Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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(Mark One) | |
þ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the quarterly period ended June 30, 2018 |
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or |
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o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the transition period from __________ to __________ |
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| Commission file number 1-3950 |
Ford Motor Company
(Exact name of Registrant as specified in its charter)
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| |
Delaware | 38-0549190 |
(State of incorporation) | (I.R.S. Employer Identification No.) |
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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 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 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 July 20, 2018, Ford had outstanding 3,914,874,462 shares of Common Stock and 70,852,076 shares of Class B Stock.
Exhibit Index begins on page
FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2018
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| | | |
| 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 1A | Risk Factors | | |
Item 6 | Exhibits | | |
| Signature | | |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions, except per share amounts)
|
| | | | | | | | | | | | | | | |
| For the periods ended June 30, |
| 2017 | | 2018 | | 2017 | | 2018 |
| Second Quarter | | First Half |
| (unaudited) |
Revenues | | | | | | | |
Automotive | $ | 37,113 |
| | $ | 35,905 |
| | $ | 73,588 |
| | $ | 74,917 |
|
Ford Credit | 2,738 |
| | 3,009 |
| | 5,407 |
| | 5,952 |
|
Mobility | 2 |
| | 6 |
| | 4 |
| | 10 |
|
Total revenues (Note 3) | 39,853 |
| | 38,920 |
| | 78,999 |
| | 80,879 |
|
| | | | | | | |
Costs and expenses | | | | | | | |
Cost of sales | 33,342 |
| | 33,194 |
| | 66,042 |
| | 68,947 |
|
Selling, administrative, and other expenses | 2,756 |
| | 2,778 |
| | 5,520 |
| | 5,525 |
|
Ford Credit interest, operating, and other expenses | 2,203 |
| | 2,362 |
| | 4,421 |
| | 4,700 |
|
Total costs and expenses | 38,301 |
| | 38,334 |
| | 75,983 |
| | 79,172 |
|
| | | | | | | |
Interest expense on Automotive debt | 277 |
| | 287 |
| | 556 |
| | 562 |
|
Interest expense on Other debt | 14 |
| | 14 |
| | 28 |
| | 28 |
|
| | | | | | | |
Other income/(loss), net (Note 4) | 732 |
| | 1,004 |
| | 1,466 |
| | 1,867 |
|
Equity in net income of affiliated companies | 273 |
| | 60 |
| | 619 |
| | 284 |
|
Income before income taxes | 2,266 |
| | 1,349 |
|
| 4,517 |
|
| 3,268 |
|
Provision for/(Benefit from) income taxes | 211 |
| | 280 |
| | 863 |
| | 454 |
|
Net income | 2,055 |
| | 1,069 |
| | 3,654 |
| | 2,814 |
|
Less: Income/(Loss) attributable to noncontrolling interests | 8 |
| | 3 |
| | 15 |
| | 12 |
|
Net income attributable to Ford Motor Company | $ | 2,047 |
| | $ | 1,066 |
| | $ | 3,639 |
| | $ | 2,802 |
|
| | | | | | | |
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6) |
Basic income | $ | 0.51 |
| | $ | 0.27 |
| | $ | 0.92 |
| | $ | 0.70 |
|
Diluted income | 0.51 |
| | 0.27 |
| | 0.91 |
| | 0.70 |
|
| | | | | | | |
Cash dividends declared | 0.15 |
| | 0.15 |
| | 0.35 |
| | 0.43 |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
|
| | | | | | | | | | | | | | | |
| For the periods ended June 30, |
| 2017 | | 2018 | | 2017 | | 2018 |
| Second Quarter | | First Half |
| (unaudited) |
Net income | $ | 2,055 |
| | $ | 1,069 |
| | $ | 3,654 |
| | $ | 2,814 |
|
Other comprehensive income/(loss), net of tax (Note 16) | | | | | | | |
Foreign currency translation | 84 |
| | (595 | ) | | 326 |
| | (300 | ) |
Marketable securities | 4 |
| | (8 | ) | | 3 |
| | (55 | ) |
Derivative instruments | 137 |
| | 52 |
| | (31 | ) | | 85 |
|
Pension and other postretirement benefits | (12 | ) | | 17 |
| | (3 | ) | | 25 |
|
Total other comprehensive income/(loss), net of tax | 213 |
| | (534 | ) | | 295 |
| | (245 | ) |
Comprehensive income | 2,268 |
| | 535 |
| | 3,949 |
| | 2,569 |
|
Less: Comprehensive income/(loss) attributable to noncontrolling interests | 8 |
| | 4 |
| | 13 |
| | 12 |
|
Comprehensive income attributable to Ford Motor Company | $ | 2,260 |
| | $ | 531 |
| | $ | 3,936 |
| | $ | 2,557 |
|
The accompanying notes are part of the financial statements.
