10-Q 1 f0930201610-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 September 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 October 20, 2016, Ford had outstanding 3,902,862,547 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 September 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 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 September 30,
 
2016
 
2015
 
2016
 
2015
 
Third Quarter
 
First Nine Months
 
(unaudited)
Revenues
 
 
 
 
 
 
 
Automotive
$
33,331

 
$
35,818

 
$
105,520

 
$
102,723

Financial Services
2,612

 
2,326

 
7,626

 
6,584

Total revenues
35,943

 
38,144

 
113,146

 
109,307

 
 
 
 
 
 
 
 
Costs and expenses
 

 
 

 
 
 
 
Cost of sales
30,446

 
31,213

 
93,075

 
90,011

Selling, administrative, and other expenses
2,535

 
2,386

 
7,758

 
7,402

Financial Services interest, operating, and other expenses
2,200

 
1,905

 
6,518

 
5,363

Total costs and expenses
35,181

 
35,504

 
107,351

 
102,776

 
 
 
 
 
 
 
 
Interest expense on Automotive debt
238

 
206

 
650

 
561

 
 
 
 
 
 
 
 
Non-Financial Services interest income and
 other income/(loss), net (Note 13)
328

 
446

 
1,121

 
908

Financial Services other income/(loss), net (Note 13)
132

 
97

 
305

 
241

Equity in net income of affiliated companies
403

 
314

 
1,342

 
1,237

Income before income taxes
1,387

 
3,291


7,913


8,356

Provision for/(Benefit from) income taxes
426

 
1,099

 
2,525

 
2,849

Net income
961

 
2,192

 
5,388

 
5,507

Less: Income/(Loss) attributable to noncontrolling interests
4

 

 
9

 
2

Net income attributable to Ford Motor Company
$
957

 
$
2,192

 
$
5,379

 
$
5,505

 
 
 
 
 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income
$
0.24

 
$
0.55

 
$
1.35

 
$
1.39

Diluted income
0.24

 
0.55

 
1.35

 
1.38

 
 
 
 
 
 
 
 
Cash dividends declared
0.15

 
0.15

 
0.70

 
0.45



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended September 30,
 
2016
 
2015
 
2016
 
2015
 
Third Quarter
 
First Nine Months
 
(unaudited)
Net income
$
961

 
$
2,192

 
$
5,388

 
$
5,507

Other comprehensive income/(loss), net of tax (Note 12)
 
 
 
 
 
 
 
Foreign currency translation
(184
)
 
(882
)
 
(306
)
 
(816
)
Marketable securities

 

 
6

 

Derivative instruments
99

 
374

 
456

 
208

Pension and other postretirement benefits
14

 
133

 
53

 
1

Total other comprehensive income/(loss), net of tax
(71
)
 
(375
)
 
209

 
(607
)
Comprehensive income
890

 
1,817

 
5,597

 
4,900

Less: Comprehensive income/(loss) attributable to noncontrolling interests
3

 
1

 
7

 
2

Comprehensive income attributable to Ford Motor Company
$
887

 
$
1,816

 
$
5,590

 
$
4,898


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)
 
September 30,
2016
 
December 31,
2015
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents (Note 4)
$
13,340

 
$
14,272

Marketable securities (Note 4)
20,825

 
20,904

Financial Services finance receivables, net (Note 5)
45,550

 
45,137

Trade and other receivables, less allowances of $359 and $372
10,029

 
11,042

Inventories (Note 7)
10,219

 
8,319

Other assets
3,552

 
2,913

Total current assets
103,515

 
102,587

 
 
 
 
Financial Services finance receivables, net (Note 5)
49,614

 
45,554

Net investment in operating leases
29,196

 
27,093

Net property
32,257

 
30,163

Equity in net assets of affiliated companies
3,795

 
3,224

Deferred income taxes
9,475

 
11,509

Other assets
7,111

 
4,795

Total assets
$
234,963

 
$
224,925

 
 
