wolff thomas.ford motor company.cfm paris.equity research

8/13/2019 Wolff Thomas.ford Motor Company.cfm Paris.equity Research

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Ford Motor Co.

All Lights are Green on thePath to Recovery

INVESTMENT CONCLUSIONS

Ford will continue to gain market shares, notably in Asia-Pacific-Africa (APA)The ongoing shift in strategy already allowed the company to gain respectively +1.0and +0.6 percentage point in the USA and China over the period 2008-2012. Fordhaving penetrated the Asian market later than its competitors, we expect its marketshares in the Asia-Pacific-Africa (APA) region to further grow.

Ford is asserting itself as a leader in the Connected and Electric Vehicles segmentsFords pioneering R&D programs and partnerships with high-tech companies positionit as leader in the automotive fastest growing segments: 60% of its vehicles sold embedconnected system and the company is the world second electric car-maker. Thispositioning will drive both revenues and margins up.

Stable margins outlook, expected to remain constant at 17%Margins are estimated to benefit from South America breaking heaven this year andfrom the Europe business regaining profitability in 2015.They are however likely to be adversely impacted by the ongoing shift in product mix,with low-margin Small Vehicles increasing shares (e.g. +29% in North America in 2012).

Relevant Risk factorsFord has major ongoing investments in APA, which are aimed at capturing theforecasted growth of the region. Should Ford not be able to gain the expected marketshares there, those assets could heavily burden the company s returns.

Current valuation is already quite high in comparison with the industry characteristics

and comparable companies.

Valuation SummaryTarget Price

Dividend Based Valuation 17,51$Free Cash Flow Valuation 17,51$Residual Income Valuation 17,51$Residual Income Market-to-Book Valuati 17,51$

Average Value Per Share 17,51$

Current Share Price 16,56$Potential Upside 5,76%

RECOMMENDATION

BUY

Target PricePotential Upside

$ 17.51% 4.85

2012 KEY FINANCIALS

Sales VolumeRevenues (bil.)

EBITDA (bil.)Net Income (bil.)

Employees

EV/EBITDA

5 666 000$ 134 252$ 14 696$ 5 665

171 000

x11.2

STOCK PERFORMANCE

Previous close Market Cap. (bil.) Shares Out. (mil.)

Volume (90 days)

1-y return (F:US) (S&P 500)

12 EPS 12 P/E

Beta

5-y div. yield 5-y T-bond yield

$ 16.70$ 65.923 959.9

37 084 000

44.25 %27.38%1.4810.541.76

3.00%1.31%

nalyst:homas Wolffutomotive Industry [email protected]

EQUITY RESEARCH AUTOMOTIVE | FORD MOTOR COMPANY (F :US) | DECEMBER 2014

%

%

%

%

%

F:US S&P 500

16.7


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BUSINESS ANALYSIS PER REGION: PERFORMANCES AND FORECASTED TRENDS

North AmericaLast quarter earnings (Q3) revealed good performances from the North Americanmarket, with revenues rising by 11.8% to $21.7 billion and volume rising by 12.9% to744000 vehicles compared with Q3 2012. Operating margin decreased from 12% to10.6% due to adverse product mix effects and because of favorable one-off items in Q32012s earnings.

2013-2017 TrendsThis upward trend, driven by the Pick-Up and Small Vehicles segments, islikely to carry on thanks to strong macro-economic fundamentals:

Positive trend of New Home Sales, with October up 25.4% comparedwith September, and 2.7% above consensus;

Ageing fleet of vehicles likely to lead to important replacements.

EuropeThe ongoing restructuring of the European operations has begun to bear fruits, with anet loss in Q3 2013 that has decreased by 51.3% versus Q3 2012. In terms ofproduction, the company is planning to reduce its production capacity by 18% throughthe disposal of 3 sites, which would properly resize the business to the local demandand which should generate annual savings of $500 million. It is also deepening itsproduct range, with 25 new models to be launched over the next few years.

2013-2017 TrendsWith the stabilization of the economic environment and low-level interestrates over an extended period, volumes are rising again and Fords Europeanbusiness should regain profitability in 2015.

Asia/Pacific/Africa (APA)Ford is aggressively developing its activity in this region and should continue to gainmarket shares, notably in China, with the ongoing construction of 7 facilities, and thedevelopment of models specifically tailored for regions needs. APA is however facing important challenges. India, for example, is adversely impactedby the volatility of its currency, the rising interest rate and the lack of sustainableinfrastructures, and is therefore delivering a growth that is below its potential.

2013-2017 TrendsAPA is, and is likely to remain, the fastest growing region for Ford. The abilityof the ongoing investments in APA to be profitable will depend on thecompanys ability to generate sales and win market shares in the region .

South AmericaMainly driven by the sales of pickup in Brazil, South America is likely to breakeven thisyear.