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
|
| | | | | | | |
| December 31, 2017 | | June 30, 2018 |
| (unaudited) |
ASSETS | | | |
Cash and cash equivalents (Note 7) | $ | 18,492 |
| | $ | 16,828 |
|
Marketable securities (Note 7) | 20,435 |
| | 19,648 |
|
Ford Credit finance receivables, net (Note 8) | 52,210 |
| | 51,354 |
|
Trade and other receivables, less allowances of $392 and $395 | 10,599 |
| | 11,026 |
|
Inventories (Note 10) | 11,176 |
| | 12,565 |
|
Other assets | 3,889 |
| | 3,604 |
|
Total current assets | 116,801 |
| | 115,025 |
|
| | | |
Ford Credit finance receivables, net (Note 8) | 56,182 |
| | 56,351 |
|
Net investment in operating leases | 28,235 |
| | 29,365 |
|
Net property | 35,327 |
| | 35,580 |
|
Equity in net assets of affiliated companies | 3,085 |
| | 3,087 |
|
Deferred income taxes | 10,762 |
| | 10,371 |
|
Other assets | 8,104 |
| | 8,300 |
|
Total assets | $ | 258,496 |
| | $ | 258,079 |
|
| | | |
LIABILITIES | | | |
Payables | $ | 23,282 |
| | $ | 22,743 |
|
Other liabilities and deferred revenue (Note 12) | 19,697 |
| | 21,234 |
|
Automotive debt payable within one year (Note 14) | 3,356 |
| | 3,968 |
|
Ford Credit debt payable within one year (Note 14) | 48,265 |
| | 46,916 |
|
Total current liabilities | 94,600 |
| | 94,861 |
|
| | | |
Other liabilities and deferred revenue (Note 12) | 24,711 |
| | 24,107 |
|
Automotive long-term debt (Note 14) | 12,575 |
| | 11,642 |
|
Ford Credit long-term debt (Note 14) | 89,492 |
| | 89,718 |
|
Other long-term debt (Note 14) | 599 |
| | 599 |
|
Deferred income taxes | 815 |
| | 584 |
|
Total liabilities | 222,792 |
| | 221,511 |
|
| | | |
Redeemable noncontrolling interest | 98 |
| | 99 |
|
| | | |
EQUITY | | | |
Common Stock, par value $.01 per share (3,999 million shares issued of 6 billion authorized) | 40 |
| | 40 |
|
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized) | 1 |
| | 1 |
|
Capital in excess of par value of stock | 21,843 |
| | 21,953 |
|
Retained earnings | 21,906 |
| | 22,993 |
|
Accumulated other comprehensive income/(loss) (Note 16) | (6,959 | ) | | (7,204 | ) |
Treasury stock | (1,253 | ) | | (1,342 | ) |
Total equity attributable to Ford Motor Company | 35,578 |
| | 36,441 |
|
Equity attributable to noncontrolling interests | 28 |
| | 28 |
|
Total equity | 35,606 |
| | 36,469 |
|
Total liabilities and equity | $ | 258,496 |
| | $ | 258,079 |
|
|
| | | | | | | |
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, 2017 | | June 30, 2018 |
| (unaudited) |
ASSETS | | | |
Cash and cash equivalents | $ | 3,479 |
| | $ | 3,079 |
|
Ford Credit finance receivables, net | 56,250 |
| | 55,600 |
|
Net investment in operating leases | 11,503 |
| | 12,207 |
|
Other assets | 64 |
| | 55 |
|
LIABILITIES | | | |
Other liabilities and deferred revenue | $ | 2 |
| | $ | 6 |
|
Debt | 46,437 |
| | 50,012 |
|
The accompanying notes are part of the financial statements.
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
|
| | | | | | | |
| For the periods ended June 30, |
| 2017 | | 2018 |
| First Half |
| (unaudited) |
Cash flows from operating activities | | | |
Net cash provided by/(used in) operating activities | $ | 9,951 |
| | $ | 8,486 |
|
| | | |
Cash flows from investing activities | | | |
Capital spending | (3,264 | ) | | (3,688 | ) |
Acquisitions of finance receivables and operating leases | (27,379 | ) | | (32,273 | ) |
Collections of finance receivables and operating leases | 21,636 |
| | 25,980 |
|
Purchases of marketable and other securities | (16,931 | ) | | (11,725 | ) |
Sales and maturities of marketable and other securities | 16,906 |
| | 12,756 |
|
Settlements of derivatives | 154 |
| | 109 |
|
Other | 16 |
| | (181 | ) |
Net cash provided by/(used in) investing activities | (8,862 | ) | | (9,022 | ) |
| | | |
Cash flows from financing activities | | | |
Cash dividends | (1,392 | ) | | (1,711 | ) |
Purchases of common stock | (131 | ) | | (89 | ) |
Net changes in short-term debt | 72 |
| | (1,735 | ) |
Proceeds from issuance of long-term debt | 20,467 |
| | 28,135 |
|
Principal payments on long-term debt | (19,952 | ) | | (25,299 | ) |
Other | (102 | ) | | (93 | ) |
Net cash provided by/(used in) financing activities | (1,038 | ) | | (792 | ) |
| | | |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 267 |
| | (289 | ) |
| | | |
Net increase/(decrease) in cash, cash equivalents, and restricted cash | $ | 318 |
| | $ | (1,617 | ) |
| | | |
Cash, cash equivalents, and restricted cash at January 1 (Note 7) | $ | 16,019 |
| | $ | 18,638 |
|
Net increase/(decrease) in cash, cash equivalents, and restricted cash | 318 |
| | (1,617 | ) |
Cash, cash equivalents, and restricted cash at June 30 (Note 7) | $ | 16,337 |
| | $ | 17,021 |
|
The accompanying notes are part of the financial statements.
