PRESENTATION
For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us” or similar references mean Ford Motor Company and our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.
We prepare our financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). We present the financial statements on both a consolidated basis and on a sector basis for our Automotive and Financial Services sectors. The additional information provided in the sector statements enables the reader to better understand the operating performance, financial position, cash flows, and liquidity of our two very different businesses. We eliminate all intercompany items and transactions in the consolidated and sector balance sheets. In certain circumstances, presentation of these intercompany eliminations or consolidated adjustments differ between the consolidated and sector financial statements. These line items are reconciled below under “Reconciliations between Consolidated and Sector Financial Statements” or in related footnotes.
We reclassified certain prior year amounts on 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 4 and Note 16 for further disclosure regarding balance sheet offsetting.
Intangibles - Goodwill and Other. On January 1, 2013, we adopted the new accounting standard that provides the option to evaluate qualitative factors to determine whether a calculated impairment test for indefinite-lived intangible assets is necessary. The adoption of this accounting standard did not impact our consolidated financial statements.
Comprehensive Income - Reporting of Reclassification Adjustments. During 2012, we early adopted the new accounting standard that requires us to disclose significant amounts reclassified out of each component of Accumulated other comprehensive income/(loss) (“AOCI”) and the affected income statement line item only if the item reclassified is required to be reclassified to net income in its entirety. See Note 18 for further disclosure regarding the significant amounts reclassified out of AOCI.
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 on our sector balance sheet and consolidated balance sheet is the result of netting deferred income tax assets and liabilities. The reconciliation between the totals for the sector and consolidated balance sheets was as follows (in millions):
|
| | | | | | | |
| December 31,
2013 | | December 31,
2012 |
Sector balance sheet presentation of deferred income tax assets | | | |
Automotive sector current deferred income tax assets | $ | 1,574 |
| | $ | 3,488 |
|
Automotive sector non-current deferred income tax assets | 13,283 |
| | 13,325 |
|
Financial Services sector deferred income tax assets (a) | 184 |
| | 184 |
|
Total | 15,041 |
| | 16,997 |
|
Reclassification for netting of deferred income taxes | (1,726 | ) | | (1,812 | ) |
Consolidated balance sheet presentation of deferred income tax assets | $ | 13,315 |
| | $ | 15,185 |
|
| | | |
Sector balance sheet presentation of deferred income tax liabilities | |
| | |
|
Automotive sector current deferred income tax liabilities | $ | 267 |
| | $ | 81 |
|
Automotive sector non-current deferred income tax liabilities | 430 |
| | 514 |
|
Financial Services sector deferred income tax liabilities | 1,627 |
| | 1,687 |
|
Total | 2,324 |
| | 2,282 |
|
Reclassification for netting of deferred income taxes | (1,726 | ) | | (1,812 | ) |
Consolidated balance sheet presentation of deferred income tax liabilities | $ | 598 |
| | $ | 470 |
|
__________
| |
(a) | Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet. |
NOTE 1. PRESENTATION (Continued)
Sector to Consolidated Cash Flow. We present certain cash flows from wholesale and other receivables, interest supplements and residual support, 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 years ended December 31 was as follows (in millions):
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Automotive net cash provided by/(used in) operating activities | $ | 7,738 |
| | $ | 6,266 |
| | $ | 9,368 |
|
Financial Services net cash provided by/(used in) operating activities | 3,352 |
| | 2,043 |
| | 418 |
|
Total sector net cash provided by/(used in) operating activities (Note 25) | 11,090 |
| | 8,309 |
| | 9,786 |
|
Reclassifications from investing to operating cash flows | |
| | |
| | |
Purchases/Collections of wholesale receivables (a) | (2,971 | ) | | (1,235 | ) | | (2,010 | ) |
Purchases/Collections of other receivables (b) | (73 | ) | | 57 |
| | 21 |
|
Payments of interest supplements and residual support (c) | 2,398 |
| | 1,914 |
| | 1,987 |
|
Consolidated net cash provided by/(used in) operating activities | $ | 10,444 |
| | $ | 9,045 |
| | $ | 9,784 |
|
| | | | | |
Automotive net cash provided by/(used in) investing activities | $ | (8,111 | ) | | $ | (8,024 | ) | | $ | (1,541 | ) |
Financial Services net cash provided by/(used in) investing activities | (11,821 | ) | | (4,404 | ) | | 1,401 |
|
Total sector net cash provided by/(used in) investing activities | (19,932 | ) | | (12,428 | ) | | (140 | ) |
Reclassifications from investing to operating cash flows | |
| | |
| | |
Purchases/Collections of wholesale receivables (a) | 2,971 |