 
 
LIABILITIES
 

 
 

Payables
$
22,384

 
$
20,272

Other liabilities and deferred revenue (Note 8)
19,531

 
19,089

Automotive debt payable within one year (Note 10)
2,472

 
1,779

Financial Services debt payable within one year (Note 10)
44,801

 
41,196

Total current liabilities
89,188

 
82,336

 
 
 
 
Other liabilities and deferred revenue (Note 8)
23,652

 
23,457

Automotive long-term debt (Note 10)
10,675

 
11,060

Financial Services long-term debt (Note 10)
79,276

 
78,819

Deferred income taxes
577

 
502

Total liabilities
203,368

 
196,174

 
 
 
 
Redeemable noncontrolling interest
96

 
94

 
 
 
 
EQUITY
 

 
 

Common Stock, par value $.01 per share (3,976 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
21,598

 
21,421

Retained earnings
17,013

 
14,414

Accumulated other comprehensive income/(loss) (Note 12)
(6,046
)
 
(6,257
)
Treasury stock
(1,122
)
 
(977
)
Total equity attributable to Ford Motor Company
31,484

 
28,642

Equity attributable to noncontrolling interests
15

 
15

Total equity
31,499

 
28,657

Total liabilities and equity
$
234,963

 
$
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. 
 
September 30,
2016
 
December 31,
2015
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,318

 
$
3,949

Financial Services finance receivables, net
47,627

 
45,902

Net investment in operating leases
9,951

 
13,309

Other assets
7

 
85

LIABILITIES
 
 
 
Other liabilities and deferred revenue
$
10

 
$
19

Debt
39,123

 
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 September 30,
 
2016
 
2015
 
First Nine Months
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by/(used in) operating activities
$
16,994

 
$
14,078

 
 
 
 
Cash flows from investing activities
 
 
 
Capital spending
(4,912
)
 
(5,358
)
Acquisitions of finance receivables and operating leases
(43,746
)
 
(43,762
)
Collections of finance receivables and operating leases
30,254

 
28,632

Purchases of equity and debt securities
(22,049
)
 
(29,493
)
Sales and maturities of equity and debt securities
22,022

 
32,874

Settlements of derivatives
330

 
26

Other
43

 
417

Net cash provided by/(used in) investing activities
(18,058
)
 
(16,664
)
 
 
 
 
Cash flows from financing activities
 

 
 

Cash dividends
(2,780
)
 
(1,785
)
Purchases of Common Stock
(145
)
 
(129
)
Net changes in short-term debt
1,200

 
844

Proceeds from issuance of other debt
31,956

 
35,876

Principal payments on other debt
(30,019
)
 
(27,366
)
Other
(44
)
 
(303
)
Net cash provided by/(used in) financing activities
168

 
7,137

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(36
)
 
(622
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(932
)
 
$
3,929

 
 
 
 
Cash and cash equivalents at January 1
$
14,272

 
$
10,757

Net increase/(decrease) in cash and cash equivalents
(932
)
 
3,929

Cash and cash equivalents at September 30
$
13,340

 
$
14,686


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

 

 
5,379

 

 

 
5,379

 
9

 
5,388

Other comprehensive income/(loss), net of tax

 

 

 
211

 

 
211

 
(2
)
 
209

Common stock issued (including share-based compensation impacts)

 
177

 

 

 

 
177

 

 
177

Treasury stock/other 

 

 

 

 
(145
)
 
(145
)
 
(2
)
 
(147
)
Cash dividends declared

 

 
(2,780
)
 

 

 
(2,780
)
 
(5
)
 
(2,785
)
Balance at September 30, 2016
$
41

 
$
21,598

 
$
17,013

 
$
(6,046
)
 
$
(1,122
)
 
$
31,484

 
$
15

 
$
31,499

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
40

 
$
21,089

 
$
9,422

 
$
(5,265
)
 
$
(848
)
 
