The purpose of this case is to show our understanding of the Statement of Stockholders' Equity by re-creating the journal entries that would have occurred based upon the information from the financial statements. Let's start by looking at the heading of the Consolidated Statement of Equity for Ford Motor Company and its subsidiaries. 1. The heading of the statement is not quite clear. You may need to refer to the text. What is the date of the statement for the most current year? Is it for a period of time or at a point in time? Explain. 2. Each column heading represents a line item in the Equity section of the Balance Sheet. However, there are seven line items on the Balance Sheet and on columns. What items were combined on the Equity Statement? Why do you think Ford combined the two items? Let's journalize. Only prepare journal entries for the most current year. 3. Start with the Capital Stock and Capital in Excess of Par Value columns on the Consolidated Statement of Equity for Ford Motor Company. We see that Capital in Excess of Part increased $163 mill, but the par value account did not change. We can also see on the cash flow statement that no stock was issued. Since the line item says that the increase to the account includes share-based compensation impacts, we will assume that the entire amount is for share-based compensation. Show the journal entry here. Date Accounts Debit Credit 4. Move to the Retained Earnings Column. Show the journal entry to close out net income to Retained Earnings. (6 points) Date Accounts Debit Credit FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (in millions) Equity Attributable to Ford Motor Company Cap. In Excess of Par Value of Stock $ 21,421 Capital Stock $ 41 Treasury Accumulated Other Comprehensive Income/(Loss) (Note 21) (6,257) Equity Attributable to Non- controlling Interests $ 15 Retained Earnings/(Accumulated Deficit) $ 14,980 4,589 Total Equity Stock $ (977) $ $ Balance at December 31, 2015 Net income ther comprehensive income/(loss), net of tax Common stock issued (including share-based compensation impacts) Total 29,208 4,589 (756) 29,223 4,600 (757) (756) (1) 209 209 (148) Treasury stock/other (145) (3) 209 (145) (3,376) 29,729 Cash dividends declared (a) Balance at December 31, 2016 (3,376) 16,193 (3,381) 29,746 $ 41 $ 21,630 $ $ (7,013) $ (1,122) $ $ 17 $ $ 41 $ 21,630 $ 16.193 $ (7,013) $ (1,122) $ $ 17 $ 566 29,729 572 7,731 29,746 572 7,757 52 7.731 26 (2) Balance at December 31, 2016 Adoption of accounting standards Net income Other comprehensive income/(loss), net of tax ommon stock issued (including share-based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2017 (131) 207 (131) (2,584) 35,578 207 (133) (2,595) 35,606 (11) 28 $ 41 (2,584) 21,906 $ 21,843 $ (6,959) $ (1,253) $ $ $ $ 41 $ 21,843 $ $ (6,959) $ (1,253) $ $ $ 21,906 3,677 35,578 3,677 28 18 - 35,606 3,695 (407) (407) (407) Balance at December 31, 2017 Net income 5ther comprehensive income/(loss), net of tax Common stock issued (including share-based compensation impacts) Treasury stock/other Dividend and dividend equivalents declared (a) Balance at December 31, 2018 163 - (164) 163 (164) (2,915) 35,932 163 (164) (2.927) 35,966 (2,915) 22.668 $ 41 $ 22,006 (12) 34 (7.366) $ (1,417) $ $ $ (a) We declared dividends per share of common and Class B Stock of $0.85, $0.65, and $0.73 per share in 2016, 2017 and 2018, respectively. The accompanying notes are part of the consolidated financial statements. FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (in millions, except per share amounts) For the years ended December 31, 2017 2016 2018 $ $ Revenues Automotive Ford Credit Mobility Total revenues (Note 4) 141,546 10,253 145,653 11,113 10 148,294 12,018 26 160,338 151,800 156,776 Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses 126,195 10,972 8,847 146,014 131,321 11,527 9,047 151,895 136,269 11,403 9,463 157,135 1,133 1,171 Interest expense on Automotive debt Interest expense on Other debt 894 57 2,247 123 Other income/loss), net (Note 5) Equity in net income of affiliated companies Income before income taxes Provision for (Benefit from) income taxes (Note 7) Net Income Less: Income (Loss) attributable to noncontrolling interests Net Income attributable to Ford Motor Company 169 1,780 6,784 2,184 3,267 1,201 8,159 402 7.757 26 7.731 4,345 650 3,695 