10-Q 1 f0331201910-q.htm 10-Q Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)
 
þ
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the quarterly period ended March 31, 2019
 
 
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  þ   No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes  þ   No  o

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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  þ

As of April 19, 2019, Ford had outstanding 3,918,693,825 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 March 31, 2019
 
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
 
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Overview
 
 
Results of Operations
 
 
Automotive Segment
 
 
Mobility Segment
 
 
Ford Credit Segment
 
 
Corporate Other
 
 
Interest on Debt
 
 
Special Items
 
 
Taxes
 
 
Liquidity and Capital Resources
 
 
Credit Ratings
 
 
Outlook
 
 
Non-GAAP Financial Measure Reconciliations
 
 
Supplemental Information
 
 
Cautionary Note on Forward-Looking Statements
 
 
Accounting Standards Issued But Not Yet Adopted
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
Item 4
Controls and Procedures
 
 
 
 
 
 
Part II - Other Information
 
 
Item 1
Legal Proceedings
 
Item 6
Exhibits
 
 
Signature
 

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 March 31,
 
2018
 
2019
 
First Quarter
 
(unaudited)
Revenues
 
 
 
Automotive
$
39,012

 
$
37,239

Ford Credit
2,943

 
3,097

Mobility
4

 
6

Total revenues (Note 3)
41,959

 
40,342

 
 
 
 
Costs and expenses
 
 
 
Cost of sales
35,753

 
33,942

Selling, administrative, and other expenses
2,747

 
2,843

Ford Credit interest, operating, and other expenses
2,338

 
2,355

Total costs and expenses
40,838

 
39,140

 
 
 
 
Interest expense on Automotive debt
275

 
231

Interest expense on Other debt
14

 
14

 
 
 
 
Other income/(loss), net (Note 4)
863

 
628

Equity in net income of affiliated companies
224

 
25

Income before income taxes
1,919

 
1,610

Provision for/(Benefit from) income taxes
174

 
427

Net income
1,745

 
1,183

Less: Income/(Loss) attributable to noncontrolling interests
9

 
37

Net income attributable to Ford Motor Company
$
1,736

 
$
1,146

 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income
$
0.44

 
$
0.29

Diluted income
0.43

 
0.29



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended March 31,
 
2018
 
2019
 
First Quarter
 
(unaudited)
Net income
$
1,745

 
$
1,183

Other comprehensive income/(loss), net of tax (Note 20)
 
 
 
Foreign currency translation
295

 
243

Marketable securities
(47
)
 
63

Derivative instruments
33

 
(446
)
Pension and other postretirement benefits
8

 
5

Total other comprehensive income/(loss), net of tax
289

 
(135
)
Comprehensive income
2,034

 
1,048

Less: Comprehensive income/(loss) attributable to noncontrolling interests
8

 
37

Comprehensive income attributable to Ford Motor Company
$
2,026

 
$
1,011

 
 
 
 

The accompanying notes are part of the consolidated financial statements.

1

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
December 31,
2018
 
March 31,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents (Note 7)
$
16,718

 
$
20,848

Marketable securities (Note 7)
17,233

 
16,882

Ford Credit finance receivables, net (Note 8)
54,353

 
55,444

Trade and other receivables, less allowances of $94 and $98
11,195

 
12,016

Inventories (Note 10)
11,220

 
12,333

Other assets
3,930

 
3,672

Total current assets
114,649

 
121,195

 
 
 
 
Ford Credit finance receivables, net (Note 8)
55,544

 
54,332

Net investment in operating leases (Note 11)
29,119

 
29,229

Net property
36,178

 
36,145

Equity in net assets of affiliated companies
2,709

 
2,605

Deferred income taxes
10,412

 
10,316

Other assets
7,929

 
9,459

Total assets
$
256,540

 
$
263,281

LIABILITIES
 
 
 
Payables
$
21,520

 
$
23,325

Other liabilities and deferred revenue (Note 13)
20,556

 
21,364

Automotive debt payable within one year (Note 16)
2,314

 
2,523

Ford Credit debt payable within one year (Note 16)
51,179

 
51,895

Other debt payable within one year (Note 16)