$
24,438

 
$
27

 
$
24,465

Net income

 

 
5,505

 

 

 
5,505

 
2

 
5,507

Other comprehensive income/(loss), net of tax

 

 

 
(607
)
 

 
(607
)
 

 
(607
)
Common stock issued (including share-based compensation impacts)
1

 
265

 

 

 

 
266

 

 
266

Treasury stock/other 

 

 

 

 
(129
)
 
(129
)
 
(4
)
 
(133
)
Cash dividends declared

 

 
(1,785
)
 

 

 
(1,785
)
 
(6
)
 
(1,791
)
Balance at September 30, 2015
$
41

 
$
21,354

 
$
13,142

 
$
(5,872
)
 
$
(977
)
 
$
27,688

 
$
19

 
$
27,707


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 Ford Motor Credit Company LLC (“Ford Credit”). 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 reevaluated our disclosures and concluded we should eliminate our two-sector financial presentation and, reflecting the manner in which our Chief Operating Decision Maker manages our business, changed our segment presentation beginning with the second quarter of 2016 to be Automotive, Financial Services, and All Other. See Note 3 for a description of our 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 method with a method 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. We will adopt the standard effective January 1, 2017 by recognizing a one-time adjustment to retained earnings and deferred tax assets related to cumulative excess tax benefits previously unrecognized. We will also change classification of tax-related items on the consolidated statement of cash flows.

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 by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. We do not expect a material impact to our financial statements or disclosures.


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 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 were 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 (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment), 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 September 30 were as follows (in millions):

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

 
 

 
 

 
 
 
 

 
 

Revenues
$
33,331

 
$
2,612

 
$

 
$

 
$

 
$
35,943

Pre-tax results - income/(loss)
1,084

 
552

 
(223
)
 
(26
)
 

 
1,387

Equity in net income/(loss) of affiliated companies
395

 
8

 

 

 

 
403

Cash, cash equivalents, and marketable securities
24,300

 
9,855

 
10

 

 

 
34,165

Total assets
97,269

 
142,979

 
67

 

 
(5,352
)
(a)
234,963

Debt
13,147

 
124,077

 

 

 

 
137,224

Operating cash flows
(1,954
)
 
5,953

 

 

 
1,161

(b)
5,160

 
 
 
 
 
 
 
 
 
 
 
 
Third Quarter 2015
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
35,818

 
$
2,326

 
$

 
$

 
$

 
$
38,144

Pre-tax results - income/(loss)
2,762

 
526

 
(163
)
 
166

 

 
3,291

Equity in net income/(loss) of affiliated companies
306

 
8

 

 

 

 
314

Cash, cash equivalents, and marketable securities
22,177

 
9,670

 

 

 

 
31,847

Total assets
92,873

 
130,626

 

 

 
(3,921
)
(a)
219,578

Debt
12,798

 
113,627

 

 

 

 
126,425

Operating cash flows
2,787

 
2,167

 

 

 
1,501

(b)
6,455

 
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
 
Financial
Services
 
All Other
 
Special
Items
 
Adjustments
 
Total
First Nine Months 2016
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
105,520

 
$
7,626

 
$

 
$

 
$

 
$
113,146

Pre-tax results - income/(loss)
7,380

 
1,436

 
(573
)
 
(330
)
 

 
7,913

Equity in net income/(loss) of affiliated companies
1,319

 
23

 

 

 

 
1,342

Operating cash flows
4,917

 
8,761

 

 

 
3,316

(b)
16,994

 
 
 
 
 
 
 
 
 
 
 
 
First Nine Months 2015
 

 
 

 
 

 
 
 
 

 
 

Revenues
$
102,723

 
$
6,584

 
$

 
$

 
$

 
$
109,307

Pre-tax results - income/(loss)
7,246

 
1,486

 
(542
)
 
166

 

 
8,356

Equity in net income/(loss) of affiliated companies
1,213

 
24

 

 

 

