F 09.30.2013 - 10Q
                                                                

 
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, 2013
 
 
 
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 Act). Yes  o   No  R
 
As of October 24, 2013, Ford had outstanding 3,873,584,594 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, 2013

 
Table of Contents
 
Page
 
Part I - Financial Information
 
 
Item 1
Financial Statements
 
 
 
 
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
 
 
 
 
 
 
 
 
 
Critical Accounting Estimates
 
 
 
 
Other Financial Information
 
Item 3
 
 
 
 
Financial Services Sector
 
Item 4
 
 
 
 
 
 
Part II - Other Information
 
 
Item 1
 
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6
 
 
 
 
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,
 
2013
 
2012
 
2013
 
2012
 
Third Quarter
 
First Nine Months
 
(unaudited)
Revenues
 
 
 
 
 
 
 
Automotive
$
33,857

 
$
30,247

 
$
103,794

 
$
92,100

Financial Services
2,119

 
1,925

 
6,087

 
5,728

Total revenues
35,976

 
32,172

 
109,881

 
97,828

 
 
 
 
 
 
 
 
Costs and expenses
 

 
 

 
 
 
 
Automotive cost of sales
30,030

 
26,650

 
92,559

 
81,454

Selling, administrative, and other expenses
3,436

 
2,919

 
10,096

 
8,780

Financial Services interest expense
762

 
764

 
2,173

 
2,388

Financial Services provision for credit and insurance losses
46

 
55

 
139

 
16

Total costs and expenses
34,274

 
30,388

 
104,967

 
92,638

 
 
 
 
 
 
 
 
Automotive interest expense
204

 
198

 
617

 
571

 
 
 
 
 
 
 
 
Automotive interest income and other income/(loss), net (Note 15)
200

 
427

 
686

 
675

Financial Services other income/(loss), net (Note 15)
100

 
104

 
270

 
260

Equity in net income/(loss) of affiliated companies
293

 
129

 
780

 
325

Income before income taxes
2,091

 
2,246

 
6,033

 
5,879

Provision for/(Benefit from) income taxes (Note 17)
818

 
613

 
1,914

 
1,810

Net income
1,273

 
1,633

 
4,119

 
4,069

Less: Income/(Loss) attributable to noncontrolling interests
1

 
2

 
3

 
2

Net income attributable to Ford Motor Company
$
1,272

 
$
1,631

 
$
4,116

 
$
4,067

 
 
 
 
 
 
 
 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 19)
Basic income
$
0.32

 
$
0.43

 
$
1.05

 
$
1.07

Diluted income
$
0.31

 
$
0.41

 
$
1.02

 
$
1.02

 
 
 
 
 
 
 
 
Cash dividends declared
$
0.10

 
$
0.05

 
$
0.30

 
$
0.10



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended September 30,
 
2013
 
2012
 
2013
 
2012
 
Third Quarter
 
First Nine Months
 
(unaudited)
Net income
$
1,273

 
$
1,633

 
$
4,119

 
$
4,069

Other comprehensive income/(loss), net of tax (Note 14)
 
 
 
 
 
 
 
Foreign currency translation
314

 
440

 
(486
)
 
185

Derivative instruments
(95
)
 
1

 
191

 
(151
)
Pension and other postretirement benefits
109

 
(54
)
 
1,640

 
159

Total other comprehensive income/(loss), net of tax
328

 
387

 
1,345

 
193

Comprehensive income
1,601

 
2,020

 
5,464

 
4,262

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

 
2

 
3

 
2

Comprehensive income attributable to Ford Motor Company
$
1,600

 
$
2,018

 
$
5,461

 
$
4,260


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,
 
2013
 
2012
 
2013
 
2012
 
Third Quarter
 
First Nine Months
 
(unaudited)
AUTOMOTIVE
 
 
 
 
 
 
 
Revenues
$
33,857

 
$
30,247

 
$
103,794

 
$
92,100

Costs and expenses
 
 
 
 
 
 
 
Cost of sales
30,030

 
26,650

 
92,559

 
81,454

Selling, administrative, and other expenses
2,382

 
2,092

 
7,351

 
6,460

Total costs and expenses
32,412

 
28,742

 
99,910

 
87,914

 
 
 
 
 
 
 
 