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 16) | | Treasury Stock | | Total | | Equity Attributable to Non-controlling Interests | | Total Equity |
Balance at December 31, 2016 | $ | 41 |
| | $ | 21,630 |
| | $ | 16,193 |
| | $ | (7,013 | ) | | $ | (1,122 | ) | | $ | 29,729 |
| | $ | 17 |
| | $ | 29,746 |
|
Adoption of accounting standards | — |
| | 6 |
| | 566 |
| | — |
| | — |
| | 572 |
| | — |
| | 572 |
|
Net income | — |
| | — |
| | 3,639 |
| | — |
| | — |
| | 3,639 |
| | 15 |
| | 3,654 |
|
Other comprehensive income/(loss), net of tax | — |
| | — |
| | — |
| | 297 |
| | — |
| | 297 |
| | (2 | ) | | 295 |
|
Common stock issued (including share-based compensation impacts) | — |
| | 99 |
| | — |
| | — |
| | — |
| | 99 |
| | — |
| | 99 |
|
Treasury stock/other | — |
| | — |
| | — |
| | — |
| | (131 | ) | | (131 | ) | | (1 | ) | | (132 | ) |
Cash dividends declared | — |
| | — |
| | (1,392 | ) | | — |
| | — |
| | (1,392 | ) | | (11 | ) | | (1,403 | ) |
Balance at June 30, 2017 | $ | 41 |
| | $ | 21,735 |
| | $ | 19,006 |
| | $ | (6,716 | ) | | $ | (1,253 | ) | | $ | 32,813 |
| | $ | 18 |
| | $ | 32,831 |
|
| | | | | | | | | | | | | | | |
Balance at December 31, 2017 | $ | 41 |
| | $ | 21,843 |
| | $ | 21,906 |
| | $ | (6,959 | ) | | $ | (1,253 | ) | | $ | 35,578 |
| | $ | 28 |
| | $ | 35,606 |
|
Net income | — |
| | — |
| | 2,802 |
| | — |
| | — |
| | 2,802 |
| | 12 |
| | 2,814 |
|
Other comprehensive income/(loss), net of tax | — |
| | — |
| | — |
| | (245 | ) | | — |
| | (245 | ) | | — |
| | (245 | ) |
Common stock issued (including share-based compensation impacts) | — |
| | 110 |
| | — |
| | — |
| | — |
| | 110 |
| | — |
| | 110 |
|
Treasury stock/other | — |
| | — |
| | — |
| | — |
| | (89 | ) | | (89 | ) | | — |
| | (89 | ) |
Dividends and dividend equivalents declared | — |
| | — |
| | (1,715 | ) | | — |
| | — |
| | (1,715 | ) | | (12 | ) | | (1,727 | ) |
Balance at June 30, 2018 | $ | 41 |
| | $ | 21,953 |
| | $ | 22,993 |
| | $ | (7,204 | ) | | $ | (1,342 | ) | | $ | 36,441 |
| | $ | 28 |
| | $ | 36,469 |
|
The accompanying notes are part of the financial statements.
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 | Goodwill | |
Note 12 | Other Liabilities and Deferred Revenue | |
Note 13 | Retirement Benefits | |
Note 14 | Debt | |
Note 15 | Derivative Financial Instruments and Hedging Activities | |
Note 16 | Accumulated Other Comprehensive Income/(Loss) | |
Note 17 | Commitments and Contingencies | |
Note 18 | Segment Information | |
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, 2017 (“2017 Form 10-K Report”). We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.
Change in Presentation
Effective January 1, 2018, we changed our reportable segments to reflect the manner in which we now manage our business. Based on recent changes to our organization structure and how our Chief Operating Decision Maker (“CODM”) reviews operating results and makes decisions about resource allocation, we now have three reportable segments that represent the primary businesses reported in our consolidated financial statements: Automotive, Mobility, and Ford Credit. See Note 18 for a description of our new segment presentation.
Change in Accounting
We carry inventory on our consolidated balance sheet that is comprised of finished products, raw materials, work-in-process, and supplies. As of January 1, 2018, we changed our accounting method for U.S. inventories to a first-in, first-out basis from a last-in, first-out basis. We believe this change in accounting method is preferable as it is consistent with how we manage our business, results in a uniform method to value our inventory across all regions in our business, and improves comparability with our peers. The effect of this change was immaterial on our consolidated income statement, balance sheet, and statement of cash flow amounts for the interim period ended June 30, 2018.
We have retrospectively applied this change in accounting method to all prior periods. As of December 31, 2016, the cumulative effect of the change increased Retained earnings by $559 million.
