10-Q 1 f0630201610-q.htm 10-Q Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)
 
R
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the quarterly period ended June 30, 2016
 
 
 
or
 
 
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the transition period from  __________ to __________
 
 
 
Commission file number 1-3950
 
Ford Motor Company
(Exact name of Registrant as specified in its charter)

Delaware
38-0549190
(State of incorporation)
(I.R.S. Employer Identification No.)
 
 
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(Zip Code)
313-322-3000
(Registrant’s telephone number, including area code)


Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  R   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  R   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   Large accelerated filer R     Accelerated filer o     Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No  R
 
As of July 21, 2016, Ford had outstanding 3,902,388,793 shares of Common Stock and 70,852,076 shares of Class B Stock.  
  


Exhibit Index begins on page


 


 


FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2016
 
Table of Contents
 
Page
 
Part I - Financial Information
 
 
Item 1
Financial Statements
 
 
Consolidated Income Statement
 
 
Consolidated Statement of Comprehensive Income
 
 
Consolidated Balance Sheet
 
 
Condensed Consolidated Statement of Cash Flows
 
 
Consolidated Statement of Equity
 
 
Notes to the Financial Statements
 
 
Report of Independent Registered Public Accounting Firm
 
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Overview
 
 
Results of Operations
 
 
Liquidity and Capital Resources
 
 
Credit Ratings
 
 
Production Volumes
 
 
Outlook
 
 
GAAP Reconciliations of Non-GAAP Financial Measures
 
 
Risk Factors
 
 
Accounting Standards Issued But Not Yet Adopted
 
 
Other Financial Information
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
 
Automotive
 
 
Financial Services
 
Item 4
Controls and Procedures
 
 
 
 
 
 
Part II - Other Information
 
 
Item 1A
Risk Factors
 
Item 6
Exhibits
 
 
Signature
 
 
Exhibit Index
 

i


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions, except per share amounts)
 
For the periods ended June 30,
 
2016
 
2015
 
2016
 
2015
 
Second Quarter
 
First Half
 
(unaudited)
Revenues
 
 
 
 
 
 
 
Automotive
$
36,932

 
$
35,105

 
$
72,189

 
$
66,905

Financial Services
2,553

 
2,158

 
5,014

 
4,258

Total revenues
39,485

 
37,263

 
77,203

 
71,163

 
 
 
 
 
 
 
 
Costs and expenses
 

 
 

 
 
 
 
Cost of sales
32,348

 
30,326

 
62,629

 
58,798

Selling, administrative, and other expenses
2,661

 
2,544

 
5,223

 
5,016

Financial Services interest, operating, and other expenses
2,258

 
1,745

 
4,318

 
3,458

Total costs and expenses
37,267

 
34,615

 
72,170

 
67,272

 
 
 
 
 
 
 
 
Interest expense on Automotive debt
212

 
190

 
412

 
355

 
 
 
 
 
 
 
 
Non-Financial Services interest income and
 other income/(loss), net (Note 13)
389

 
272

 
793

 
462

Financial Services other income/(loss), net (Note 13)
82

 
70

 
173

 
144

Equity in net income of affiliated companies
398

 
486

 
939

 
923

Income before income taxes
2,875

 
3,286


6,526


5,065

Provision for/(Benefit from) income taxes
903

 
1,125

 
2,099

 
1,750

Net income
1,972

 
2,161

 
4,427

 
3,315

Less: Income/(Loss) attributable to noncontrolling interests
2

 
1

 
5

 
2

Net income attributable to Ford Motor Company
$
1,970

 
$
2,160

 
$
4,422

 
$
3,313

 
 
 
 
 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income
$
0.50

 
$
0.54

 
$
1.11

 
$
0.83

Diluted income
0.49

 
0.54

 
1.11

 
0.83

 
 
 
 
 
 
 
 
Cash dividends declared
0.15

 
0.15

 
0.55

 
0.30



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended June 30,
 
2016
 
2015
 
2016
 
2015
 
Second Quarter
 
First Half
 
(unaudited)
Net income
$
1,972

 
$
2,161

 
$
4,427

 
$
3,315

Other comprehensive income/(loss), net of tax (Note 12)
 
 
 
 
 
 
 
Foreign currency translation
(58
)
 
(37
)
 
(122
)
 
66

Marketable securities

 

 
6

 

Derivative instruments
111

 
(76
)
 
357

 
(166
)
Pension and other postretirement benefits
17

 
16

 
39

 
(132
)
Total other comprehensive income/(loss), net of tax
70

 
(97
)
 
280

 
(232
)
Comprehensive income
2,042

 
2,064

 
4,707

 
3,083

Less: Comprehensive income/(loss) attributable to noncontrolling interests
2

 

 
4

 
1

Comprehensive income attributable to Ford Motor Company
$
2,040

 
$
2,064

 
$
4,703

 
$
3,082


The accompanying notes are part of the financial statements.