4.600 4.589 $ 3.677 EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8) Basic income Diluted income $ $ $ 1.16 1.15 1.94 1.93 0.93 0.92 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) For the years ended December 31, 2016 2017 $ 4,600 $ 7.757 $ 2018 3,695 Net Income Other comprehensive income/loss), net of tax (Note 21) Foreign currency translation Marketable securities (1,024) (523) (11) Derivative Instruments 219 183 314 (34) (265) 37 52 7,809 56 Pension and other postretirement benefits Total other comprehensive income (loss), net of tax (757) 3,843 (56) (407) 3,288 Comprehensive Income ess: Comprehensive income/(loss) attributable to noncontrolling interests Comprehensive income attributable to Ford Motor Company 3,833 7.785 $ 3,270 The accompanying notes are part of the consolidated financial statements. FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) December 31, 2017 December 31, 2018 $ ASSETS Cash and cash equivalents (Note 9) Marketable securities (Note 9) Ford Credit finance receivables, net (Note 10) Trade and other receivables, less allowances of $412 and $94 Inventories (Note 12) Other assets Total current assets Ford Credit finance receivables, net (Note 10) Net investment in operating leases (Note 13) Net property (Note 14) Equity in net assets of affiliated companies (Note 15) Deferred income taxes (Note 7) 18,492 20,435 52.210 10,599 11,176 3,889 116.801 56,182 28.235 35,327 3,085 10,762 8,104 258,496 16,718 17,233 54.353 11,195 11,220 3.930 114,649 55,544 29,119 36,178 2,709 10,412 7,929 256,540 Other assets Total assets $ $ LIABILITIES $ 23,282 19,697 Payables Other liabilities and deferred revenue (Note 16) Automotive debt payable within one year (Note 18) Ford Credit debt payable within one year (Note 18) Total current liabilities 3,356 48,265 94,600 21,520 20,556 2,314 51,179 95,569 24.711 12.575 89.492 Other liabilities and deferred revenue (Note 16) Automotive long-term debt (Note 18) Ford Credit long-term debt (Note 18) Other long-term debt (Note 18) Deferred income taxes (Note 7) Total liabilities 23,588 11,233 88,887 600 599 597 815 222.792 220,474 Redeemable con controlling interest (Note 20) 98 100 40 40 EQUITY Common Stock, par value $.01 per share (4,000 million shares issued of 6 billion authorized) Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized) Capital in excess of par value of stock Retained earnings Accumulated other comprehensive income/(loss) (Note 21) Treasury stock Total equity attributable to Ford Motor Company Equity attributable to noncontrolling interests Total equity Total liabilities and equity 21.843 21,906 (6.959) (1.253) 35,578 28 22,006 22,668 (7.366) (1,417) 35,932 34 35,966 256,540 35,606 258,496 $ $ FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) For the years ended December 31, 2016 2017 2018 $ $ 3,695 9.280 (972) 7,757 9,122 (669) 717 (608) 240 (403) 609 400 206 529 Cash flows from operating activities Net income Depreciation and tooling amortization Other amortization Provision for credit and insurance losses Pension and other postretirement employee benefits ("OPEB") expense/income) Equity investment (eamings Mosses in excess of dividends received Foreign currency adjustments Net (gain Wloss on changes in investments in affiliates Stock compensation Net change in wholesale and other receivables Provision for deferred income taxes Decrease/(Increase) in accounts receivable and other assets Decrease/Increase) in inventory Increase/(Decrease) in accounts payable and accrued and other liabilities Other Net cash provided by (used in) operating activities 4,600 9,023 (306) 672 2.667 (178) 283 (139) 210 (1,449) 1,473 (2,855) (803) 6,595 57 19,850 246 (836) (350) (2.297) (970) 6,089 (42) 191 (2,408) (197) (2,239) (828) 6,781 65 17 15,022 18,096 Cash flows from investing activities Capital spending Acquisitions of finance receivables and operating leases Collections of finance receivables and operating leases Purchases of marketable and other securities Sales and maturities of marketable and other securities Settlements of derivatives (6,992) (56,007) 38,834 (31,428) 29,354 (7,049) (59,354) 44.641 (27,567) 29,898 (7,785) (62,924) 50,880 (17.140) 20,527 825 100 358 (177) Other Net cash provided by/(used in) investing activities 112 (25,302) (29) (19,360) (16.261) Cash flows from financing activities