 
130

Total current liabilities
95,569

 
99,237

Other liabilities and deferred revenue (Note 13)
23,588

 
24,216

Automotive long-term debt (Note 16)
11,233

 
11,087

Ford Credit long-term debt (Note 16)
88,887

 
91,055

Other long-term debt (Note 16)
600

 
470

Deferred income taxes
597

 
647

Total liabilities
220,474

 
226,712

 
 
 
 
Redeemable noncontrolling interest (Note 19)
100

 
135

 
 
 
 
EQUITY
 
 
 
Common Stock, par value $.01 per share (4,011 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
22,006

 
22,026

Retained earnings
22,668

 
23,226

Accumulated other comprehensive income/(loss) (Note 20)
(7,366
)
 
(7,501
)
Treasury stock
(1,417
)
 
(1,394
)
Total equity attributable to Ford Motor Company
35,932

 
36,398

Equity attributable to noncontrolling interests
34

 
36

Total equity
35,966

 
36,434

Total liabilities and equity
$
256,540

 
$
263,281

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.
 
December 31,
2018
 
March 31,
2019
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,728

 
$
2,990

Ford Credit finance receivables, net
58,662

 
60,745

Net investment in operating leases
16,332

 
16,013

Other assets
27

 
14

LIABILITIES
 
 
 
Other liabilities and deferred revenue
$
24

 
$
45

Debt
53,269

 
52,248

The accompanying notes are part of the consolidated 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 March 31,
 
2018
 
2019
 
First Quarter
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by/(used in) operating activities
$
3,514

 
$
3,544

 
 
 
 
Cash flows from investing activities
 
 
 
Capital spending
(1,779
)
 
(1,633
)
Acquisitions of finance receivables and operating leases
(15,683
)
 
(12,595
)
Collections of finance receivables and operating leases
12,956

 
12,336

Purchases of marketable and other securities
(7,867
)
 
(3,923
)
Sales and maturities of marketable and other securities
6,040

 
4,441

Settlements of derivatives
(61
)
 
(14
)
Other
(150
)
 
54

Net cash provided by/(used in) investing activities
(6,544
)
 
(1,334
)
 
 
 
 
Cash flows from financing activities
 
 
 
Cash payments for dividends and dividend equivalents
(1,113
)
 
(597
)
Purchases of common stock
(89
)
 

Net changes in short-term debt
(909
)
 
420

Proceeds from issuance of long-term debt
16,953

 
15,411

Principal payments on long-term debt
(12,360
)
 
(13,277
)
Other
(68
)
 
(84
)
Net cash provided by/(used in) financing activities
2,414

 
1,873

 
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
115

 
29

 
 
 
 
Net increase/(decrease) in cash, cash equivalents, and restricted cash
$
(501
)
 
$
4,112

 
 
 
 
Cash, cash equivalents, and restricted cash at January 1 (Note 7)
$
18,638

 
$
16,907

Net increase/(decrease) in cash, cash equivalents, and restricted cash
(501
)
 
4,112

Cash, cash equivalents, and restricted cash at March 31 (Note 7)
$
18,137

 
$
21,019


The accompanying notes are part of the consolidated 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 20)
 
Treasury Stock
 
Total
 
Equity
Attributable
to Non-controlling Interests
 
Total
Equity
Balance at December 31, 2017
$
41

 
$
21,843

 
$
21,906

 
$
(6,959
)
 
$
(1,253
)
 
$
35,578

 
$
28

 
$
35,606

Net income

 

 
1,736

 

 

 
1,736

 
9

 
1,745

Other comprehensive income/(loss), net of tax

 

 

 
290

 

 
290

 
(1
)
 
289

Common stock issued (including share-based compensation impacts)

 
(2
)
 

 

 

 
(2
)
 

 
(2
)
Treasury stock/other 

 

 

 

 
(89
)
 
(89
)
 