2013-2017 TrendsEven if some concerns are being raised regarding Brazils growth potential, thecompany is confident in continuing to steadily grow its sales and profits in theregion.

63,1%

In % of Total Sales - 2012

21,0%


7,8%


8,0%


2012a 2013e 2014e 2015eevenues 79 900 81 836 84 472 87 351

CoGS ( 64 431) (65 845) (68 118) ( 70 597)SG&A (7 159) (7 316) (7 569) (7 844)

. Profit 8 310 8 675 8 785 8 910 Margin 10,4% 10,6% 10,4% 10,2%

2012a 2013e 2014e 2015eRevenues 26 600 26 599 26 945 27 406

CoGS (25 520) (24 777) (24 615) (24 419)SG&A (2 836) (2 753) (2 735) (2 713)

. Profit (1 756) (931) (404) 274 Margin -6,6% -3,5% -1,5% 1,0%

2012a 2013e 2014e 2015eRevenues 10 000 10 569 11 207 11 915

CoGS (9 072) (9 226) (9 733) (10 295)SG&A (1 008) (1 025) (1 081) (1 144)

. Profit (80) 317 392 477 Margin -0,8% 3,0% 3,5% 4,0%

2012a 2013e 2014e 2015eevenues 10 100 10 441 10 846 11 265

CoGS (8 899) (9 115) (9 420) (9 733)SG&A (989) (1 013) (1 047) (1 081) Profit 212 313 380 451

Margin 2,1% 3,0% 3,5% 4,0%


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KEY RATIOS ANALYSISProfitability and Risk Ratios

Return On Assets: still room for improvementROA is currently benefiting from t he companys global recovery but still remainsslightly lower than the industry average, due to the companys im portant productionovercapacity. Over the coming years, we expect ROA to further increase as it should bepositively driven by:

The ongoing European restructuring, which intends to close 3 sites and reducesignificantly the regional production capacity;

The development of Fords in APA, where new facilities are not yet profitable.The company plans to install a production capacity of 2.7 million vehicles, tobe compared with the 1 million vehicles sold in the region in 2012.

Outlook:

Return On Equity: over-performing but inflated by the capital structureFords ROE is on average 50% higher than the industry, and two times higher than itsclosest competitors (GM and Toyota, 13.3% and 12,2% respectively). Fords ROE ishowever highly inflated by the companys high gearing (538,8% in 2012, cf. hereunder) ,which contribute to 20.2% of the 36.6%. When cancelling the effect of Fords capitalstructure (and applying the industry average capital structure instead), the ROE falls to16.4%, much lower than the industry but still slightly over GM and Toyota.

Outlook:By 2017, we expect the ROE to further increase, driven by forecasted increasing and asimilar capital structure.

Solvency Profile: stable outlook with limited room for errorFords high Gearing Ratio is essentially due to the important load of debt carried byFord Credit, the financial services business of the company. The effective debt

consumed by the Ford Automotive amounts to $15.8 million (as of Q3 2013), andintended to be reduced to $10 million by 2015.

Thanks to a liquid Balance Sheet and to good operating performances (in Q3 2013,management has achieved its 7 th consecutive profitable quarter), the co mpanysAltman Z Score remains in the grey zone, standing higher than the industry at 1.58.

Outlook:In the light of the forecasted operating performance and the stable liquidity profile ofthe company (see below), we expect Fords bankruptcy profile to remain stable.

2008-2012a 2012a 2017eFord Industry Ford Ford

ROA +7,5% 4,97% 4,42% 4,69%


ROE n/a 24,25% 36,58% 40,92%

2008-2012a 2012a 2017e

Ford Industry Ford FordGearing Ratio n/a 173,26% 538,83% 545,22%

Z Score +0,66 1,40 1,58 1,59

1 9721 617

(18%)

re restructuring Post Restructuring

Europe production capacity(in thousands of vehicles)

16,4%

20,2%

ROE components

Capital StructureLeverage

Operating

performance

14,3%

Automotive Debt

6,7 5

5,6

3

2,7

2

0,8

Public Debt

S Gov. Debt

Otheronvertibles

$15,8 bil.

$10 bil.

2013 2015


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KEY RATIOS ANALYSISOperating Performance and Income Statement items

Gross Profit and Operating Margin: stable outlook at 17% and 8%We estimate gross profit to remain around 17% for the coming years, at a similar levelthan the past 3 years on average. Margins should benefit from the restructuring of theEuropean business, which it estimates will regain profitability in 2015, and from theSouth America business estimated to break even this year. On the other side, marginsshould be adversely impacted by the following items:

Cost leadership war in mature markets, notably in Europe where the economicenvironment is burdening the sales, and in North America, those two regionsaccounting almost 45% of Fords revenues;

Increasing share of EMCs, likely to consume low-margin products, in thecompanys revenue;

Adverse effect of the product mix, which is turning toward low-margin smallvehicles.