Cash dividends Purchases of common stock Net changes in short-term debt Proceeds from issuance of long-term debt Principal payments on long-term debt Other (3.376) (145) 3,864 45.961 (38.797) (107) 7,400 (265) 1,683 (2,584) (131) 1,229 45,801 (40,770) (151) 3,394 489 2,619 (2,905) (164) (2.819) 50,130 (44,172) (192) (122) (370) (1,731) Net cash provided by/(used in) financing activities Effect of exchange rate changes on cash, cash equivalents, and restricted cash Net increase/(decrease) in cash, cash equivalents, and restricted cash $ $ $ $ $ Cash, cash equivalents, and restricted cash at January 1 (Note 9) Net increase/(decrease) in cash, cash equivalents, and restricted cash Cash, cash equivalents, and restricted cash at December 31 (Note 9) 14,336 1,683 16,019 16,019 2,619 18,638 18,638 (1,731) 16,907 $ $ $ NOTE 6. SHARE-BASED COMPENSATION Under our Long-Term Incentive Plans, we may issue restricted stock units ("RSUs"), restricted stock shares ("RSSs"), and stock options. RSUS and RSSs consist of time-based and performance-based awards. The number of shares that may be granted in any year is limited to 2% of our issued and outstanding Common Stock as of December 31 of the prior calendar year. The limit may be increased up to 3% in any year, with a corresponding reduction in shares available for grants in future years. Granted RSUs generally cliff vest or ratably vest over a three-year service period. Performance- based RSUs have two components: one based on internal financial performance metrics, and the other based on total shareholder return relative to an industrial and automotive peer group. At the time of vest, RSU awards are net settled (shares are withheld to cover the employee tax obligation), The fair value of both the time-based and the internal performance metrics portion of the performance-based RSUS and RSSs is determined using the closing price of our Common Stock at grant date. The weighted average per unit grant date fair value for the years ended December 31, 2016, 2017, and 2018 was $13.54, $12.37, and $9.89, respectively. The fair value of time-based RSUS and RSSs is expensed over the shorter of the vesting period, using the graded vesting method, or the time period an employee becomes eligible to retain the award at retirement. The fair value of performance-based RSUS and RSSs is expensed when it is probable and estimable as measured against the performance metrics over the shorter of the performance or required service periods. We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUS and RSSs in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses. The fair value of vested RSUS and RSSs as well as the compensation cost for the years ended December 31 was as follows (in millions): 2016 2017 2018 Fair value of vested shares 157 $ 175 $ 187 Compensation cost (a) 135 193 162 (a) Net of tax benefit of $72 million, $52 million, and $29 million in 2016, 2017, and 2018, respectively. As of December 31, 2018, there was approximately $146 million in unrecognized compensation cost related to non- vested RSUS and RSSs. This expense will be recognized over a weighted average period of 1.9 years. The performance-based RSUs granted in March 2016, 2017, and 2018 include a relative Total Shareholder Return ("TSR) metric. We estimate the fair value of the TSR component of the performance-based RSUS using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value at grant date were as follows: 2016 2017 2018 Fair value per stock award $ 15.56 $ 12.44 $ 9.03 Grant date stock price 13.54 12.66 10.40 Assumptions: Ford's stock price expected volatility (a) 23.1% 23.4% 22.9% Expected average volatility of peer companies (a) 26.4 25.4 Risk-free interest rate 098 1.57 Dividend yield 4.43 4.74 5.00 26.0 2.46 (a) Expected volatility based on three years of daily closing share price changes ending on the grant date. During 2018, activity for RSUs and RSSs was as follows (in millions, except for weighted average fair value): Weighted- Average Fair Shares Outstanding, beginning of year 44.4 $ 13.32 Granted 37.7 9.89 Value Vested Forfeited (13.7) (4.3) 64.1 13.68 13.85 10.80 Outstanding, end of year The table above also includes shares awarded to non-employee directors. At December 31, 2018, there were 684,461 shares vested, but unissued. Stock Options As of March 31, 2017, all of our