The effect of this change on our consolidated financial statements was as follows (in millions except for per share amounts):
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the periods ended June 30, 2017 |
| | Second Quarter | | First Half |
| | Previously Reported | | As Revised | | Effect of Change Higher/(Lower) | | Previously Reported | | As Revised | | Effect of Change Higher/(Lower) |
Income Statement | | | | | | | | | | | | |
| | | | | | | | | | | | |
Cost of Sales | | $ | 33,349 |
| | $ | 33,342 |
| | $ | (7 | ) | | $ | 66,057 |
| | $ | 66,042 |
| | $ | (15 | ) |
Income before income taxes | | 2,259 |
| | 2,266 |
| | 7 |
| | 4,502 |
| | 4,517 |
| | 15 |
|
Provision for/ (Benefit from) income taxes | | 209 |
| | 211 |
| | 2 |
| | 858 |
| | 863 |
| | 5 |
|
Net income | | 2,050 |
| | 2,055 |
| | 5 |
| | 3,644 |
| | 3,654 |
| | 10 |
|
Net income attributable to Ford Motor Company | | 2,042 |
| | 2,047 |
| | 5 |
| | 3,629 |
| | 3,639 |
| | 10 |
|
Basic earning per share attributable to Ford Motor Company | | 0.51 |
| | 0.51 |
| | — |
| | 0.91 |
| | 0.92 |
| | 0.01 |
|
Diluted earning per share attributable to Ford Motor Company | | 0.51 |
| | 0.51 |
| | — |
| | 0.91 |
| | 0.91 |
| | — |
|
|
| | | | | | | | | | | | |
| | December 31, 2017 |
| | Previously Reported | | As Revised | | Effect of Change Higher/(Lower) |
Balance Sheet | | | | | | |
| | | | | | |
Inventories | | $ | 10,277 |
| | $ | 11,176 |
| | $ | 899 |
|
Deferred income taxes (assets) | | 10,973 |
| | 10,762 |
| | (211 | ) |
Retained earnings | | 21,218 |
| | 21,906 |
| | 688 |
|
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. PRESENTATION (Continued)
Argentina
In June 2018, as a result of the three-year cumulative consumer price index exceeding 100%, Argentina was classified as having a highly inflationary economy. We are presently evaluating the impact of accounting for our Argentina operations as highly inflationary beginning on July 1, 2018.
NOTE 2. NEW ACCOUNTING STANDARDS
Adoption of New Accounting Standards
Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging. On January 1, 2018, we adopted the amendments to Accounting Standards Codification 815 which aligns hedge accounting with risk management activities and simplifies the requirements to qualify for hedge accounting. Adoption did not have a material impact on our financial statements. We continue to assess opportunities enabled by the new standard to expand our risk management strategies.
ASU 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities. On January 1, 2018, we adopted ASU 2016-01 and the related amendments. This standard amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments. We adopted the measurement alternative for equity investments without readily determinable fair values (often referred to as cost method investments) on a prospective basis. As a result, these investments will be revalued upon occurrence of an observable price change for similar investments and for impairments. We anticipate adoption may increase the volatility on our consolidated income statement.
We also adopted the following standards during 2018, none of which had a material impact to our financial statements or financial statement disclosures:
|
| | | |
Standard | | Effective Date |
2017-08 | Nonrefundable Fees and Other Costs - Premium Amortization on Purchased Callable Debt Securities | | January 1, 2018 |
2016-18 | Statement of Cash Flows - Restricted Cash | | January 1, 2018 |
2016-16 | Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory | | January 1, 2018 |
2016-15 | Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments | | January 1, 2018 |
Accounting Standards Issued But Not Yet Adopted
The following represent the standards that will, or are expected to, result in a significant change in practice and/or have a significant financial impact to Ford.
ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. We will adopt the new credit loss guidance 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.
ASU 2016-02, Leases. In February 2016, the FASB issued a new accounting standard which provides guidance on the recognition, measurement, presentation, and disclosure of leases. The new standard supersedes the present U.S. GAAP standard on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We plan to adopt the new standard on its effective date of January 1, 2019. We anticipate adoption of the standard will add between $1.5 billion and $2 billion in right-of-use assets and lease obligations to our consolidated balance sheet and will not significantly impact results. We plan to elect the practical expedients upon transition that will retain the lease classification and initial direct costs for any leases that exist prior to adoption of the standard. We will not reassess whether any contracts entered into prior to adoption are leases. We are in the process of cataloging our existing lease contracts and implementing changes to our systems.