 
1,237

Operating cash flows
5,199

 
5,329

 

 

 
3,550

(b)
14,078

__________
(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 non-designated derivatives, and excludes outflows for funded pension contributions, separation payments, and other items 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 September 30 (in millions):
 
 
Third Quarter
 
First Nine Months
 
 
2016
 
2015
 
2016
 
2015
 
Automotive capital spending
$
1,696

 
$
1,819

 
$
4,879

 
$
5,324

 
Net cash flows from non-designated derivatives
(246
)
 
119

 
(322
)
 
90

 
Funded pension contributions
(246
)
 
(89
)
 
(835
)
 
(942
)
 
Separation payments
(40
)
 
(90
)
 
(198
)
 
(600
)
 
Other
(3
)
 
(258
)
 
(208
)
 
(322
)
 
Total operating cash flow adjustments
$
1,161

 
$
1,501

 
$
3,316

 
$
3,550



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):
 
 
 
September 30, 2016
 
Fair Value
 Level
 
Automotive
 
Financial Services
 
All
Other
 
Consolidated
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
599

 
$

 
$

 
$
599

U.S. government agencies
2
 

 
4

 

 
4

Non-U.S. government and agencies
2
 
551

 
280

 

 
831

Corporate debt
2
 
60

 
50

 

 
110

Total marketable securities classified as cash equivalents
 
 
1,210

 
334

 

 
1,544

Cash, time deposits, and money market funds
 
 
6,445

 
5,341

 
10

 
11,796

Total cash and cash equivalents
 
 
$
7,655

 
$
5,675

 
$
10

 
$
13,340

 
 
 
 
 
 
 
 
 
 
Marketable securities
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
3,982

 
$
1,724

 
$

 
$
5,706

U.S. government agencies
2
 
3,284

 
1,354

 

 
4,638

Non-U.S. government and agencies
2
 
5,423

 
520

 

 
5,943

Corporate debt
2
 
3,709

 
540

 

 
4,249

Equities
1
 
198

 

 

 
198

Other marketable securities
2
 
49

 
42

 

 
91

Total marketable securities
 
 
$
16,645

 
$
4,180

 
$

 
$
20,825

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
Fair Value
 Level
 
Automotive
 
Financial Services
 
All
Other
 
Consolidated
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
115

 
$

 
$

 
$
115

U.S. government agencies
2
 
22

 

 

 
22

Non-U.S. government and agencies
2
 
173

 
266

 

 
439

Corporate debt
2
 
20

 

 

 
20

Total marketable securities classified as cash equivalents
 
 
330

 
266

 

 
596

Cash, time deposits, and money market funds
 
 
5,056

 
8,620

 

 
13,676

Total cash and cash equivalents
 
 
$
5,386

 
$
8,886

 
$

 
$
14,272

 
 
 
 
 
 
 
 
 
 
Marketable securities
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
1,623

 
$
298

 
$

 
$
1,921

U.S. government agencies
2
 
5,240

 
1,169

 

 
6,409

Non-U.S. government and agencies
2
 
7,451

 
832

 

 
8,283

Corporate debt
2
 
3,279

 
384

 

 
3,663

Equities
1
 
240

 

 

 
240

Other marketable securities
2
 
348

 
40

 

 
388

Total marketable securities
 
 
$
18,181

 
$
2,723

 
$

 
$
20,904



10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The following tables present cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities on our balance sheet (in millions):
 
September 30, 2016
 
 
 
 
 
 
 
 
 
Fair Value of Securities with
Contractual Maturities:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Less than 1 Year
 
1-5 Years
Automotive
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
447

 
$

 
$

 
$
447

 
$

 
$
447

U.S. government agencies
100

 

 

 
100

 

 
100

Non-U.S. government and agencies
77

 

 

 
77

 

 
77

Corporate debt
337

 

 

 
337

 
247

 
90

Total
$
961

 
$

 
$

 
$
961

 
$
247

 
$
714

 
 
 
 
