Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor — Q4 2017 Earnings Presentation
67 slides from Ford Mtr Co Del's earnings presentation, Jan 24, 2018
Slide 1: 4Q 2017 And Full Year Earnings Review And 2018 Outlook
1 4Q 2017 And Full Year Earnings Review And 2018 Outlook January 24, 2018 (Preliminary Results)
Slide 2: Agenda and appendix contents
2 Appendix Shareholder Distributions A1 Shareholder Payout Ratio A2 Reconciliations to GAAP Adjusted Pre-Tax Profit A3 Adjusted Effective Tax Rate A4 Operating Cash Flow A5 Special Items A6 Adjusted Earnings Per Share A7 Managed Receivables A8 Managed Leverage A9 Supplemental Data Automotive Debt A1
Slide 3: Smart Vehicles In A Smart World
3 1. Rapidly improving our fitness to lower costs, release capital and finance growth 2. Accelerating the introduction of connected, smart vehicles and services 3. Re-allocating capital to where we can win in the future 4. Continuously innovating to create the most human-centered mobility solutions
Slide 4: Fitness Redesign
4 Fitness Redesign Customer centricity Simplicity Speed & agility Efficiency Accountability Step-change improvement of financial performance Company EBIT EBIT Margin Capital Return on Invested Capital Operating Cash Flow Total Shareholder Return
Slide 5: Product And Other Highlights
5 Product And Other Highlights Commercial vehicle leader in Europe for third straight year; began production of the new EcoSport SUV in Romania 100 percent of Ford’s new U.S. vehicles will be built with connectivity by 2019 and 90 percent globally by 2020 Announced the introduction of more than 50 n
Slide 6: Financial Review
6 Bob Shanks Chief Financial Officer Financial Review
Slide 7: 4Q And Full Year Results Delivered
7 4Q And Full Year Results Delivered Fourth Quarter Adjusted EPS of $0.39 And Full Year Adjusted EPS Of $1.78 * See Appendix for detail, reconciliation to GAAP and definitions Company Revenue (GAAP) Company Net Income (GAAP) Company Adjusted Pre-Tax Results* (Non-GAAP) EPS (GAAP) Adjusted EPS* (Non-
Slide 8: Key Financial Summary
8 Wholesale volume up 2% in 4Q, about flat FY; revenue up 7% in 4Q and 3% in FY 4Q and FY adj. pre-tax profit lower 4Q and FY net income up significantly due to lower remeasurement loss on pension and OPEB plans and favorable tax planning 4Q adj. effective tax rate of 10% and FY at 15.3%, incl. favo
Slide 9: 4Q 2017 Company Adjusted Pre-Tax Results
9 4Q Automotive segment PBT driven by NA Auto operations outside NA a loss in total and down YoY Strong Financial Services profit All Other primarily net interest expense plus FSM LLC Company 4Q 2017 Adjusted Pre-Tax Results* (Mils) $1,737 $1,641 $(197) $56 $(70) $5 $595 $(293) South AmericaTotal No
Slide 10: Automotive Segment 4Q 2017 Key Metrics
10 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment 4Q 2017 Key Metrics 4Q Auto key metrics mixed from a year ago Top line up due mainly to higher volume from consolidated operations in all
Slide 11: Automotive Segment 4Q 2017 Pre-Tax Results
11 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment 4Q 2017 Pre-Tax Results (Mils) 4Q Auto PBT $607M lower YoY due mainly to higher commodities, adverse exchange and higher warranty cost Commodities reflects continu
Slide 12: Automotive Segment – North America 4Q 2017 Key Metrics
12 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment – North America 4Q 2017 Key Metrics 4Q NA top-line metrics up YoY, including market share; financial metrics lower Volume up due to highe
Slide 13: North America 4Q 2017 Pre-Tax Results
13 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment – North America 4Q 2017 Pre-Tax Results (Mils) 4Q NA PBT down $315M driven by Expedition / Navigator launch, higher commodities and warranty cost Expedition / Navi
Slide 14: North America: A Disciplined Approach To The U.S. Business