1

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
June 30,
2016
 
December 31,
2015
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents (Note 4)
$
17,063

 
$
14,272

Marketable securities (Note 4)
22,234

 
20,904

Financial Services finance receivables, net (Note 5)
47,860

 
45,137

Trade and other receivables, less allowances of $366 and $372
10,728

 
11,042

Inventories (Note 7)
9,829

 
8,319

Other assets
3,053

 
2,913

Total current assets
110,767

 
102,587

 
 
 
 
Financial Services finance receivables, net (Note 5)
47,427

 
45,554

Net investment in operating leases
29,468

 
27,093

Net property
31,940

 
30,163

Equity in net assets of affiliated companies
3,349

 
3,224

Deferred income taxes
9,822

 
11,509

Other assets
6,905

 
4,795

Total assets
$
239,678

 
$
224,925

 
 
 
 
LIABILITIES
 

 
 

Payables
$
23,084

 
$
20,272

Other liabilities and deferred revenue (Note 8)
21,463

 
19,089

Automotive debt payable within one year (Note 10)
2,417

 
1,779

Financial Services debt payable within one year (Note 10)
42,444

 
41,196

Total current liabilities
89,408

 
82,336

 
 
 
 
Other liabilities and deferred revenue (Note 8)
23,416

 
23,457

Automotive long-term debt (Note 10)
10,654

 
11,060

Financial Services long-term debt (Note 10)
84,399

 
78,819

Deferred income taxes
552

 
502

Total liabilities
208,429

 
196,174

 
 
 
 
Redeemable noncontrolling interest
95

 
94

 
 
 
 
EQUITY
 

 
 

Common Stock, par value $.01 per share (3,975 million shares issued of 6 billion authorized)
40

 
40

Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)
1

 
1

Capital in excess of par value of stock
21,546

 
21,421

Retained earnings
16,652

 
14,414

Accumulated other comprehensive income/(loss)
(5,976
)
 
(6,257
)
Treasury stock
(1,122
)
 
(977
)
Total equity attributable to Ford Motor Company
31,141

 
28,642

Equity attributable to noncontrolling interests
13

 
15

Total equity
31,154

 
28,657

Total liabilities and equity
$
239,678

 
$
224,925


The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”).  These assets and liabilities are included in the consolidated balance sheet above. 
 
June 30,
2016
 
December 31,
2015
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,418

 
$
3,949

Financial Services finance receivables, net
49,844

 
45,902

Net investment in operating leases
11,714

 
13,309

Other assets
2

 
85

LIABILITIES
 
 
 
Other liabilities and deferred revenue
$
25

 
$
19

Debt
41,515

 
43,086

The accompanying notes are part of the financial statements.

2

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
 
For the periods ended June 30,
 
2016
 
2015
 
First Half
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by/(used in) operating activities
$
11,834

 
$
7,623

 
 
 
 
Cash flows from investing activities
 
 
 
Capital spending
(3,206
)
 
(3,533
)
Acquisitions of finance receivables and operating leases
(27,501
)
 
(26,505
)
Collections of finance receivables and operating leases
19,732

 
18,844

Purchases of equity and debt securities
(16,757
)
 
(21,282
)
Sales and maturities of equity and debt securities
15,491

 
23,222

Settlements of derivatives
111

 
192

Other
21

 
112

Net cash provided by/(used in) investing activities
(12,109
)
 
(8,950
)
 
 
 
 
Cash flows from financing activities
 

 
 

Cash dividends
(2,184
)
 
(1,190
)
Purchases of Common Stock
(145
)
 
(91
)
Net changes in short-term debt
934

 
176

Proceeds from issuance of other debt
25,574

 
24,912

Principal payments on other debt
(21,104
)
 
(19,787
)
Other
(30
)
 
(279
)
Net cash provided by/(used in) financing activities
3,045

 
3,741

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
21

 
(274
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
2,791

 
$
2,140

 
 
 
 
Cash and cash equivalents at January 1
$
14,272

 
$
10,757

Net increase/(decrease) in cash and cash equivalents
2,791

 
2,140

Cash and cash equivalents at June 30
$
17,063

 
$
12,897


The accompanying notes are part of the financial statements.

