UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | | | | |
☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
OR
| | | | | | | | |
☐ | | 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: 001-36085
CNH INDUSTRIAL N.V.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Netherlands | Not Applicable98-1125413 | | | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | | | |
25 St. James’s Street, London, SW1A 1HA,Cranes Farm Road, Basildon, Essex, SS14 3AD, United Kingdom | | | |
(Address of principal executive offices) | | | |
Registrant’s telephone number including area code: +44 2079 251964207 925 1964
Former name, former address and former fiscal year, if changed since last report: N/A
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Shares, par value €0.01 | | CNHI | | New York Stock Exchange 1 |
4.50% Notes due 2023 | | CNHI23 | | New York Stock Exchange |
3.850% Notes due 2027 | | CNHI27 | | New York Stock Exchange |
1 In addition to the New York Stock Exchange, CNHI common shares are listed on the Euronext Milan, the regulated market of Borsa Italiana, in Italy.
Indicate by check mark whether 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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). þ Yes o No
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 the 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 | ☑ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes þ No
At October 31September 30, 20222023, there were 1,344,479,8731,330,483,676 common shares, par value €0.01 per share, and 371,073,335 special voting shares, par value €0.01 per shareof the registrant were outstanding.
TABLE OF CONTENTS
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Item 1 | statements | |
Item 2 | | |
Item 3 | | |
Item 4 | | |
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Item 1 | | |
Item 1A | | |
Item 2 | | |
Item 3 | | |
Item 4 | | |
Item 5 | | |
Item 6 | | |
Note:
CNH Industrial N.V. qualifies as a Foreign Private Issuer, as determined by Rule 3b-4 under the Securities Exchange Act of 1934 (the "Exchange Act") and is exempt from filing quarterly reports on Form 10-Q by virtue of Rules 13a-13 and 15d-13 under the Exchange Act. CNH Industrial N.V. has voluntarily elected to file this quarterly financial report using Form 10-Q.
As a Foreign Private Issuer, CNH Industrial N.V. is also exempt from the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and its officers, directors, and principal shareholders are not subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
PART I - FINANCIAL INFORMATION
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 20222023 and December 31, 20212022
(Unaudited)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (in millions) |
ASSETS | | | |
Cash and cash equivalents | $ | 3,154 | | | $ | 5,044 | |
Restricted cash | 660 | | | 801 | |
Trade receivables, net | 200 | | | 192 | |
Financing receivables, net | 16,901 | | | 15,376 | |
Receivables from Iveco Group N.V. | 224 | | | — | |
Inventories, net | 5,362 | | | 4,216 | |
Property, plant and equipment, net | 1,405 | | | 1,475 | |
Investments in unconsolidated subsidiaries and affiliates | 327 | | | 333 | |
Equipment under operating leases | 1,539 | | | 1,738 | |
Goodwill, net | 3,233 | | | 3,210 | |
Other intangible assets, net | 1,158 | | | 1,207 | |
Deferred tax assets | 351 | | | 421 | |
Derivative assets | 280 | | | 182 | |
Other assets | 1,050 | | | 1,675 | |
Assets held for distribution | — | | | 13,546 | |
Total Assets | $ | 35,844 | | | $ | 49,416 | |
LIABILITIES AND EQUITY | | | |
Debt | 20,922 | | | 20,897 | |
Payables to Iveco Group N.V. | 95 | | | 502 | |
Trade payables | 3,312 | | | 3,530 | |
Deferred tax liabilities | 134 | | | 125 | |
Pension, postretirement and other postemployment benefits | 522 | | | 675 | |
Derivative liabilities | 412 | | | 181 | |
Other liabilities | 4,038 | | | 4,761 | |
Liabilities held for distribution | — | | | 11,892 | |
Total Liabilities | $ | 29,435 | | | $ | 42,563 | |
Redeemable noncontrolling interest | 52 | | | 45 | |
Common shares, €0.01, par value; outstanding 1,347,028,843 common shares and 371,073,335 loyalty program special voting shares at 9/30/2022; and outstanding 1,356,077,000 common shares and 371,218,250 loyalty program special voting shares at 12/31/2021 | 25 | | | 25 | |
