Ford Motor Company (F)

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Ford Motor Company (F)

Q4 2012 Earnings Conference Call

January 29, 2013 9:00 a.m. ET

Executives

George Sharp – Executive Director of Investor Relations

Alan Mulally – President and Chief Executive Officer

Robert Shanks – Executive Vice President and Chief Financial Officer

Stephen Odell – Group Vice President, Chairman and Chief Executive Officer, Ford of Europe

Mark Fields – Chief Operating Officer

Analysts

Brian Johnson – Barclays Capital
John Murphy – Bank of America Merrill Lynch
Patrick Archambault – Goldman Sachs & Co.
Emmanuel Rosner - CLSA
Chris Ceraso - Credit Suisse
Ryan Brinkman – JPMorgan
Adam Jonas – Morgan Stanley

Rod Lache - Deutsche Bank

Mike Ramsey – Wall Street Journal
Craig Trudell – Bloomberg News
Karl Henkel – Detroit News

Veronique Dupont - AFP
Colin Langan – UBS
Itay Michaeli – Citigroup

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Ford Fourth Quarter Earnings Conference Call. My name is Darcel and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. George Sharp, Executive Director of Investor Relations. Please proceed.

George Sharp

Thank you very much, Darcel, and good morning, ladies and gentlemen. Welcome to all of you who are joining us today either by phone or webcast. On behalf of the entire Ford management team I would like to thank you for taking the time to be with us this morning so we can provide you with additional details of our fourth quarter and full year 2012 financial results.

Presenting today are Alan Mulally, President and CEO of Ford Motor; and Robert Shanks, Chief Financial Officer. Also participating are Mark Fields, Chief Operating Officer; Stephen Odell, President, Europe, Middle East and Africa; Stuart Rowley, Corporate Controller; Neil Schloss, Corporate Treasurer; Paul Andonian, Director of Accounting; and Mike Seneski, Ford Credit CFO.

Now before we begin, I need to cover a few things. As you know we are in the process of realigning our African operations with Europe and the Middle East under Stephen Odell to take advantage of profitable growth opportunities and efficiencies. Changes to our business unit reporting to reflect the realigned organization will began next year. The data reviewed today and used by us throughout 2013 will be consistent with our reporting over the past several years.

Also copies of this morning’s press release and the presentation slides that we will be using 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 presented are 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 US 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 various SEC filings.

With that, I would now like to turn the presentation over to Ford's President and CEO, Alan Mulally.

Alan 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 2012 business performance and the progress we continue to make in delivering our plan. We also share with you today our major plan assumptions and key metrics for 2013. Let's’ start by turning to slide three please.

The company had a solid fourth quarter achieving operating profit for the 14th consecutive quarter and the higher fourth quarter operating profit for the total company and the automotive sector since 1999, when trucks and SUVs were a more significant portion of our U.S. product mix. Automotive operating related cash flow was positive and we ended the year with strong liquidity. We delivered year-over-year increases of both wholesale volume and total company revenue, driven by gains in all reasons except Europe.

Operating profit and margin in North America set fourth quarter records since 2000 when we began reporting North America as a separate business unit. Ford Credit once again delivered solid performance and results in South America and Asia Pacific and Africa were positive. Europe, on the other hand, incurred a substantial loss.

For the full year, total company operating profit was strong with automotive operating profit and margin about equal to a year ago. Within the automotive results, North America delivered record operating profit and margin since 2000. South America was profitable for the ninth consecutive year. Europe incurred a substantial loss in line with guidance and Asia Pacific and Africa achieved record full-year wholesale volume and revenue. At Ford Credit, results were solid. And automotive operating related cash flow is positive for the third year in a row.

For 2013, we expect total company operating profit to be about equal to 2012, automotive operating margin to be about equal to or lower than last year and automotive operating related cash flow to be higher as we implement our ONE Ford plan.

Let’s look more closely now to financial highlights of the quarter and full year. Slide 4 summarizes our business results for the fourth quarter and full year compared with a year ago. Fourth quarter wholesale volume was 1.5 million units, up 107,000 units or 7% compared with a year ago and revenue at $36.5 billion was up $1.9 billion or 5%. Pretax profit, which excludes special items was $1.7 billion, $577 million higher than a year ago. Earnings were $0.31 per share, $0.11 higher.

Net income attributable to Ford, including favorable pretax special items of $160 million, was $1.6 billion or $0.40 per share. Excluding the impact of 2011 changes in our valuation allowance against deferred tax assets which we highlighted last year, our fourth quarter net income was $565 million higher than 2011, while our full year net income was $307 million lower than a year ago.

We also show the difference in net income, including valuation allowance on the line just below. Automotive operating related cash flow was $1 billion, the 11th consecutive quarter of positive performance. Full year pretax profit was $8 billion, $797 million lower than a year ago and net income was $5.7 billion. Automotive operating related cash flow was $3.4 billion and we ended 2012 with $24.3 billion of automotive gross cash, exceeding debt by $10 billion. Overall, despite many challenges, including the tough environment in Europe, we had a solid fourth quarter and a strong full year, thanks to our ONE Ford plan.

During 2012, we continued to execute the ONE Ford plan and providing customers with vehicles they want and value as we undertook one of the most aggressive large schedules in several years and our customers responded. Through the first nine months of the year, Focus was the world’s bestselling nameplate and Fiesta the world’s top selling B car.

We also continued to invest for tomorrow by increasing capacity in North America by 400,000 units and opened two new plants in Asia with seven additional facilities under construction. With regard to Blue Oval back after achieving investment-grade ratings. Consistent with our plan to deliver profitable growth for all, we resumed regular dividend payments to our shareholders and just over two weeks ago, we announced that we are doubling it. And finally, we began to implement our plan to achieve profitable growth in Europe, focusing on all parts of the business including product, brand and cost. All in all, this has been a strong year for Ford, including the actions we announced to ensure future success.

Now, let’s turn to Robert for a more detailed look at our financial results.

Robert Shanks

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