3

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(in millions, unaudited)
 
Equity Attributable to Ford Motor Company
 
 
 
 
 
Capital Stock
 
Cap. in
Excess of
Par Value 
of Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income/(Loss) (Note 12)
 
Treasury Stock
 
Total
 
Equity
Attributable
to Non-controlling Interests
 
Total
Equity
Balance at December 31, 2015
$
41

 
$
21,421

 
$
14,414

 
$
(6,257
)
 
$
(977
)
 
$
28,642

 
$
15

 
$
28,657

Net income

 

 
4,422

 

 

 
4,422

 
5

 
4,427

Other comprehensive income/(loss), net of tax

 

 

 
281

 

 
281

 
(1
)
 
280

Common stock issued (including share-based compensation impacts)

 
125

 

 

 

 
125

 

 
125

Treasury stock/other 

 

 

 

 
(145
)
 
(145
)
 
(1
)
 
(146
)
Cash dividends declared

 

 
(2,184
)
 

 

 
(2,184
)
 
(5
)
 
(2,189
)
Balance at June 30, 2016
$
41

 
$
21,546

 
$
16,652

 
$
(5,976
)
 
$
(1,122
)
 
$
31,141

 
$
13

 
$
31,154

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
40

 
$
21,089

 
$
9,422

 
$
(5,265
)
 
$
(848
)
 
$
24,438

 
$
27

 
$
24,465

Net income

 

 
3,313

 

 

 
3,313

 
2

 
3,315

Other comprehensive income/(loss), net of tax

 

 

 
(231
)
 

 
(231
)
 
(1
)
 
(232
)
Common stock issued (including share-based compensation impacts)
1

 
228

 

 

 

 
229

 

 
229

Treasury stock/other 

 

 

 

 
(91
)
 
(91
)
 
(1
)
 
(92
)
Cash dividends declared

 

 
(1,190
)
 

 

 
(1,190
)
 
(6
)
 
(1,196
)
Balance at June 30, 2015
$
41

 
$
21,317

 
$
11,545

 
$
(5,496
)
 
$
(939
)
 
$
26,468

 
$
21

 
$
26,489


The accompanying notes are part of the financial statements.

4

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

Table of Contents
Footnote
 
Page
Note 1
Presentation
Note 2
New Accounting Standards
Note 3
Segment Information
Note 4
Cash, Cash Equivalents, and Marketable Securities
Note 5
Financial Services Finance Receivables
Note 6
Financial Services Allowance for Credit Losses
Note 7
Inventories
Note 8
Other Liabilities and Deferred Revenue
Note 9
Retirement Benefits
Note 10
Debt
Note 11
Derivative Financial Instruments and Hedging Activities
Note 12
Accumulated Other Comprehensive Income/(Loss)
Note 13
Other Income/(Loss)
Note 14
Income Taxes
Note 15
Capital Stock and Earnings Per Share
Note 16
Commitments and Contingencies



5

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION

For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us” or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.

Our financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X.

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented.  The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K Report”).   

Change in presentation. Our core Automotive business includes the designing, manufacturing, marketing, and servicing of a full line of Ford cars, trucks, SUVs, and electrified vehicles, as well as Lincoln luxury vehicles. We provide vehicle-related financing and leasing activities through our Ford Credit operation. At the same time, we are pursuing emerging opportunities in connectivity, mobility, autonomous vehicles, the customer experience, and data and analytics.
Prior to the second quarter of 2016, we presented our financial statements on both a consolidated basis and on a “sector” basis for our Automotive and Financial Services sectors. With our expansion into mobility services, including the formation in March 2016 of the Ford Smart Mobility LLC subsidiary, we have reevaluated our disclosures and concluded we should eliminate our two-sector financial presentation and, reflecting the manner in which our Chief Operating Decision Maker now manages our business, change our segment presentation to be Automotive, Financial Services, and All Other. See Note 3 for a description of our new segment presentation.
In addition, as a result of the elimination of our two-sector financial presentation, at June 30,2016 we changed the presentation of our consolidated balance sheet and certain notes to the consolidated financial statements to classify our assets and liabilities as current or non-current. We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standard Update (“ASU”) 2015-17, Income Taxes - Balance Sheet Classification of Deferred Taxes. On April 1, 2016, we retrospectively adopted the new accounting standard which requires deferred tax assets and liabilities to be classified as non-current in the consolidated balance sheet. The impact of the change resulted in the classification of all deferred taxes as non-current.
We also adopted the following standards during 2016, none of which have a material impact to our financial statements or financial statement disclosures:
Standard
 
