F 03.31.2013 - 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 March 31, 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 April 24, 2013, Ford had outstanding 3,860,353,986 shares of Common Stock and 70,852,076 shares of Class B Stock.  
  

Exhibit Index begins on page


 






                                                                                

FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2013

 
Table of Contents
 
Page
 
Part I - Financial Information
 
 
Item 1
Financial Statements
 
 
 
 
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 

 

 

 
Item 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 March 31,
 
2013
 
2012
 
First Quarter
 
(unaudited)
Revenues
 
 
 
Automotive
$
33,858

 
$
30,525

Financial Services
1,952

 
1,920

Total revenues
35,810

 
32,445

 
 
 
 
Costs and expenses
 

 
 

Automotive cost of sales
30,005

 
26,934

Selling, administrative, and other expenses
3,285

 
2,878

Financial Services interest expense
706

 
826

Financial Services provision for credit and insurance losses
40

 
(16
)
Total costs and expenses
34,036

 
30,622

 
 
 
 
Automotive interest expense
206

 
185

 
 
 
 
Automotive interest income and other income/(loss), net (Note 15)
245

 
232

Financial Services other income/(loss), net (Note 15)
96

 
73

Equity in net income/(loss) of affiliated companies
214

 
95

Income before income taxes
2,123

 
2,038

Provision for/(Benefit from) income taxes (Note 16)
511

 
640

Net income
1,612

 
1,398

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

 
2

Net income attributable to Ford Motor Company
$
1,611

 
$
1,396

 
 
 
 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 18)
Basic income
$
0.41

 
$
0.37

Diluted income
$
0.40

 
$
0.35

 
 
 
 
Cash dividends declared
$
0.10

 
$
0.05



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended March 31,
 
2013
 
2012
 
First Quarter
 
(unaudited)
Net income
$
1,612

 
$
1,398

Other comprehensive income/(loss), net of tax (Note 14)
 
 
 
Foreign currency translation
(367
)
 
523

Derivative instruments
97

 
(63
)
Pension and other postretirement benefits
591

 
(40
)
Total other comprehensive income/(loss), net of tax
321

 
420

Comprehensive income
1,933

 
1,818

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

 
2

Comprehensive income attributable to Ford Motor Company
$
1,932

 
$
1,816


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 March 31,
 
2013
 
2012
 
First Quarter
 
(unaudited)
AUTOMOTIVE
 
 
 
Revenues
$
33,858

 
$
30,525

Costs and expenses
 
 
 
Cost of sales
30,005

 
26,934

Selling, administrative, and other expenses
2,481

 
2,135

Total costs and expenses
32,486

 
29,069

 
 
 
 
Interest expense
206

 
185

 
 
 
 
Interest income and other income/(loss), net (Note 15)
245

 
232

Equity in net income/(loss) of affiliated companies
209

 
79

Income before income taxes — Automotive
1,620

 
1,582

 
 
 
 
FINANCIAL SERVICES
 

 
 

Revenues
1,952

 
1,920

Costs and expenses
 
 
 
Interest expense
706

 
826

Depreciation on vehicles subject to operating leases
644

 
590

Operating and other expenses
160

 
153

Provision for credit and insurance losses
40

 
(16
)
Total costs and expenses
1,550

 
1,553

 
 
 
 
Other income/(loss), net (Note 15)
96

 
73

Equity in net income/(loss) of affiliated companies
5

 
16

Income before income taxes — Financial Services
503

 
456

 
 
 
 
TOTAL COMPANY
 

 
 

Income before income taxes
2,123

 
2,038

Provision for/(Benefit from) income taxes (Note 16)
511

 
640

Net income
1,612

 
1,398

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

 
2

Net income attributable to Ford Motor Company
$
1,611

 
$
1,396


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)
 
March 31,
2013
 
December 31,
2012
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
13,820

 
$
15,659

Marketable securities
20,521

 
20,284

Finance receivables, net (Note 5)
71,823

 
71,510

Other receivables, net
11,384

 
10,828

Net investment in operating leases
17,265

 
16,451

Inventories (Note 7)
8,423

 
7,362

Equity in net assets of affiliated companies
3,291

 
3,246

Net property
25,795

 
24,942

Deferred income taxes
14,479

 
15,185

Net intangible assets
84

 
87

Assets held for sale (Note 17)
571

 
—

Other assets
5,554

 
5,000

Total assets
$
193,010

 
$
190,554

 
 