 
(89
)
Cash dividends declared (a)

 

 
(1,113
)
 

 

 
(1,113
)
 

 
(1,113
)
Balance at March 31, 2018
$
41

 
$
21,841

 
$
22,529

 
$
(6,669
)
 
$
(1,342
)
 
$
36,400

 
$
36

 
$
36,436

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$
41

 
$
22,006

 
$
22,668

 
$
(7,366
)
 
$
(1,417
)
 
$
35,932

 
$
34

 
$
35,966

Adoption of accounting standards

 

 
13

 

 

 
13

 

 
13

Net income

 

 
1,146

 

 

 
1,146

 
37

 
1,183

Other comprehensive income/(loss), net of tax

 

 

 
(135
)
 

 
(135
)
 

 
(135
)
Common stock issued (including share-based compensation impacts)

 
20

 

 

 

 
20

 

 
20

Treasury stock/other 

 

 

 

 
23

 
23

 
(35
)
 
(12
)
Dividends and dividend equivalents declared (a)

 

 
(601
)
 

 

 
(601
)
 

 
(601
)
Balance at March 31, 2019
$
41

 
$
22,026

 
$
23,226

 
$
(7,501
)
 
$
(1,394
)
 
$
36,398

 
$
36

 
$
36,434


(a) We declared dividends of Common and Class B Stock of $0.28 and $0.15 per share in the first quarter of 2018 and 2019, respectively.

The accompanying notes are part of the consolidated 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
Revenue
Note 4
Other Income/(Loss)
Note 5
Income Taxes
Note 6
Capital Stock and Earnings Per Share
Note 7
Cash, Cash Equivalents, and Marketable Securities
Note 8
Ford Credit Finance Receivables
Note 9
Ford Credit Allowance for Credit Losses
Note 10
Inventories
Note 11
Net Investment in Operating Leases
Note 12
Goodwill
Note 13
Other Liabilities and Deferred Revenue
Note 14
Retirement Benefits
Note 15
Lease Commitments
Note 16
Debt
Note 17
Derivative Financial Instruments and Hedging Activities
Note 18
Employee Separation Actions and Exit and Disposal Activities
Note 19
Redeemable Noncontrolling Interest
Note 20
Accumulated Other Comprehensive Income/(Loss)
Note 21
Commitments and Contingencies
Note 22
Segment Information

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. We also make reference to Ford Motor Credit Company LLC, herein referenced to as Ford Credit. 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, 2018 (“2018 Form 10-K Report”). We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

Change in Accounting

As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on Ford Credit’s vehicles subject to operating leases. Previously, we presented the early termination loss reserve on operating leases due to customer default events as part of the allowance for credit losses within Net investment in operating leases. We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within Net investment in operating leases. We believe this change in accounting method is preferable as the characterization of these changes are better reflected as depreciation.

We have retrospectively applied this change in accounting method to all prior periods. At December 31, 2018, this reclassification increased accumulated depreciation and decreased allowance for credit losses by $78 million within Net investment in operating leases. This change had no impact on our consolidated income statement, consolidated balance sheet or Net cash provided by/(used in) operating activities in the consolidated statement of cash flows for the interim periods presented.

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2016-02, Leases.  On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments (“new lease standard”) using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods. We do not expect the adoption of the new lease standard to have a material impact to our net income on an ongoing basis.

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts or land easements entered into prior to adoption are leases or contain leases.

6

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS (Continued)

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2019, for the adoption of ASU 2016-02, Leases, was as follows (in millions):
 
 
Balance at December 31, 2018
 
Adjustments due to ASU 2016-02
 
Balance at
January 1, 2019
Balance sheet
 
 
 
 
 
 
Assets
 
 
 
 
 
 
Other assets, current
 
$
3,930

 
$
(8
)
 
$
3,922

Other assets, non-current
 
7,929

 
1,324

 
9,253

Deferred income taxes
 
10,412

 
(4
)
 
10,408

Liabilities
 
 
 
 
 