Besides those market drivers, we estimate that the companys industrial performance islikely not to improve substantially over the coming years. Indeed, we believe that theimpact of Fords brands portfolio reshaping has already delivered its upside in terms ofoptimization of the manufacturing process.

OutlookBoth market and intrinsic drivers indicate that CoGS should remain at a stable level inpercentage of revenues. Gross profits should therefore increase steadily with sales,from $23.8 billion this year to $27.9 billion by 2017.Regarding SG&A, are also expect a stable outlook over the next coming years, as weestimate that the restructuring already impacted overhead costs.

Income Before Taxes

As in the past, IBT over the next few years will be essentially impacted by the interestexpenses due to the companys high indebtedness. Due to the recent upgrading byStandard & Poors, from BB+ to BBB- , interests should consume only one third of theoperating profit going forward, to be compare with more than 50% in 2010.The Interest Coverage Ratio is therefore expected to stand at 3, i.e. much lower thanthe industry average of 14.3 (excluding outliers). As highlighted in the Solvency analysisof the company, Ford as limited room for error in its operating performance in order toremain able to face its financial obligations.In addition, considering those low level of ratios, some concerns are raised concerningthe companys loan covenants, which are not made public.

2012a 2013e 2014e 2015e 2016e 2017e 2018eRevenues 134 252 137 317 141 588 146 326 151 221 156 281 160 970

Automotive Cost of Sales (112 578) (113 532) (117 063) (120 980) (125 027) (129 211) (133 087)Gross Profit 21 674 23 786 24 525 25 346 26 194 27 071 27 883

% Margin 16,1% 17,3% 17,3% 17,3% 17,3% 17,3% 17,3%

SG&A (12 182) (12 460) (12 848) (13 278) (13 722) (14 181) (14 606) Operating Profit 9 492 11 326 11 678 12 069 12 472 12 890 13 276

% Margin 7,1% 8,2% 8,2% 8,2% 8,2% 8,2% 8,2%


Interest Coverage +3,40 14,30 3,02 3,52

Small51,2%Medium

21,2%

Large27,6%

Sales breakdown/product - 2012

Small65%

Medium19%

Large16%

Sales breakdown/product - 2018

87%85%

81%83%84% 83% 83%

08 09 10 11 12 13e 17e

CoGS (in % of annual revenues)

2%39% 40%

34% 34% 34% 33%

08 09 10 11 12 13e 17e

Interest Expenses (in % of IBT)


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STRATEGIC ANALYSIS

Development on new segments so far successfulConnected VehiclesInitiated in 2007 through a partnership with Microsoft, Ford pioneered the mass-distribution in the Connected Vehicle segment. The in-car communication andentertainment system the two companies have jointly developed, SYNC, has beenconsiderably spread among Fords models, from 7 models in 2008 to 19 in 2012.It is estimated that in 2012, 8.22 million connected vehicles have been sold, whichwould result in a potential market share of 30% to 40% for Ford on that segment. (Nopublic data has been disclosed on the effective number of cars sold with SYNC).

We estimate that Ford has a competitive advantage on that segment, and that sales ofcars embedding SYNC (as an optional or standard feature) should further increase,through both increasing total sales and an increase in models proposing the service.

Electric-/Hybrid-VehiclesIn line with its global strategy of providing the customers the power of choice, Ford hisinvolved into various aspect of Green Cars, with technologies ranging from hybrid,plug-in hybrid and electric vehicle.Going forward, we estimate that Fords intensive involvement into R&D andcommercial initiatives will allow the company to further capture the growth of thesesegments and to increase its market shares . This assertion is strengthen by Fordscurrent performance in the overall electric drive segment, with a market share reaching14.7% as of Q3 2013, up from 7.3% in 2012, making Ford the worlds second electricauto-maker behind Toyota. Ford is notably performing very well in the Plug-in HybridVehicles segment, with market shares multiplied by 3.8 over the last 9 months.

Funding of operations through internal resources seems reasonableCapital ExpendituresCapital Expenditures are estimated to gradually increase up to $7.5 billion in2015/2016, which seems appropriate with regards to the following assertions:

Production facilities in North America are getting closer to saturation, with autilization rate coming close to 100%. Further investments may therefore beforeseen in order to increase the production capacity;

Development in APA region requires important capital expenditures in terms

of production facilities. Major investments are currently underway in India, andnew facilities are on their way to be opened in Oceania;

Deeper ranges of products and new segments requiring investments in R&Dwill call for further development.

In lights of the management ability to efficiently restructure the business (as witnessedby the past years recovery), we are confident in the companys ability to efficientlymanage those investment, and we therefore expect them to provide additional salesand positively contribute to the margins.

Supply Strategy and Working CapitalIn the light of the lasting economic crisis in Europe, which, through a decrease invehicles sold of approximately 23% since 2007, put auto-parts suppliers into severefinancial distress, Ford has initiated a plan to reduce its reliance on non-reliablesuppliers.