 
 
LIABILITIES
 

 
 

Payables
$
20,600

 
$
19,308

Accrued liabilities and deferred revenue (Note 9)
46,454

 
49,407

Debt (Note 11)
107,356

 
105,058

Deferred income taxes
638

 
470

Total liabilities
175,048

 
174,243

 
 
 
 
Redeemable noncontrolling interest (Note 13)
324

 
322

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,889 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
21,094

 
20,976

Retained earnings
19,296

 
18,077

Accumulated other comprehensive income/(loss) (Note 14)
(22,533
)
 
(22,854
)
Treasury stock
(302
)
 
(292
)
Total equity attributable to Ford Motor Company
17,595

 
15,947

Equity attributable to noncontrolling interests
43

 
42

Total equity
17,638

 
15,989

Total liabilities and equity
$
193,010

 
$
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.
 
March 31,
2013
 
December 31,
2012
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,977

 
$
2,911

Finance receivables, net
47,426

 
47,515

Net investment in operating leases
6,557

 
6,308

Other assets
47

 
4

LIABILITIES
 
 
 
Accrued liabilities and deferred revenue
60

 
134

Debt
40,527

 
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) 
 
March 31,
2013
 
December 31,
2012
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
5,989

 
$
6,247

Marketable securities
18,190

 
18,178

Total cash and marketable securities
24,179

 
24,425

Receivables, less allowances of $119 and $115
5,677

 
5,361

Inventories (Note 7)
8,423

 
7,362

Deferred income taxes
3,828

 
3,488

Net investment in operating leases
1,036

 
1,415

Other current assets
1,197

 
1,124

Current receivable from Financial Services
565

 
—

Total current assets
44,905

 
43,175

Equity in net assets of affiliated companies
3,165

 
3,112

Net property
25,671

 
24,813

Deferred income taxes
12,081

 
13,325

Net intangible assets
84

 
87

Non-current receivable from Financial Services
107

 
—

Other assets
2,025

 
1,946

Total Automotive assets
88,038

 
86,458

Financial Services
 

 
 

Cash and cash equivalents
7,831

 
9,412

Marketable securities
2,331

 
2,106

Finance receivables, net (Note 5)
76,632

 
75,770

Net investment in operating leases
16,229

 
15,036

Equity in net assets of affiliated companies
126

 
134

Assets held for sale (Note 17)
571

 
—

Other assets
3,532

 
3,450

Receivable from Automotive
—

 
252

Total Financial Services assets
107,252

 
106,160

Intersector elimination
(672
)
 
(252
)
Total assets
$
194,618

 
$
192,366

LIABILITIES
 

 
 

Automotive
 

 
 

Payables
$
19,280

 
$
18,151

Accrued liabilities and deferred revenue (Note 9)
14,528

 
15,358

Deferred income taxes
185

 
81

Debt payable within one year (Note 11)
1,244

 
1,386

Current payable to Financial Services
—

 
252

Total current liabilities
35,237

 
35,228

Long-term debt (Note 11)
14,761

 
12,870

Other liabilities (Note 9)
28,840

 
30,549

Deferred income taxes
409

 
514

Total Automotive liabilities
79,247

 
79,161

Financial Services
 

 
 

Payables
1,320

 
1,157

Debt (Note 11)
91,351

 
90,802

Deferred income taxes
1,652

 
1,687

Other liabilities and deferred income (Note 9)
3,086

 
3,500

Payable to Automotive
672

 
—

Total Financial Services liabilities
98,081

 
97,146

Intersector elimination
(672
)
 
(252
)
Total liabilities
176,656

 
176,055

 
 
 
 
Redeemable noncontrolling interest (Note 13)
324

 
322

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,889 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
21,094

 
20,976

Retained earnings
19,296

 
18,077

Accumulated other comprehensive income/(loss) (Note 14)
(22,533
)
 
(22,854
)
Treasury stock
(302
)
 
(292
)
Total equity attributable to Ford Motor Company
17,595

 
15,947

Equity attributable to noncontrolling interests
43

 
42

Total equity
17,638

 
15,989

Total liabilities and equity
$
194,618

 
$
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 March 31,
 
2013
 
2012
 
First Quarter
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
Net cash provided by/(used in) operating activities
$
211