Effective Date
2015-16
Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments
 
January 1, 2016
2015-09
Insurance - Disclosures about Short-Duration Contracts
 
January 1, 2016
2015-05
Internal-Use Software - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
 
January 1, 2016
2015-02
Consolidation - Amendments to the Consolidation Analysis
 
January 1, 2016
2015-01
Extraordinary and Unusual Items - Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items
 
January 1, 2016
2014-12
Stock Compensation - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
 
January 1, 2016


6

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS (Continued)

Accounting Standards Issued But Not Yet Adopted

ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. We are assessing the potential impact to our financial statements and disclosures.

ASU 2016-09, Stock Compensation - Improvements to Employee Share-Based Payment Accounting. In March 2016, the FASB issued a new accounting standard which simplifies accounting for share-based payment transactions, including income tax consequences and the classification of the tax impact on the statement of cash flows. The new standard is effective as of January 1, 2017, and early adoption is permitted.  We are assessing the potential impact to our financial statements and disclosures.

ASU 2016-02, Leases.  In February 2016, the FASB issued a new accounting standard which provides guidance on the recognition, measurement, presentation, and disclosure of leases. The new standard supersedes present U.S. GAAP guidance on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease liabilities, as well as additional disclosures. The new standard is effective as of January 1, 2019, and early adoption is permitted.  We are assessing the potential impact to our financial statements and disclosures.

ASU 2014-09, Revenue - Revenue from Contracts with Customers. In May 2014, the FASB issued a new accounting standard that requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards. It also requires additional disclosures. We plan to adopt the new revenue guidance effective January 1, 2017 and do not expect a material impact to our financial statements or disclosures. Under the new standard, the income statement classification for certain performance obligations will change.


7

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. SEGMENT INFORMATION

In conjunction with our expanded business model to become an automotive, financial services, and mobility company, beginning with the second quarter of 2016, we have changed our reportable segment disclosures. Reflecting the manner in which our Chief Operating Decision Maker manages our businesses, including resource allocation and performance assessment, we have four operating segments that represent the primary businesses reported in our consolidated financial statements. These operating segments are: Automotive, Financial Services, Ford Smart Mobility LLC, and Central Treasury Operations.

Automotive and Financial Services comprise separate reportable segments. Ford Smart Mobility LLC and Central Treasury Operations did not meet the quantitative thresholds in this reporting period to qualify as reportable segments; therefore, these operating segments are combined and disclosed below as All Other. Prior-period amounts have been adjusted retrospectively to reflect the change to our reportable segments.
Below is a description of our reportable segments and the business activities included in All Other.

Automotive Segment

Our Automotive segment primarily includes the sale of Ford and Lincoln brand vehicles, service parts, and accessories worldwide, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories. The segment includes 5 regional business units:  North America, South America, Europe, Middle East & Africa, and Asia Pacific.
Financial Services Segment

The Financial Services segment primarily includes our vehicle-related financing and leasing activities at Ford Credit.

All Other

All Other is a combination of operating segments that did not meet the quantitative thresholds in this reporting period to qualify as reportable segments. All Other consists of our Central Treasury Operations (formerly Other Automotive) and Ford Smart Mobility LLC. The Central Treasury Operations segment is primarily engaged in decision making for investments, risk management activities, and providing financing for the Automotive segment. Interest income, interest expense, gains and losses on cash equivalents and marketable securities, and foreign exchange derivatives associated with intercompany lending, are included in the results of Central Treasury Operations. The underlying assets and liabilities, primarily cash and cash equivalents, marketable securities, debt, and derivatives, remain with the Automotive segment.

Ford Smart Mobility LLC is a new subsidiary formed to design, build, grow, and invest in emerging mobility services. Designed to compete like a start-up company, Ford Smart Mobility LLC will design and build mobility services on its own, and collaborate with start-ups and tech companies.

Special Items

In addition, our results include Special Items that consist of (i) pension and other postretirement employee benefits (“OPEB”) remeasurement gains and losses, (ii) significant personnel and dealer-related costs stemming from our efforts to match production capacity and cost structure to market demand and changing model mix, and (iii) certain infrequent significant items that we generally do not consider to be indicative of our ongoing operating activities. Our management excludes these items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. Special items are presented as a separate reconciling item.