Interest expense
204

 
198

 
617

 
571

 
 
 
 
 
 
 
 
Interest income and other income/(loss), net (Note 15)
200

 
427

 
686

 
675

Equity in net income/(loss) of affiliated companies
287

 
124

 
763

 
298

Income before income taxes — Automotive
1,728

 
1,858

 
4,716

 
4,588

 
 
 
 
 
 
 
 
FINANCIAL SERVICES
 

 
 

 
 
 
 
Revenues
2,119

 
1,925

 
6,087

 
5,728

Costs and expenses
 
 
 
 
 
 
 
Interest expense
762

 
764

 
2,173

 
2,388

Depreciation on vehicles subject to operating leases
833

 
645

 
2,207

 
1,824

Operating and other expenses
221

 
182

 
538

 
496

Provision for credit and insurance losses
46

 
55

 
139

 
16

Total costs and expenses
1,862

 
1,646

 
5,057

 
4,724

 
 
 
 
 
 
 
 
Other income/(loss), net (Note 15)
100

 
104

 
270

 
260

Equity in net income/(loss) of affiliated companies
6

 
5

 
17

 
27

Income before income taxes — Financial Services
363

 
388

 
1,317

 
1,291

 
 
 
 
 
 
 
 
TOTAL COMPANY
 

 
 

 
 
 
 
Income before income taxes
2,091

 
2,246

 
6,033

 
5,879

Provision for/(Benefit from) income taxes (Note 17)
818

 
613

 
1,914

 
1,810

Net income
1,273

 
1,633

 
4,119

 
4,069

Less: Income/(Loss) attributable to noncontrolling interests
1

 
2

 
3

 
2

Net income attributable to Ford Motor Company
$
1,272

 
$
1,631

 
$
4,116

 
$
4,067


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,
2013
 
December 31,
2012
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
14,752

 
$
15,659

Marketable securities
22,890

 
20,284

Finance receivables, net (Note 5)
73,418

 
71,510

Other receivables, net
11,693

 
10,828

Net investment in operating leases
20,959

 
16,451

Inventories (Note 7)
8,799

 
7,362

Equity in net assets of affiliated companies
3,466

 
3,246

Net property
26,836

 
24,942

Deferred income taxes
13,023

 
15,185

Net intangible assets
86

 
87

Assets held for sale (Note 18)
98

 
—

Other assets
5,051

 
5,000

Total assets
$
201,071

 
$
190,554

 
 
 
 
LIABILITIES
 

 
 

Payables
$
21,640

 
$
19,308

Accrued liabilities and deferred revenue (Note 9)
47,333

 
49,407

Debt (Note 11)
110,622

 
105,058

Deferred income taxes
637

 
470

Total liabilities
180,232

 
174,243

 
 
 
 
Redeemable noncontrolling interest (Note 13)
329

 
322

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,911 million shares issued)
39

 
39

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

 
1

Capital in excess of par value of stock
21,378

 
20,976

Retained earnings
21,014

 
18,077

Accumulated other comprehensive income/(loss) (Note 14)
(21,509
)
 
(22,854
)
Treasury stock
(456
)
 
(292
)
Total equity attributable to Ford Motor Company
20,467

 
15,947

Equity attributable to noncontrolling interests
43

 
42

Total equity
20,510

 
15,989

Total liabilities and equity
$
201,071

 
$
190,554

 
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 8 for additional information on our VIEs.
 
September 30,
2013
 
December 31,
2012
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,705

 
$
2,911

Finance receivables, net
43,106

 
47,515

Net investment in operating leases
6,963

 
6,308

Other assets
4

 
4

LIABILITIES
 
 
 
Accrued liabilities and deferred revenue
76

 
134

Debt
38,537

 
40,245


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,
2013
 
December 31,
2012
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
5,660

 
$
6,247

Marketable securities
20,485

 
18,178

Total cash and marketable securities
26,145

 
24,425

Receivables, less allowances of $126 and $115
6,141

 
5,361

Inventories (Note 7)
8,799

 
7,362

Deferred income taxes
2,943

 
3,488

Net investment in operating leases
1,834

 
1,415

Other current assets
878

 
1,124

Current receivable from Financial Services
222

 
—

Total current assets
46,962

 
43,175

Equity in net assets of affiliated companies
3,340

 
3,112

Net property
26,713

 
24,813

Deferred income taxes
11,583

 
13,325

Net intangible assets
86

 
87

Other assets
2,190

 
1,946

Non-current receivable from Financial Services
297

 
—

Total Automotive assets
91,171

 
86,458

Financial Services
 

 
 