14 Automotive Segment – North America A Disciplined Approach To The U.S. Business Industry Average Ford 70 70 60 79 78 68 U.S. Gross Days Supply 4Q Ford ATPs up, about the same as the industry average; FY ATPs rose more than 2X the industry due to F-Series 4Q Ford incentives, as a percent of vehicle
Slide 15: South America 4Q 2017 Key Metrics
15 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment – South America 4Q 2017 Key Metrics All 4Q SA key metrics up sharply YoY as macroeconomic conditions continue to improve Volume higher du
Slide 16: South America 4Q 2017 Pre-Tax Results
16 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment – South America 4Q 2017 Pre-Tax Results (Mils) 4Q SA loss narrowed $96M due to favorable market factors Relatively small unfavorable changes in other factors, main
Slide 17: Europe 4Q 2017 Key Metrics
17 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment – Europe 4Q 2017 Key Metrics 4Q Europe top-line metrics up YoY; financial metrics lower Volume up mainly due to favorable stock changes H
Slide 18: Europe 4Q 2017 Pre-Tax Results
18 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment – Europe 4Q 2017 Pre-Tax Results (Mils) 4Q Europe YoY PBT decline of $110M more than explained by Brexit effects, higher warranty cost and commodities Brexit effec
Slide 19: Middle East & Africa 4Q 2017 Key Metrics
19 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment – Middle East & Africa 4Q 2017 Key Metrics 4Q MEA key metrics lower YoY except for a largely unchanged pre-tax loss Volume lower due to u
Slide 20: Middle East & Africa 4Q 2017 Pre-Tax Results
20 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment – Middle East & Africa 4Q 2017 Pre-Tax Results (Mils) 4Q MEA loss about flat from a year ago with relatively minor changes across causal factors Industry $(19) Sha
Slide 21: Asia Pacific 4Q 2017 Key Metrics
21 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment – Asia Pacific 4Q 2017 Key Metrics 4Q AP key metrics down YoY except revenue, with China the key driver for the unfavorable changes Volum
Slide 22: Asia Pacific 4Q 2017 Pre-Tax Results
22 Market Factors Total Cost 4Q 20174Q 2016 Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost Automotive Segment – Asia Pacific 4Q 2017 Pre-Tax Results (Mils) 4Q AP PBT YoY decline of $279M due to China factors -- lower industry pricing and volume Fourth consecutive quarter o
Slide 23: Ford Credit 4Q 2017 Key Metrics
23 20172016 2017201620172016 20172016 2017201620172016 Average Placement FICO Managed Receivables* (Bils) Over-60-Day Delinquencies (Pct) Pre-Tax Results (Mils) Loss-to-Receivables (LTR) (Pct) U.S. Retail and Lease Net Receivables (Bils) Financial Services Segment – Ford Credit 4Q 2017 Key Metrics S
Slide 24: Ford Credit 4Q 2017 Pre-Tax Results
24 4Q Ford Credit PBT YoY improvement of $212M broad-based as all factors favorable except credit losses Volume and mix gain due to global receivables growth Higher auction values YoY drove lease residual improvement Pension improvement reflects non-repeat of 2016 Ford Credit Europe plan settlement
Slide 25: Ford Credit U.S. Automotive Financing Trends
25 Financial Services Segment – Ford Credit U.S. Automotive Financing Trends Prudent management of lease mix Higher auction values YoY supported lease residual and credit loss performance Continue to plan for lower auction values – about 4% at constant mix in 2018 Strong loss metrics reflect healthy
Slide 26: Automotive Segment Cash Flow
26 Automotive Segment Cash Flow Positive 4Q operating cash flow driven by Automotive profit, favorable working capital and timing / other changes FY capital spending at $7.0B FY funded pension contributions of $1.4B FY shareholder distributions of $2.7B (Bils) 4Q 2017 FY 2017 Cash at end of period 2
Slide 27: Balance Sheet Summary
27 Auto cash and liquidity balances strong Ford Credit well capitalized with strong liquidity. Managed leverage at low end of target range due to U.S. tax reform effects Global funded pension plans now fully funded Balance Sheet Summary (Bils) 2016 2017 Dec 31 Dec 31 Automotive Segment Cash, cash eq