8

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. SEGMENT INFORMATION (Continued)

Key operating data for our business segments for the periods ended or at June 30 were as follows (in millions):

 
Automotive
 
Financial
Services
 
All Other
 
Special
Items
 
Adjustments
 
Total
Second Quarter 2016
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
36,932

 
$
2,553

 
$

 
$

 
$

 
$
39,485

Pre-tax results - income/(loss)
2,832

 
385

 
(224
)
 
(118
)
 

 
2,875

Cash, cash equivalents, and marketable securities
27,210

 
12,087

 

 

 

 
39,297

Total assets
99,272

 
145,303

 
6

 

 
(4,903
)
(a)
239,678

Debt
13,071

 
126,843

 

 

 

 
139,914

Operating cash flows
4,144

 
2,283

 

 

 
1,315

(b)
7,742

 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter 2015
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
35,105

 
$
2,158

 
$

 
$

 
$

 
$
37,263

Pre-tax results - income/(loss)
2,962

 
491

 
(167
)
 

 

 
3,286

Cash, cash equivalents, and marketable securities
20,729

 
10,573

 

 

 

 
31,302

Total assets
92,610

 
126,383

 

 

 
(2,866
)
(a)
216,127

Debt
13,713

 
109,813

 

 

 

 
123,526

Operating cash flows
1,887

 
1,755

 

 

 
1,568

(b)
5,210

 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
 
Financial
Services
 
All Other
 
Special
Items
 
Adjustments
 
Total
First Half 2016
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
72,189

 
$
5,014

 
$

 
$

 
$

 
$
77,203

Pre-tax results - income/(loss)
6,296

 
884

 
(350
)
 
(304
)
 

 
6,526

Operating cash flows
6,871

 
2,808

 

 

 
2,155

(b)
11,834

 
 
 
 
 
 
 
 
 
 
 
 
First Half 2015
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
66,905

 
$
4,258

 
$

 
$

 
$

 
$
71,163

Pre-tax results - income/(loss)
4,484

 
960

 
(379
)
 

 

 
5,065

Operating cash flows
2,412

 
3,162

 

 

 
2,049

(b)
7,623

__________
(a)
Includes eliminations of intersegment transactions occurring in the ordinary course of business and deferred tax netting.
(b)
We measure and evaluate our Automotive segment operating cash flow on a different basis than Net cash provided by/(used in) operating activities in our consolidated statement of cash flows. Automotive segment operating cash flow includes additional elements management considers to be related to our Automotive operating activities, primarily capital spending, and excludes outflows for funded pension contributions and separation payments that are considered operating cash flows under U.S. GAAP. The table below quantifies these reconciling adjustments to Net cash provided by/(used in) operating activities for the periods ended June 30 (in millions):
 
 
Second Quarter
 
First Half
 
 
2016
 
2015
 
2016
 
2015
 
Automotive capital spending
$
1,686

 
$
1,719

 
$
3,183

 
$
3,505

 
Separation payments
(148
)
 
(109
)
 
(158
)
 
(510
)
 
Funded pension contributions
(221
)
 
(91
)
 
(589
)
 
(853
)
 
Other
(2
)
 
49

 
(281
)
 
(93
)
 
Total operating cash flow adjustments
$
1,315

 
$
1,568

 
$
2,155

 
$
2,049




9

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The following tables categorize the fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis on our balance sheet (in millions):

 
 
 
June 30, 2016
 
December 31, 2015
 
Fair Value
 Level
 
Automotive
 
Financial Services
 
Consolidated
 
Automotive
 
Financial Services
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
699

 
$
974

 
$
1,673

 
$
115

 
$

 
$
115

U.S. government agencies
2
 
400

 
55

 
455

 
22

 

 
22

Non-U.S. government and agencies
2
 
924

 
353

 
1,277

 
173

 
266

 
439

Corporate debt
2
 
125

 
65

 
190

 
20

 

 
20

Total marketable securities classified as cash equivalents
 
 
2,148

 
1,447

 
3,595

 
330

 
266

 
596

Cash, time deposits, and money market funds
 
 
7,345

 
6,123

 
13,468

 
5,056

 
8,620

 
13,676

Total cash and cash equivalents
 
 
$
9,493

 
$
7,570

 
$
17,063

 
$
5,386

 
$
8,886

 
$
14,272

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
3,366

 
$
1,888

 
$
5,254

 
$
1,623

 
$
298

 
$
1,921

U.S. government agencies
2
 
4,228

 
1,556

 
5,784

 
5,240

 
1,169

 
6,409

Non-U.S. government and agencies
2
 
6,296

 
739

 
7,035

 
7,451

 
832

 
8,283

Corporate debt
2
 
3,573

 
290

 
3,863

 
3,279

 
384

 
3,663

Equities
1
 
207

 