Cash and cash equivalents
9,092

 
9,412

Marketable securities
2,405

 
2,106

Finance receivables, net (Note 5)
78,021

 
75,770

Net investment in operating leases
19,125

 
15,036

Equity in net assets of affiliated companies
126

 
134

Assets held for sale (Note 18)
98

 
—

Other assets
3,223

 
3,450

Receivable from Automotive
—

 
252

Total Financial Services assets
112,090

 
106,160

Intersector elimination
(519
)
 
(252
)
Total assets
$
202,742

 
$
192,366

LIABILITIES
 

 
 

Automotive
 

 
 

Payables
$
20,168

 
$
18,151

Accrued liabilities and deferred revenue (Note 9)
16,419

 
15,358

Deferred income taxes
207

 
81

Debt payable within one year (Note 11)
1,313

 
1,386

Current payable to Financial Services
—

 
252

Total current liabilities
38,107

 
35,228

Long-term debt (Note 11)
14,511

 
12,870

Other liabilities (Note 9)
26,880

 
30,549

Deferred income taxes
389

 
514

Total Automotive liabilities
79,887

 
79,161

Financial Services
 

 
 

Payables
1,472

 
1,157

Debt (Note 11)
94,798

 
90,802

Deferred income taxes
1,712

 
1,687

Other liabilities and deferred income (Note 9)
4,034

 
3,500

Payable to Automotive
519

 
—

Total Financial Services liabilities
102,535

 
97,146

Intersector elimination
(519
)
 
(252
)
Total liabilities
181,903

 
176,055

 
 
 
 
Redeemable noncontrolling interest (Note 13)
329

 
322

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,911 million shares issued)
39

 
39

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

 
1

Capital in excess of par value of stock
21,378

 
20,976

Retained earnings
21,014

 
18,077

Accumulated other comprehensive income/(loss) (Note 14)
(21,509
)
 
(22,854
)
Treasury stock
(456
)
 
(292
)
Total equity attributable to Ford Motor Company
20,467

 
15,947

Equity attributable to noncontrolling interests
43

 
42

Total equity
20,510

 
15,989

Total liabilities and equity
$
202,742

 
$
192,366

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,
 
2013
 
2012
 
First Nine Months
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
Net cash provided by/(used in) operating activities
$
10,129

 
$
9,406

 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
Capital expenditures
(4,659
)
 
(3,603
)
Acquisitions of retail and other finance receivables and operating leases
(33,926
)
 
(29,034
)
Collections of retail and other finance receivables and operating leases
25,431

 
23,933

Purchases of securities
(96,614
)
 
(66,232
)
Sales and maturities of securities
94,064

 
63,119

Cash change due to initial consolidation of businesses
9

 
191

Proceeds from sale of business
—

 
65

Settlements of derivatives
(247
)
 
(681
)
Proceeds from sales of retail finance receivables (Note 18)
410

 
—

Other
212

 
(381
)
Net cash provided by/(used in) investing activities
(15,320
)
 
(12,623
)
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

Cash dividends
(1,179
)
 
(572
)
Purchases of Common Stock
(164
)
 
(92
)
Changes in short-term debt
(3,227
)
 
(2,111
)
Proceeds from issuance of other debt
28,946

 
25,272

Principal payments on other debt
(20,288
)
 
(23,041
)
Other
254

 
162

Net cash provided by/(used in) financing activities
4,342

 
(382
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(58
)
 
(10
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(907
)
 
$
(3,609
)
 
 
 
 
Cash and cash equivalents at January 1
$
15,659

 
$
17,148

Net increase/(decrease) in cash and cash equivalents
(907
)
 
(3,609
)
Cash and cash equivalents at September 30
$
14,752

 
$
13,539


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,
 
2013
 
2012
 
First Nine Months
 
Automotive
 
Financial
Services
 
Automotive
 
Financial
Services
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
 
 
 
 
Net cash provided by/(used in) operating activities
$
6,378

 
$
4,928

 
$
4,113

 
$
3,624

 
 
