10-Q


 
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, 2015
 
 
 
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, 2015, Ford had outstanding 3,897,778,098 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, 2015
 
Table of Contents
 
Page
 
Part I - Financial Information
 
 
Item 1
Financial Statements
 
 
Consolidated Income Statement
 
 
Consolidated Statement of Comprehensive Income
 
 
Sector Income Statement
 
 
Consolidated Balance Sheet
 
 
Sector Balance Sheet
 
 
Condensed Consolidated Statement of Cash Flows
 
 
Condensed Sector 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
 
 
Results of Operations
 
 
Automotive Sector
 
 
Financial Services Sector
 
 
Liquidity and Capital Resources
 
 
Production Volumes
 
 
Outlook
 
 
Accounting Standards Issued But Not Yet Adopted
 
 
Other Financial Information
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
 
Automotive Sector
 
 
Financial Services Sector
 
Item 4
Controls and Procedures
 
 
 
 
 
 
Part II - Other Information
 
 
Item 1
Legal Proceedings
 
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
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,
 
2015
 
2014
 
2015
 
2014
 
Third Quarter
 
First Nine Months
 
(unaudited)
Revenues
 
 
 
 
 
 
 
Automotive
$
35,818

 
$
32,779

 
$
102,723

 
$
102,020

Financial Services
2,326

 
2,141

 
6,584

 
6,187

Total revenues
38,144

 
34,920

 
109,307

 
108,207

 
 
 
 
 
 
 
 
Costs and expenses
 

 
 

 
 
 
 
Automotive cost of sales
31,493

 
30,197

 
90,797

 
92,465

Selling, administrative, and other expenses
3,731

 
3,484

 
11,058

 
10,332

Financial Services interest expense
592

 
673

 
1,846

 
2,034

Financial Services provision for credit and insurance losses
120

 
74

 
299

 
217

Total costs and expenses
35,936

 
34,428

 
104,000

 
105,048

 
 
 
 
 
 
 
 
Automotive interest expense
206

 
204

 
561

 
619

 
 
 
 
 
 
 
 
Automotive interest income and other income/(loss), net (Note 14)
446

 
255

 
908

 
739

Financial Services other income/(loss), net (Note 14)
97

 
90

 
241

 
245

Equity in net income of affiliated companies
314

 
388

 
1,237

 
874

Income before income taxes
2,859

 
1,021


7,132


4,398

Provision for/(Benefit from) income taxes (Note 16)
950

 
188

 
2,412

 
1,261

Net income
1,909

 
833

 
4,720

 
3,137

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

 
(2
)
 
2

 
2

Net income attributable to Ford Motor Company
$
1,909

 
$
835

 
$
4,718

 
$
3,135

 
 
 
 
 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 18)
Basic income
$
0.48

 
$
0.22

 
$
1.19

 
$
0.80

Diluted income
0.48

 
0.21

 
1.18

 
0.78

 
 
 
 
 
 
 
 
Cash dividends declared
0.15

 
0.125

 
0.45

 
0.375



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended September 30,
 
2015
 
2014
 
2015
 
2014
 
Third Quarter
 
First Nine Months
 
(unaudited)
Net income
$
1,909

 
$
833

 
$
4,720

 
$
3,137

Other comprehensive income/(loss), net of tax (Note 13)
 
 
 
 
 
 
 
Foreign currency translation
(1,036
)
 
(550
)
 
(1,344
)
 
(468
)
Derivative instruments
374

 
(48
)
 
208

 
(243
)
Pension and other postretirement benefits
481

 
540

 
726

 
776

Total other comprehensive income/(loss), net of tax
(181
)
 
(58
)
 
(410
)
 
65

Comprehensive income
1,728

 
775

 
4,310

 
3,202

Less: Comprehensive income/(loss) attributable to noncontrolling interests
1

 
(2
)
 
2

 
2

Comprehensive income attributable to Ford Motor Company
$
1,727

 
$
777

 
$
4,308

 
$
3,200


The accompanying notes are part of the financial statements.