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. REVENUE
The following tables disaggregate our revenue by major source for the periods ended June 30 (in millions):
|
| | | | | | | | | | | | | | | |
| Second Quarter 2017 |
| Automotive | | Mobility | | Ford Credit | | Consolidated |
Vehicles, parts, and accessories | $ | 35,746 |
| | $ | — |
| | $ | — |
| | $ | 35,746 |
|
Used vehicles | 708 |
| | — |
| | — |
| | 708 |
|
Extended service contracts | 332 |
| | — |
| | — |
| | 332 |
|
Other revenue | 202 |
| | 2 |
| | 55 |
| | 259 |
|
Revenues from sales and services | 36,988 |
| | 2 |
| | 55 |
| | 37,045 |
|
| | | | | | | |
Leasing income | 125 |
| | — |
| | 1,381 |
| | 1,506 |
|
Financing income | — |
| | — |
| | 1,260 |
| | 1,260 |
|
Insurance income | — |
| | — |
| | 42 |
| | 42 |
|
Total revenues | $ | 37,113 |
| | $ | 2 |
| | $ | 2,738 |
| | $ | 39,853 |
|
| | | | | | | |
| Second Quarter 2018 |
| Automotive | | Mobility | | Ford Credit | | Consolidated |
Vehicles, parts, and accessories | $ | 34,569 |
| | $ | — |
| | $ | — |
| | $ | 34,569 |
|
Used vehicles | 655 |
| | — |
| | — |
| | 655 |
|
Extended service contracts | 328 |
| | — |
| | — |
| | 328 |
|
Other revenue | 210 |
| | 6 |
| | 58 |
| | 274 |
|
Revenues from sales and services | 35,762 |
| | 6 |
| | 58 |
| | 35,826 |
|
| | | | | | | |
Leasing income | 143 |
| | — |
| | 1,443 |
| | 1,586 |
|
Financing income | — |
| | — |
| | 1,465 |
| | 1,465 |
|
Insurance income | — |
| | — |
| | 43 |
| | 43 |
|
Total revenues | $ | 35,905 |
| | $ | 6 |
| | $ | 3,009 |
| | $ | 38,920 |
|
|
| | | | | | | | | | | | | | | |
| First Half 2017 |
| Automotive | | Mobility | | Ford Credit | | Consolidated |
Vehicles, parts, and accessories | $ | 70,742 |
| | $ | — |
| | $ | — |
| | $ | 70,742 |
|
Used vehicles | 1,581 |
| | — |
| | — |
| | 1,581 |
|
Extended service contracts | 607 |
| | — |
| | — |
| | 607 |
|
Other revenue | 426 |
| | 4 |
| | 104 |
| | 534 |
|
Revenues from sales and services | 73,356 |
| | 4 |
| | 104 |
| | 73,464 |
|
| | | | | | | |
Leasing income | 232 |
| | — |
| | 2,747 |
| | 2,979 |
|
Financing income | — |
| | — |
| | 2,474 |
| | 2,474 |
|
Insurance income | — |
| | — |
| | 82 |
| | 82 |
|
Total revenues | $ | 73,588 |
| | $ | 4 |
| | $ | 5,407 |
| | $ | 78,999 |
|
| | | | | | | |
| First Half 2018 |
| Automotive | | Mobility | | Ford Credit | | Consolidated |
Vehicles, parts, and accessories | $ | 71,986 |
| | $ | — |
| | $ | — |
| | $ | 71,986 |
|
Used vehicles | 1,583 |
| | — |
| | — |
| | 1,583 |
|
Extended service contracts | 657 |
| | — |
| | — |
| | 657 |
|
Other revenue | 429 |
| | 10 |
| | 113 |
| | 552 |
|
Revenues from sales and services | 74,655 |
| | 10 |
| | 113 |
| | 74,778 |
|
| | | | | | | |
Leasing income | 262 |
| | — |
| | 2,858 |
| | 3,120 |
|
Financing income | — |
| | — |
| | 2,897 |
| | 2,897 |
|
Insurance income | — |
| | — |
| | 84 |
| | 84 |
|
Total revenues | $ | 74,917 |
| | $ | 10 |
| | $ | 5,952 |
| | $ | 80,879 |
|
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. REVENUE (Continued)
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our vehicles, parts, accessories, or services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our base warranties continue to be recognized as expense when the products are sold. We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverages beyond our base warranties over the life of the contract. We do not have any material significant payment terms as payment is received at or shortly after the point of sale.
Automotive Segment
Vehicles, Parts, and Accessories. For the majority of vehicles, parts, and accessories, we transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer (dealers and distributors). We receive cash equal to the invoice price for most vehicle sales at the time of wholesale. When the vehicle sale is financed by our wholly-owned subsidiary Ford Credit, the dealer pays Ford Credit when it sells the vehicle to the retail customer. Payment terms on part sales to dealers, distributors, and retailers range from 30 days to 120 days. The amount of consideration we receive and revenue we recognize varies with changes in marketing incentives and returns we offer to our customers and their customers. When we give our dealers the right to return eligible parts and accessories, we estimate the expected returns based on an analysis of historical experience. We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed. As a result, we recorded a decrease to revenue recognized in prior periods of $510 million and $220 million in the second quarter of 2017 and 2018, respectively.
Depending on the terms of the arrangement, we may also defer the recognition of a portion of the consideration received because we have to satisfy a future obligation (e.g., free extended service contracts). We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories have transferred to the customer as an expense in Cost of sales.
We sell vehicles to daily rental companies and guarantee that we will pay them the difference between an agreed amount and the value they are able to realize upon resale. At the time of transfer of vehicles to the daily rental companies, we record the probable amount we will pay under the guarantee to Other liabilities and deferred revenue.
Used Vehicles. We sell used vehicles both at auction and through our consolidated dealerships. Proceeds from the sale of these vehicles are recognized in Automotive revenues upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Cost of sales.
Extended Service Contracts. We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners. The separately priced service contracts range from 12 months to 120 months. We receive payment at contract inception and recognize revenue over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations. At January 1, 2017 and December 31, 2017, $3.5 billion and $3.8 billion, respectively, of unearned revenue associated with outstanding contracts was reported in Other Liabilities and deferred revenue. We recognized $271 million and $269 million of the unearned amounts as revenue during the second quarter of 2017 and 2018, respectively, and $541 million and $567 million in the first half of 2017 and 2018, respectively. At June 30, 2018, the unearned amount was $3.9 billion. We expect to recognize approximately $600 million of the unearned amount in the remainder of 2018, $1 billion in 2019, and $2.3 billion thereafter.