 
 
 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
 
 
 
 
Capital expenditures
(4,635
)
 
(24
)
 
(3,580
)
 
(23
)
Acquisitions of retail and other finance receivables and operating leases
—

 
(34,015
)
 
—

 
(29,036
)
Collections of retail and other finance receivables and operating leases
—

 
25,431

 
—

 
23,933

Net collections/(acquisitions) of wholesale receivables
—

 
(1,088
)
 
—

 
1,671

Purchases of securities
(71,471
)
 
(25,143
)
 
(50,166
)
 
(16,066
)
Sales and maturities of securities
69,246

 
24,818

 
47,534

 
15,786

Cash change due to initial consolidation of businesses
9

 
—

 
191

 
—

Proceeds from sale of business
—

 
—

 
54

 
11

Settlements of derivatives
(274
)
 
27

 
(634
)
 
(47
)
Proceeds from sales of retail finance receivables (Note 18)
—

 
410

 
—

 
—

Investing activity (to)/from Financial Services
298

 
—

 
794

 
—

Other
194

 
18

 
(279
)
 
(102
)
Net cash provided by/(used in) investing activities
(6,633
)
 
(9,566
)
 
(6,086
)
 
(3,873
)
 
 
 
 
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

 
 

 
 

Cash dividends
(1,179
)
 
—

 
(572
)
 
—

Purchases of Common Stock
(164
)
 
—

 
(92
)
 
—

Changes in short-term debt
(120
)
 
(3,107
)
 
26

 
(2,137
)
Proceeds from issuance of other debt
2,175

 
26,771

 
1,502

 
23,770

Principal payments on other debt
(1,230
)
 
(19,058
)
 
(647
)
 
(22,595
)
Financing activity to/(from) Automotive
—

 
(298
)
 
—

 
(794
)
Other
264

 
(10
)
 
16

 
146

Net cash provided by/(used in) financing activities
(254
)
 
4,298

 
233

 
(1,610
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(78
)
 
20

 
(5
)
 
(5
)
 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(587
)
 
$
(320
)
 
$
(1,745
)
 
$
(1,864
)
 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
6,247

 
$
9,412

 
$
7,965

 
$
9,183

Net increase/(decrease) in cash and cash equivalents
(587
)
 
(320
)
 
(1,745
)
 
(1,864
)
Cash and cash equivalents at September 30
$
5,660

 
$
9,092

 
$
6,220

 
$
7,319


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/(Deficit) Attributable to Ford Motor Company
 
 
 
 
 
Capital Stock
 
Cap. in
Excess of
Par Value 
of Stock
 
Retained Earnings/
(Accumulated Deficit)
 
Accumulated Other Comprehensive Income/(Loss) (Note 14)
 
Treasury Stock
 
Total
 
Equity/ (Deficit)
Attributable
to Non-controlling Interests
 
Total
Equity/
(Deficit)
Balance at December 31, 2012
$
40

 
$
20,976

 
$
18,077

 
$
(22,854
)
 
$
(292
)
 
$
15,947

 
$
42

 
$
15,989

Net income
—

 
—

 
4,116

 
—

 
—

 
4,116

 
3

 
4,119

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

 
—

 
—

 
1,345

 
—

 
1,345

 
—

 
1,345

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

 
402

 
—

 
—

 
—

 
402

 
—

 
402

Treasury stock/other 
—

 
—

 
—

 
—

 
(164
)
 
(164
)
 
(2
)
 
(166
)
Cash dividends declared
—

 
—

 
(1,179
)
 
—

 
—

 
(1,179
)
 
—

 
(1,179
)
Balance at September 30, 2013
$
40

 
$
21,378

 
$
21,014

 
$
(21,509
)
 
$
(456
)
 
$
20,467

 
$
43

 
$
20,510

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2011
$
38

 
$
20,905

 
$
12,985

 
$
(18,734
)
 
$
(166
)
 
$
15,028

 
$
43

 
$
15,071

Net income
—

 
—

 
4,067

 
—

 
—

 
4,067

 
2

 
4,069

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

 
—

 
—

 
193

 
—

 
193

 
—

 
193

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

 
26

 
—

 
—

 
—

 
27

 
—

 
27

Treasury stock/other 
—

 
—

 
—

 
—

 
(92
)
 