Treasury stock, at cost; 17,371,353 common shares at 9/30/2022 and 8,323,196 common shares at 12/31/2021 | (193) | | | (84) | |
Additional paid in capital | 1,479 | | | 4,464 | |
Retained earnings | 7,307 | | | 4,818 | |
Accumulated other comprehensive loss | (2,264) | | | (2,445) | |
Noncontrolling interests | 3 | | | 30 | |
Total Equity | $ | 6,357 | | | $ | 6,808 | |
Total Liabilities and Equity | $ | 35,844 | | | $ | 49,416 | |
| | | | | | | | | | | |
(in millions of dollars) | September 30, 2023 | | December 31, 2022 |
Assets | | | |
Cash and cash equivalents | $ | 2,979 | | | $ | 4,376 | |
Restricted cash | 706 | | | 753 | |
Trade receivables, net | 199 | | | 172 | |
Financing receivables, net | 22,240 | | | 19,260 | |
Receivables from Iveco Group N.V. | 229 | | | 298 | |
Inventories, net | 6,447 | | | 4,811 | |
Property, plant and equipment, net | 1,681 | | | 1,532 | |
Investments in unconsolidated subsidiaries and affiliates | 477 | | | 385 | |
Equipment under operating leases | 1,454 | | | 1,502 | |
Goodwill, net | 3,490 | | | 3,322 | |
Other intangible assets, net | 1,237 | | | 1,129 | |
Deferred tax assets | 704 | | | 433 | |
Derivative assets | 163 | | | 189 | |
Other assets | 1,035 | | | 1,219 | |
Total Assets | $ | 43,041 | | | $ | 39,381 | |
Liabilities and Equity | | | |
Debt | $ | 24,958 | | | $ | 22,962 | |
Payables to Iveco Group N.V. | 76 | | | 156 | |
Trade payables | 3,574 | | | 3,702 | |
Deferred tax liabilities | 26 | | | 85 | |
Pension, postretirement and other postemployment benefits | 421 | | | 449 | |
Derivative liabilities | 246 | | | 204 | |
Other liabilities | 5,625 | | | 4,847 | |
Total Liabilities | 34,926 | | | 32,405 | |
Redeemable noncontrolling interest | 58 | | | 49 | |
Common shares, €0.01, par value; outstanding 1,330,483,676 common shares and 371,000,610 loyalty program special voting shares at 9/30/2023; and outstanding 1,344,240,971 common shares and 371,072,953 loyalty program special voting shares at 12/31/2022 | 25 | | | 25 | |
Treasury stock, at cost; 33,916,520 common shares at 9/30/2023 and 20,159,225 common shares at 12/31/2022 | (437) | | | (230) | |
Additional paid in capital | 1,563 | | | 1,504 | |
Retained earnings | 9,134 | | | 7,906 | |
Accumulated other comprehensive income (loss) | (2,300) | | | (2,278) | |
Noncontrolling interests | 72 | | | — | |
Total Equity | 8,057 | | | 6,927 | |
Total Liabilities and Equity | $ | 43,041 | | | $ | 39,381 | |
See accompanying notes to the condensed consolidated financial statements
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Andand Nine Months Ended September 30, 20222023 and 20212022
(Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | |
| (in millions) | | (in millions) | |
(in millions of dollars and shares, except per share amounts) | | (in millions of dollars and shares, except per share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
Revenues | Revenues | | Revenues | | | | | | | |
Net sales | Net sales | $ | 5,396 | | | $ | 4,336 | | | $ | 15,189 | | | $ | 12,808 | | Net sales | $ | 5,332 | | | $ | 5,396 | | | $ | 16,062 | | | $ | 15,189 | |
Finance, interest and other income | Finance, interest and other income | 485 | | | 410 | | | 1,419 | | | 1,208 | | Finance, interest and other income | 654 | | | 485 | | | 1,833 | | | 1,419 | |
Total Revenues | Total Revenues | $ | 5,881 | | | $ | 4,746 | | | $ | 16,608 | | | $ | 14,016 | | Total Revenues | 5,986 | | | 5,881 | | | 17,895 | | | 16,608 | |
Costs and Expenses | Costs and Expenses | | | | | | | | Costs and Expenses | | | | | | | |
Cost of goods sold | Cost of goods sold | 4,156 | | | 3,452 | | | 11,819 | | | 10,064 | | Cost of goods sold | 4,059 | | | 4,156 | | | 12,133 | | | 11,819 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 422 | | | 349 | | | 1,224 | | | 1,023 | | Selling, general and administrative expenses | 462 | | | 422 | | | 1,385 | | | 1,224 | |
Research and development expenses | Research and development expenses | 213 | | | 157 | | | 609 | | | 453 | | Research and development expenses | 266 | | | 213 | | | 766 | | | 609 | |
Restructuring expenses | Restructuring expenses | 11 | | | 15 | | | 19 | | | 21 | | Restructuring expenses | 5 | | | 11 | | | 8 | | | 19 | |