We record a premium deficiency reserve to the extent we estimate the future costs associated with these contracts exceed the unrecognized revenue. Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. These costs are amortized to expense consistent with how the related revenue is recognized. We had a balance of $232 million and $242 million in deferred costs as of December 31, 2017 and June 30, 2018, respectively. Amortization of $14 million and $19 million was recognized during the second quarter of 2017 and 2018, respectively, and $29 million and $37 million in the first half of 2017 and 2018, respectively.
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. REVENUE (Continued)
Other Revenue. Other revenue consists primarily of net commissions received for serving as the agent in facilitating the sale of a third party’s products or services to our customers and payments for vehicle-related design and testing services we perform for others. We have applied the practical expedient to recognize Automotive revenues for vehicle-related design and testing services over the two to three year term of these agreements in proportion to the amount we have the right to invoice.
Leasing Income. We sell vehicles to daily rental companies with an obligation to repurchase the vehicles for a guaranteed amount, exercisable at the option of the customer. The transactions are accounted for as operating leases. Upon the transfer of vehicles to the daily rental companies, we record proceeds received in Other liabilities and deferred revenue. The difference between the proceeds received and the guaranteed repurchase amount is recorded in Automotive revenues over the term of the lease using a straight-line method. The cost of the vehicle is recorded in Net investment in operating leases on our consolidated balance sheet and the difference between the cost of the vehicle and the estimated auction value is depreciated in Cost of sales over the term of the lease.
Ford Credit Segment
Leasing Income. Ford Credit offers leasing plans to retail consumers through Ford and Lincoln brand dealers who originate the leases. Ford Credit records an operating lease upon purchase of a vehicle subject to a lease from the dealer. The retail consumer makes lease payments representing the difference between Ford Credit’s purchase price of the vehicle and the contractual residual value of the vehicle, plus lease fees that we recognize on a straight-line basis over the term of the lease agreement. Depreciation and the gain or loss upon disposition of the vehicle is recorded in Ford Credit interest, operating, and other expenses.
Financing Income. Ford Credit originates and purchases finance installment contracts. Financing income represents interest earned on the finance receivables (including direct financing leases). Interest is recognized using the interest method, and includes the amortization of certain direct origination costs.
Insurance Income. Income from insurance contracts is recognized evenly over the term of the agreement. Insurance commission revenue is recognized on a net basis at the time of sale of the third party’s product or service to our customer.
NOTE 4. OTHER INCOME/(LOSS)
The amounts included in other income/(loss), net for the periods ended June 30 were as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Second Quarter | | First Half |
| 2017 | | 2018 | | 2017 | | 2018 |
Net periodic pension and OPEB income/(cost), excluding service cost | $ | 389 |
| | $ | 429 |
| | $ | 779 |
| | $ | 906 |
|
Investment-related interest income | 109 |
| | 167 |
| | 201 |
| | 313 |
|
Interest income/(expense) on income taxes | — |
| | 32 |
| | 1 |
| | 33 |
|
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other securities | (24 | ) | | 217 |
| | 27 |
| | 212 |
|
Gains/(Losses) on changes in investments in affiliates | (1 | ) | | — |
| | (2 | ) | | 58 |
|
Royalty income | 150 |
| | 129 |
| | 304 |
| | 272 |
|
Other | 109 |
| | 30 |
| | 156 |
| | 73 |
|
Total | $ | 732 |
| | $ | 1,004 |
| | $ | 1,466 |
| | $ | 1,867 |
|
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
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.
For the second quarter and first half of 2018, our effective tax rates were 20.8% and 13.9%, respectively. During the first quarter of 2018, we recognized $235 million of benefit for non-U.S. capital loss carryforwards expected to be realized in the foreseeable future.
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):
|
| | | | | | | | | | | | | | | |
| Second Quarter | | First Half |
| 2017 | | 2018 | | 2017 | | 2018 |
Basic and Diluted Income Attributable to Ford Motor Company | | | | | | | |
Basic income | $ | 2,047 |
| | $ | 1,066 |
| | $ | 3,639 |
| | $ | 2,802 |
|
Diluted income | 2,047 |