(92
)
 
—

 
(92
)
Cash dividends declared
—

 
—

 
(382
)
 
—

 
—

 
(382
)
 
—

 
(382
)
Balance at September 30, 2012
$
39

 
$
20,931

 
$
16,670

 
$
(18,541
)
 
$
(258
)
 
$
18,841

 
$
45

 
$
18,886


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
Restricted Cash
Note 5
Finance Receivables
Note 6
Allowance for Credit Losses
Note 7
Inventories
Note 8
Variable Interest Entities
Note 9
Accrued Liabilities and Deferred Revenue
Note 10
Retirement Benefits
Note 11
Debt and Commitments
Note 12
Derivative Financial Instruments and Hedging Activities
Note 13
Redeemable Noncontrolling Interest
Note 14
Accumulated Other Comprehensive Income/(Loss)
Note 15
Other Income/(Loss)
Note 16
Employee Separation Actions and Exit and Disposal Activities
Note 17
Income Taxes
Note 18
Dispositions, Changes in Investments in Affiliates, and Assets Held For Sale
Note 19
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
Note 20
Segment Information
Note 21
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 related 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, 2012 (“2012 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

Derivatives and Hedging - Inclusion of the Fed Funds Effective Swap Rate (“OIS rate”) as a Benchmark Interest Rate for Hedge Accounting Purposes. On July 17, 2013, we adopted the new accounting standard that permits the use of the OIS rate as an acceptable U.S. benchmark interest rate for hedge accounting purposes and removes the restriction on using different benchmark rates for similar hedges. The adoption of this accounting standard did not impact our consolidated financial statements.

Balance Sheet - Offsetting. On January 1, 2013, we adopted the new accounting standard that requires disclosures about offsetting and related arrangements for derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. See Note 3 and Note 12 for further disclosure regarding balance sheet offsetting.

Intangibles - Goodwill and Other. On January 1, 2013, we adopted the new accounting standard that provides the option to evaluate qualitative factors to determine whether a calculated impairment test for indefinite-lived intangible assets is necessary. The adoption of this accounting standard did not impact our consolidated financial statements.

Comprehensive Income - Reporting of Reclassification Adjustments. During 2012, we early adopted the new accounting standard that requires us to disclose significant amounts reclassified out of each component of Accumulated other comprehensive income/(loss) (“AOCI”) and the affected income statement line item only if the item reclassified is required to be reclassified to net income in its entirety. See Note 14 for further disclosure regarding the significant amounts reclassified out of AOCI.




9
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION (Continued)

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 in 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,
2013
 
December 31,
2012
Sector balance sheet presentation of deferred income tax assets
 
 
 
Automotive sector current deferred income tax assets
$
2,943

 
$
3,488

Automotive sector non-current deferred income tax assets
11,583

 
13,325

Financial Services sector deferred income tax assets (a)
168

 
184

Total
14,694

 
16,997

Reclassification for netting of deferred income taxes
(1,671
)
 
(1,812
)
Consolidated balance sheet presentation of deferred income tax assets
$
13,023

 
$
15,185

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities
 

 
 

Automotive sector current deferred income tax liabilities
$
207

 
$
81

Automotive sector non-current deferred income tax liabilities
389

 
514

Financial Services sector deferred income tax liabilities
1,712

 
1,687

Total
2,308

 
2,282

Reclassification for netting of deferred income taxes
(1,671
)
 
(1,812
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
637

 
$
470

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

10
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION (Continued)

Sector to Consolidated Cash Flow. We present certain cash flows from wholesale receivables, finance receivables and the acquisition of intersector debt differently on our sector and consolidated statements of cash flows. The reconciliation between totals for the sector and consolidated cash flows for the periods ended September 30 was as follows (in millions):
 
First Nine Months
 
2013
 
2012
Automotive net cash provided by/(used in) operating activities
$
6,378

 
$
4,113

Financial Services net cash provided by/(used in) operating activities
4,928

 
3,624

Total sector net cash provided by/(used in) operating activities
11,306

 
7,737

Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
(1,088
)
 
1,671

Finance receivables (b)
(89
)
 
(2
)
Consolidated net cash provided by/(used in) operating activities
$
10,129

 
$
9,406

 
 