1
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR INCOME STATEMENT
(in millions)
 
For the periods ended September 30,
 
2015
 
2014
 
2015
 
2014
 
Third Quarter
 
First Nine Months
 
(unaudited)
AUTOMOTIVE
 
 
 
 
 
 
 
Revenues
$
35,818

 
$
32,779

 
$
102,723

 
$
102,020

Costs and expenses
 
 
 
 
 
 
 
Cost of sales
31,493

 
30,197

 
90,797

 
92,465

Selling, administrative, and other expenses
2,538

 
2,489

 
7,840

 
7,516

Total costs and expenses
34,031

 
32,686

 
98,637

 
99,981

 
 
 
 
 
 
 
 
Interest expense
206

 
204

 
561

 
619

 
 
 
 
 
 
 
 
Interest income and other income/(loss), net (Note 14)
446

 
255

 
908

 
739

Equity in net income of affiliated companies
306

 
382

 
1,213

 
853

Income before income taxes — Automotive
2,333

 
526

 
5,646

 
3,012

 
 
 
 
 
 
 
 
FINANCIAL SERVICES
 

 
 

 
 
 
 
Revenues
2,326

 
2,141

 
6,584

 
6,187

Costs and expenses
 
 
 
 
 
 
 
Interest expense
592

 
673

 
1,846

 
2,034

Depreciation on vehicles subject to operating leases
956

 
808

 
2,630

 
2,256

Operating and other expenses
237

 
187

 
588

 
560

Provision for credit and insurance losses
120

 
74

 
299

 
217

Total costs and expenses
1,905

 
1,742

 
5,363

 
5,067

 
 
 
 
 
 
 
 
Other income/(loss), net (Note 14)
97

 
90

 
241

 
245

Equity in net income of affiliated companies
8

 
6

 
24

 
21

Income before income taxes — Financial Services
526

 
495

 
1,486

 
1,386

 
 
 
 
 
 
 
 
TOTAL COMPANY
 
 
 
 
 
 
 
Income before income taxes
2,859

 
1,021

 
7,132

 
4,398

Provision for/(Benefit from) income taxes (Note 16)
950

 
188

 
2,412

 
1,261

Net income
1,909

 
833

 
4,720

 
3,137

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

 
(2
)
 
2

 
2

Net income attributable to Ford Motor Company
$
1,909

 
$
835

 
$
4,718

 
$
3,135


The accompanying notes are part of the financial statements.

2
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
September 30,
2015
 
December 31,
2014
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
14,686

 
$
10,757

Marketable securities
17,161

 
20,393

Finance receivables, net (Note 4)
85,208

 
81,111

Other receivables, net
13,373

 
11,708

Net investment in operating leases
26,907

 
23,217

Inventories (Note 6)
9,496

 
7,866

Equity in net assets of affiliated companies
3,505

 
3,357

Net property
30,137

 
30,126

Deferred income taxes
11,434

 
13,639

Other assets
7,524

 
6,353

Total assets
$
219,431

 
$
208,527

 
 
 
 
LIABILITIES
 

 
 

Payables
$
22,386

 
$
20,035

Other liabilities and deferred revenue (Note 7)
42,513

 
43,577

Debt (Note 9)
126,425

 
119,171

Deferred income taxes
529

 
570

Total liabilities
191,853

 
183,353

 
 
 
 
Redeemable noncontrolling interest (Note 10)
94

 
342

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,960 million shares issued of 6 billion authorized)
40

 
39

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
21,354

 
21,089

Retained earnings
27,489

 
24,556

Accumulated other comprehensive income/(loss) (Note 13)
(20,442
)
 
(20,032
)
Treasury stock
(977
)
 
(848
)
Total equity attributable to Ford Motor Company
27,465

 
24,805

Equity attributable to noncontrolling interests
19

 
27

Total equity
27,484

 
24,832

Total liabilities and equity
$
219,431

 
$
208,527

 
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.  See Note 11 for additional information on our VIEs.
 
September 30,
2015
 
December 31,
2014
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,443

 
$
2,094

Finance receivables, net
44,036

 
39,522

Net investment in operating leases
11,266

 
9,631

Other assets
64

 
27

LIABILITIES
 
 
 
Other liabilities and deferred revenue
$
30

 
$
22

Debt
41,712

 
37,156


The accompanying notes are part of the financial statements.