Models proposing SYNC

Focus 1 036 683Fiesta 657 564

Escape/Kuga 403 841ncoln Navigator 9 069

TOTAL 3 451 299In % of 2012 sales 60,9%

6,2%

23,3%

2012 Q3 2013

Plug-in Hybrid Vehiclesmarket shares (as of Q3 2013)


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The plan foresees to reduce the companys supplier base from 1260 to 750 providersapproximately, and is also in line with the current resizing of the European operations.Even if this new supply strategy should provide the company with further bargainingpower due to increasing orders towards the remaining suppliers, further details on thedifferent categories of suppliers would be good to make sure the company is notputting itself in a situation of dependence.

Considering the current cost leadership war in the automotive market, we took theassumption that an increase in bargaining power towards suppliers, combined withincreasing volumes ordered, would be used to lower the purchasing price. Wetherefore expect global conditions (for both receivables and payables) and inventorymanagement to remain similar as the past few years, which would result in thefollowing Working Capital requirements:

2012a 2013e 2014e 2015e 2016e 2017e 2018eAccounts Receivables (82 338) (84 218) (86 837) (89 743) (92 745) (95 849) (98 724)

Inventories (7 362) (7 424) (7 655) (7 911) (8 176) (8 450) (8 703)Other Assets (16 451) (16 827) (17 350) (17 931) (18 530) (19 150) (19 725)

Suppliers 19 308 19 233 19 859 20 527 21 213 21 923 22 581Other liab 49 407 50 535 52 107 53 851 55 652 57 514 59 239

WC (37 436) (38 701) (39 877) (41 208) (42 587) (44 012) (45 332)%Sales 27,9% 28,2% 28,2% 28,2% 28,2% 28,2% 28,2%

Change in WC n/a (1 265) (1 175) (1 332) (1 379) (1 425) (1 320)


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VALUATIONComparable Valuations

Ford s current high valuation could slow down the upward trendWithout calling into question our strategic analysis of the business and our positiveview of Ford s stock, we still believe that the company s current valuation is quite high,both in the light of its past performance and in comparison with the industry average.

Fords current valuation indeed implies an EV/EBITDA multiple of x11.2, to becompared with the industry average EBITDA of 6.99.

As a consequence, we expect Ford s stock price s increase to be slowed down. Thestock should however deliver its full potential should Ford be able to convert itsstrategy into concrete cash flows.

The following Comparable Multiples reflect the company s current high valuation.

Enterprise Value Multiple are though biased by the company s high gearing.

Enterprise Value Multiples

Equity Value Multiples

EV/Sales EV/EBITDARenault 0,72 6,42

Volkwsagen 0,79 7,62Fiat 0,18 1,92

Toyota 1,37 12,02Average 0,76 6,99

Implied Equity Value 13 285$ 13 396$Shares Outstanding 3 809 3 809Value per share 3,49$ 3,52$

C o m p a r a b l e s

P/E RatioRenault 6,25

Volkwsagen 3,13Fiat 13,54

Toyota 16,00Average 9,73

Implied Equity Value 55 024$Shares Outstanding 3 809

Value per share 14,45$

C o m p a r a b l e s


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VALUATIONIntrinsic Valuations

Sum up of the Discounted Cash Flow assumptions

Risk-free Rate 2,56% 10-year US T-Bond as of October 28, 2013Company Beta 1,76 Average of Ford's10-year, 5-year and 1-year BetaMarket Risk Premium 5,73% Premium observed on S&P 500 as of October 1, 2013Cost Of Equity 12,63%

Pre-tax Cost of Debt 3,60% Interests paid, consistent with the company's ratingTaxe Rate -32,00% Effective tax ratePost-tax Cost of Debt 4,76%

Weight of Equity 37,52%Weight of Debt 62,48%WACC 7,71%

Dividend Based Valuation

2013e 2014e 2015e 2016e 2017e ContinuingValueDividends Paid to Common Shareholders 5 811 6 829 7 079 7 322 7 588Less: Common Stock Issues (457) (624) (688) (711) (732)Plus: Common Stock Repurchases 125 125 125 125 125Dividends to Common Equity 5 479 6 330 6 516 6 735 6 981 7 033

Present Value Factors 0,888 0,788 0,700 0,621 0,552 PV Net Dividends 4 864 4 990 4 560 4 185 3 852

Sum of PV Net Dividends 22 452PV of Continuing Value 40 298Total 62 750

Adjust to midyear discounting 1,063 Total PV Dividends 66 712Shares Outstanding 3 809Estimated Value per Share 17,51