 
Other liabilities and deferred revenue, current
 
20,556

 
316

 
20,872

Other liabilities and deferred revenue, non-current
 
23,588

 
983

 
24,571

Equity
 
 
 
 
 
 
Retained earnings
 
22,668

 
13

 
22,681


We also adopted the following ASUs effective January 1, 2019, none of which had a material impact to our financial statements or financial statement disclosures:
ASU
 
Effective Date
2018-17
Targeted Improvements to Related Party Guidance for Variable Interest Entities
 
January 1, 2019
2018-16
Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
 
January 1, 2019
2018-13
Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement
 
January 1, 2019
2018-08
Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
 
January 1, 2019
2018-07
Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting
 
January 1, 2019
2018-02
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (a)
 
January 1, 2019
__________
(a) Ford did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from Accumulated other comprehensive income/(loss) to Retained earnings.

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impact of all ASUs.  ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

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. We plan to adopt the new standard and the related amendments on the effective date of January 1, 2020, by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of Retained earnings. We anticipate adoption will increase the amount of expected credit losses reported in Ford Credit finance receivables, net on our consolidated balance sheet and do not expect a material impact to our consolidated income statement.

7

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE

The following table disaggregates our revenue by major source for the periods ended March 31 (in millions):
 
First Quarter 2018
 
Automotive
 
Mobility
 
Ford Credit
 
Consolidated
Vehicles, parts, and accessories
$
37,417

 
$

 
$

 
$
37,417

Used vehicles
928

 

 

 
928

Extended service contracts
329

 

 

 
329

Other revenue
219

 
4

 
55

 
278

Revenues from sales and services
38,893

 
4

 
55

 
38,952

 
 
 
 
 
 
 
 
Leasing income
119

 

 
1,415

 
1,534

Financing income

 

 
1,432

 
1,432

Insurance income

 

 
41

 
41

Total revenues
$
39,012

 
$
4

 
$
2,943

 
$
41,959

 
 
 
 
 
 
 
 
 
First Quarter 2019
 
Automotive
 
Mobility
 
Ford Credit
 
Consolidated
Vehicles, parts, and accessories
$
35,576

 
$

 
$

 
$
35,576

Used vehicles
1,020

 

 

 
1,020

Extended service contracts
333

 

 

 
333

Other revenue
213

 
6

 
51

 
270

Revenues from sales and services
37,142

 
6

 
51

 
37,199

 
 
 
 
 
 
 
 
Leasing income
97

 

 
1,477

 
1,574

Financing income

 

 
1,528

 
1,528

Insurance income

 

 
41

 
41

Total revenues
$
37,239

 
$
6

 
$
3,097

 
$
40,342


The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in marketing incentives and returns we offer to our customers and their customers. As a result of changes in our estimate of marketing incentives, we recorded a decrease related to revenue recognized in prior periods of $718 million and $481 million in the first quarter of 2018 and 2019, respectively.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). At December 31, 2017 and December 31, 2018, $3.8 billion and $4 billion, respectively, of unearned revenue associated with outstanding contracts was reported in Other liabilities and deferred revenue. We recognized $298 million and $305 million of the unearned amounts as revenue during the first quarter of 2018 and 2019, respectively. At March 31, 2019, the unearned amount was $4 billion. We expect to recognize approximately $900 million of the unearned amount in the remainder of 2019, $1.1 billion in 2020, and $2 billion thereafter.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of $247 million and $256 million in deferred costs as of December 31, 2018 and March 31, 2019, respectively, and recognized $18 million and $19 million of amortization during the first quarter of 2018 and 2019, respectively.