 
 
Automotive net cash provided by/(used in) investing activities
$
(6,633
)
 
$
(6,086
)
Financial Services net cash provided by/(used in) investing activities
(9,566
)
 
(3,873
)
Total sector net cash provided by/(used in) investing activities
(16,199
)
 
(9,959
)
Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
1,088

 
(1,671
)
Finance receivables (b)
89

 
2

Reclassifications from investing to financing cash flows
 
 
 
Maturity of Financial Services sector debt held by Automotive sector (c)
—

 
(201
)
Elimination of investing activity to/(from) Financial Services in consolidation
(298
)
 
(794
)
Consolidated net cash provided by/(used in) investing activities
$
(15,320
)
 
$
(12,623
)
 
 
 
 
Automotive net cash provided by/(used in) financing activities
$
(254
)
 
$
233

Financial Services net cash provided by/(used in) financing activities
4,298

 
(1,610
)
Total sector net cash provided by/(used in) financing activities
4,044

 
(1,377
)
Reclassifications from investing to financing cash flows
 

 
 

Maturity of Financial Services sector debt held by Automotive sector (c)
—

 
201

Elimination of investing activity to/(from) Financial Services in consolidation
298

 
794

Consolidated net cash provided by/(used in) financing activities
$
4,342

 
$
(382
)
 __________
(a)
In addition to the cash flow from vehicles sold by us, the cash flow from wholesale finance receivables (being reclassified from investing to operating) includes dealer financing by Ford Credit of used and non-Ford vehicles. One hundred percent of cash flows from these wholesale finance receivables have been reclassified for consolidated presentation as the portion of these cash flows from used and non-Ford vehicles is impracticable to separate.
(b)
Includes cash flows of finance receivables purchased/collected by the Financial Services sector from certain divisions and subsidiaries of the Automotive sector.
(c)
Cash inflows related to these transactions are reported as financing activities on the consolidated statement of cash flows and investing activities on the sector statement of cash flows.


11
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION (Continued)

Venezuelan Operations

In February 2013, the Venezuelan government announced a devaluation of the bolivar, effective February 13, 2013. The devaluation, from an exchange rate of 4.3 bolivars to the U.S. dollar to an exchange rate of 6.3 bolivars to the U.S. dollar, resulted in a remeasurement loss of $186 million in the first quarter. For periods subsequent to the date of the devaluation, assets, liabilities, and results of operations from our Venezuelan subsidiary are remeasured at this new exchange rate, including $704 million of cash and cash equivalents at the end of the third quarter of 2013. At September 30, 2013, our investment in our Venezuelan subsidiary (which includes undistributed earnings) was $802 million. Also, at September 30, 2013, it had $283 million of U.S. dollar currency exchange requests pending with and in transit to the Commission for Administration of Foreign Exchange (“CADIVI”), including $274 million payable to other Ford consolidated affiliates.

The operating environment in Venezuela continues to be challenging, reflecting economic uncertainty and our limited ability to convert bolivars to U.S. dollars through CADIVI. Various restrictions on our ability to manage our operations, including restrictions on the distribution of foreign exchange by the authorities, have affected our Venezuelan operation’s ability to pay obligations denominated in U.S. dollars and are constraining parts availability and our ability to maintain normal production, thereby restricting our ability to benefit from our investment in this operation. 

NOTE 2.  ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. The new accounting standard is effective as of January 1, 2014 and is consistent with our present practice.

Foreign Currency Matters - Parent’s Accounting for Cumulative Translation Adjustment. In March 2013, the FASB issued a new accounting standard that clarifies the applicable guidance for a parent company’s accounting for the release of the cumulative translation adjustment into net income upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The new accounting standard is effective as of
January 1, 2014 and is consistent with our present practice.

Liabilities - Obligations Resulting from Joint and Several Liability Arrangements. In February 2013, the FASB issued a new accounting standard that provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements. This new accounting standard is effective as of January 1, 2014 and we do not expect this standard to have a material impact on our consolidated financial statements or financial statement disclosures.




12
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 presented in our financial statements on a recurring basis at fair value, while other assets and liabilities are measured at fair value on a nonrecurring basis, such as when we have an asset impairment.

Fair Value Measurements

In measuring fair value, we use various valuation methodologies and prioritize the use of observable inputs. The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our fair value hierarchy assessment.