Share Price as of December 6th, 2013 16,56 Percent difference 5,76%

Beta

10-year 2,01 5-year 1,96 1-year 1,30 Average 1,76


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Free Cash Flow Valuation

Residual Income Valuation

2013e 2014e 2015e 2016e 2017e ContinuingValueNet Cash Flow from Operations 9 637 10 333 10 834 11 483 12 174 7 710+/(-) in Cash Required for Operations (358) (498) (553) (571) (590) (547)Net Cash Flow from Investing (5 925) (6 637) (7 218) (7 746) (8 275) (3 775)Net CFs from Debt Financing 2 286 3 121 3 441 3 557 3 659 3 634

Net CFs into Financial Assets - - - - - -Net CFs - Pref. Stock and Minority Int. (161) 11 12 12 13 13Free Cash Flow for Common Equity 5 479 6 330 6 516 6 735 6 981 7 033

Present Value Factors 0,888 0,788 0,700 0,621 0,552 - PV Free Cash Flows 4 864 4 990 4 560 4 185 3 852 -

Sum of PV Free Cash Flows 22 452PV of Continuing Value 40 298Total 62 750

Adjust to midyear discounting 1,063 Total PV Free Cash Flows to Equity 66 712Shares Outstanding 3 809Estimated Value per Share 17,51

Current share price 16,56 Percent difference 5,76%

2013e 2014e 2015e 2016e 2017e ContinuingValueComprehensive Income Available

for Common Shareholders 6 268 6 647 6 877 7 113 7 358 7 579Lagged Book Value of Common Shareholders' Equity (at t-1) 15 947 16 736 17 053 17 415 17 793 18 170

Required Earnings 2 014 2 114 2 154 2 199 2 247 2 295Residual Income 4 254 4 533 4 723 4 914 5 111 5 284

Present Value Factors 0,888 0,788 0,700 0,621 0,552 - PV Residual Income 3 777 3 574 3 306 3 054 2 820 -

Sum of PV Residual Income 16 530PV of Continuing Value 30 273Total 46 803

Add: Beginning Book Value of Equity 15 947PV of Equity 62 750

Adjust to midyear discounting 1,063

Total PV of Equity 66 712Shares Outstanding 3 809Estimated Value per Share 17,51



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Residual Income Valuation (Book To Market)

Free Cash Flow for All Debt and Equity

2013e 2014e 2015e 2016e 2017e ContinuingValueComprehensive Income Available

for Common Shareholders 6 268 6 647 6 877 7 113 7 358 7 579Book Value of Common Shareholders' Equity (at t-1) 15 947 16 736 17 053 17 415 17 793 18 170

Implied ROCE 39,3% 39,7% 40,3% 40,8% 41,4% 41,7%Residual ROCE 26,7% 27,1% 27,7% 28,2% 28,7% 29,1%Cumulative equity growth factor as of t-1 100,0% 104,9% 106,9% 109,2% 111,6% 113,9%Residual ROE times cumulative growth 26,7% 28,4% 29,6% 30,8% 32,0% 33,1%

Present Value Factors 0,888 PV Residual ROCE times growth 0,237

Sum of PV Residual ROCE times growth 1,04PV of Continuing Value 1,90Total PV Residual ROCE 2,93

Add one for book value of equity a t t -1 1,00Sum 3,93

Adjust to mid-year discounting 1,063 Implied Market-to-Book Ratio 4,183Times Beginning Book Value of Equity 15 947Total PV of Equity 66 712Shares Outstanding 3 809Estimated Value per Share 17,51


2013e 2014e 2015e 2016e 2017eContinuing

ValueNet Cash Flow from Operations 9 637 10 333 10 834 11 483 12 174 7 710Add back: Interest Expense after tax 2 603 2 669 2 750 2 835 2 924 3 012Subtract: Interest Income after tax - - - - - -Decrease (Increase) in Cash Required for (358) (498) (553) (571) (590) (547)Free Cash Flow from Operations 11 882 12 504 13 031 13 748 14 508 10 174Net Cash Flow from Investing (5 925) (6 637) (7 218) (7 746) (8 275) (3 775)Add back: Net CFs into Financial Assets - - - - - -Free Cash Flows - All Debt and Equity 5 957 5 868 5 813 6 002 6 233 6 399

Present Value Factors 0,941 0,885 0,833 0,784 0,738 PV Free Cash Flows 5 605 5 196 4 843 4 706 4 599

Sum of PV Free Cash Flows 24 949PV of Continuing Value 144 394Total PV FCF to Equity and Debt 169 343Less: Value of Outstanding Debt (105 058)Less: Value of Preferred Stock -Plus: Value of Financial Assets -PV of Equity 64 285

Adjust to midyear discounting 1,031 Total PV of Equity 66 300Shares Outstanding 3 809Estimated Value per Share 17,41



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APPENDIXBalance Sheet (Historic)

2007a 2008a 2009a 2010a 2011a 2012aASSETS

Cash and Cash Equivalents 35 283 22 049 21 441 14 805 17 148 15 659Marketable Securities 15 515 17 411 21 387 20 765 18 618 20 284

