Ford Motor Company (F)
Q1 2010 Earnings Call Transcript
April 27, 2010 9:00 am ET
Brian Harris – Director, IR
Alan Mulally – President and CEO
Lewis Booth – EVP and CFO
Joe Amaturo – Buckingham Research
John Murphy – Banc of America Merrill Lynch
Itay Michaeli – Citi
Patrick Archambault – Goldman Sachs
Tim Denoyer – Wolfe Trahan
Colin Langan – UBS
Himanshu Patel – JPMorgan
Chris Ceraso – Credit Suisse
Rod Lache – Deutsche Bank
Brian Johnson – Barclays Capital
Bryce Hoffman – The Detroit News
Jeff Bennett – Wall Street Journal
Tom Walsh – Free Press
Dee-Ann Durbin – The Associated Press
Robert Schoenberger – The Plain Dealer
Brent Snavely – Detroit Free Press
Jere Downs – The Louisville Courier–Journal
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Good day, ladies and gentlemen, and welcome to the first quarter Ford Motor Company earnings conference call. My name is Katrina, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this presentation. (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. Brian Harris, Director of Investor Relations. Please proceed.
Thank you Katrina, 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 spending time with us this morning.
With me here today are Alan Mulally, President and CEO of Ford Motor Company; and Lewis Booth, Chief Financial Officer. Also in attendance are Bob Shanks, Vice President and Controller; Neil Schloss, Vice President and Treasurer; Paul Andonian, Director of Accounting; and K.R. Kent, Ford Credit's CFO.
Before we begin, I would like to cover a few items. Copies of this morning's press release and the presentation slides that we will be using today have been posted on Ford's Investor and Media Website for up to your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-Q. Additionally, the financial results presented here 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 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. Actual results could differ materially from those suggested by our comments made here. 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 would now like to turn the presentation over to Ford's President and CEO, Mr. Alan Mulally.
Thank you, Brian, and good morning everyone. We are very pleased to be able to share today our first quarter 2010 financial results.
This was another solid quarter for and further evidence that our plan is working and we are delivering profitable growth. Despite challenging economic conditions and below trend global demand per vehicles, Ford posted a pretax operating profit of $2 billion, our best quarterly pretax operating profit in six years.
The basic engine that drives our business results products, market share, revenue and cost structure is performing stronger each quarter. Each of our Ford business units, North America, South America, Europe, Asia Pacific and Africa and Ford Credit delivered operating profits in each improved substantially, compared with a year ago.
Perhaps, most importantly we continue to accelerate the development of products people really want and value. Vehicles like the Global Fiesta, the New Figo for India and the redesigned Super Duty pickup here in North America are further strengthening our balance line up of cars, utilities and trucks that offer the very best quality, fuel efficiency, safety, smart design and value. Based on our improving performance, the gradual strength in the economy and the present assumptions, we now expect to deliver solid profits this year with positive automotive operating related-cash flow.
While we are pleased with our progress, we do not underestimate the challenges ahead. We plan to stay completely focus on delivering on our One Ford plan. I will start off of this morning by providing you with an overview of our financial results and business product and sales highlights the Lewis will walk us through the financial results in even greater detail. Finally, I will summarize our 2010 outlook and our plans going forward.
Turning to slide three, I will begin by reviewing the key financial results. Please note as a result of our agreement to sell Volvo all of our Volvo's 2010 results are being reported as special items and excluded from our operating results, 2009 results do include Volvo.
As show at the top of the slide, first quarter vehicle wholesales were 1.3 million units up 267,000 units from a year ago. The increase was explained by higher wholesales in all of our automotive segments offset partially by the exclusion of Volvo wholesales.
Our first quarter revenue was $28.1 billion, a $3.7 billion increase. The increase was more than explained by higher volumes, favorable exchange translation and favorable net pricing offset partially by the exclusion of Volvo revenue.
If Volvo had been excluded from the 2009 automotive revenue would have increased by $7 billion or more than 30%. Our first quarter pretax operating profit excluding special items was $2 billion, a $4 billion improvement. Automotive results improved by $3.2 billion and financial service s improved by $877 million.
Our first quarter net income attributable to Ford was $2.1 billion, including favorable pretax special items of $125 million; this was a $3.5 billion improvement. We ended the quarter with $25.3 billion automotive gross cash, up $4.4 billion.
Slide four details some of our key business highlights since our last earnings release. At the end of March, Ford entered into a definitive agreement to sell Volvo in related assets to Geely for $1.8 billion subject to customary purchase price adjustments.
We expect to close the sale in the third quarter of 2010. We also announced the series of new investments around the world in Brazil; in Argentina we announced plans to increase our commitment by $450 million to more than $2.6 million by 2015.
In the UK, we announced a $2.3 billion investment in manufacturing facilities over the next five years to support production of low carbon emission vehicles. In South Africa, we announced a $400 million investment to support production of Ford's next generation compact pickup and Puma Diesel engine primarily for escort.
Early in the quarter we confirmed a $400 million investment in our Chicago Assembly Plant in the addition of 1200 job to support production of the next generation Ford Explorer.
And finally it is part of our plan to improve our balance sheet on April 6 we paid down $3 billion of our revolving credit facility which remains available through December of 2013.
Turning to slide five, we will look at Ford's product highlights since our last earnings release. Ford, Lincoln and Mercury vehicles achieved the highest customer satisfaction and the fewest number of things going wrong among full auto manufacturers in the first quarter GQRS study for the U.S.