Ford Motor Company (F)

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Ford Motor (F)

Q4 2011 Earnings Call

January 27, 2012 9:00 am ET

Executives

George Sharp - Director of Investor Relations

Alan R. Mulally - Chief Executive Officer, President, Executive Director, Member of Long-Term Incentive Compensation Award Committee and Member of Finance Committee

Lewis W. K. Booth - Chief Financial Officer, Executive Vice President of Premier Automotive Group, Executive Vice President, Director of Jaguar Brand, Non-Executive Director of Volvo Cars Division, Director of Land Volvo Brand and Director of Ford of Europe

Michael L. Seneski - Chief Financial Officer of Ford Motor Credit Company

Analysts

Himanshu Patel - JP Morgan Chase & Co, Research Division

Timothy J. Denoyer - Wolfe Trahan & Co.

Joseph Spak - RBC Capital Markets, LLC, Research Division

Peter Nesvold

John Murphy - BofA Merrill Lynch, Research Division

Adam Jonas - Morgan Stanley, Research Division

Brian Arthur Johnson - Barclays Capital, Research Division

Matthew T. Stover - Guggenheim Securities, LLC, Research Division

Colin Langan - UBS Investment Bank, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter Ford Motor Co. Earnings Conference Call. My name is Katina, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. George Sharp, Director of Investor Relations and Executive Director. Please proceed.

George Sharp

Thank you, Katina, and good morning, ladies and gentlemen. Welcome to all of you who are joining us today either by phone or by webcast. On behalf of the entire Ford management team, I'd like to thank you for spending time with us this morning, so we can provide you with additional details of our fourth quarter and full year 2001 (sic) [ 2011] financial results. Presenting today are Alan Mulally, President and CEO of Ford Motor Co.; and Lewis Booth, Chief Financial Officer. Also in attendance are Bob Shanks, Corporate Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, Ford Credit CFO.

Before we begin, I'd like to cover a few items. Copies of today's -- this morning's press release and the presentation slides that we'll be using today have been posted on Ford's investor and media website for your reference. The financial results discussed today are presented on a preliminary basis. Final data will be included in our Form 10-K that will be filed next month. The financial results are presented on a GAAP basis and, in some cases, on a non-GAAP basis. The non-GAAP financial measures discussed in this call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide deck. Finally, today's presentation includes some forward-looking statements about our expectations for Ford's future performance. Of course, actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information are detailed in our SEC filings, including our annual, quarterly and current reports. With that, I'd now like to turn the presentation over to Ford's President and CEO, Mr. Alan Mulally.

Alan R. Mulally

Thank you, George, and good morning to everyone. We are pleased to have the opportunity today to review our fourth quarter and full year business performance and the progress we continue to make in delivering our plan. We also will share with you this morning our major assumptions and key metrics for 2012.

Let's start by turning to Slide 3. Our fourth quarter results reflect higher volume and net revenue, the 10th consecutive quarterly pretax operating profit and positive Automotive operating-related cash flow. In the quarter, North America drove our Automotive profitability with strong performance. However, since the third quarter earnings call, the deteriorating external environment impacted most of our Automotive operations outside of North America. In addition, commodity costs, exchange rates and the floods in Thailand all had a greater-than-expected adverse impact. As a result, our margins were somewhat lower than the guidance we provided in October.

In 2011, we improved total company pretax operating profit and improved Automotive operating-related cash flow, enabling us to further strengthen our balance sheet. In addition, Ford Credit continued to perform strongly, providing significant contribution to our overall profit, consistent with our guidance.

During the quarter and throughout the year, we continued to invest for future growth in a stronger product lineup around the world. Turning to 2012, we expect to continue improving our business and delivering solid profits and strong Automotive operating-related cash flow while working to strengthen our operations in Europe and South America and continue to grow. We believe our 2011 performance, as well as our guidance for 2012, confirm that we are well on track to achieve the mid-decade outlook we provided in the middle of last year.

Let's look more closely now at the financial highlights for the quarter and full year 2011. Slide 4 summarizes our fourth quarter and full year business results compared with a year ago. In the fourth quarter, vehicle wholesales were 1.4 million units, up 38,000 units or 3% from 2010. Revenue was about $35 billion, an increase of about $2 billion or 6%. Pretax operating profit, excluding special items, was $1.1 billion, $189 million lower than a year ago. Earnings were $0.20 per share. Net income attributable to Ford was $13.6 billion. This includes a favorable special item in our taxes totaling $12.4 billion, reflecting the release of almost all of the valuation allowance against our net deferred tax assets. We also had a favorable pretax special items of $349 million. Earnings were $3.40 per share. Automotive operating-related cash flow was $700 million, the seventh consecutive quarter of positive performance. In the full year compared with the year ago, vehicle wholesales increased by 7% and revenue improved by 13%.

Full year pretax operating profit, excluding special items, was $8.8 billion, a $463 million improvement, and income attributable to Ford was $20.2 billion, $13.7 billion higher than a year ago, reflecting mainly the tax valuation allowance release. Operating-related cash flow was $5.6 billion for the year. We ended 2011 with $22.9 billion of Automotive gross cash and with Automotive gross cash exceeding debt by $9.8 billion. This is a net cash improvement of $8.4 billion compared with a year ago and $1.7 billion higher than the third quarter. Despite a challenging external environment, we had a good fourth quarter and a strong full year, reflecting the strength of our business and our ONE Ford plan.

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