3
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET (in millions) 
 
September 30,
2015
 
December 31,
2014
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
7,773

 
$
4,567

Marketable securities
14,404

 
17,135

Total cash and marketable securities
22,177

 
21,702

Receivables, less allowances of $387 and $455
5,827

 
5,789

Inventories (Note 6)
9,496

 
7,866

Deferred income taxes
2,885

 
2,039

Net investment in operating leases
2,397

 
1,699

Other current assets
1,588

 
1,347

Total current assets
44,370

 
40,442

Equity in net assets of affiliated companies
3,356

 
3,216

Net property
30,003

 
29,795

Deferred income taxes
11,453

 
13,331

Other assets
3,544

 
2,798

Non-current receivable from Financial Services
—

 
497

Total Automotive assets
92,726

 
90,079

Financial Services
 

 
 

Cash and cash equivalents
6,913

 
6,190

Marketable securities
2,757

 
3,258

Finance receivables, net (Note 4)
91,968

 
86,141

Net investment in operating leases
24,510

 
21,518

Equity in net assets of affiliated companies
149

 
141

Other assets
3,476

 
3,613

Receivable from Automotive
853

 
527

Total Financial Services assets
130,626

 
121,388

Intersector elimination
(853
)
 
(1,024
)
Total assets
$
222,499

 
$
210,443

LIABILITIES
 

 
 

Automotive
 

 
 

Payables
$
21,095

 
$
18,876

Other liabilities and deferred revenue (Note 7)
17,509

 
17,934

Deferred income taxes
263

 
270

Debt payable within one year (Note 9)
1,590

 
2,501

Current payable to Financial Services
555

 
527

Total current liabilities
41,012

 
40,108

Long-term debt (Note 9)
11,208

 
11,323

Other liabilities and deferred revenue (Note 7)
23,210

 
23,793

Deferred income taxes
388

 
367

Non-current payable to Financial Services
298

 
—

Total Automotive liabilities
76,116

 
75,591

Financial Services
 

 
 

Payables
1,291

 
1,159

Debt (Note 9)
113,627

 
105,347

Deferred income taxes
2,946

 
1,849

Other liabilities and deferred income (Note 7)
1,794

 
1,850

Payable to Automotive
—

 
497

Total Financial Services liabilities
119,658

 
110,702

Intersector elimination
(853
)
 
(1,024
)
Total liabilities
194,921

 
185,269

 
 
 
 
Redeemable noncontrolling interest (Note 10)
94

 
342

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,960 million shares issued of 6 billion authorized)
40

 
39

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
21,354

 
21,089

Retained earnings
27,489

 
24,556

Accumulated other comprehensive income/(loss) (Note 13)
(20,442
)
 
(20,032
)
Treasury stock
(977
)
 
(848
)
Total equity attributable to Ford Motor Company
27,465

 
24,805

Equity attributable to noncontrolling interests
19

 
27

Total equity
27,484

 
24,832

Total liabilities and equity
$
222,499

 
$
210,443

The accompanying notes are part of the financial statements.

4
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
 
For the periods ended September 30,
 
2015
 
2014
 
First Nine Months
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by/(used in) operating activities
$
14,078

 
$
12,339

 
 
 
 
Cash flows from investing activities
 
 
 
Capital spending
(5,358
)
 
(5,309
)
Acquisitions of finance receivables and operating leases
(43,762
)
 
(39,368
)
Collections of finance receivables and operating leases
28,632

 
27,607

Purchases of marketable securities
(29,493
)
 
(37,788
)
Sales and maturities of marketable securities
32,874

 
39,153

Settlements of derivatives
26

 
(46
)
Other
417

 
157

Net cash provided by/(used in) investing activities
(16,664
)
 
(15,594
)
 
 
 
 
Cash flows from financing activities
 

 
 

Cash dividends
(1,785
)
 
(1,470
)
Purchases of Common Stock
(129
)
 
(1,964
)
Net changes in short-term debt
844

 
(2,792
)
Proceeds from issuance of other debt
35,876

 
31,107

Principal payments on other debt
(27,366
)
 
(22,504
)
Other
(303
)
 
36

Net cash provided by/(used in) financing activities
7,137

 
2,413

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(622
)
 
(306
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
3,929

 
$
(1,148
)
 
 
 
 
Cash and cash equivalents at January 1
$
10,757

 
$
14,468

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

 
(1,148
)
Cash and cash equivalents at September 30
$
14,686

 
$
13,320


The accompanying notes are part of the financial statements.