8

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. OTHER INCOME/(LOSS)

The amounts included in Other income/(loss), net for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2018
 
2019
Net periodic pension and other postretirement employee benefits (OPEB) income/(cost), excluding service cost
$
477

 
$
272

Investment-related interest income
146

 
203

Interest income/(expense) on income taxes
1

 
(20
)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other securities
(5
)
 
67

Gains/(Losses) on changes in investments in affiliates
58

 
3

Royalty income
143

 
84

Other
43

 
19

Total
$
863

 
$
628


NOTE 5. INCOME TAXES

For interim tax reporting, we estimate one single effective tax rate for tax jurisdictions not subject to a valuation allowance, which is applied to the year-to-date ordinary income/(loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

NOTE 6. CAPITAL STOCK AND EARNINGS PER SHARE

Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock

Basic and diluted income per share were calculated using the following (in millions):
 
First Quarter
 
2018
 
2019
Basic and Diluted Income Attributable to Ford Motor Company
 
 
 
Basic income
$
1,736

 
$
1,146

Diluted income
1,736

 
1,146

 
 
 
 
Basic and Diluted Shares
 

 
 

Basic shares (average shares outstanding)
3,974

 
3,973

Net dilutive options, unvested restricted stock units, and unvested restricted stock shares
23

 
24

Diluted shares
3,997

 
3,997


9

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):
 
 
 
December 31, 2018
 
Fair Value
 Level
 
Automotive
 
Mobility
 
Ford Credit
 
Consolidated
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
220

 
$

 
$
139

 
$
359

U.S. government agencies
2
 
496

 

 
25

 
521

Non-U.S. government and agencies
2
 
169

 

 
114

 
283

Corporate debt
2
 
174

 

 
884

 
1,058

Total marketable securities classified as cash equivalents
 
 
1,059

 

 
1,162

 
2,221

Cash, time deposits, and money market funds
 
 
5,999

 
53

 
8,445

 
14,497

Total cash and cash equivalents
 
 
$
7,058

 
$
53

 
$
9,607

 
$
16,718

 
 
 
 
 
 
 
 
 
 
Marketable securities
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
3,014

 
$

 
$
289

 
$
3,303

U.S. government agencies
2
 
1,953

 

 
65

 
2,018

Non-U.S. government and agencies
2
 
4,674

 

 
610

 
5,284

Corporate debt
2
 
5,614

 

 
198

 
5,812

Equities (a)
1
 
424

 

 

 
424

Other marketable securities
2
 
246

 

 
146

 
392

Total marketable securities
 
 
$
15,925

 
$

 
$
1,308

 
$
17,233

 
 
 
 
 
 
 
 
 
 
Restricted cash
 
 
$
16

 
$
33

 
$
140

 
$
189

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
Fair Value
 Level
 
Automotive
 
Mobility
 
Ford Credit
 
Consolidated
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
1,044

 
$

 
$
1,112

 
$
2,156

U.S. government agencies
2
 
325

 

 
599

 
924

Non-U.S. government and agencies
2
 
658

 

 
394

 
1,052

Corporate debt
2
 
484

 

 
639

 
1,123

Total marketable securities classified as cash equivalents
 
 
2,511

 

 
2,744

 
5,255

Cash, time deposits, and money market funds
 
 
6,481

 
123

 
8,989

 
15,593

Total cash and cash equivalents
 
 
$
8,992

 
$
123

 
$
11,733

 
$
20,848

 
 
 
 
 
 
 
 
 
 
Marketable securities
 
 
 
 
 
 
 
 
 
U.S. government
1
 
$
2,769

 
$

 
$
241

 
$
3,010

U.S. government agencies
2
 
1,940

 

 
40

 
1,980

Non-U.S. government and agencies
2
 
4,219

 

 
803

 
5,022

Corporate debt
2
 
5,375

 

 
556

 
5,931

Equities (a)
1
 
478

 

 

 
478

Other marketable securities
2
 
255

 

 
206

 
461

Total marketable securities
 
 
$
15,036

 
$

 
$
1,846

 
$
16,882

 
 
 
 
 
 
 
 
 
 
Restricted cash
 
 
$
6

 
$
44

 
$
121

 
$
171

__________
(a) Net unrealized gains/losses on equities were a $25 million gain and a $54 million gain at December 31, 2018 and March 31, 2019, respectively.