outstanding stock options were fully vested. The last of our outstanding stock options will expire in July 2024, if not exercised sooner. We measure the fair value of our stock options using the Black-Scholes option-pricing model and record expense in Selling, administrative, and other expenses. NOTE 8. CAPITAL STOCK AND EARNINGS PER SHARE All general voting power is vested in the holders of Common Stock and Class B Stock. Holders of our Common Stock have 60% of the general voting power and holders of our Class B Stock are entitled to such number of votes per share as will give them the remaining 40%. Shares of Common Stock and Class B Stock share equally in dividends when and as paid, with stock dividends payable in shares of stock of the class held. If liquidated, each share of Common Stock is entitled to the first $0.50 available for distribution to holders of Common Stock and Class B Stock, each share of Class B Stock is entitled to the next $1.00 so available, each share of Common Stock is entitled to the next $0.50 so available, and each share of Common and Class B Stock is entitled to an equal amount thereafter. We present both basic and diluted earnings per share ("EPS) amounts in our financial reporting. Basic EPS excludes dilution and is computed by dividing income available to Common and Class B Stock holders by the weighted average number of Common and Class B Stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our share-based compensation, including "in-the-money" stock options, unvested restricted stock units, and unvested restricted stock shares. Potentially dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock 2017 2018 Basic and diluted income per share were calculated using the following (in millions): 2016 Basic and Diluted Income Attributable to Ford Motor Company Basic income 4,589 Diluted income 4,589 $ $ 7,731 7.731 3,677 3,677 Basic and Diluted Shares 3,973 3.975 3,974 Basic shares (average shares outstanding) det dilutive options, unvested restricted stock units, and unvested restricted stock shares Diluted shares 26 24 3.903.08 23 3,998 3,999 3,998 The purpose of this case is to show our understanding of the Statement of Stockholders' Equity by re-creating the journal entries that would have occurred based upon the information from the financial statements. Let's start by looking at the heading of the Consolidated Statement of Equity for Ford Motor Company and its subsidiaries. 1. The heading of the statement is not quite clear. You may need to refer to the text. What is the date of the statement for the most current year? Is it for a period of time or at a point in time? Explain. 2. Each column heading represents a line item in the Equity section of the Balance Sheet. However, there are seven line items on the Balance Sheet and on columns. What items were combined on the Equity Statement? Why do you think Ford combined the two items? Let's journalize. Only prepare journal entries for the most current year. 3. Start with the Capital Stock and Capital in Excess of Par Value columns on the Consolidated Statement of Equity for Ford Motor Company. We see that Capital in Excess of Part increased $163 mill, but the par value account did not change. We can also see on the cash flow statement that no stock was issued. Since the line item says that the increase to the account includes share-based compensation impacts, we will assume that the entire amount is for share-based compensation. Show the journal entry here. Date Accounts Debit Credit 4. Move to the Retained Earnings Column. Show the journal entry to close out net income to Retained Earnings. (6 points) Date Accounts Debit Credit FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (in millions) Equity Attributable to Ford Motor Company Cap. In Excess of Par Value of Stock $ 21,421 Capital Stock $ 41 Treasury Accumulated Other Comprehensive Income/(Loss) (Note 21) (6,257) Equity Attributable to Non- controlling Interests $ 15 Retained Earnings/(Accumulated Deficit) $ 14,980 4,589 Total Equity Stock $ (977) $ $ Balance at December 31, 2015 Net income ther comprehensive income/(loss), net of tax Common stock issued (including share-based compensation impacts) Total 29,208 4,589 (756) 29,223 4,600 (757) (756) (1) 209 209 (148) Treasury stock/other (145) (3) 209 (145) (3,376) 29,729 Cash dividends declared (a) Balance at December 31, 2016 (3,376) 16,193 (3,381) 29,746 $ 41 $ 21,630 $ $ (7,013) $ (1,122) $ $ 17 $ $ 41 $ 21,630 $ 16.193 $ (7,013) $ (1,122) $ $ 17 $ 566 29,729 572 7,731 29,746 572 7,757 52 7.731 26 (2) Balance at December 31, 2016 Adoption of accounting standards Net income Other comprehensive income/(loss), net of tax ommon stock issued (including share-based compensation impacts) Treasury stock/other Cash dividends declared (a) Balance at December 31, 2017 (131) 207 (131) (2,584) 35,578 207 (133) (2,595) 35,606 (11) 28 $ 41 (2,584) 21,906 $ 21,843 $ (6,959) $ (1,253) $ $ $ $ 41 $ 21,843 $ $ (6,959) $ (1,253) $ $ $ 21,906 3,677 35,578 3,677 28 18 - 35,606 3,695 (407) (407) (407) Balance at December 31, 2017 Net income 5ther comprehensive income/(loss), net of tax Common stock issued (including share-based compensation impacts) Treasury stock/other Dividend and dividend equivalents declared (a) Balance at December 31, 2018 163 - (164) 163 (164) (2,915) 35,932 163 (164) (2.927) 35,966 (2,915) 22.668 $ 41 $ 22,006 (12) 34 (7.366) $ (1,417) $ $ $ (a) We declared dividends per share of common and Class B Stock of $0.85, $0.65, and $0.73 per share in 2016, 2017 and 2018, respectively. The accompanying notes are part of the consolidated financial statements. FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT (in millions, except per share amounts) For the years ended December 31, 2017 2016 2018 $ $ Revenues Automotive Ford Credit Mobility Total revenues (Note 4) 141,546 10,253 145,653 11,113 10 148,294 12,018 26 160,338 151,800 156,776 Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses 126,195 10,972 8,847 146,014 131,321 11,527 9,047 151,895 136,269 11,403 9,463 157,135 1,133 1,171 Interest expense on Automotive debt Interest expense on Other debt 894 57 2,247 123 Other income/loss), net (Note 5) Equity in net income of affiliated companies Income before income taxes Provision for (Benefit from) income taxes (Note 7) Net Income Less: Income (Loss) attributable to noncontrolling interests Net Income attributable to Ford Motor Company 169 1,780 6,784 2,184 3,267 1,201 8,159 402 7.757 26 7.731 4,345 650 3,695 4.600 4.589 $ 3.677 EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8) Basic income Diluted income $ $ $ 1.16 1.15 1.94 1.93 0.93 0.92 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in millions) For the years ended December 31, 2016 2017 $ 4,600 $ 7.757 $ 2018 3,695 Net Income Other comprehensive income/loss), net of tax (Note 21) Foreign currency translation Marketable securities (1,024) (523) (11) Derivative Instruments 219 183 314 (34) (265) 37 52 7,809 56 Pension and other postretirement benefits Total other comprehensive income (loss), net of tax (757) 3,843 (56) (407) 3,288 Comprehensive Income ess: Comprehensive income/(loss) attributable to noncontrolling interests Comprehensive income attributable to Ford Motor Company 3,833 7.785 $ 3,270 The accompanying notes are part of the consolidated financial statements. FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions) December 31, 2017 December 31, 2018 $ ASSETS Cash and cash equivalents (Note 9) Marketable securities (Note 9) Ford Credit finance receivables, net (Note 10) Trade and other receivables, less allowances of $412 and $94 Inventories (Note 12) Other assets Total current assets Ford Credit finance receivables, net (Note 10) Net investment in operating leases (Note 13) Net property (Note 14) Equity in net assets of affiliated companies (Note 15) Deferred income taxes (Note 7) 18,492 20,435 52.210 10,599 11,176 3,889 116.801 56,182 28.235 35,327 3,085 10,762 8,104 258,496 16,718 17,233 54.353 11,195 11,220 3.930 114,649 55,544 29,119 36,178 2,709 10,412 7,929 256,540 Other assets Total assets $ $ LIABILITIES $ 23,282 19,697 Payables Other liabilities and deferred revenue (Note 16) Automotive debt payable within one year (Note 18) Ford Credit debt payable within one year (Note 18) Total current liabilities 3,356 48,265 94,600 21,520 20,556 2,314 51,179 95,569 24.711 12.575 89.492 Other liabilities and deferred revenue (Note 16) Automotive long-term debt (Note 18) Ford Credit long-term debt (Note 18) Other long-term debt (Note 18) Deferred income taxes (Note 7) Total liabilities 23,588 11,233 88,887 600 599 597 815 222.792 220,474 Redeemable con controlling interest (Note 20) 98 100 40 