Accounts Receivable - Net 117 263 99 557 84 583 77 458 78 541 82 338Inventories 10 121 8 618 5 450 5 917 5 901 7 362

Other Current Assets 653 92 0 0 0 0Net investment in operating leases 33 255 25 738 17 270 11 675 12 838 16 451

Current Assets 212 090 173 465 150 131 130 620 133 046 142 094Equity in net assets of affiliated companies 2 853 1 592 1 550 2 569 2 936 3 246

Gross Property 79 563 77 923 64 276 60 955 58 778 61 432 (43 324) (49 358) (39 498) (37 776) (36 407) (36 490)

Amortizable Intangible Assets (net) 565 403 166 102 100 87Goodwill 1 504 1 190 43 0 0 0

Deferred Tax Assets - Noncurrent 3 500 3 108 3 440 2 003 15 125 15 185Assets of discountinued operations 7 537 198 7 923 0 0 0

Other Non-Current Assets (2) 14 976 9 807 6 819 6 214 4 770 5 000 Total Assets 279 264 218 328 194 850 164 687 178 348 190 554

LIABILITIES & EQUITYPayables 20 832 14 772 14 594 16 362 17 724 19 308

Accrued liabilities and deferred revenue 74 738 63 386 46 599 43 844 45 369 49 407Notes Payable and Short Term Debt 28 275 21 759 17 714 15 456 17 629 19 131

Current Liabilities 123 845 99 917 78 907 75 662 80 722 87 846Long Term Debt 140 255 132 437 114 727 88 532 81 859 85 927

Deferred Income Taxes - Non curent 3 034 2 035 2 375 1 135 696 470Net liabilities of discountinued operations 5 081 55 5 356 0 0 0

Total Liabilities 272 215 234 444 201 365 165 329 163 277 174 243Minority Interest 1 421 1 195 1 305 31 43 364Preferred Stock 0 0 0 0 0 0

Common Stock + Paid in Capital 7 856 9 100 16 820 20 841 20 943 21 016Retained Earnings (1 485) (16 145) (13 599) (7 038) 12 985 18 077

Accum. Other Comprehensive Income (558) (10 085) (10 864) (14 313) (18 734) (22 854) (185) (181) (177) (163) (166) (292)

Common Shareholders' Equity 5 628 (17 311) (7 820) (673) 15 028 15 947 Total Liabilities and Equities 279 264 218 328 194 850 164 687 178 348 190 554


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APPENDIXBalance Sheet (Forecasts)

2013e 2014e 2015e 2016e 2017eASSETS

Cash and Cash Equivalents 16 017 16 515 17 067 17 638 18 228Marketable Securities 20 747 21 392 22 108 22 848 23 612

Accounts Receivable - Net 84 218 86 837 89 743 92 745 95 849Inventories 7 424 7 655 7 911 8 176 8 450

Other Current Assets 0 0 0 0 0Net investment in operating leases 16 827 17 350 17 931 18 530 19 150

Current Assets 145 233 149 750 154 761 159 938 165 290Equity in net assets of affiliated companies 3 320 3 423 3 538 3 656 3 779

Gross Property 66 820 72 708 79 096 85 984 93 372 (40 945) (45 792) (51 065) (56 797) (63 022)

Amortizable Intangible Assets (net) 87 87 87 87 87Goodwill 0 0 0 0 0Deferred Tax Assets - Noncurrent 15 185 15 185 15 185 15 185 15 185

Assets of discountinued operations 0 0 0 0 0Other Non-Current Assets (2) 5 000 5 000 5 000 5 000 5 000

Total Assets 194 700 200 361 206 602 213 053 219 690

LIABILITIES & EQUITYPayables 19 233 19 859 20 527 21 213 21 923

Accrued liabilities and deferred revenue 50 535 52 107 53 851 55 652 57 514Notes Payable and Short Term Debt 19 547 20 116 20 742 21 390 22 056

Current Liabilities 89 315 92 081 95 119 98 255 101 493Long Term Debt 87 797 90 349 93 164 96 073 99 065

Deferred Income Taxes - Non curent 480 494 510 525 542Net liabilities of discountinued operations 0 0 0 0 0

Total Liabilities 177 592 182 925 188 793 194 853 201 101Minority Interest 372 383 395 407 420Preferred Stock 0 0 0 0 0

Common Stock + Paid in Capital 21 473 22 098 22 786 23 497 24 229Retained Earnings 18 534 18 352 18 150 17 942 17 712

Accum. Other Comprehensive Income (22 854) (22 854) (22 854) (22 854) (22 854) (417) (542) (667) (792) (917)

Common Shareholders' Equity 16 736 17 053 17 415 17 793 18 170 Total Liabilities and Equities 194 700 200 361 206 602 213 053 219 690


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APPENDIXIncome Statement (Historic)