 
$
2,075

 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
Capital expenditures
(1,483
)
 
(1,093
)
Acquisitions of retail and other finance receivables and operating leases
(10,358
)
 
(8,929
)
Collections of retail and other finance receivables and operating leases
8,224

 
7,850

Purchases of securities
(38,953
)
 
(19,816
)
Sales and maturities of securities
38,761

 
17,704

Cash change due to initial consolidation of businesses
9

 
—

Proceeds from sale of business
—

 
5

Settlements of derivatives
(217
)
 
(201
)
Other
166

 
(31
)
Net cash provided by/(used in) investing activities
(3,851
)
 
(4,511
)
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

Cash dividends
(392
)
 
(190
)
Purchases of Common Stock
(10
)
 
(27
)
Changes in short-term debt
(1,428
)
 
(1,651
)
Proceeds from issuance of other debt
11,242

 
10,318

Principal payments on other debt
(7,548
)
 
(8,164
)
Other
103

 
84

Net cash provided by/(used in) financing activities
1,967

 
370

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(166
)
 
162

 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(1,839
)
 
$
(1,904
)
 
 
 
 
Cash and cash equivalents at January 1
$
15,659

 
$
17,148

Net increase/(decrease) in cash and cash equivalents
(1,839
)
 
(1,904
)
Cash and cash equivalents at March 31
$
13,820

 
$
15,244


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 March 31,
 
2013
 
2012
 
First Quarter
 
Automotive
 
Financial
Services
 
Automotive
 
Financial
Services
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
 
 
 
 
Net cash provided by/(used in) operating activities
$
721

 
$
1,552

 
$
875

 
$
1,269

 
 
 
 
 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
 
 
 
 
Capital expenditures
(1,471
)
 
(12
)
 
(1,083
)
 
(10
)
Acquisitions of retail and other finance receivables and operating leases
—

 
(10,576
)
 
—

 
(9,043
)
Collections of retail and other finance receivables and operating leases
—

 
8,224

 
—

 
7,850

Net collections/(acquisitions) of wholesale receivables
—

 
(1,844
)
 
—

 
45

Purchases of securities
(29,697
)
 
(9,256
)
 
(14,302
)
 
(5,514
)
Sales and maturities of securities
29,740

 
9,021

 
13,525

 
4,380

Cash change due to initial consolidation of businesses
9

 
—

 
—

 
—

Proceeds from sale of business
—

 
—

 
—

 
5

Settlements of derivatives
(177
)
 
(40
)
 
(174
)
 
(27
)
Investing activity (to)/from Financial Services
(129
)
 
—

 
45

 
—

Other
147

 
19

 
10

 
(41
)
Net cash provided by/(used in) investing activities
(1,578
)
 
(4,464
)
 
(1,979
)
 
(2,355
)
 
 
 
 
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

 
 

 
 

Cash dividends
(392
)
 
—

 
(190
)
 
—

Purchases of Common Stock
(10
)
 
—

 
(27
)
 
—

Changes in short-term debt
(240
)
 
(1,188
)
 
(19
)
 
(1,632
)
Proceeds from issuance of other debt
2,059

 
9,183

 
674

 
9,644

Principal payments on other debt
(823
)
 
(6,725
)
 
(132
)
 
(8,233
)
Financing activity to/(from) Automotive
—

 
129

 
—

 
(45
)
Other
43

 
60

 
9

 
75

Net cash provided by/(used in) financing activities
637

 
1,459

 
315

 
(191
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(38
)
 
(128
)
 
85

 
77

 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(258
)
 
$
(1,581
)
 
$
(704
)
 
$
(1,200
)
 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
6,247

 
$
9,412

 
$
7,965

 
$
9,183

Net increase/(decrease) in cash and cash equivalents
(258
)
 
(1,581
)
 
(704
)
 
(1,200
)
Cash and cash equivalents at March 31
$
5,989

 
$
7,831

 
$
7,261

 
$
7,983


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
—

 
—

 
1,611

 
—

 
—

 
1,611

 
1

 
1,612

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

 
—

 
—

 
321

 
—

 
321

 
—

 
321

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

 
118

 
—

 
—

 
—

 
118

 
—

 
118

Treasury stock/other 
—

 
—

 
—

 
—

 
(10
)
 