 
 
 
 

 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
Fair Value of Securities with
Contractual Maturities:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Less than 1 Year
 
1-5 Years
Automotive
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$

 
$

 
$

 
$

 
$

 
$

U.S. government agencies

 

 

 

 

 

Non-U.S. government and agencies
82

 

 
(12
)
 
70

 

 
70

Corporate debt

 

 

 

 

 

Total
$
82

 
$

 
$
(12
)
 
$
70

 
$

 
$
70


Sales proceeds for investments classified as AFS and sold prior to maturity were $69 million and $0 for the nine months ended September 30, 2016 and 2015, respectively. Gross realized gains from the sale of AFS securities were $1 million and $0 for the nine months ended September 30, 2016 and 2015, respectively. There were no gross realized losses from the sale of AFS securities for the nine months ended September 30, 2016 and 2015.

We determine other-than-temporary impairments on cash equivalents and marketable securities using a specific identification method. During the nine months ended September 30, 2016 and 2015, we did not recognize any other-than-temporary impairment loss.

11

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):
 
September 30,
2016
 
December 31,
2015
Consumer
 
 
 
Retail financing, gross
$
67,894

 
$
62,068

Unearned interest supplements
(2,785
)
 
(2,119
)
Consumer finance receivables
65,109

 
59,949

Non-Consumer
 

 
 

Dealer financing
30,533

 
31,115

Non-Consumer finance receivables
30,533

 
31,115

Total recorded investment
$
95,642

 
$
91,064

 
 
 
 
Recorded investment in finance receivables
$
95,642

 
$
91,064

Allowance for credit losses
(478
)
 
(373
)
Finance receivables, net
$
95,164

 
$
90,691

 
 
 
 
Current portion
$
45,550

 
$
45,137

Non-current portion
49,614

 
45,554

Finance receivables, net
$
95,164

 
$
90,691

 
 
 
 
Net finance receivables subject to fair value (a)
$
93,033

 
$
88,876

Fair value
94,327

 
90,048

__________
(a)
At September 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 fair value hierarchy.

Excluded from finance receivables at September 30, 2016 and December 31, 2015, was $206 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 September 30, 2016 and December 31, 2015 were consumer receivables of $29.9 billion and $27.6 billion, respectively, and non-consumer receivables of $23.3 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.


12

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 $24 million and $16 million at September 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 de minimis and $1 million at September 30, 2016 and December 31, 2015, respectively.

The aging analysis of our finance receivables balances were as follows (in millions):
 
September 30,
2016
 
December 31,
2015
Consumer
 
 
 
31-60 days past due
$
652

 
$
708

61-90 days past due
112

 
108

91-120 days past due
36

 
27

Greater than 120 days past due
39

 
38

Total past due
839

 
881

Current
64,270

 
59,068

Consumer finance receivables
65,109

 
59,949

 
 
 
 
Non-Consumer
 
 
 
Total past due
71

 
116

Current
30,462

 
30,999

Non-Consumer finance receivables
30,533

 
31,115

Total recorded investment
$
95,642

 
$
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


13

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):
 
September 30,
2016
 
December 31,
2015
Dealer Financing
 
 
 
Group I
$
23,162

 
$
22,146

Group II
5,847

 
7,175

Group III
1,399

 
1,683

Group IV
125

 
111

Total recorded investment
$
30,533

 
$
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 September 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 September 30, 2016 and December 31, 2015 was $140 million, or 0.5% of non-consumer receivables, and $134 million, or 0.4% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.