5
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
(in millions)
 
For the periods ended September 30,
 
2015
 
2014
 
First Nine Months
 
Automotive
 
Financial Services
 
Automotive
 
Financial Services
 
(unaudited)
Cash flows from operating activities
 
 
 
 
 
 
 
Net cash provided by/(used in) operating activities (a)
$
8,749

 
$
4,297

 
$
6,733

 
$
3,878

 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
Capital spending
(5,324
)
 
(34
)
 
(5,236
)
 
(73
)
Acquisitions of finance receivables and operating leases (excluding wholesale and other)
—

 
(43,762
)
 
—

 
(39,368
)
Collections of finance receivables and operating leases (excluding wholesale and other)
—

 
28,632

 
—

 
27,607

Net change in wholesale and other receivables (b)
—

 
(1,552
)
 
—

 
(729
)
Purchases of marketable securities
(21,748
)
 
(7,745
)
 
(26,836
)
 
(10,952
)
Sales and maturities of marketable securities
24,636

 
8,238

 
30,061

 
9,092

Settlements of derivatives
(90
)
 
116

 
115

 
(161
)
Other
362

 
55

 
55

 
102

Investing activity (to)/from Financial Services (c)
2

 
—

 
178

 
—

Interest supplements and residual value support from Automotive (a)
—

 
2,584

 
—

 
2,457

Net cash provided by/(used in) investing activities
(2,162
)

(13,468
)

(1,663
)

(12,025
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
Cash dividends
(1,785
)
 
—

 
(1,470
)
 
—

Purchases of Common Stock
(129
)
 
—

 
(1,964
)
 
—

Net changes in short-term debt
385

 
459

 
22

 
(2,814
)
Proceeds from issuance of other debt
615

 
35,261

 
156

 
30,951

Principal payments on other debt
(1,945
)
 
(25,421
)
 
(829
)
 
(21,675
)
Other
(219
)
 
(84
)
 
122

 
(86
)
Financing activity to/(from) Automotive (c)
—

 
(2
)
 
—

 
(178
)
Net cash provided by/(used in) financing activities
(3,078
)
 
10,213

 
(3,963
)
 
6,198

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(303
)
 
(319
)
 
(86
)
 
(220
)
 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
3,206


$
723


$
1,021


$
(2,169
)
 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
4,567

 
$
6,190

 
$
4,959

 
$
9,509

Net increase/(decrease) in cash and cash equivalents
3,206

 
723

 
1,021

 
(2,169
)
Cash and cash equivalents at September 30
$
7,773


$
6,913


$
5,980


$
7,340

_________
(a)
Operating activities include outflows of $2,584 million and $2,457 million for the periods ended September 30, 2015 and 2014, respectively, of interest supplements and residual value support to Financial Services. Interest supplements and residual value support from Automotive to Financial Services are eliminated in the condensed consolidated statement of cash flows.
(b)
Reclassified to operating activities in the condensed consolidated statement of cash flows.
(c)
Eliminated in the condensed consolidated statement of cash flows.


The accompanying notes are part of the financial statements.