(10
)
 
—

 
(10
)
Cash dividends declared
—

 
—

 
(392
)
 
—

 
—

 
(392
)
 
—

 
(392
)
Balance at March 31, 2013
$
40

 
$
21,094

 
$
19,296

 
$
(22,533
)
 
$
(302
)
 
$
17,595

 
$
43

 
$
17,638

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2011
$
38

 
$
20,905

 
$
12,985

 
$
(18,734
)
 
$
(166
)
 
$
15,028

 
$
43

 
$
15,071

Net income
—

 
—

 
1,396

 
—

 
—

 
1,396

 
2

 
1,398

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

 
—

 
—

 
420

 
—

 
420

 
—

 
420

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

 
(21
)
 
—

 
—

 
—

 
(20
)
 
—

 
(20
)
Treasury stock/other 
—

 
—

 
—

 
—

 
(27
)
 
(27
)
 
(1
)
 
(28
)
Cash dividends declared
—

 
—

 
(191
)
 
—

 
—

 
(191
)
 
—

 
(191
)
Balance at March 31, 2012
$
39

 
$
20,884

 
$
14,190

 
$
(18,314
)
 
$
(193
)
 
$
16,606

 
$
44

 
$
16,650


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
Income Taxes
Note 17
Changes in Investments in Affiliates and Assets Held For Sale
Note 18
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
Note 19
Segment Information
Note 20
Commitments and Contingencies



8
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors. Intercompany items and transactions 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

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 financial condition or results of operations.

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):
 
March 31,
2013
 
December 31,
2012
Sector balance sheet presentation of deferred income tax assets
 
 
 
Automotive sector current deferred income tax assets
$
3,828

 
$
3,488

Automotive sector non-current deferred income tax assets
12,081

 
13,325

Financial Services sector deferred income tax assets (a)
178

 
184

Total
16,087

 
16,997

Reclassification for netting of deferred income taxes
(1,608
)
 
(1,812
)
Consolidated balance sheet presentation of deferred income tax assets
$
14,479

 
$
15,185

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities
 

 
 

Automotive sector current deferred income tax liabilities
$
185

 
$
81

Automotive sector non-current deferred income tax liabilities
409

 
514

Financial Services sector deferred income tax liabilities
1,652

 
1,687

Total
2,246

 
2,282

Reclassification for netting of deferred income taxes
(1,608
)
 
(1,812
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
638

 
$
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 March 31 was as follows (in millions):
 
First Quarter
 
2013
 
2012
Automotive net cash provided by/(used in) operating activities
$
721

 
$
875

Financial Services net cash provided by/(used in) operating activities
1,552

 
1,269

Total sector net cash provided by/(used in) operating activities
2,273

 
2,144

Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
(1,844
)
 
45

Finance receivables (b)
(218
)
 
(114
)
Consolidated net cash provided by/(used in) operating activities
$
211

 
$
2,075

 
 
 
 
Automotive net cash provided by/(used in) investing activities
$
(1,578
)
 
$
(1,979
)
Financial Services net cash provided by/(used in) investing activities
(4,464
)
 
(2,355
)
Total sector net cash provided by/(used in) investing activities
(6,042
)
 
(4,334
)
Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
1,844

 
(45
)
Finance receivables (b)
218

 
114

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
129

 
(45
)
Consolidated net cash provided by/(used in) investing activities
$
(3,851
)
 
$
(4,511
)
 
 
 
 
Automotive net cash provided by/(used in) financing activities
$
637

 
$
315

Financial Services net cash provided by/(used in) financing activities
1,459

 
(191
)
Total sector net cash provided by/(used in) financing activities
2,096

 
124

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
(129
)
 
45

Consolidated net cash provided by/(used in) financing activities
$
1,967

 
$
370

 __________
(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.

Venezuelan Operations

On February 8, 2013, the Venezuelan government announced a devaluation of the bolivar 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 which resulted in a remeasurement loss of $186 million. At March 31, 2013, we had $422 million in net monetary assets (primarily cash and receivables partially offset by payables and accrued liabilities) denominated in Venezuelan bolivars. These net monetary assets included $446 million in cash and cash equivalents. The operating environment in Venezuela continues to be challenging, reflecting economic uncertainty and our limited ability to convert bolivars to U.S. dollars through the foreign exchange administration authorities. 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.