14

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 September 30 was as follows (in millions):
 
Third Quarter 2016
 
First Nine Months 2016
 
Consumer
 
Non-Consumer
 
Total
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
432

 
$
17

 
$
449

 
$
357

 
$
16

 
$
373

Charge-offs
(108
)
 
(5
)
 
(113
)
 
(304
)
 
(7
)
 
(311
)
Recoveries
29

 
1

 
30

 
89

 
4

 
93

Provision for credit losses
112

 
1

 
113

 
323

 
1

 
324

Other (a)
(1
)
 

 
(1
)
 
(1
)
 

 
(1
)
Ending balance (b)
$
464

 
$
14

 
$
478

 
$
464

 
$
14

 
$
478

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
 
 
 
 
 
 
$
445

 
$
12

 
$
457

Specific impairment allowance
 
 
 
 
 
 
19

 
2

 
21

Ending balance (b)
 
 
 
 
 
 
464

 
14

 
478

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
 
Collectively evaluated for impairment
 
 
 
 
 
 
64,743

 
30,393

 
95,136

Specifically evaluated for impairment
 
 
 
 
 
 
366

 
140

 
506

Recorded investment
 
 
 
 
 
 
65,109

 
30,533

 
95,642

 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, net of allowance for credit losses
 
 
 
$
64,645

 
$
30,519

 
$
95,164

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $541 million.
 
Third Quarter 2015
 
First Nine Months 2015
 
Consumer
 
Non-Consumer
 
Total
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
322

 
$
13

 
$
335

 
$
305

 
$
16

 
$
321

Charge-offs
(85
)
 
(2
)
 
(87
)
 
(235
)
 
(3
)
 
(238
)
Recoveries
29

 
1

 
30

 
90

 
4

 
94

Provision for credit losses
80

 
2

 
82

 
190

 
(2
)
 
188

Other (a)
(4
)
 

 
(4
)
 
(8
)
 
(1
)
 
(9
)
Ending balance (b)
$
342

 
$
14

 
$
356

 
$
342

 
$
14

 
$
356

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
 
 
 
 
 
 
$
323

 
$
12

 
$
335

Specific impairment allowance
 
 
 
 
 
 
19

 
2

 
21

Ending balance (b)
 
 
 
 
 
 
342

 
14

 
356

 
 
 
 
 
 
 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
 
Collectively evaluated for impairment
 
 
 
 
 
 
58,749

 
26,311

 
85,060

Specifically evaluated for impairment
 
 
 
 
 
 
375

 
129

 
504

Recorded investment
 
 
 
 
 
 
59,124

 
26,440

 
85,564

 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, net of allowance for credit losses
 
$
58,782

 
$
26,426

 
$
85,208

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $403 million.


15

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 32% and 27% of total inventories at September 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):
 
September 30,
2016
 
December 31,
2015
Raw materials, work-in-process, and supplies
$
4,335

 
$
4,005

Finished products
6,823

 
5,254

Total inventories under FIFO
11,158

 
9,259

LIFO adjustment
(939
)
 
(940
)
Total inventories
$
10,219

 
$
8,319


NOTE 8. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):
 
September 30,
2016
 
December 31,
2015
Current
 
 
 
Dealer and dealers’ customer allowances and claims
$
9,050

 
$
8,122

Deferred revenue
4,715

 
4,675

Employee benefit plans
1,505

 
1,562

Accrued interest
761

 
840

OPEB
357

 
354

Pension (a)
268

 
249

Other
2,875

 
3,287

Total current other liabilities and deferred revenue
$
19,531

 
$
19,089

Non-current
 

 
 

Pension (a)
$
9,024

 
$
9,543

OPEB
5,362

 
5,347

Dealer and dealers’ customer allowances and claims
3,146

 
2,731

Deferred revenue
3,639

 
3,285

Employee benefit plans
1,112

 
1,041

Other
1,369

 
1,510

Total non-current other liabilities and deferred revenue
$
23,652

 
$
23,457

__________
(a)
Balances at September 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 $2.3 billion and $1.6 billion at September 30, 2016 and December 31, 2015, respectively.



16

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 September 30 was as follows (in millions):
 
Third Quarter
 
Pension Benefits
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
128

 
$
147

 
$
116

 
$
133

 
$
13

 
$
15

Interest cost
381

 
454

 
190

 
236

 
49

 
59