•
Level 1 - inputs include quoted prices for identical instruments and are the most observable
•
Level 2 - inputs include quoted prices for similar instruments and observable inputs such as interest rates, currency exchange rates, and yield curves
•
Level 3 - inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the instruments

We review the inputs to the fair value measurements to ensure they are appropriately categorized within the fair value hierarchy. Transfers into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period.

Valuation Methodologies

Cash and Cash Equivalents. Included in Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of 90 days or less from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents. Time deposits, certificates of deposit, and money market accounts that meet the above criteria are reported at par value on our balance sheet and are excluded from the tables below.

Marketable Securities. Investments in securities with a maturity date greater than 90 days at the date of purchase and other securities for which there is more than an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal are classified as Marketable securities. We generally measure fair value using prices obtained from pricing services. Pricing methodologies and inputs to valuation models used by the pricing services depend on the security type (i.e., asset class). Where possible, fair values are generated using market inputs including quoted prices (the closing price in an exchange market), bid prices (the price at which a buyer stands ready to purchase), and other market information. For fixed income securities that are not actively traded, the pricing services use alternative methods to determine fair value for the securities, including quotes for similar fixed-income securities, matrix pricing, discounted cash flow using benchmark curves, or other factors. In certain cases, when market data are not available, we may use broker quotes to determine fair value.

An annual review is performed on the security prices received from our pricing services, which includes discussion and analysis of the inputs used by the pricing services to value our securities. We also compare the price of certain securities sold close to the quarter end to the price of the same security at the balance sheet date to ensure the reported fair value is reasonable.  

We have entered into repurchase agreements with certain counterparties where we are the transferee. These agreements allow us to offset our entire gross exposure in the event of default or breach of contract.  The gross value of these assets and liabilities reflected on our balance sheet at September 30, 2013 and December 31, 2012 was $202 million and $51 million, respectively. 


13
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

Derivative Financial Instruments. Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value of these instruments using industry-standard valuation models such as a discounted cash flow. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates, commodity prices, and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit rate (e.g., LIBOR) plus an adjustment for non-performance risk. The adjustment reflects the full credit default swap (“CDS”) spread applied to a net exposure, by counterparty, considering the master netting agreements and posted collateral. We use our counterparty’s CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability position. In certain cases, market data are not available and we use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is lack of liquidity for a particular currency or commodity or when the instrument is longer-dated.

Finance Receivables. We measure finance receivables at fair value for purposes of disclosure (see Note 5) using internal valuation models. These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to present value based on assumptions regarding credit losses, pre-payment speed, and applicable spreads to approximate current rates. Our assumptions regarding pre-payment speed and credit losses are based on historical performance. The fair value of finance receivables is categorized within Level 3 of the hierarchy.

On a nonrecurring basis, when retail contracts are greater than 120 days past due or deemed to be uncollectible, or if individual dealer loans are probable of foreclosure, we use the fair value of collateral, adjusted for estimated costs to sell, to determine the fair value of our receivables. The collateral for a retail receivable is the vehicle financed, and for dealer loans is real estate or other property.

The fair value of collateral for retail receivables is calculated based on the number of contracts multiplied by the loss severity and the probability of default (“POD”) percentage, or the outstanding receivable balances multiplied by the average recovery value (“ARV”) percentage to determine the fair value adjustment.

The nonrecurring fair value measurements for dealer loans are based on an assessment of the estimated fair value of collateral. The assessment is performed by reviewing various appraisals, which include total adjusted appraised value of land and improvements, alternate use appraised value, broker’s opinion of value, and purchase offers. The fair value adjustment is determined by comparing the net carrying value of the dealer loan and the estimated fair value of collateral.

Debt. We measure debt at fair value for purposes of disclosure (see Note 11) using quoted prices for our own debt with approximately the same remaining maturities, where possible. Where quoted prices are not available, we estimate fair value using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of the debt instruments. For certain short-term debt with an original maturity date of one year or less, we assume that book value is a reasonable approximation of the debt’s fair value. The fair value of debt is categorized within Level 2 of the hierarchy.