2007a 2008a 2009a 2010a 2011a 2012a

Total sales and revenues 172 455 146 277 118 308 128 954 136 264 134 252 (142 587) (127 103) (100 016) (104 451) (113 345) (112 578)

Gross Profit 29 868 19 174 18 292 24 503 22 919 21 674 (21 169) (21 430) (13 258) (11 909) (11 578) (12 182)

Goodwill Impairment (2 400) 0 0 0 0 0 Operating Profit 6 299 (2 256) 5 034 12 594 11 341 9 492

Interest Income 1 161 0 5 288 0 825 1 185 (10 927) (10 437) (6 828) (6 514) (4 431) (3 828)

Income from Equity Affiliates 389 163 10 538 500 588Other Income or Gains 0 0 552 315 413 369

(668) (1 874) (1 030) 216 33 (86) Income before Tax (3 746) (14 404) 3 026 7 149 8 681 7 720

1 294 (63) (69) (592) 11 541 (2 056) (312) (214) (245) 4 (9) 1

Income from Discontinued Operations 41 9 5 0 0 0Net Income (computed) (2 723) (14 672) 2 717 6 561 20 213 5 665

Other Comprehensive Income Items (558) (9 527) (779) (3 449) (4 421) (4 120)Comprehensive Income (3 281) (24 199) 1 938 3 112 15 792 1 545

EBITDA 20 035 17 902 12 926 18 178 15 597 14 696


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APPENDIXIncome Statement (Forecasts)

2013e 2014e 2015e 2016e 2017e

Total sales and revenues 137 317 141 588 146 326 151 221 156 281 (113 532) (117 063) (120 980) (125 027) (129 211)

Gross Profit 23 786 24 525 25 346 26 194 27 071 (12 460) (12 848) (13 278) (13 722) (14 181)

Goodwill Impairment 0 0 0 0 0 Operating Profit 11 326 11 678 12 069 12 472 12 890

Interest Income 1 185 1 217 1 256 1 298 1 342 (3 828) (3 925) (4 044) (4 170) (4 300)

Income from Equity Affiliates 492 506 522 540 558Other Income or Gains 377 389 402 416 430

(88) (91) (94) (97) (100) Income before Tax 9 465 9 774 10 112 10 459 10 819

(3 029) (3 128) (3 236) (3 347) (3 462) 1 1 1 1 1

Income from Discontinued Operations 0 0 0 0 0Net Income (computed) 6 437 6 647 6 877 7 113 7 358

Other Comprehensive Income Items 0 0 0 0 0Comprehensive Income 6 437 6 647 6 877 7 113 7 358

EBITDA 15 780 16 525 17 342 18 205 19 114


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APPENDIXCash Flows (Historic)

2007a 2008a 2009a 2010a 2011a 2012a

Net Income (2 723) (14 672) 2 717 6 561 20 213 5 665Add back D&A Expenses 13 736 20 158 7 892 5 584 4 256 5 204

Add back Stock-Based Compensation 76 35 29 34 171 140Deferred Income Taxes (5 477) 1 954 (804) (216) (11 071) 1 989

(175) 60 (6) (198) (169) 0 Decrease in Accounts Receivable 45 1 091 2 244 765 (927) (1 622)

Decrease in Inventories 371 (358) 2 333 (903) (367) (1 401)Increase in Accounts Payable 1 348 (12 647) (1 803) (704) (680) 485

Other Addbacks to Net Income 668 1 874 1 030 34 (33) 92Other Operating Cash Flows 9 205 2 326 2 410 520 (1 609) (1 507)

Net CF from Operations 17 074 (179) 16 042 11 477 9 784 9 045s from Sales of Property, Plant, and Equipment 1 236 6 854 382 1 318 333 66

(6 022) (6 696) (4 561) (4 092) (4 293) (5 488) Decrease in Marketable Securities 7 237 (2 708) (3 856) 927 2 072 (1 386)

Settlement Of Derivatives 0 2 533 478 (37) 353 (737)other finance receivables and operating leases (9 475) (2 501) 14 403 8 884 (1 902) (6 875)

Other Investment Transactions (2) 541 (625) (377) (92) 396 130 Net CF from Investing Activities (6 483) (3 143) 6 469 6 908 (3 041) (14 290)

Increase in Short-Term Borrowing 919 0 0 0 2 841 1 208 0 (5 120) (5 935) (1 754) 0 0

Increase in Long-Term Borrowing 33 113 42 163 45 990 30 821 35 921 32 436 (39 431) (46 299) (61 894) (47 625) (43 095) (29 210)

Issue of Capital Stock 250 756 2 450 1 339 0 0 (31) 0 0 0 0 (125)

0 0 0 0 0 (763)Other Financing Transactions (1) (62) (604) (3 570) (7 202) 92 159 Net CF from Financing Activities (5 242) (9 104) (22 959) (24 421) (4 241) 3 705