10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) debt securities were as follows (in millions):
 
December 31, 2018
 
 
 
 
 
 
 
 
 
Fair Value of Securities with
Contractual Maturities
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Within 1 Year
 
After 1 Year through 5 Years
 
After 5 Years
Automotive
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
2,933

 
$
5

 
$
(10
)
 
$
2,928

 
$
1,714

 
$
1,214

 
$

U.S. government agencies
1,920

 

 
(18
)
 
1,902

 
797

 
1,087

 
18

Non-U.S. government and agencies
3,841

 
4

 
(37
)
 
3,808

 
194

 
3,614

 

Corporate debt
4,010

 
3

 
(33
)
 
3,980

 
1,148

 
2,830

 
2

Other marketable securities
207

 

 

 
207

 
1

 
134

 
72

Total
$
12,911

 
$
12

 
$
(98
)
 
$
12,825

 
$
3,854

 
$
8,879

 
$
92

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
March 31, 2019
 
 
 
 
 
 
 
 
 
Fair Value of Securities with
Contractual Maturities
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Within 1 Year
 
After 1 Year through 5 Years
 
After 5 Years
Automotive
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
2,914

 
$
7

 
$
(5
)
 
$
2,916

 
$
1,884

 
$
1,027

 
$
5

U.S. government agencies
1,972

 
1

 
(10
)
 
1,963

 
1,106

 
851

 
6

Non-U.S. government and agencies
3,639

 
8

 
(17
)
 
3,630

 
362

 
3,263

 
5

Corporate debt
5,154

 
21

 
(9
)
 
5,166

 
2,199

 
2,964

 
3

Other marketable securities
212

 
1

 

 
213

 
1

 
135

 
77

Total
$
13,891

 
$
38

 
$
(41
)
 
$
13,888

 
$
5,552

 
$
8,240

 
$
96


Sales proceeds and gross realized gains/losses from the sale of AFS debt securities for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2018
 
2019
Automotive
 
 
 
Sales proceeds
$
1,339

 
$
1,142

Gross realized gains

 
2

Gross realized losses
6

 
5


11

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The present fair values and gross unrealized losses for cash equivalents and marketable securities accounted for as AFS debt securities that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, were as follows (in millions):
 
December 31, 2018
 
Less than 1 year
 
1 Year or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
 
 
 
 
 
 
 
 
 
 
 
Automotive
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
199

 
$
(1
)
 
$
1,637

 
$
(9
)
 
$
1,836

 
$
(10
)
U.S. government agencies
193

 
(1
)
 
1,596

 
(17
)
 
1,789

 
(18
)
Non-U.S. government and agencies
341

 
(1
)
 
2,445

 
(36
)
 
2,786

 
(37
)
Corporate debt
1,816

 
(16
)
 
856

 
(17
)
 
2,672

 
(33
)
Other marketable securities
125

 

 

 

 
125

 

Total
$
2,674

 
$
(19
)
 
$
6,534

 
$
(79
)
 
$
9,208

 
$
(98
)
 
 

 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
Less than 1 year
 
1 Year or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Automotive
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
324

 
$

 
$
685

 
$
(5
)
 
$
1,009

 
$
(5
)
U.S. government agencies
90

 

 
1,524

 
(10
)
 
1,614

 
(10
)
Non-U.S. government and agencies
25

 

 
2,171

 
(17
)
 
2,196

 
(17
)
Corporate debt
233

 
(1
)
 
1,110

 
(8
)
 
1,343

 
(9
)
Other marketable securities
22

 

 
48

 

 
70

 

Total
$
694

 
$
(1
)
 
$
5,538

 
$
(40
)
 
$
6,232

 
$
(41
)

During the first quarter of 2018 and 2019, we did not recognize any other-than-temporary impairment loss.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash as reported in the consolidated statement of cash flows were as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Cash and cash equivalents
$
16,718

 
$
20,848

Restricted cash (a)
189

 
171

Total cash, cash equivalents, and restricted cash
$
16,907

 
$
21,019

__________
(a)
Included in Other assets in the non-current assets section of our consolidated balance sheet.

Other Securities

We have investments in entities for which we do not have the ability to exercise significant influence and fair values are not readily available. We have elected to record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance sheet. These investments were $250 million and $233 million at December 31, 2018 and March 31, 2019, respectively. In the first quarter of 2019, there there were no material adjustments to the fair values of these investments held at March 31, 2019.