14
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

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

The following tables categorize the fair values of items measured at fair value on a recurring basis on our balance sheet (in millions):
 
September 30, 2013
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
16

 
$
—

 
$
—

 
$
16

 
$
—

 
$
—

 
$
—

 
$
—

U.S. government-sponsored enterprises
—

 
5

 
—

 
5

 
—

 
718

 
—

 
718

Non-U.S. government
—

 
72

 
—

 
72

 
—

 
139

 
—

 
139

Non-U.S. government agencies (a)
—

 
20

 
—

 
20

 
—

 
365

 
—

 
365

Corporate debt
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total cash equivalents – financial instruments (b)
16

 
97

 
—

 
113

 
—

 
1,222

 
—

 
1,222

Marketable securities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. government
4,924

 
—

 
—

 
4,924

 
4,493

 
—

 
—

 
4,493

U.S. government-sponsored enterprises
—

 
5,895

 
—

 
5,895

 
—

 
5,459

 
—

 
5,459

Non-U.S. government agencies (a)
—

 
5,830

 
—

 
5,830

 
—

 
4,794

 
—

 
4,794

Corporate debt
—

 
2,316

 
—

 
2,316

 
—

 
1,871

 
—

 
1,871

Mortgage-backed and other asset-backed
—

 
296

 
—

 
296

 
—

 
25

 
—

 
25

Equities
295

 
—

 
—

 
295

 
142

 
—

 
—

 
142

Non-U.S. government
—

 
911

 
—

 
911

 
—

 
1,367

 
—

 
1,367

Other liquid investments (c)
—

 
18

 
—

 
18

 
—

 
27

 
—

 
27

Total marketable securities
5,219

 
15,266

 
—

 
20,485

 
4,635

 
13,543

 
—

 
18,178

Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Foreign currency exchange contracts
—

 
442

 
—

 
442

 
—

 
218

 
—

 
218

Commodity contracts
—

 
20

 
3

 
23

 
—

 
19

 
4

 
23

Total derivative financial instruments (d)
—

 
462

 
3

 
465

 
—

 
237

 
4

 
241

Total assets at fair value
$
5,235

 
$
15,825

 
$
3

 
$
21,063

 
$
4,635

 
$
15,002

 
$
4

 
$
19,641

Liabilities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Foreign currency exchange contracts
$
—

 
$
390

 
$
—

 
$
390

 
$
—

 
$
486

 
$
—

 
$
486

Commodity contracts
—

 
20

 
2

 
22

 
—

 
112

 
12

 
124

Total derivative financial instruments (d)
—

 
410

 
2

 
412

 
—

 
598

 
12

 
610

Total liabilities at fair value
$
—

 
$
410

 
$
2

 
$
412

 
$
—

 
$
598

 
$
12

 
$
610

 __________
(a)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(b)
Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $2.5 billion and $3 billion at September 30, 2013 and December 31, 2012, respectively, for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $3.1 billion and $2 billion at September 30, 2013 and December 31, 2012, respectively.
(c)
Includes certificates of deposit and time deposits subject to changes in value.
(d)
See Note 12 for additional information regarding derivative financial instruments.


15
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
September 30, 2013
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Services Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government
$
—

 
$
—

 
$
—

 
$
—

 
$
200

 
$
—

 
$
—

 
$
200

U.S. government-sponsored enterprises
—

 
—

 
—

 
—

 
—

 
20

 
—

 
20

Non-U.S. government
—

 
66

 
—

 
66

 
—

 
103

 
—

 
103

Corporate debt
—

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Total cash equivalents – financial instruments (a)
—

 
66

 
—

 
66

 
200

 
124

 
—

 
324

Marketable securities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. government
611

 
—

 
—

 
611

 
620

 
—

 
—

 
620

U.S. government-sponsored enterprises
—

 
457

 
—

 
457

 
—

 
12

 
—

 
12

Non-U.S. government agencies
—

 
4

 
—

 
4

 
—

 
95

 
—

 
95

Corporate debt
—

 
1,228

 
—

 
1,228

 
—

 
1,155

 
—

 
1,155

Mortgage-backed and other asset-backed
—

 
46

 
—

 
46

 
—

 
67

 
—

 
67

Non-U.S. government
—

 
59

 
—

 
59

 
—

 
142

 
—

 
142

Other liquid investments (b)
—

 
—

 
—

 
—

 
—

 
15

 
—

 
15