Effects of exchange rate changes on cash 1 014 (808) 470 (53) (159) 51Other cash flows 26 0 (630) 0 0 0

Net Change in Cash 6 389 (13 234) (608) (6 089) 2 343 (1 489)


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APPENDIXCash Flows (Forecasts)

2013e 2014e 2015e 2016e 2017e

Net Income 6 437 6 647 6 877 7 113 7 358Add back D&AExpense (net) 4 455 4 847 5 273 5 732 6 225

Decrease in Receivables - Net (1 880) (2 619) (2 906) (3 002) (3 103) Decrease in Inventories (62) (231) (256) (265) (274)

Decrease in Other Curr. Assets (1) (376) (523) (581) (600) (620)Increase in A/P - Trade (75) 626 668 687 710

Increase in Current Accrued Liab. 1 128 1 572 1 744 1 801 1 862Net Change in Deferred Tax Assets/Liab. 10 14 15 16 16

Net Cash Flows from Operations 9 637 10 333 10 834 11 483 12 174 Decrease in PPE at cost (5 388) (5 888) (6 388) (6 888) (7 388)

Decrease in Marketable Securities (463) (645) (716) (740) (764) Decrease in Investment Securities (74) (103) (115) (118) (122) Net Cash Flows from Investing Activities (5 925) (6 637) (7 218) (7 746) (8 275)

Increase in Short-Term Debt 416 568 627 648 666Increase in Long-Term Debt 1 870 2 553 2 814 2 909 2 993

+/(-) Minority Interest and Preferred Stock 8 11 12 12 13+/(-) in Common Stock + Paid in Capital 457 624 688 711 732

Increase in Treasury Stock (125) (125) (125) (125) (125)Dividends (5 980) (6 829) (7 079) (7 322) (7 588)

Net Cash Flows from Financing Activities (3 354) (3 198) (3 063) (3 166) (3 309) Net Change in Cash 358 498 553 571 590


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APPENDIXSensitivity Analysis (Altman Z Score)

Sales vs. EBIT Margin

Current Ratio vs. EBIT Margin

Sales sensitivity (in % of 2012 revenues) 1,582 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160%

6% 1,018 1,102 1,186 1,271 1,355 1,440 1,524 1,608 1,693 1,777 1,862 1,946 2,0306,5% 1,022 1,108 1,193 1,279 1,365 1,450 1,536 1,621 1,707 1,792 1,878 1,964 2,0497,0% 1,027 1,114 1,200 1,287 1,374 1,461 1,547 1,634 1,721 1,807 1,894 1,981 2,0687,5% 1,032 1,119 1,207 1,295 1,383 1,471 1,559 1,647 1,735 1,823 1,910 1,998 2,086

EBIT Margin 8,0% 1,036 1,125 1,214 1,303 1,392 1,482 1,571 1,660 1,749 1,838 1,927 2,016 2,1058,5% 1,041 1,131 1,221 1,312 1,402 1,492 1,582 1,672 1,763 1,853 1,943 2,033 2,1239,0% 1,046 1,137 1,228 1,320 1,411 1,502 1,594 1,685 1,777 1,868 1,959 2,051 2,1429,5% 1,050 1,143 1,235 1,328 1,420 1,513 1,605 1,698 1,791 1,883 1,976 2,068 2,161

10,0% 1,055 1,149 1,242 1,336 1,430 1,523 1,617 1,711 1,804 1,898 1,992 2,086 2,179

Current Ratio 1,582 0,80 0,90 1,00 1,10 1,20 1,30 1,40 1,50 1,60 1,62 1,70 1,80 1,90

6% 1,072 1,127 1,182 1,238 1,293 1,348 1,404 1,459 1,514 1,524 1,570 1,625 1,6806,5% 1,083 1,139 1,194 1,249 1,305 1,360 1,415 1,471 1,526 1,536 1,581 1,637 1,6927,0% 1,095 1,150 1,206 1,261 1,316 1,372 1,427 1,482 1,538 1,547 1,593 1,648 1,7047,5% 1,107 1,162 1,217 1,273 1,328 1,383 1,439 1,494 1,549 1,559 1,605 1,660 1,715

EBIT Margin 8,0% 1,118 1,174 1,229 1,284 1,340 1,395 1,450 1,506 1,561 1,571 1,616 1,671 1,7278,5% 1,130 1,185 1,241 1,296 1,351 1,407 1,462 1,517 1,572 1,582 1,628 1,683 1,7389,0% 1,142 1,197 1,252 1,308 1,363 1,418 1,473 1,529 1,584 1,594 1,639 1,695 1,7509,5% 1,153 1,208 1,264 1,319 1,374 1,430 1,485 1,540 1,596 1,605 1,651 1,706 1,762

10,0% 1,165 1,220 1,275 1,331 1,386 1,441 1,497 1,552 1,607 1,617 1,663 1,718 1,773

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