Slide 28: FY 2017 Company Adjusted Pre-Tax Results
28 FY Automotive segment PBT driven by NA Auto operations outside NA a loss in total and down YoY, driven largely by expected Brexit effects in Europe Strong Financial Services profit All Other primarily net interest expense plus FSM LLC Company FY 2017 Adjusted Pre-Tax Results* (Mils) $8,437 $7,511
Slide 29: Automotive Segment FY 2017 Key Metrics
29 Wholesales (000) Revenue (Bils) Market Share (Pct) Operating Margin (Pct) Pre-Tax Results (Mils) 20172016 2017201620172016 20172016 20172016 Automotive Segment FY 2017 Key Metrics FY wholesales about flat; revenue up 3% due to favorable mix and higher volume from consolidated operations and net p
Slide 30: Automotive Segment FY 2017 Pre-Tax Results
30 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment FY 2017 Pre-Tax Results (Mils) FY Auto PBT $2.2B lower than 2016 due to higher commodities and adverse exchange; all other factors about offset Higher commodities
Slide 31: Major External Factors Assumptions
31 Major External Factors Assumptions For 2018, We Expect External Factors To Be Mixed 2017 Est. 2018 Change Industry Volume (Mils.) Global 94.9 ~97 Higher U.S. 17.5 Low 17s Slightly Lower Brazil 2.2 Mid 2s Higher Europe 20.9 Low 21s Slightly Higher China* 28.2 Mid 28s Slightly Higher Key Commoditie
Slide 32: Ford's Commodity Costs Move In-Line With Market Prices
32 Commodity Prices* YoY Profit Impact (Bils) Ford’s Commodity Costs Generally Move In-Line With Market Prices Annual buy of about $10B; steel and aluminum roughly two-thirds Benefited in 2015 and 2016 YoY from falling prices as commodities hit cyclical lows Market pricing began to climb in late 201
Slide 33: Robust Increase In Product Launches In 2018
33 Reflects benefits of investment in 2016 and 2017 Fresh products drive improved pricing and mix Robust Increase In Product Launches In 2018 11 8 2 5 6 4 23 11 6 21 17 16 Global* Asia Pacific Launches North America South America Europe Middle East & Africa 2017 2018 * Global launches do not equal t
Slide 34: 2018 Full Year Guidance
34 2018 Full Year Guidance * See Appendix for detail, reconciliation to GAAP and definitions Company Revenue Flat To Modestly Higher Than 2017 Adjusted EPS $1.45 - $1.70 Company Operating Cash Flow Positive But Lower Than 2017 * Mobility Higher Loss Ford Credit Strong Profit, But Lower Automotive Fl
Slide 35: 2017 To 2018 Company Adjusted EBIT Margin Bridge
35 Automotive – flat to lower than 2017 with continued headwinds from commodities and exchange; higher market factors driven by mix and net pricing Mobility – higher loss due to increased investments in AVs and mobility services / capabilities Ford Credit – strong but lower than 2017 due to adverse
Slide 36: Questions & Answers
36 Questions & Answers
Slide 37: Key Takeaways
37 • 2017 was a critical year in a pivot to our vision of Smart Vehicles for a Smart World • Achieving our vision requires a higher level of Company fitness, underscored by our full year results for 2017 • We are making significant progress across our six Global Fitness Redesign initiatives now unde
Slide 38: Cautionary Note On Forward-Looking Statements
38 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 a number o
Slide 39: Appendix
39 Appendix
Slide 40: Shareholder Distributions
40 Total shareholder distributions of $18.4B 2012 - 2018 First quarter regular dividend of 15¢ per share and a supplemental dividend of 13¢ per share 2018 planned distributions of about $3.1B Shareholder Distributions (Bils) $1.7 $2.4 $2.4 $2.4 Average 2012 - 2015 2012 - 2018 $2.7$1.0 2016 $0.6 $2.3
Slide 41: Shareholder Payout Ratio
41 Targeting total payout of 40% - 50% of prior year net income less pension and OPEB remeasurement and tax only special items Payout includes quarterly cash dividends, purchases of common stock and supplemental cash dividends 2015 - 2017 shareholder payouts within target range Shareholder Payout Ra