Interest expense | Interest expense | 190 | | | 127 | | | 490 | | | 417 | | Interest expense | 346 | | | 190 | | | 941 | | | 490 | |
Other, net | Other, net | 159 | | | 124 | | | 490 | | | 422 | | Other, net | 186 | | | 159 | | | 536 | | | 490 | |
Total Costs and Expenses | Total Costs and Expenses | $ | 5,151 | | | $ | 4,224 | | | $ | 14,651 | | | $ | 12,400 | | Total Costs and Expenses | 5,324 | | | 5,151 | | | 15,769 | | | 14,651 | |
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries and affiliates | 730 | | | 522 | | | 1,957 | | | 1,616 | | |
Income of Consolidated Group before Income Taxes | | Income of Consolidated Group before Income Taxes | 662 | | | 730 | | | 2,126 | | | 1,957 | |
Income tax (expense) benefit | Income tax (expense) benefit | (192) | | | (79) | | | (579) | | | (347) | | Income tax (expense) benefit | (171) | | | (192) | | | (536) | | | (579) | |
Equity in income of unconsolidated subsidiaries and affiliates | Equity in income of unconsolidated subsidiaries and affiliates | 21 | | | 17 | | | 69 | | | 68 | | Equity in income of unconsolidated subsidiaries and affiliates | 79 | | | 21 | | | 176 | | | 69 | |
Net income (loss) from continuing operations | 559 | | | 460 | | | 1,447 | | | 1,337 | | |
Net income (loss) from discontinued operations | — | | | (131) | | | — | | | 116 | | |
Net income | $ | 559 | | | $ | 329 | | | $ | 1,447 | | | $ | 1,453 | | |
Net income attributable to noncontrolling interests | 3 | | | 6 | | | 10 | | | 32 | | |
Net income (loss) | | Net income (loss) | 570 | | | 559 | | | 1,766 | | | 1,447 | |
Net income (loss) attributable to noncontrolling interests | | Net income (loss) attributable to noncontrolling interests | 3 | | | 3 | | | 11 | | | 10 | |
Net income (loss) attributable to CNH Industrial N.V. | Net income (loss) attributable to CNH Industrial N.V. | $ | 556 | | | $ | 323 | | | $ | 1,437 | | | $ | 1,421 | | Net income (loss) attributable to CNH Industrial N.V. | $ | 567 | | | $ | 556 | | | $ | 1,755 | | | $ | 1,437 | |
| Basic earnings (loss) per share attributable to common shareholders | | |
Continuing operations | $ | 0.41 | | | $ | 0.34 | | | $ | 1.06 | | | $ | 0.98 | | |
Discontinuing operations | $ | — | | | $ | (0.10) | | | $ | — | | | $ | 0.07 | | |
Basic earnings per share attributable to CNH Industrial N.V. | $ | 0.41 | | | $ | 0.24 | | | $ | 1.06 | | | $ | 1.05 | | |
Diluted earnings (loss) per share attributable to common shareholders | | | | | | | | |
Continuing operations | $ | 0.41 | | | $ | 0.34 | | | $ | 1.06 | | | $ | 0.98 | | |
Discontinuing operations | $ | — | | | $ | (0.10) | | | $ | — | | | $ | 0.06 | | |
Diluted earnings per share attributable to CNH Industrial N.V. | $ | 0.41 | | | $ | 0.24 | | | $ | 1.06 | | | $ | 1.04 | | |
Average shares outstanding (in millions) | | | | | | | | |
Earnings per share attributable to common shareholders | | Earnings per share attributable to common shareholders | |
Basic | | Basic | $ | 0.43 | | | $ | 0.41 | | | $ | 1.31 | | | $ | 1.06 | |
Diluted | | Diluted | $ | 0.42 | | | $ | 0.41 | | | $ | 1.30 | | | $ | 1.06 | |
Weighted average shares outstanding | | Weighted average shares outstanding | |
Basic | Basic | 1,350 | | | 1,354 | | | 1,354 | | | 1,354 | | Basic | 1,332 | | | 1,350 | | | 1,337 | | | 1,354 | |
Diluted | Diluted | 1,355 | | | 1,361 | | | 1,359 | | | 1,360 | | Diluted | 1,351 | | | 1,355 | | | 1,355 | | | 1,359 | |
| Cash dividends declared per common share | Cash dividends declared per common share | $ | — | | | $ | — | | | $ | 0.302 | | | $ | 0.132 | | Cash dividends declared per common share | $ | — | | | $ | — | | | $ | 0.396 | | | $ | 0.302 | |
See accompanying notes to the condensed consolidated financial statements
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
For the Three Andand Nine Months Ended September 30, 20222023 and 20212022
(Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | |
| (in millions) | | (in millions) | |
Net income | $ | 559 | | | $ | 329 | | | $ | 1,447 | | | $ | 1,453 | | |
(in millions of dollars) | | (in millions of dollars) | 2023 | | 2022 | | 2023 | | 2022 |
Net income (loss) | | Net income (loss) | $ | 570 | | | $ | 559 | | | $ | 1,766 | | | $ | 1,447 | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | |
Unrealized gain (loss) on cash flow hedges | Unrealized gain (loss) on cash flow hedges | (10) | | | 40 | | | (89) | | | (33) | | Unrealized gain (loss) on cash flow hedges | (33) | | | (10) | | | (59) | | | (89) | |
Changes in retirement plans’ funded status | Changes in retirement plans’ funded status | (14) | | | 13 | | | (64) | | | (21) | | Changes in retirement plans’ funded status | (3) | | | (14) | | | (11) | | | (64) | |
Foreign currency translation | Foreign currency translation | 96 | | | (34) | | | 427 | | | 172 | | Foreign currency translation | (14) | | | 96 | | | 70 | | | 427 | |
Share of other comprehensive income (loss) of entities using the equity method | Share of other comprehensive income (loss) of entities using the equity method | (13) | | | (46) | | | (42) | | | (67) | | Share of other comprehensive income (loss) of entities using the equity method | (8) | | | (13) | | | (23) | | | (42) | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | 59 | | | (27) | | | 232 | | | 51 | | Other comprehensive income (loss), net of tax | (58) | | | 59 | | | (23) | | | 232 | |
Comprehensive income | 618 | | | 302 | | | 1,679 | | | 1,504 | | |
Less: Comprehensive income attributable to noncontrolling interests | 3 | | | 7 | | | 9 | | | 35 | | |
Comprehensive income (loss) | | Comprehensive income (loss) | 512 | | | 618 | | | 1,743 | | | 1,679 | |
Less: Comprehensive income (loss) attributable to noncontrolling interests | | Less: Comprehensive income (loss) attributable to noncontrolling interests | (1) | | | 3 | | | 10 | | | 9 | |
Comprehensive income (loss) attributable to CNH Industrial N.V. | Comprehensive income (loss) attributable to CNH Industrial N.V. | $ | 615 | | | $ | 295 | | | $ | 1,670 | | | $ | 1,469 | | Comprehensive income (loss) attributable to CNH Industrial N.V. | $ | 513 | | | $ | 615 | | | $ | 1,733 | | | $ | 1,670 | |
See accompanying notes to the condensed consolidated financial statements
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 20222023 and 20212022
(Unaudited)
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| (in millions) |
Operating activities: | | | |
Net income | $ | 1,447 | | | $ | 1,453 | |
Less: Net income (loss) from discontinued operations | — | | | 116 | |
Net income (loss) of continuing operations | 1,447 | | | 1,337 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Depreciation and amortization expense, net of depreciation and amortization of assets under operating leases | 252 | | | 219 | |
Depreciation and amortization expense of assets under operating leases | 155 | | | 182 | |
(Gain) loss on disposal of assets | 22 | | | — | |
Loss on repurchase of notes | — | | | 8 | |
Undistributed loss of unconsolidated subsidiaries | (36) | | | (7) | |
Other non-cash items | 130 | | | 74 | |
Changes in operating assets and liabilities: | | | |
Provisions | (21) | | | 57 | |
Deferred income taxes | 83 | | | (7) | |
Trade and financing receivables related to sales, net | (1,279) | | | 3 | |
Inventories, net | (1,121) | | | (838) | |
Trade payables | (120) | | | 334 | |
Other assets and liabilities | (398) | | | 112 | |
Cash flow from operating activities discontinued operation | — | | | 418 | |
Net cash provided by (used in) operating activities | $ | (886) | | | $ | 1,892 | |
Investing activities: | | | |
Additions to retail receivables | (4,179) | | | (3,680) | |
Collections of retail receivables | 3,342 | | | 3,297 | |
Proceeds from the sale of assets, net of assets under operating leases | 25 | | | 15 | |
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases | (245) | | | (197) | |
Expenditures for assets under operating leases | (368) | | | (352) | |
Other | (165) | | | (803) | |
Cash flow from investing activities discontinued operation | — | | | 134 | |
Net cash used in investing activities | $ | (1,590) | | | $ | (1,586) | |
Financing activities: | | | |
Proceeds from long-term debt | 7,727 | | | 6,392 | |
Payments of long-term debt | (6,733) | | | (7,128) | |
Net increase (decrease) in other financial liabilities | 340 | | | (322) | |
Dividends paid | (416) | | | (184) | |
Other | (116) | | | — | |
Cash flow from financing activities discontinued operation | — | | | (450) | |
Net cash provided by (used in) financing activities | $ | 802 | | | $ | (1,692) | |
