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» Ford Motor Company Q1 2010 Earnings Call Transcript
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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 your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-Q.The financial results presented here 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. 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. Alan Mulally We are pleased today to report very solid financial results for the second quarter, which underscores our ONE Ford plan is clearly working. Ford earned a pre-tax operating $2.9 billion for the quarter as each of our major business operations around the world posted improved profits compared to last year and the first quarter of 2010. We generated positive automotive operating related cash flow of $2.6 billion and strengthened our balance sheet paying down $7 billion of debt and lowering our interest costs. At the same time, we are increasing our investments to support greater growth in the future. Overall, we are ahead of where we thought we would be after this excellent first half. We clearly remain on track to deliver solid profits and positive automotive operating related cash flow for 2010, and we expect even better results in 2011. The driving forces behind our progress include our new products and our leaner global structure.
We have developed, we and many others believe, is our finest ever product line up. The full family of vehicles with world-class quality, fuel efficiency, safety, smart design and the best value.I will start up this morning by providing you with an overview of our financial results and business, product and sales highlights. Then Lewis Booth will walk us through the financial results in even greater detail. Finally, I will summarize our 2010 outlook and our plan going forward. Turning to Slide three, I'll begin by reviewing the key financial results compared with year ago. As we mentioned last quarter, based on our agreement to sell Volvo, all of our Volvo's 2010 results are reported as special items and excluded from our wholesales revenue and operating results. 2009 results include Volvo. As show at the top of the slide, second quarter vehicle wholesales were 1.4 million units up 224,000 units. The increase was explained by higher wholesales in all of our automotive segments offset partially by the exclusion of Volvo. Excluding Volvo for 2009, the wholesale increase was 303,000 units or 27%. Our second quarter revenue was $31.3 billion, a $4.5 billion increase. The increase was explained primarily by higher volumes, favorable net pricing and favorable exchange translation offset partially by the exclusion of Volvo. Excluding Volvo from 2009, the revenue increase was $7.4 billion or over 30% increase. Our second quarter pre-tax operating profit excluding special items was $2.9 billion, a $3.5 billion improvement. Automotive results improved by $3.2 billion and financial services improved by $280 million. Our second quarter net income attributable to Ford includes unfavorable pre-tax special items of $95 million was $2.6 billion, a $338 million improvement. For the first half, pre-tax operating profit excluding special items was about $5 billion, a $7.5 million improvement and net income attributable to Ford was $4.7 billion, about a $3.9 billion improvement. We ended the quarter with $21.9 billion of automotive gross cash up $1.5 billion from year ago.
Slide four details some of our key business highlights since our last earnings release. During the quarter we repaid $7 billion in automotive debt, including about $3.8 billion to the UAW Retiree Medical Benefits Trust or VEBA.In addition we repaid $3 billion of our revolving credit facility earlier in the quarter. These actions will save Ford more than $470 million in interest costs on an annualized basis. Ford was recognized as a leader in relationships with the suppliers by key third-party studies included being awarded number one in the UBS Investment Research quarterly survey of OEM supplier relation in the United States for a second consecutive quarter. We also announced several investments aimed at continue to strengthen our global business going forward. In Thailand we announced a $450 million investment a state-of-the-art flexible passenger vehicle manufacturing plant. We also announced a $250 million investment in Argentina in order to out debt our Pacheco Plant. We announced $135 million investment to design, engineer and produce key components in Michigan for our next-generation hybrid-electric vehicles that go into production in 2012. In last month we announced a plan to discontinue production of the Mercury brand in the fourth quarter of this year allowing us to increase our focus on the company's core brands in North America. Read the rest of this transcript for free on seekingalpha.com