6
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 13)
 
Treasury Stock
 
Total
 
Equity
Attributable
to Non-controlling Interests
 
Total
Equity
Balance at December 31, 2014
$
40

 
$
21,089

 
$
24,556

 
$
(20,032
)
 
$
(848
)
 
$
24,805

 
$
27

 
$
24,832

Net income
—

 
—

 
4,718

 
—

 
—

 
4,718

 
2

 
4,720

Other comprehensive income/(loss), net of tax
—

 
—

 
—

 
(410
)
 
—

 
(410
)
 
—

 
(410
)
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

 
$
27,489

 
$
(20,442
)
 
$
(977
)
 
$
27,465

 
$
19

 
$
27,484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
40

 
$
21,422

 
$
23,386

 
$
(18,230
)
 
$
(506
)
 
$
26,112

 
$
33

 
$
26,145

Net income
—

 
—

 
3,135

 
—

 
—

 
3,135

 
2

 
3,137

Other comprehensive income/(loss), net of tax
—

 
—

 
—

 
65

 
—

 
65

 
—

 
65

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

 
258

 
—

 
—

 
—

 
258

 
—

 
258

Treasury stock/other 
—

 
—

 
—

 
—

 
(1,964
)
 
(1,964
)
 
(4
)
 
(1,968
)
Cash dividends declared
—

 
—

 
(1,470
)
 
—

 
—

 
(1,470
)
 
(2
)
 
(1,472
)
Balance at September 30, 2014
$
40

 
$
21,680

 
$
25,051

 
$
(18,165
)
 
$
(2,470
)
 
$
26,136

 
$
29

 
$
26,165


The accompanying notes are part of the financial statements.

7
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
Accounting Standards Issued But Not Yet Adopted
Note 3
Fair Value Measurements
Note 4
Financial Services Sector Finance Receivables
Note 5
Financial Services Sector Allowance for Credit Losses
Note 6
Inventories
Note 7
Other Liabilities and Deferred Revenue
Note 8
Retirement Benefits
Note 9
Debt
Note 10
Redeemable Noncontrolling Interest
Note 11
Variable Interest Entities
Note 12
Derivative Financial Instruments and Hedging Activities
Note 13
Accumulated Other Comprehensive Income/(Loss)
Note 14
Other Income/(Loss)
Note 15
Employee Separation Actions and Exit and Disposal Activities
Note 16
Income Taxes
Note 17
Changes in Investments in Affiliates
Note 18
Capital Stock and Earnings Per Share
Note 19
Segment Information
Note 20
Commitments and Contingencies



8
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors. Intercompany items have been eliminated in both the consolidated and sector balance sheets. Where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements, reconciliations of certain line items are explained below in this Note or in the related financial statements and footnotes.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company, its consolidated subsidiaries, and consolidated VIEs of which we are the primary beneficiary 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, 2014 (“2014 Form 10-K Report”).  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 reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing - Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures. On January 1, 2015, we adopted the new accounting standard that changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new standard also requires additional disclosures for certain transfers of financial assets with agreements that both entitle and obligate the transferor to repurchase the transferred assets from the transferee. The adoption of this accounting standard did not impact our financial statements or financial statement disclosures.

Reconciliations between Consolidated and Sector Financial Statements

Sector to Consolidated Deferred Tax Assets and Liabilities. The difference between the total assets and total liabilities as presented on our sector balance sheet and consolidated balance sheet is the result of netting deferred income tax assets and liabilities. The reconciliation between the totals for the sector and consolidated balance sheets was as follows (in millions):
 
September 30,
2015
 
December 31,
2014
Sector balance sheet presentation of deferred income tax assets
 
 
 
Automotive sector current deferred income tax assets
$
2,885

 
$
2,039

Automotive sector non-current deferred income tax assets
11,453

 
13,331

Financial Services sector deferred income tax assets (a)
164

 
185

Total
14,502

 
15,555

Reclassification for netting of deferred income taxes
(3,068
)
 
(1,916
)
Consolidated balance sheet presentation of deferred income tax assets
$
11,434

 
$
13,639

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities
 

 
 

Automotive sector current deferred income tax liabilities
$
263

 
$
270

Automotive sector non-current deferred income tax liabilities
388

 
367

Financial Services sector deferred income tax liabilities
2,946

 
1,849

Total
3,597

 
2,486

Reclassification for netting of deferred income taxes
(3,068
)
 
(1,916
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
529

 
$
570

__________
(a)
Financial Services deferred income tax assets are included in Financial Services Other assets on our sector balance sheet.