 
207

 
240

 

 
240

Other marketable securities
2
 
47

 
44

 
91

 
348

 
40

 
388

Total marketable securities
 
 
$
17,717

 
$
4,517

 
$
22,234

 
$
18,181

 
$
2,723

 
$
20,904




10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES FINANCE RECEIVABLES

Our Financial Services, primarily Ford Credit, manages finance receivables as “consumer” and “non-consumer” portfolios.  The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables, net were as follows (in millions):
 
June 30,
2016
 
December 31,
2015
Consumer
 
 
 
Retail financing, gross
$
64,601

 
$
62,068

Unearned interest supplements
(2,416
)
 
(2,119
)
Consumer finance receivables
62,185

 
59,949

Non-Consumer
 

 
 

Dealer financing
33,551

 
31,115

Non-Consumer finance receivables
33,551

 
31,115

Total recorded investment
$
95,736

 
$
91,064

 
 
 
 
Recorded investment in finance receivables
$
95,736

 
$
91,064

Allowance for credit losses
(449
)
 
(373
)
Finance receivables, net
$
95,287

 
$
90,691

 
 
 
 
Current portion
$
47,860

 
$
45,137

Non-current portion
47,427

 
45,554

Finance receivables, net
$
95,287

 
$
90,691

 
 
 
 
Net finance receivables subject to fair value (a)
$
93,234

 
$
88,876

Fair value
94,720

 
90,048

__________
(a)
At June 30, 2016 and December 31, 2015, excludes $2.1 billion and $1.8 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements. The fair value of finance receivables is categorized within Level 3 of the hierarchy.

Excluded from finance receivables at June 30, 2016 and December 31, 2015, was $213 million and $209 million, respectively, of accrued uncollected interest, which are reported as Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at June 30, 2016 and December 31, 2015 were consumer receivables of $30.8 billion and $27.6 billion, respectively, and non-consumer receivables of $25.7 billion and $26.1 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.


11

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)
Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $20 million and $16 million at June 30, 2016 and December 31, 2015, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was $3 million and $1 million at June 30, 2016 and December 31, 2015, respectively.

The aging analysis of our finance receivables balances were as follows (in millions):
 
June 30,
2016
 
December 31,
2015
Consumer
 
 
 
31-60 days past due
$
633

 
$
708

61-90 days past due
107

 
108

91-120 days past due
30

 
27

Greater than 120 days past due
40

 
38

Total past due
810

 
881

Current
61,375

 
59,068

Consumer finance receivables
62,185

 
59,949

 
 
 
 
Non-Consumer
 
 
 
Total past due
91

 
116

Current
33,460

 
30,999

Non-Consumer finance receivables
33,551

 
31,115

Total recorded investment
$
95,736

 
$
91,064


Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on aging. Refer to the aging table above.

Consumer receivables credit quality ratings are as follows:

Pass – current to 60 days past due
Special Mention – 61 to 120 days past due and in intensified collection status
Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell

Non-Consumer Portfolio. Dealers are assigned to one of four groups according to risk ratings as follows:

Group I – strong to superior financial metrics
Group II – fair to favorable financial metrics
Group III – marginal to weak financial metrics
Group IV – poor financial metrics, including dealers classified as uncollectible


12

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)
The credit quality analysis of our dealer financing receivables was as follows (in millions):
 
June 30,
2016
 
December 31,
2015
Dealer Financing
 
 
 
Group I
$
24,853

 
$
22,146

Group II
6,849

 
7,175

Group III
1,739

 
1,683

Group IV
110

 
111

Total recorded investment
$
33,551

 
$
31,115


Impaired Receivables

Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be troubled debt restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at June 30, 2016 and December 31, 2015 was $366 million, or 0.6% of consumer receivables, and $375 million, or 0.6% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at June 30, 2016 and December 31, 2015 was $126 million, or 0.4% of non-consumer receivables, and $134 million, or 0.4% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.