Slide 42: Net Income Reconciliation To Adjusted Pre-Tax Profit
42 Company Net Income Reconciliation To Adjusted Pre-Tax Profit (Mils) 2016 2017 2016 2017 Net income / (Loss) attributable to Ford (GAAP) (783)$ 2,409$ 4,596$ 7,602$ Income / (Loss) attributable to non-controlling interests 2 4 11 26 Net income / (Loss) (781)$ 2,413$ 4,607$ 7,628$ Less: (Provision
Slide 43: Reconciliation To Adjusted Effective Tax Rate
43 Company Effective Tax Rate Reconciliation To Adjusted Effective Tax Rate 2017 Memo: 4Q FY FY 2016 Pre-Tax Results (Mils) Income / (Loss) before income taxes (GAAP) 1,889$ 8,148$ 6,796$ Less: Impact of special items 152 (289) (3,579) Adjusted pre-tax profit (Non-GAAP) 1,737$ 8,437$ 10,375$ Taxes (
Slide 44: Reconciliation To Company Operating Cash Flow
44 Company Net Cash Provided By / (Used in) Operating Activities Reconciliation To Company Operating Cash Flow (Mils) 2016 2017 Company net cash provided by / (used in) operating activities (GAAP) 19,850$ 18,096$ Less: Items not included in Company operating cash flows Ford Credit operating cash flo
Slide 45: Company Special Items
45 Company Special Items * Includes related tax effect on special items and tax special items (Mils) 2016 2017 2016 2017 Pension and OPEB gain / (loss) Year end net pension and OPEB remeasurement loss (2,985)$ (162)$ (2,985)$ (162)$ Other pension remeasurement loss - - (11) - Pension curtailment gai
Slide 46: Reconciliation To Adjusted Earnings Per Share
46 Company Earnings Per Share Reconciliation To Adjusted Earnings Per Share 2017 4Q FY Diluted After-Tax Results (Mils) Diluted after-tax results (GAAP) 2,409$ 7,602$ Less: Impact of pre-tax and tax special items 849 486 Adjusted net income – diluted (Non-GAAP) 1,560$ 7,116$ Basic and Diluted Shares
Slide 47: Ford Credit Reconciliation To Managed Receivables
47 * Includes finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s bal
Slide 48: Ford Credit Reconciliation To Managed Leverage
48 Financial Services Segment – Ford Credit Financial Statement Leverage Reconciliation To Managed Leverage (Bils) 2015 2016 2017 Dec 31 Dec 31 Dec 31 Leverage Calculation Total debt* 119.6$ 126.5$ 137.8$ Adjustments for cash** (11.2) (10.8) (11.8) Adjustments for derivative accounting*** (0.5) (0.3
Slide 49: Automotive Segment Debt
49 Automotive Segment Debt 2016 2017 (Bils) Dec 31 Sep 30 Dec 31 Public unsecured debt 9.2$ 9.2$ 9.2$ U.S. Department of Energy 3.2 2.8 2.7 Other debt (including international) 3.5 4.2 4.0 Total Automotive debt 15.9$ 16.2$ 15.9$ Memo: Automotive debt payable within one year 2.7$ 3.6$ 3.4$ A10
Slide 50: China Unconsolidated Affiliates
50 Automotive Segment – Asia Pacific China Unconsolidated Affiliates 2016 2017 2016 2017 China Unconsolidated Affiliates Wholesales (000) 380 341 1,217 1,132 Ford equity income (Mils)* 380 $ 206 $ 1,439 $ 916 $ China JV net income margin 12.8% 8.3% 14.6% 10.9% 4Q FY * Ford equity share of China join
Slide 51: Return On Invested Capital Calculation
51 Return On Invested Capital Calculation (Bils) * Reflects total pension & OPEB (income) / expense except service cost ** Calculated as five-year average NOPAT divided by five-year average invested capital Note: Results may not sum due to rounding 2013 2014 2015 2016 2017 Net Operating Profit After
Slide 52: Employment Data By Business Unit
52 Employment Data By Business Unit* * Employment data includes the approximate number of individuals employed by consolidated entities (000) 2016 Dec 31 2017 Dec 31 North America 101 100 South America 15 14 Europe 52 54 Middle East & Africa 3 3 Asia Pacific 23 23 Total Automotive 194 194 Financial
Slide 53: Pension Update
53 Underfunded status of pension plans at $6.6B Funded status improved by $2.3B versus a year ago Funded plans are now fully funded Expect 2018 funded pension contributions to be about $500M Pension Update * Excludes all pension-related special items, primarily remeasurement ** Reflects pension and