| | 1,235 |
| | 2,010 |
|
Purchases/Collections of other receivables (b) | 73 |
| | (57 | ) | | (21 | ) |
Payments of interest supplements and residual support (c) | (2,398 | ) | | (1,914 | ) | | (1,987 | ) |
Reclassifications from investing to financing cash flows | | | | | |
Maturity of Financial Services sector debt held by Automotive sector (d) | — |
| | (201 | ) | | — |
|
Elimination of investing activity to/(from) Financial Services in consolidation | (445 | ) | | (925 | ) | | (2,903 | ) |
Consolidated net cash provided by/(used in) investing activities | $ | (19,731 | ) | | $ | (14,290 | ) | | $ | (3,041 | ) |
| | | | | |
Automotive net cash provided by/(used in) financing activities | $ | (822 | ) | | $ | 40 |
| | $ | (5,932 | ) |
Financial Services net cash provided by/(used in) financing activities | 8,510 |
| | 2,539 |
| | (1,212 | ) |
Total sector net cash provided by/(used in) financing activities | 7,688 |
| | 2,579 |
| | (7,144 | ) |
Reclassifications from investing to financing cash flows | |
| | |
| | |
Maturity of Financial Services sector debt held by Automotive sector (d) | — |
| | 201 |
| | — |
|
Elimination of investing activity to/(from) Financial Services in consolidation | 445 |
| | 925 |
| | 2,903 |
|
Consolidated net cash provided by/(used in) financing activities | $ | 8,133 |
| | $ | 3,705 |
| | $ | (4,241 | ) |
__________
| |
(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 other receivables purchased/collected by the Financial Services sector from certain divisions and subsidiaries of the Automotive sector. |
| |
(c) | Payments from Automotive sector to Ford Credit on behalf of the retail customer that represent interest supplements and residual support. |
| |
(d) | 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. |
NOTE 1. PRESENTATION (Continued)
Certain Transactions Between Automotive and Financial Services Sectors
Intersector transactions occur in the ordinary course of business. Additional detail regarding certain transactions and the effect on each sector’s balance sheet was as follows (in billions): |
| | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| Automotive | | Financial Services | | Automotive | | Financial Services |
Finance receivables, net (a) | | | $ | 3.3 |
| | | | $ | 4.8 |
|
Unearned interest supplements and residual support (b) | | | (3.1 | ) | | | | (2.6 | ) |
Wholesale receivables/Other (c) | | | 0.8 |
| | | | 0.8 |
|
Net investment in operating leases (d) | | | 0.6 |
| | | | 0.5 |
|
Intersector receivables/(payables) (e) | $ | (0.2 | ) | | 0.2 |
| | $ | (0.3 | ) | | 0.3 |
|
__________
| |
(a) | Automotive sector receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit. These receivables are classified as Other receivables, net on our consolidated balance sheet and Finance receivables, net on our sector balance sheet. |
| |
(b) | We pay amounts to Ford Credit at the point of retail financing or lease origination that represent interest supplements and residual support. |
| |
(c) | Primarily wholesale receivables with entities that are consolidated subsidiaries of Ford. |
| |
(d) | Sale-leaseback agreement between Automotive and Financial Services sectors relating to vehicles that we lease to our employees. |
| |
(e) | Amounts owed to the Financial Services sector by Automotive sector, or vice versa. |
Venezuelan Operations
On February 13, 2013, the Venezuelan government effected 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. This resulted in a remeasurement loss of $186 million in the first quarter. For periods subsequent to the date of the devaluation, assets, liabilities, and results of operations from our Venezuelan subsidiary are remeasured at this new exchange rate.
At December 31, 2013, we had a bolivar denominated net monetary position of $749 million, including $765 million of bolivar denominated cash and cash equivalents. Based on our net monetary position at December 31, 2013, a further devaluation from an exchange rate of 6.3 bolivars to the U.S. dollar to an exchange rate of 12 bolivars to the U.S. dollar would have resulted in a balance sheet remeasurement loss of approximately $360 million.
At December 31, 2013, our investment in our Venezuelan subsidiary (which includes undistributed earnings) was $881 million. Also, at December 31, 2013, it had $300 million of U.S. dollar currency exchange requests pending with and in transit to the governmental controlled currency exchange, including $295 million payable to other Ford consolidated affiliates.
The operating environment in Venezuela continues to be challenging. Foreign exchange control regulations have affected our Venezuelan operation’s ability to pay dividends and obligations denominated in U.S. dollars, and are constraining parts availability and our ability to maintain normal production. Recent developments in Venezuela, including price controls and a very limited and uneven supply of foreign currency to support production, have affected adversely our business and results of operations. These and other restrictions could limit our ability to benefit from our investment and maintain a controlling interest in our Venezuelan subsidiary.