| | 1,066 |
| | 3,639 |
| | 2,802 |
|
| | | | | | | |
Basic and Diluted Shares | |
| | |
| | | | |
Basic shares (average shares outstanding) | 3,977 |
| | 3,977 |
| | 3,977 |
| | 3,976 |
|
Net dilutive options, unvested restricted stock units, and restricted stock | 19 |
| | 22 |
| | 21 |
| | 22 |
|
Diluted shares | 3,996 |
| | 3,999 |
| | 3,998 |
| | 3,998 |
|
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 on our balance sheet were as follows (in millions):
|
| | | | | | | | | | | | | | | | | |
| | | December 31, 2017 |
| Fair Value Level | | Automotive | | Mobility | | Ford Credit | | Consolidated |
Cash and cash equivalents | | | | | | | | | |
U.S. government | 1 | | $ | 913 |
| | $ | — |
| | $ | — |
| | $ | 913 |
|
U.S. government agencies | 2 | | 433 |
| | — |
| | 300 |
| | 733 |
|
Non-U.S. government and agencies | 2 | | — |
| | — |
| | 703 |
| | 703 |
|
Corporate debt | 2 | | 55 |
| | — |
| | 25 |
| | 80 |
|
Total marketable securities classified as cash equivalents | | | 1,401 |
| | — |
| | 1,028 |
| | 2,429 |
|
Cash, time deposits, and money market funds | | | 7,529 |
| | 4 |
| | 8,530 |
| | 16,063 |
|
Total cash and cash equivalents | | | $ | 8,930 |
| | $ | 4 |
| | $ | 9,558 |
| | $ | 18,492 |
|
| | | | | | | | | |
Marketable securities | | | | | | | | | |
U.S. government | 1 | | $ | 5,580 |
| | $ | — |
| | $ | 966 |
| | $ | 6,546 |
|
U.S. government agencies | 2 | | 2,484 |
| | — |
| | 384 |
| | 2,868 |
|
Non-U.S. government and agencies | 2 | | 5,270 |
| | — |
| | 660 |
| | 5,930 |
|
Corporate debt | 2 | | 4,031 |
| | — |
| | 848 |
| | 4,879 |
|
Equities (a) | 1 | | 138 |
| | — |
| | — |
| | 138 |
|
Other marketable securities | 2 | | 51 |
| | — |
| | 23 |
| | 74 |
|
Total marketable securities | | | $ | 17,554 |
| | $ | — |
| | $ | 2,881 |
| | $ | 20,435 |
|
| | | | | | | | | |
| | | June 30, 2018 |
| Fair Value Level | | Automotive | | Mobility | | Ford Credit | | Consolidated |
Cash and cash equivalents | | | | | | | | | |
U.S. government | 1 | | $ | 8 |
| | $ | — |
| | $ | 10 |
| | $ | 18 |
|
U.S. government agencies | 2 | | 3 |
| | — |
| | — |
| | 3 |
|
Non-U.S. government and agencies | 2 | | 210 |
| | — |
| | 587 |
| | 797 |
|
Corporate debt | 2 | | 225 |
| | — |
| | 460 |
| | 685 |
|
Total marketable securities classified as cash equivalents | | | 446 |
| | — |
| | 1,057 |
| | 1,503 |
|
Cash, time deposits, and money market funds | | | 7,284 |
| | 19 |
| | 8,022 |
| | 15,325 |
|
Total cash and cash equivalents | | | $ | 7,730 |
| | $ | 19 |
| | $ | 9,079 |
| | $ | 16,828 |
|
| | | | | | | | | |
Marketable securities | | | | | | | | | |
U.S. government | 1 | | $ | 2,949 |
| | $ | — |
| | $ | 404 |
| | $ | 3,353 |
|
U.S. government agencies | 2 | | 1,992 |
| | — |
| | 164 |
| | 2,156 |
|
Non-U.S. government and agencies | 2 | | 6,322 |
| | — |
| | 1,045 |
| | 7,367 |
|
Corporate debt | 2 | | 5,306 |
| | — |
| | 516 |
| | 5,822 |
|
Equities (a) | 1 | | 558 |
| | — |
| | — |
| | 558 |
|
Other marketable securities | 2 | | 235 |
| | — |
| | 157 |
| | 392 |
|
Total marketable securities | | | $ | 17,362 |
| | $ | — |
| | $ | 2,286 |
| | $ | 19,648 |
|
__________
(a) Net unrealized gains/losses on equities were a $27 million loss and a $158 million gain at December 31, 2017 and June 30, 2018, respectively.
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 on our balance sheet were as follows (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | | | | | | | | 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 | $ | 3,669 |
| | $ | — |
| | $ | (18 | ) | | $ | 3,651 |
| | $ | 1,377 |
| | $ | 2,274 |
| | $ | — |
|
U.S. government agencies | 1,915 |
| | — |
| | (15 | ) | | 1,900 |
| | 265 |
| | 1,620 |
| | 15 |
|
Non-U.S. government and agencies | 4,021 |
| | — |
| | (28 | ) | | 3,993 |
| | 197 |
| | 3,771 |
| | 25 |
|
Corporate debt | 1,716 |
| | 1 |
| | (8 | ) | | 1,709 |
| | 194 |
| | 1,509 |
| | 6 |
|
Other marketable securities | 17 |
| | — |
| | — |
| | 17 |
| | — |
| | 16 |
| | 1 |
|
Total | $ | 11,338 |
| | $ | 1 |
| | $ | (69 | ) | | $ | 11,270 |
| | $ | 2,033 |
| | $ | 9,190 |
| | $ | 47 |
|
| | | | | | | |
| | | | | | |
| June 30, 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 | $ | 2,634 |
| | $ | — |
| | $ | (21 | ) | | $ | 2,613 |
| | $ | 1,777 |
| | $ | 836 |
| | $ | — |
|
U.S. government agencies | 1,871 |
| | — |
| | (26 | ) | | 1,845 |
| | 309 |
| | 1,518 |
| | 18 |
|
Non-U.S. government and agencies | 4,178 |
| | — |
| | (63 | ) | | 4,115 |
| | 6 |
| | 4,109 |
| | — |
|
Corporate debt | 2,628 |
| | 1 |
| | (33 | ) | | 2,596 |
| | 190 |
| | 2,404 |
| | 2 |
|
Other marketable securities | 200 |
| | — |
| | (1 | ) | | 199 |
| | — |
| | 140 |
| | 59 |
|
Total | $ | 11,511 |
| | $ | 1 |
| | $ | (144 | ) | | $ | 11,368 |
| | $ | 2,282 |
| | $ | 9,007 |