40 EQUITY Common Stock, par value $.01 per share (4,000 million shares issued of 6 billion authorized) Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized) Capital in excess of par value of stock Retained earnings Accumulated other comprehensive income/(loss) (Note 21) Treasury stock Total equity attributable to Ford Motor Company Equity attributable to noncontrolling interests Total equity Total liabilities and equity 21.843 21,906 (6.959) (1.253) 35,578 28 22,006 22,668 (7.366) (1,417) 35,932 34 35,966 256,540 35,606 258,496 $ $ FORD MOTOR COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) For the years ended December 31, 2016 2017 2018 $ $ 3,695 9.280 (972) 7,757 9,122 (669) 717 (608) 240 (403) 609 400 206 529 Cash flows from operating activities Net income Depreciation and tooling amortization Other amortization Provision for credit and insurance losses Pension and other postretirement employee benefits ("OPEB") expense/income) Equity investment (eamings Mosses in excess of dividends received Foreign currency adjustments Net (gain Wloss on changes in investments in affiliates Stock compensation Net change in wholesale and other receivables Provision for deferred income taxes Decrease/(Increase) in accounts receivable and other assets Decrease/Increase) in inventory Increase/(Decrease) in accounts payable and accrued and other liabilities Other Net cash provided by (used in) operating activities 4,600 9,023 (306) 672 2.667 (178) 283 (139) 210 (1,449) 1,473 (2,855) (803) 6,595 57 19,850 246 (836) (350) (2.297) (970) 6,089 (42) 191 (2,408) (197) (2,239) (828) 6,781 65 17 15,022 18,096 Cash flows from investing activities Capital spending Acquisitions of finance receivables and operating leases Collections of finance receivables and operating leases Purchases of marketable and other securities Sales and maturities of marketable and other securities Settlements of derivatives (6,992) (56,007) 38,834 (31,428) 29,354 (7,049) (59,354) 44.641 (27,567) 29,898 (7,785) (62,924) 50,880 (17.140) 20,527 825 100 358 (177) Other Net cash provided by/(used in) investing activities 112 (25,302) (29) (19,360) (16.261) Cash flows from financing activities Cash dividends Purchases of common stock Net changes in short-term debt Proceeds from issuance of long-term debt Principal payments on long-term debt Other (3.376) (145) 3,864 45.961 (38.797) (107) 7,400 (265) 1,683 (2,584) (131) 1,229 45,801 (40,770) (151) 3,394 489 2,619 (2,905) (164) (2.819) 50,130 (44,172) (192) (122) (370) (1,731) Net cash provided by/(used in) financing activities Effect of exchange rate changes on cash, cash equivalents, and restricted cash Net increase/(decrease) in cash, cash equivalents, and restricted cash $ $ $ $ $ Cash, cash equivalents, and restricted cash at January 1 (Note 9) Net increase/(decrease) in cash, cash equivalents, and restricted cash Cash, cash equivalents, and restricted cash at December 31 (Note 9) 14,336 1,683 16,019 16,019 2,619 18,638 18,638 (1,731) 16,907 $ $ $ NOTE 6. SHARE-BASED COMPENSATION Under our Long-Term Incentive Plans, we may issue restricted stock units ("RSUs"), restricted stock shares ("RSSs"), and stock options. RSUS and RSSs consist of time-based and performance-based awards. The number of shares that may be granted in any year is limited to 2% of our issued and outstanding Common Stock as of December 31 of the prior calendar year. The limit may be increased up to 3% in any year, with a corresponding reduction in shares available for grants in future years. Granted RSUs generally cliff vest or ratably vest over a three-year service period. Performance- based RSUs have two components: one based on internal financial performance metrics, and the other based on total shareholder return relative to an industrial and automotive peer group. At the time of vest, RSU awards are net settled (shares are withheld to cover the employee tax obligation), The fair value of both the time-based and the internal performance metrics portion of the performance-based RSUS and RSSs is determined using the closing price of our Common Stock at grant date. The weighted average per unit grant date fair value for the years ended December 31, 2016, 2017, and 2018 was $13.54, $12.37, and $9.89, respectively. The fair value of time-based RSUS and RSSs is expensed over the shorter of the vesting