11
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2.  ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Foreign Currency Matters - Parent's Accounting for Cumulative Translation Adjustment. In March 2013, the Financial Accounting Standards Board ("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 for us as of January 1, 2014 and we do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

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 for us as of January 1, 2014 and we do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

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 to determine fair value. In certain cases, when market data are not available, we may use broker quotes to determine fair value.


12
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

A 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, and we account for these agreements as an asset along with a liability to resell the asset to the transferor at a future date. These agreements allow us to offset our entire gross exposure in the event of default or termination of the counterparty agreement due to breach of contract.  The gross value of these assets and liabilities reflected on our balance sheet at March 31, 2013 and December 31, 2012 was $72 million and $51 million, respectively. 

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 illiquidity for a particular currency or commodity or for longer-dated instruments.

Ford Credit's two Ford Upgrade Exchange Linked securitization transactions ("FUEL Notes") had derivative features that included a mandatory exchange to Ford Credit unsecured notes when Ford Credit's senior unsecured debt received two investment grade credit ratings among Fitch, Moody's, and S&P, and a make-whole provision.  Ford Credit estimated the fair value of these features by comparing the fair value of the FUEL Notes to the value of a hypothetical debt instrument without these features. In the second quarter of 2012, Ford Credit received two investment grade credit ratings, thereby triggering the mandatory exchange feature and the FUEL Notes derivatives were extinguished.

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 adjustment to our receivables. The collateral for retail receivables is the vehicle financed, and for dealer loans is real estate or other property.

The nonrecurring fair value measurements for retail receivables are 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.

13
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):
 
March 31, 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
$
50

 
$
—

 
$
—

 
$
50

 
$
—

 
$
—

 
$
—

 
$
—

U.S. government-sponsored enterprises
—

 
400

 
—

 
400

 
—

 
718

 
—

 
718

Non-U.S. government
—

 
—

 
—

 
—

 
—

 
139

 
—

 
139

Non-U.S. government agencies (a)
—

 
410

 
—

 
410

 
—

 
365

 
—

 
365

Corporate debt
—

 
4

 
—

 
4

 
—

 
—

 
—

 
—

Total cash equivalents – financial instruments (b)
50

 
814

 
—

 
864

 
—

 
1,222

 
—

 
1,222

Marketable securities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. government
3,613

 
—

 
—

 
3,613

 
4,493

 
—

 
—

 
4,493

U.S. government-sponsored enterprises
—

 
5,295

 
—

 
5,295

 
—

 
5,459

 
—

 
5,459

Non-U.S. government agencies (a)
—

 
5,811

 
—

 
5,811

 
—

 
4,794

 
—

 
4,794

Corporate debt
—

 
2,270

 
—

 
2,270

 
—

 
1,871

 
—

 
1,871

Mortgage-backed and other asset-backed
—

 
27

 
—

 
27

 
—

 
25

 
—

 
25

Equities
201

 
—

 
—

 
201

 
142

 
—

 
—

 
142

Non-U.S. government
—

 
948

 
—

 
948

 
—

 
1,367

 
—

 
1,367

Other liquid investments (c)
—

 
25

 
—

 
25

 
—

 
27

 
—

 
27

Total marketable securities
3,814

 
14,376

 
—

 
18,190

 
4,635

 
13,543

 
—

 
18,178

Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Foreign currency exchange contracts
—

 
395

 
—

 
395

 
—

 
218

 
—

 
218

Commodity contracts
—

 
10

 
11

 
21

 
—

 
19

 
4

 
23

Total derivative financial instruments (d)
—

 
405

 
11

 
416

 
—

 
237

 
4

 
241

Total assets at fair value
$
3,864

 
$
15,595

 
$
11

 
$
19,470

 
$
4,635

 
$
15,002

 
$
4

 
$
19,641

Liabilities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Foreign currency exchange contracts
$
—

 
$
479

 
$
—

 
$
479

 
$
—

 
$
486

 
$
—

 
$
486

Commodity contracts
—

 
90

 
4

 
94

 
—

 
112

 
12

 
124

Total derivative financial instruments (d)
—

 
569

 
4

 
573

 
—

 
598

 
12

 
610

Total liabilities at fair value
$
—

 
$
569

 
$
4

 
$
573

 
$
—

 
$
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 $3.4 billion and $3 billion at March 31, 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 $1.7 billion and $2 billion at March 31, 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.