13

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. FINANCIAL SERVICES ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables for the periods ended June 30 was as follows (in millions):
 
Second Quarter 2016
 
First Half 2016
 
Consumer
 
Non-Consumer
 
Total
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
390

 
$
20

 
$
410

 
$
357

 
$
16

 
$
373

Charge-offs
(94
)
 
(3
)
 
(97
)
 
(196
)
 
(2
)
 
(198
)
Recoveries
31

 
2

 
33

 
60

 
3

 
63

Provision for credit losses
109

 
(1
)
 
108

 
211

 

 
211

Other (a)
(4
)
 
(1
)
 
(5
)
 

 

 

Ending balance (b)
$
432

 
$
17

 
$
449

 
$
432

 
$
17

 
$
449

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
 
 
 
 
 
 
$
414

 
$
13

 
$
427

Specific impairment allowance
 
 
 
 
 
 
18

 
4

 
22

Ending balance (b)
 
 
 
 
 
 
432

 
17

 
449

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
 
Collectively evaluated for impairment
 
 
 
 
 
 
61,819

 
33,425

 
95,244

Specifically evaluated for impairment
 
 
 
 
 
 
366

 
126

 
492

Recorded investment
 
 
 
 
 
 
62,185

 
33,551

 
95,736

 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, net of allowance for credit losses
 
 
 
$
61,753

 
$
33,534

 
$
95,287

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $512 million.
 
Second Quarter 2015
 
First Half 2015
 
Consumer
 
Non-Consumer
 
Total
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
301

 
$
13

 
$
314

 
$
305

 
$
16

 
$
321

Charge-offs
(70
)
 
(2
)
 
(72
)
 
(150
)
 
(1
)
 
(151
)
Recoveries
31

 
1

 
32

 
61

 
3

 
64

Provision for credit losses
57

 

 
57

 
110

 
(4
)
 
106

Other (a)
3

 
1

 
4

 
(4
)
 
(1
)
 
(5
)
Ending balance (b)
$
322

 
$
13

 
$
335

 
$
322

 
$
13

 
$
335

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
 
 
 
 
 
 
$
303

 
$
13

 
$
316

Specific impairment allowance
 
 
 
 
 
 
19

 

 
19

Ending balance (b)
 
 
 
 
 
 
322

 
13

 
335

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
 
Collectively evaluated for impairment
 
 
 
 
 
 
55,527

 
27,123

 
82,650

Specifically evaluated for impairment
 
 
 
 
 
 
380

 
126

 
506

Recorded investment
 
 
 
 
 
 
55,907

 
27,249

 
83,156

 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, net of allowance for credit losses
 
$
55,585

 
$
27,236

 
$
82,821

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $380 million.


14

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INVENTORIES

All inventories are stated at the lower of cost and net realizable value. Cost for a substantial portion of U.S. inventories is determined on a last-in, first-out (“LIFO”) basis. LIFO was used for 33% and 27% of total inventories at June 30, 2016 and December 31, 2015, respectively. Cost of other inventories is determined by costing methods that approximate a first-in, first-out (“FIFO”) basis.

Inventories were as follows (in millions):
 
June 30,
2016
 
December 31,
2015
Raw materials, work-in-process, and supplies
$
4,186

 
$
4,005

Finished products
6,571

 
5,254

Total inventories under FIFO
10,757

 
9,259

LIFO adjustment
(928
)
 
(940
)
Total inventories
$
9,829

 
$
8,319


NOTE 8. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):
 
June 30,
2016
 
December 31,
2015
Current
 
 
 
Dealer and dealers’ customer allowances and claims
$
9,632

 
$
8,122

Deferred revenue
5,639

 
4,662

Employee benefit plans
1,482

 
1,562

Accrued interest
946

 
840

OPEB
358

 
354

Pension (a)
266

 
249

Other
3,140

 
3,300

Total current other liabilities and deferred revenue
$
21,463

 
$
19,089

Non-current
 

 
 

Pension (a)
$
9,190

 
$
9,543

OPEB
5,392

 
5,347

Dealer and dealers’ customer allowances and claims
2,782

 
2,731

Deferred revenue
3,499

 
3,265

Employee benefit plans
1,112

 
1,041

Other
1,441

 
1,530

Total non-current other liabilities and deferred revenue
$
23,416

 
$
23,457

__________
(a)
Balances at June 30, 2016 reflect pension liabilities at December 31, 2015, updated for service and interest cost, expected return on assets, separation expense, actual benefit payments, and cash contributions. The discount rate and rate of expected return assumptions are unchanged from year-end 2015. Included in Other assets are pension assets of $2.1 billion and $1.6 billion at June 30, 2016 and December 31, 2015, respectively.