Slide 54: Industry SAAR / FY Industry Units
54 Automotive Segment 4Q Industry SAAR / FY Industry Units (Mils) 2016 2017 B / (W) 2016 2017 B / (W) North America 22.6 22.1 (0.5) 21.8 21.5 (0.3) U.S. 18.4 18.2 (0.2) 17.9 17.5 (0.4) South America 3.8 4.3 0.5 3.7 4.2 0.5 Brazil 2.0 2.3 0.3 2.1 2.2 0.1 Europe 20.6 21.2 0.6 20.1 20.9 0.8 Middle East
Slide 55: 4Q Market Share
55 Automotive Segment 4Q Market Share (Percent) Total Share of Total Industry North America 13.1 % 13.7 % 0.6 ppts 13.9 % 13.9 % - ppts U.S. 13.9 14.7 0.8 14.6 14.8 0.2 South America 8.8 8.9 0.1 8.8 8.9 0.1 Brazil 9.4 10.0 0.6 9.2 9.6 0.4 Europe 7.4 7.4 - 7.7 7.5 (0.2) Middle East & Africa 4.5 4.4 (
Slide 56: Production Volumes
56 Automotive Segment Production Volumes Key drivers of 1Q YoY: AP – matching production to demand (000) O / (U) O / (U) Units 2016 Units 2017 North America 720 10 805 (14) South America 89 12 86 13 Europe 416 59 454 6 Middle East & Africa 23 - 24 3 Asia Pacific 442 (38) 357 (41) Total 1,690 43 1,72
Slide 57: Selected Markets Dealer Stocks
57 Automotive Segment – Selected Markets Dealer Stocks (000) U.S. Brazil Europe 21 MEA China 4Q December 31, 2017 628 22 281 43 173 September 30, 2017 617 20 246 47 168 Stock Change H / (L) 11 2 35 (4) 5 4Q Prior Year December 31, 2016 648 22 226 64 154 September 30, 2016 658 22 206 63 150 Stock Cha
Slide 58: North America FY 2017 Pre-Tax Results
58 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment – North America FY 2017 Pre-Tax Results (Mils) NA PBT down $1.5B driven by higher commodities, Expedition / Navigator launch and adverse exchange Expedition / Navi
Slide 59: South America FY 2017 Pre-Tax Results
59 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment – South America FY 2017 Pre-Tax Results (Mils) Pre-tax loss improved $325M due to higher industry and favorable net pricing Unfavorable cost performance due to hig
Slide 60: Europe FY 2017 Pre-Tax Results
60 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment – Europe FY 2017 Pre-Tax Results (Mils) Europe pre-tax result $971M lower due to Brexit effects, commodities, Fiesta launch and warranty Brexit effects reflect adv
Slide 61: Middle East & Africa FY 2017 Pre-Tax Results
61 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment – Middle East & Africa FY 2017 Pre-Tax Results (Mils) MEA’s pre-tax result improved $39 million, or 13% All factors improved other than volume Exchange reflects So
Slide 62: Asia Pacific FY 2017 Pre-Tax Results
62 Market Factors Total Cost Volume / Mix Net Pricing Structural Cost Exchange Other Contribution Cost FY 2017FY 2016 Automotive Segment – Asia Pacific FY 2017 Pre-Tax Results (Mils) AP PBT down $66M YoY due to China Market factors lower reflecting lower net pricing, mainly China industry pricing, p
Slide 63: Ford Credit FY 2017 Pre-Tax Results
63 PBT improved $431M YoY reflecting favorable volume and mix, lease residual improvement and financing margin Volume and mix up due to global receivables growth Lease residual improvement driven by higher than expected auction values Financial Services Segment – Ford Credit FY 2017 Pre-Tax Results
Slide 64: Revised Reporting – 2015 And 2016
64 Revised Reporting – 2015 And 2016 (Mils) 2015 2016 Full Year 1Q 2Q 3Q 4Q Full Year North America 9,573$ 3,167$ 2,796$ 1,372$ 2,059$ 9,394$ 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 827 241 1
Slide 65: Revised Reporting – 2017
65 Revised Reporting – 2017 (Mils) 2017 1Q 2Q 3Q 4Q Full Year North America 2,122$ 2,325$ 1,811$ 1,788$ 8,046$ 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 2,167$ 2,388$ 1,866$ 1,652$
Slide 66: Non-GAAP Financial Measures That Supplement GAAP Measures
66 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 suppleme
Slide 67: Definitions And Calculations
67 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 unconsolidated affiliate) that ar