period, using the graded vesting method, or the time period an employee becomes eligible to retain the award at retirement. The fair value of performance-based RSUS and RSSs is expensed when it is probable and estimable as measured against the performance metrics over the shorter of the performance or required service periods. We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUS and RSSs in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses. The fair value of vested RSUS and RSSs as well as the compensation cost for the years ended December 31 was as follows (in millions): 2016 2017 2018 Fair value of vested shares 157 $ 175 $ 187 Compensation cost (a) 135 193 162 (a) Net of tax benefit of $72 million, $52 million, and $29 million in 2016, 2017, and 2018, respectively. As of December 31, 2018, there was approximately $146 million in unrecognized compensation cost related to non- vested RSUS and RSSs. This expense will be recognized over a weighted average period of 1.9 years. The performance-based RSUs granted in March 2016, 2017, and 2018 include a relative Total Shareholder Return ("TSR) metric. We estimate the fair value of the TSR component of the performance-based RSUS using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value at grant date were as follows: 2016 2017 2018 Fair value per stock award $ 15.56 $ 12.44 $ 9.03 Grant date stock price 13.54 12.66 10.40 Assumptions: Ford's stock price expected volatility (a) 23.1% 23.4% 22.9% Expected average volatility of peer companies (a) 26.4 25.4 Risk-free interest rate 098 1.57 Dividend yield 4.43 4.74 5.00 26.0 2.46 (a) Expected volatility based on three years of daily closing share price changes ending on the grant date. During 2018, activity for RSUs and RSSs was as follows (in millions, except for weighted average fair value): Weighted- Average Fair Shares Outstanding, beginning of year 44.4 $ 13.32 Granted 37.7 9.89 Value Vested Forfeited (13.7) (4.3) 64.1 13.68 13.85 10.80 Outstanding, end of year The table above also includes shares awarded to non-employee directors. At December 31, 2018, there were 684,461 shares vested, but unissued. Stock Options As of March 31, 2017, all of our outstanding stock options were fully vested. The last of our outstanding stock options will expire in July 2024, if not exercised sooner. We measure the fair value of our stock options using the Black-Scholes option-pricing model and record expense in Selling, administrative, and other expenses. NOTE 8. CAPITAL STOCK AND EARNINGS PER SHARE All general voting power is vested in the holders of Common Stock and Class B Stock. Holders of our Common Stock have 60% of the general voting power and holders of our Class B Stock are entitled to such number of votes per share as will give them the remaining 40%. Shares of Common Stock and Class B Stock share equally in dividends when and as paid, with stock dividends payable in shares of stock of the class held. If liquidated, each share of Common Stock is entitled to the first $0.50 available for distribution to holders of Common Stock and Class B Stock, each share of Class B Stock is entitled to the next $1.00 so available, each share of Common Stock is entitled to the next $0.50 so available, and each share of Common and Class B Stock is entitled to an equal amount thereafter. We present both basic and diluted earnings per share ("EPS) amounts in our financial reporting. Basic EPS excludes dilution and is computed by dividing income available to Common and Class B Stock holders by the weighted average number of Common and Class B Stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our share-based compensation, including "in-the-money" stock options, unvested restricted stock units, and unvested restricted stock shares. Potentially dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period. Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock 2017 2018 Basic and diluted income per share were calculated using the following (in millions): 2016 Basic and Diluted Income Attributable to Ford Motor Company Basic income 4,589 Diluted income 4,589 $ $ 7,731 7.731 3,677 3,677 Basic and Diluted Shares 3,973 3.975 3,974 Basic shares (average shares outstanding) det dilutive options, unvested restricted stock units, and unvested restricted stock shares Diluted shares 26 24 3.903.08 23 3,998 3,999 3,998