15

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

The pre-tax expense for our defined benefit pension and OPEB plans for the periods ended June 30 was as follows (in millions):
 
Second Quarter
 
Pension Benefits
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
127

 
$
146

 
$
124

 
$
133

 
$
12

 
$
15

Interest cost
381

 
455

 
202

 
232

 
49

 
59

Expected return on assets
(674
)
 
(732
)
 
(350
)
 
(369
)
 

 

Amortization of prior service costs/(credits)
43

 
39

 
9

 
11

 
(36
)
 
(52
)
Net remeasurement (gain)/loss

 

 
11

 

 

 

Separation programs/other
3

 

 
65

 
12

 

 
1

Net periodic benefit cost/(income)
$
(120
)
 
$
(92
)
 
$
61

 
$
19

 
$
25

 
$
23

 
First Half
 
Pension Benefits
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
255

 
$
293

 
$
242

 
$
268

 
$
24

 
$
30

Interest cost
762

 
909

 
397

 
471

 
97

 
119

Expected return on assets
(1,347
)
 
(1,464
)
 
(689
)
 
(744
)
 

 

Amortization of prior service costs/(credits)
85

 
78

 
19

 
23

 
(71
)
 
(103
)
Net remeasurement (gain)/loss

 

 
11

 

 

 

Separation programs/other
3

 
2

 
72

 
19

 

 
1

Net periodic benefit cost/(income)
$
(242
)
 
$
(182
)
 
$
52

 
$
37

 
$
50

 
$
47


Beginning in 2016, we changed the method used to estimate the service and interest costs for pension and OPEB plans that utilize a yield curve approach. We now apply the specific spot rates along the yield curve to the relevant cash flows instead of using a single effective discount rate. Service and interest costs in the second quarter and first half were about $145 million lower and about $290 million lower, respectively, with the new method than they would have been under the prior method.

Pension Plan Contributions

During 2016, we expect to contribute about $1.5 billion from cash and cash equivalents to our worldwide funded pension plans (including discretionary contributions of about $400 million), and to make about $300 million of benefit payments to participants in unfunded plans, for a total of about $1.8 billion. In the first half of 2016, we contributed about $600 million to our worldwide funded pension plans and made about $150 million of benefit payments to participants in unfunded plans.


16

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. DEBT

The carrying value of Automotive and Financial Services debt was as follows (in millions):
Automotive
June 30,
2016
 
December 31,
2015
Debt payable within one year
 
 
 
Short-term
$
1,126

 
$
818

Long-term payable within one year
 

 
 

U.S. Department of Energy (“DOE”) Advanced Technology Vehicles Manufacturing (“ATVM”) Incentive Program
591

 
591

Other debt
752

 
370

Unamortized (discount)/premium
(52
)
 

Total debt payable within one year
2,417

 
1,779

Long-term debt payable after one year
 

 
 

Public unsecured debt securities
6,594

 
6,594

DOE ATVM Incentive Program
2,947

 
3,242

Other debt
1,530

 
1,696

Adjustments
 
 
 
Unamortized (discount)/premium
(358
)
 
(412
)
Unamortized issuance costs
(59
)
 
(60
)
Total long-term debt payable after one year
10,654

 
11,060

Total Automotive
$
13,071

 
$
12,839

 
 
 
 
Fair value of Automotive debt (a)
$
15,151

 
$
14,199

 
 
 
 
Financial Services
 

 
 

Debt payable within one year
 

 
 

Short-term
$
12,734

 
$
12,123

Long-term payable within one year
 

 
 

Unsecured debt
10,382

 
10,241

Asset-backed debt
19,349

 
18,855

Adjustments
 
 
 
Unamortized (discount)/premium
(3
)
 
(5
)
Unamortized issuance costs
(18
)
 
(18
)
Total debt payable within one year
42,444

 
41,196

Long-term debt payable after one year
 
 
 
Unsecured debt
55,927

 
49,193

Asset-backed debt
27,420

 
29,390

Adjustments
 
 
 
Unamortized (discount)/premium
(15
)
 
(24
)
Unamortized issuance costs
(227
)
 
(198
)
Fair value adjustments (b)
1,294

 
458

Total long-term debt payable after one year
84,399

 
78,819

Total Financial Services
$
126,843

 
$
120,015

 
 
 
 
Fair value of Financial Services debt (a)
$
128,982

 
$
121,170

__________
(a)
The fair value of debt includes $869 million and $560 million of Automotive short-term debt and $12.1 billion and $10.3 billion of Financial Services short-term debt at June 30, 2016 and December 31, 2015, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.