves • China JV Equity Earnings • Venezuela Accounting Change • Cash Drivers -- Working Capital and Timing Differences • Taxes SLIDE 20
Slide 22: Operating Effective Tax Rate
OPERATING EFFECTIVE TAX RATE 2014 1Q 2Q 3Q 4Q FY Reference (Mils.) (Mils.) (Mils.) (Mils.) (Mils.) Operating results* Pre-tax results $ 1,381 $ 2,599 $ 1,181 $ 1,121 $ 6,282 A Less: Equity in net income of affiliated companies 419 396 388 401 1,604 B Adjusted pre-tax results $ 962 $ 2,203 $ 793 $ 72
Slide 23: 2015 Calendarization
2015 CALENDARIZATION Operating Effective Tax Rate* Full Year Rate First Second Third Fourth Quarter Quarter Quarter Quarter * Illustrative only, excludes special items Our Operating Effective Tax Rate Is Expected To Vary During The Year SLIDE 22
Slide 24: Appendix
APPENDIX
Slide 25: Index
INDEX Reference Appendix - Share Count -- 2016 Convertible 1 - Automotive Cost Details -- Where To Find Them 2-3 - Special Items 4 - Equity in Net Income of Affiliated Companies 5 Automotive Sector -- Gross Cash Reconciliation to GAAP 6 Automotive Sector -- Operating-Related Cash Flows Reconciliatio
Slide 26: Share Count -- 2016 Convertible
SHARE COUNT -- 2016 CONVERTIBLE Basic and Diluted Shares Related to 2016 Convertible (Mils.) Full First Second Third Fourth First Year Quarter Quarter Quarter Quarter Quarter 2013 2014 2014 2014 2014 2015 Average net dilutive shares from 2016 Convertible 98 100 101 101 47 - Average basic shares issu
Slide 27: Reference Automotive Cost Details -- Where to Find Them
REFERENCE AUTOMOTIVE COST DETAILS -- WHERE TO FIND THEM Income Statement Published Statement Contribution Costs Material (including Cost of Sales 2014 10-K P.29 Commodity / Material are commodity costs) about 2/3 of Total Automotive Freight Cost of Sales Not disclosed separately Warranty (costs for
Slide 28: Special Items
REFERENCE AUTOMOTIVE COST DETAILS -- WHERE TO FIND THEM Income Statement Published Statement Special Items Separation-related actions Mixed 2014 10-K P. 37 $(685) Mils. in 2014. (primarily related to Reduction actions separation costs for attributable to hourly labor personnel at the Genk and fall p
Slide 29: Special Items
SPECIAL ITEMS Fourth Quarter Full Year 2013 2014 2013 2014 (Mils.) (Mils.) (Mils.) (Mils.) Personnel-Related Items Separation-related actions* $ (156) $ (251) $ (856) $ (685) Other Items Venezuela accounting change $ - $ (800) $ - $ (800) Ford Sollers equity impairment - - - (329) 2016 Convertible N
Slide 30: Equity in Net Income of Affiliated Companies
EQUITY IN NET INCOME OF AFFILIATED COMPANIES 2014 1Q 2Q 3Q 4Q FY (Mils.) (Mils.) (Mils.) (Mils.) (Mils.) Equity in net income of affiliated companies * $ 419 $ 67 $ 388 $ 401 $ 1,275 Less: Special items Ford Sollers equity impairment ** - (329) - - (329) Equity in net income of affiliated companies
Slide 31: Automotive Sector -- Gross Cash Reconciliation to GAAP
AUTOMOTIVE SECTOR -- GROSS CASH RECONCILIATION TO GAAP 2013 2014 Dec. 31 Sep. 30 Dec. 31 (Bils.) (Bils.) (Bils.) Cash and cash equivalents $ 5.0 $ 6.0 $ 4.6 Marketable securities 20.1 16.9 17.1 Total cash and marketable securities (GAAP) $ 25.1 $ 22.9 $ 21.7 Securities in transit* (0.3) (0.1) - Gros
Slide 32: Automotive Sector -- Operating-Related Cash Flows Reconciliation to GAAP
AUTOMOTIVE SECTOR -- OPERATING-RELATED CASH FLOWS RECONCILIATION TO GAAP SLIDE 317 APPENDIX
Slide 33: 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