9
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

ASU 2014-09, Revenue - Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“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 new standard supersedes virtually all present U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards, as well as additional disclosures. The FASB issued ASU 2015-14 to defer the original effective date from January 1, 2017 to January 1, 2018, while allowing for early adoption as of January 1, 2017. The new accounting standard is expected to have an impact to our income statement, balance sheet, and financial statement disclosures and we are reviewing our arrangements to evaluate the impact and method of adoption.

The FASB also issued the following standards, none of which are expected to have a material impact to our financial statements or financial statement disclosures.
Standard
 
Effective Date (a)
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
2015-07
Fair Value Measurement - Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent)
 
January 1, 2016
2015-05
Internal-Use Software - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
 
January 1, 2016
2015-03
Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs
 
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
2014-16
Derivatives and Hedging - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity
 
January 1, 2016
2014-13
Consolidation - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity
 
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
2014-15
Going Concern - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
 
December 31, 2016
2015-11
Inventory - Simplifying the Measurement of Inventory
 
January 1, 2017
__________
(a)
Early adoption for each of the standards is permitted.



10
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are remeasured and presented on our financial statements on a recurring basis at fair value, while other assets and liabilities are measured at fair value on a nonrecurring basis.

There have been no changes to the types of inputs used or the valuation techniques since year end.

Input Hierarchy of Items Measured at Fair Value on a Recurring Basis

The following table categorizes the fair values of items measured at fair value on a recurring basis on our balance sheet (in millions):
 
September 30, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
64

 
$
—

 
$
64

Non-U.S. government and agencies
—

 
422

 
—

 
422

 
—

 
122

 
—

 
122

Corporate debt
—

 
70

 
—

 
70

 
—

 
20

 
—

 
20

Total cash equivalents (a)
—

 
492

 
—

 
492

 
—

 
206

 
—

 
206

Marketable securities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
609

 
3,434

 
—

 
4,043

 
969

 
5,789

 
—

 
6,758

Non-U.S. government and agencies
—

 
6,220

 
—

 
6,220

 
—

 
7,004

 
—

 
7,004

Corporate debt
—

 
3,568

 
—

 
3,568

 
—

 
2,738

 
—

 
2,738

Equities
217

 
—

 
—

 
217

 
322

 
—

 
—

 
322

Other marketable securities
—

 
356

 
—

 
356

 
—

 
313

 
—

 
313

Total marketable securities
826

 
13,578

 
—

 
14,404

 
1,291

 
15,844

 
—

 
17,135

Derivative financial instruments (b)
—

 
754

 
—

 
754

 
—

 
517

 
—

 
517

Total assets at fair value
$
826

 
$
14,824

 
$
—

 
$
15,650

 
$
1,291

 
$
16,567

 
$
—

 
$
17,858

Liabilities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Derivative financial instruments (b)
$
—

 
$
650

 
$
1

 
$
651

 
$
—

 
$
710

 
$
3

 
$
713

Total liabilities at fair value
$
—

 
$
650

 
$
1

 
$
651

 
$
—

 
$
710

 
$
3

 
$
713

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Services Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. government and agencies
$
—

 
$
307

 
$
—

 
$
307

 
$
—

 
$
341

 
$
—

 
$
341

Corporate debt
—

 
20

 
—

 
20

 
—

 
10

 
—

 
10

Total cash equivalents (a)
—

 
327

 
—

 
327

 
—

 
351

 
—

 
351

Marketable securities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
105

 
319

 
—

 
424

 
17

 
1,251

 
—

 
1,268

Non-U.S. government and agencies
—

 
700

 
—

 
700

 
—

 
405

 
—

 
405

Corporate debt
—

 
1,613

 
—

 
1,613

 
—

 
1,555

 
—

 
1,555

Other marketable securities
—

 
20

 
—

 
20

 
—

 
30

 
—

 
30

Total marketable securities
105

 
2,652

 
—

 
2,757

 
17

 
3,241

 
—

 
3,258

Derivative financial instruments (b)
—

 
1,168

 
—

 
1,168

 
—

 
859

 
—

 
859

Total assets at fair value
$
105

 
$
4,147

 
$
—

 
$
4,252

 
$
17

 
$
4,451

 
$
—

 
$
4,468

Liabilities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Derivative financial instruments (b)
$
—