12

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES

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):
 
December 31,
2018
 
March 31,
2019
Consumer
 
 
 
Retail installment contracts, gross
$
70,874

 
$
69,258

Finance leases, gross
8,748

 
9,011

Retail financing, gross
79,622

 
78,269

Unearned interest supplements
(3,508
)
 
(3,478
)
Consumer finance receivables
76,114

 
74,791

Non-Consumer
 

 
 

Dealer financing
34,372

 
35,498

Non-Consumer finance receivables
34,372

 
35,498

Total recorded investment
$
110,486

 
$
110,289

 
 
 
 
Recorded investment in finance receivables
$
110,486

 
$
110,289

Allowance for credit losses
(589
)
 
(513
)
Finance receivables, net
$
109,897

 
$
109,776

 
 
 
 
Current portion
$
54,353

 
$
55,444

Non-current portion
55,544

 
54,332

Finance receivables, net
$
109,897

 
$
109,776

 
 
 
 
Net finance receivables subject to fair value (a)
$
101,471

 
$
101,122

Fair value (b)
100,877

 
100,823

__________
(a)
Net finance receivables subject to fair value exclude finance leases. Previously, certain consumer financing products in Europe were classified as retail installment contracts. We now classify these products as finance leases. Comparative information has been revised to reflect this change.
(b)
The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Ford Credit offers finance leases to individuals, leasing companies, government entities, daily rental companies, and fleet customers. These financings include primarily lease plans for terms of 24 to 60 months. Financing revenue from finance leases was $95 million and $92 million for the periods ended March 31, 2018 and 2019, respectively, and is included in Ford Credit revenues on the consolidated income statement.

The amounts contractually due on Ford Credit’s finance lease receivables were as follows (in millions):
 
 
March 31,
2019
Within one year
 
$
2,064

After one year and within two years
 
1,955

After two years and within three years
 
1,646

After three years and within four years
 
691

After four years and within five years
 
124

After five years
 
2

Total future cash payments
 
6,482

Less: Present value discount
 
(315
)
Finance lease receivables
 
$
6,167


13

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES (Continued)

The reconciliation from finance lease receivables to finance leases, gross and finance leases, net is as follows (in millions):
 
 
March 31,
2019
Finance lease receivables
 
$
6,167

Unguaranteed residual assets
 
2,713

Initial direct costs
 
131

Finance leases, gross
 
9,011

Unearned interest supplements from Ford and affiliated companies
 
(340
)
Allowance for credit losses
 
(17
)
Finance leases, net
 
$
8,654


At December 31, 2018 and March 31, 2019, accrued uncollected interest was $264 million and $274 million, respectively, which is reported in Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at December 31, 2018 and March 31, 2019, were consumer receivables of $40.7 billion and $43.2 billion, respectively, and non-consumer receivables of $25.7 billion and $26.3 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.

Aging

For all finance receivables, Ford Credit defines “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 at December 31, 2018. At March 31, 2019, there were no balances greater than 90 days past due that are still accruing interest.

The aging analysis of Ford Credit’s finance receivables balances was as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Consumer
 
 
 
31-60 days past due
$
859

 
$
563

61-90 days past due
123

 
82

91-120 days past due
39

 
34

Greater than 120 days past due
39

 
40

Total past due
1,060

 
719

Current
75,054

 
74,072

Consumer finance receivables
76,114

 
74,791

Non-Consumer
 
 
 
Total past due
76

 
81

Current
34,296

 
35,417

Non-Consumer finance receivables
34,372

 
35,498

Total recorded investment
$
110,486

 
$
110,289


14

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES (Continued)

Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on aging. 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; and
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; and
Group IV – poor financial metrics, including dealers classified as uncollectible.