14
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
March 31, 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
$
2

 
$
—

 
$
—

 
$
2

 
$
200

 
$
—

 
$
—

 
$
200

U.S. government-sponsored enterprises
—

 
136

 
—

 
136

 
—

 
20

 
—

 
20

Non-U.S. government
—

 
42

 
—

 
42

 
—

 
103

 
—

 
103

Corporate debt
—

 
3

 
—

 
3

 
—

 
1

 
—

 
1

Total cash equivalents – financial instruments (a)
2

 
181

 
—

 
183

 
200

 
124

 
—

 
324

Marketable securities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. government
629

 
—

 
—

 
629

 
620

 
—

 
—

 
620

U.S. government-sponsored enterprises
—

 
297

 
—

 
297

 
—

 
12

 
—

 
12

Non-U.S. government agencies (b)
—

 
182

 
—

 
182

 
—

 
95

 
—

 
95

Corporate debt
—

 
1,120

 
—

 
1,120

 
—

 
1,155

 
—

 
1,155

Mortgage-backed and other asset-backed
—

 
54

 
—

 
54

 
—

 
67

 
—

 
67

Non-U.S. government
—

 
39

 
—

 
39

 
—

 
142

 
—

 
142

Other liquid investments (c)
—

 
10

 
—

 
10

 
—

 
15

 
—

 
15

Total marketable securities
629

 
1,702

 
—

 
2,331

 
620

 
1,486

 
—

 
2,106

Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Interest rate contracts
—

 
1,220

 
—

 
1,220

 
—

 
1,291

 
—

 
1,291

Foreign currency exchange contracts
—

 
51

 
—

 
51

 
—

 
9

 
—

 
9

Cross-currency interest rate swap contracts
—

 
45

 
—

 
45

 
—

 
—

 
—

 
—

Total derivative financial instruments (d)
—

 
1,316

 
—

 
1,316

 
—

 
1,300

 
—

 
1,300

Total assets at fair value
$
631

 
$
3,199

 
$
—

 
$
3,830

 
$
820

 
$
2,910

 
$
—

 
$
3,730

Liabilities
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Derivative financial instruments
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Interest rate contracts
$
—

 
$
215

 
$
—

 
$
215

 
$
—

 
$
256

 
$
—

 
$
256

Foreign currency exchange contracts
—

 
14

 
—

 
14

 
—

 
8

 
—

 
8

Cross-currency interest rate swap contracts
—

 
26

 
—

 
26

 
—

 
117

 
—

 
117

Total derivative financial instruments (d)
—

 
255

 
—

 
255

 
—

 
381

 
—

 
381

Total liabilities at fair value
$
—

 
$
255

 
$
—

 
$
255

 
$
—

 
$
381

 
$
—

 
$
381

 __________
(a)
Excludes time deposits, certificates of deposit, and money market accounts reported at par value on our balance sheet totaling $5.4 billion and $6.5 billion at March 31, 2013 and December 31, 2012, respectively. In addition to these cash equivalents, we also had cash on hand totaling $2.2 billion and $2.6 billion at March 31, 2013 and December 31, 2012, respectively.
(b)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(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)

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

The following table summarizes the items measured at fair value subsequent to initial recognition on a nonrecurring basis, all of which are Level 3 (in millions):
 
March 31,
2013
 
December 31, 2012
Financial Services Sector
 
 
 
North America
 
 
 
Retail receivables
$
44

 
$
52

Dealer loans
1

 
2

Total North America
45

 
54

International
 

 
 

Retail receivables
24

 
26

Total International
24

 
26

Total Financial Services sector
$
69

 
$
80


Nonrecurring Fair Value Changes

The following table summarizes the total change in value of items for which a nonrecurring fair value adjustment has been included in our income statement for the periods ended March 31, related to items still held on our balance sheet at those dates (in millions):
 
Total Gains/(Losses)
 
First Quarter
 
2013
 
2012
Financial Services Sector
 
 
 
North America
 
 
 
Retail receivables
$
(21
)
 
$
(11
)
Dealer loans
(1
)
 
—

Total North America
(22