 
$
280

 
$
—

 
$
280

 
$
—

 
$
167

 
$
—

 
$
167

Total liabilities at fair value
$
—

 
$
280

 
$
—

 
$
280

 
$
—

 
$
167

 
$
—

 
$
167

__________
(a)
Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $6.2 billion and $3.3 billion for Automotive sector and $4.9 billion and $3.8 billion for Financial Services sector at September 30, 2015 and December 31, 2014, respectively. In addition to these cash equivalents, we also had cash on hand totaling $1.1 billion and $1.1 billion for Automotive sector and $1.7 billion and $2 billion for Financial Services sector at September 30, 2015 and December 31, 2014, respectively.
(b)
See Note 12 for additional information regarding derivative financial instruments.

11
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES

Our Financial Services sector, primarily Ford Credit, segments finance receivables into “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,
2015
 
December 31,
2014
Consumer
 
 
 
Retail financing, gross
$
61,241

 
$
55,856

Unearned interest supplements
(2,117
)
 
(1,760
)
Consumer finance receivables
59,124

 
54,096

Non-Consumer
 

 
 

Dealer financing
32,151

 
31,340

Other financing
1,049

 
1,026

Non-Consumer finance receivables
33,200

 
32,366

Total recorded investment
$
92,324

 
$
86,462

 
 
 
 
Recorded investment in finance receivables
$
92,324

 
$
86,462

Allowance for credit losses
(356
)
 
(321
)
Finance receivables, net (a)
$
91,968

 
$
86,141

 
 
 
 
Net finance receivables subject to fair value (b)
$
90,163

 
$
84,468

Fair value
91,848

 
85,941

__________
(a)
On the consolidated balance sheet at September 30, 2015 and December 31, 2014, $6.8 billion and $5 billion, respectively, are reclassified to Other receivables, net, resulting in Finance receivables, net of $85.2 billion and $81.1 billion, respectively.
(b)
At September 30, 2015 and December 31, 2014, excludes $1.8 billion and $1.7 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

Excluded from finance receivables at September 30, 2015 and December 31, 2014, was $184 million and $191 million, respectively, of accrued uncollected interest, which we report in Other assets on the balance sheet.

Included in the recorded investment in finance receivables at September 30, 2015 and December 31, 2014 were consumer receivables of $27.7 billion and $24.4 billion, respectively, and non-consumer receivables of $23.1 billion and $21.8 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 (see Note 11 for additional information).


12
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR 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 $15 million and $17 million at September 30, 2015 and December 31, 2014, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was $3 million at September 30, 2015 and December 31, 2014.

The aging analysis of our finance receivables balances were as follows (in millions):
 
September 30,
2015
 
December 31,
2014
Consumer
 
 
 
31-60 days past due
$
597

 
$
718

61-90 days past due
94

 
97

91-120 days past due
25

 
29

Greater than 120 days past due
39

 
52

Total past due
755

 
896

Current
58,369

 
53,200

Consumer finance receivables
59,124

 
54,096

 
 
 
 
Non-Consumer
 
 
 
Total past due
127

 
117

Current
33,073

 
32,249

Non-Consumer finance receivables
33,200

 
32,366

Total recorded investment
$
92,324

 
$
86,462


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

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 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)
The credit quality analysis of our dealer financing receivables was as follows (in millions):
 
September 30,
2015
 
December 31,
2014
Dealer Financing
 
 
 
Group I
$
24,206

 
$
23,125

Group II
6,379

 
6,350

Group III
1,458

 
1,783

Group IV
108

 
82

Total recorded investment
$
32,151

 
$
31,340


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, 2015 and December 31, 2014 was $375 million, or 0.6% of consumer receivables, and $415 million, or 0.8% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at September 30, 2015 and December 31, 2014 was $129 million, or 0.4% of non-consumer receivables, and $105 million, or 0.3% 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 5. FINANCIAL SERVICES SECTOR 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 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