The credit quality analysis of dealer financing receivables was as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Dealer Financing
 
 
 
Group I
$
27,032

 
$
28,097

Group II
5,635

 
5,744

Group III
1,576

 
1,533

Group IV
129

 
124

Total recorded investment
$
34,372

 
$
35,498


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 December 31, 2018 and March 31, 2019 was $370 million and $359 million, or 0.5% and 0.5% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2018 and March 31, 2019 was $129 million and $124 million, or 0.4% and 0.3% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

15

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. FORD CREDIT ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables for the periods ended March 31 was as follows (in millions):
 
First Quarter 2018
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
582

 
$
15

 
$
597

Charge-offs
(131
)
 
(2
)
 
(133
)
Recoveries
39

 
1

 
40

Provision for credit losses
92

 
2

 
94

Other
2

 

 
2

Ending balance
$
584

 
$
16

 
$
600

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
$
563

 
$
15

 
$
578

Specific impairment allowance
21

 
1

 
22

Ending balance
584

 
16

 
600

 
 
 
 
 
 
Analysis of ending balance of finance receivables
Collectively evaluated for impairment
$
75,846

 
$
36,067

 
$
111,913

Specifically evaluated for impairment
380

 
108

 
488

Recorded investment
76,226

 
36,175

 
112,401

 


 
 
 
 
Ending balance, net of allowance for credit losses
$
75,642

 
$
36,159

 
$
111,801

 
First Quarter 2019
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
566

 
$
23

 
$
589

Charge-offs
(137
)
 
(17
)
 
(154
)
Recoveries
43

 
2

 
45

Provision for credit losses
24

 
9

 
33

Other

 

 

Ending balance
$
496

 
$
17

 
$
513

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
$
477

 
$
16

 
$
493

Specific impairment allowance
19

 
1

 
20

Ending balance
496

 
17

 
513

 
 
 
 
 
 
Analysis of ending balance of finance receivables
Collectively evaluated for impairment
$
74,432

 
$
35,374

 
$
109,806

Specifically evaluated for impairment
359

 
124

 
483

Recorded investment
74,791

 
35,498

 
110,289

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
74,295

 
$
35,481

 
$
109,776


16

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. INVENTORIES

Inventories were as follows (in millions):
 
December 31,
2018
 
March 31,
2019
Raw materials, work-in-process, and supplies
$
4,536

 
$
4,653

Finished products
6,684

 
7,680

Total inventories
$
11,220

 
$
12,333


NOTE 11. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consist primarily of lease contracts for vehicles with individuals, daily rental
companies, government entities, and fleet customers. Assets subject to operating leases are depreciated using the
straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual
values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are
expected to be returned.

The net investment in operating leases was as follows (in millions):
 
 
December 31, 2018
 
March 31,
2019
Automotive Segment
 
 
 
 
Vehicles, net of depreciation
 
$
1,705

 
$
1,656

Ford Credit Segment
 

 

Vehicles and other equipment, at cost (a)
 
33,557

 
33,551

Accumulated depreciation
 
(6,143
)
 
(5,978
)
Total Ford Credit Segment
 
27,414

 
27,573

Total
 
$
29,119

 
$
29,229

__________
(a)
Includes Ford Credit’s operating lease assets of $16.3 billion and $16 billion at December 31, 2018 and March 31, 2019, respectively, which have been included in certain lease securitization transactions. These net investments in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other obligations or the claims of other creditors.

Ford Credit Segment

Included in Ford Credit revenues are rents on operating leases. The amounts contractually due for minimum rentals on operating leases at December 31, 2018 were as follows (in millions):
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
Total
Minimum rentals on operating leases
 
$
4,708

 
$
2,929

 
$
1,083

 
$
83

 
$
6

 
$
8,809


The amounts contractually due on our operating leases at March 31, 2019 were as follows (in millions):
 
 
Within one year
 
After one year and within two years
 
After two years and within three years
 
After three years and within four years
 
After four years and within five years
 
Total
Operating lease payments
 
$
4,719