| | $ | 79 |
|
Sales proceeds and gross realized gains/(losses) from the sale of AFS debt securities prior to maturity, recorded in the income statement for the periods ended June 30 were as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Second Quarter | | First Half |
| 2017 | | 2018 | | 2017 | | 2018 |
Automotive | | | | | | | |
Sales proceeds | $ | 1,315 |
| | $ | 1,507 |
| | $ | 2,616 |
| | $ | 2,846 |
|
Gross realized gains | 2 |
| | 1 |
| | 3 |
| | 1 |
|
Gross realized losses | 6 |
| | 5 |
| | 8 |
| | 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, 2017 |
| 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 | $ | 2,382 |
| | $ | (9 | ) | | $ | 903 |
| | $ | (9 | ) | | $ | 3,285 |
| | $ | (18 | ) |
U.S. government agencies | 1,625 |
| | (12 | ) | | 260 |
| | (3 | ) | | 1,885 |
| | (15 | ) |
Non-U.S. government and agencies | 3,148 |
| | (20 | ) | | 510 |
| | (8 | ) | | 3,658 |
| | (28 | ) |
Corporate debt | 1,396 |
| | (8 | ) | | — |
| | — |
| | 1,396 |
| | (8 | ) |
Total | $ | 8,551 |
| | $ | (49 | ) | | $ | 1,673 |
| | $ | (20 | ) | | $ | 10,224 |
| | $ | (69 | ) |
| |
| | | | | | | | | | |
| June 30, 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 | $ | 544 |
| | $ | (5 | ) | | $ | 1,968 |
| | $ | (16 | ) | | $ | 2,512 |
| | $ | (21 | ) |
U.S. government agencies | 966 |
| | (14 | ) | | 848 |
| | (12 | ) | | 1,814 |
| | (26 | ) |
Non-U.S. government and agencies | 2,450 |
| | (43 | ) | | 1,120 |
| | (20 | ) | | 3,570 |
| | (63 | ) |
Corporate debt | 2,033 |
| | (29 | ) | | 190 |
| | (4 | ) | | 2,223 |
| | (33 | ) |
Other marketable securities | 156 |
| | (1 | ) | | — |
| | — |
| | 156 |
| | (1 | ) |
Total | $ | 6,149 |
| | $ | (92 | ) | | $ | 4,126 |
| | $ | (52 | ) | | $ | 10,275 |
| | $ | (144 | ) |
We determine other-than-temporary impairments on cash equivalents and marketable securities using a specific identification method. During the six months ended June 30, 2017 and 2018, 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 are presented separately on our consolidated balance sheet as follows (in millions):
|
| | | | | | | |
| December 31, 2017 | | June 30, 2018 |
Cash and cash equivalents | $ | 18,492 |
| | $ | 16,828 |
|
Restricted cash (a) | 146 |
| | 193 |
|
Total cash, cash equivalents, and restricted cash | $ | 18,638 |
| | $ | 17,021 |
|
__________
| |
(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 $363 million and $188 million at December 31, 2017 and June 30, 2018, respectively. There were no material adjustments to the fair values of these investments held at June 30, 2018.
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, 2017 | | June 30, 2018 |
Consumer | | | |
Retail financing, gross | $ | 78,331 |
| | $ | 78,826 |
|
Unearned interest supplements | (3,280 | ) | | (3,245 | ) |
Consumer finance receivables | 75,051 |
| | 75,581 |
|
Non-Consumer | |
| | |
|
Dealer financing | 33,938 |
| | 32,711 |
|
Non-Consumer finance receivables | 33,938 |
| | 32,711 |
|
Total recorded investment | $ | 108,989 |
| | $ | 108,292 |
|
| | | |
Recorded investment in finance receivables | $ | 108,989 |
| | $ | 108,292 |
|
Allowance for credit losses | (597 | ) | | (587 | ) |
Finance receivables, net | $ | 108,392 |
| | $ | 107,705 |
|
| | | |
Current portion | $ | 52,210 |
| | $ | 51,354 |
|
Non-current portion | 56,182 |
| | 56,351 |
|
Finance receivables, net | $ | 108,392 |
| | $ | 107,705 |
|
| | | |
Net finance receivables subject to fair value (a) | $ | 105,106 |
| | $ | 104,145 |
|
Fair value | 104,521 |
| | 103,517 |
|
__________
| |
(a) | At December 31, 2017 and June 30, 2018, Finance receivables, net includes $3.3 billion and $3.6 billion, respectively, of direct financing leases that are not subject to fair value disclosure requirements. The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy. |
Excluded from finance receivables at December 31, 2017 and June 30, 2018, was $240 million and $242 million, respectively, of accrued uncollected interest, which is reported as Other assets in the current assets section of our consolidated balance sheet.
Included in the recorded investment in finance receivables at December 31, 2017 and June 30, 2018, were consumer receivables of $38.9 billion and $39.3 billion, respectively, and non-consumer receivables of $24.5 billion and $22.3 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.
Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. FORD CREDIT FINANCE RECEIVABLES (Continued)
Aging
For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $24 million and $27 million at December 31, 2017 and June 30, 2018, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was $1 million and de minimis at December 31, 2017 and June 30, 2018, respectively.
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