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash | (357) | | | (329) | |
Increase (decrease) in cash and cash equivalents and restricted cash | (2,031) | | | (1,715) | |
Cash and cash equivalents and restricted cash, beginning of year | 5,845 | | | 9,629 | |
Cash and cash equivalents and restricted cash, end of period | $ | 3,814 | | | $ | 7,914 | |
Cash and cash equivalents and restricted cash, end of period (discontinued operation) | — | | | 720 | |
Cash and cash equivalents and restricted cash, end of period (continuing operations) | $ | 3,814 | | | $ | 7,194 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
(in millions of dollars) | 2023 | | 2022 |
Cash Flows from Operating Activities | | | |
Net Income (loss) | $ | 1,766 | | | $ | 1,447 | |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | | | |
Depreciation and amortization expense excluding depreciation and amortization of assets under operating leases | 276 | | | 252 | |
Depreciation and amortization expense of assets under operating leases | 140 | | | 155 | |
(Gain) loss on disposal of assets, net | 21 | | | 22 | |
Undistributed (income) loss of unconsolidated subsidiaries | (125) | | | (36) | |
Other non-cash items, net | 136 | | | 130 | |
Changes in operating assets and liabilities: | | | |
Provisions | 618 | | | (21) | |
Deferred income taxes | (319) | | | 83 | |
Trade and financing receivables related to sales, net | (1,602) | | | (1,279) | |
Inventories, net | (1,443) | | | (1,121) | |
Trade payables | (101) | | | (120) | |
Other assets and liabilities | 25 | | | (398) | |
Net cash provided (used) by operating activities | (608) | | | (886) | |
Cash Flows from Investing Activities | | | |
Additions to retail receivables | (5,689) | | | (4,179) | |
Collections of retail receivables | 4,308 | | | 3,342 | |
Proceeds from the sale of assets, excluding assets under operating leases | 1 | | | 25 | |
Expenditures for property, plant and equipment and intangible assets, excluding assets under operating leases | (401) | | | (245) | |
Expenditures for assets under operating leases | (384) | | | (368) | |
Other | 123 | | | (165) | |
Net cash provided (used) by investing activities | (2,042) | | | (1,590) | |
Cash Flows from Financing Activities | | | |
Proceeds from long-term debt | 7,510 | | | 7,727 | |
Payments of long-term debt | (6,478) | | | (6,733) | |
Net increase in other financial liabilities | 930 | | | 340 | |
Dividends paid | (531) | | | (416) | |
Purchase of treasury stock and other | (224) | | | (116) | |
Net cash provided (used) by financing activities | 1,207 | | | 802 | |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (1) | | | (357) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (1,444) | | | (2,031) | |
Cash, cash equivalents and restricted cash, beginning of year | 5,129 | | | 5,845 | |
Cash, cash equivalents and restricted cash, end of period | $ | 3,685 | | | $ | 3,814 | |
See accompanying notes to the consolidated financial statements
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Andand Nine Months Ended September 30, 20222023
(Unaudited)
| | Common Shares | | Treasury Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total | | Redeemable Noncontrolling Interest | |
| (in millions) | |
Balance, December 31, 2021, as previously reported | $ | 25 | | | $ | (84) | | | $ | 4,464 | | | $ | 4,818 | | | $ | (2,445) | | | $ | 30 | | | $ | 6,808 | | | $ | 45 | | |
Demerger of Iveco Group | — | | | — | | | (3,044) | | | 1,464 | | | (52) | | | (22) | | | (1,654) | | | — | | |
Balance, January 1, 2022 | 25 | | | (84) | | | 1,420 | | | 6,282 | | | (2,497) | | | 8 | | | 5,154 | | | 45 | | |
Net income | — | | | — | | | — | | | 333 | | | — | | | — | | | 333 | | | 3 | | |
(in millions of dollars) | | (in millions of dollars) | Common Shares | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | Redeemable Noncontrolling Interest |
Balance December 31, 2022 | | Balance December 31, 2022 | $ | 25 | | $ | (230) | | $ | 1,504 | | $ | 7,906 | | $ | (2,278) | | $ | — | | $ | 6,927 | | $ | 49 | |
Net income (loss) | | Net income (loss) | — | | — | | — | | 482 | | — | | — | | 482 | | 4 | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | 130 | | | — | | | 130 | | | — | | Other comprehensive income (loss), net of tax | — | | — | | — | | — | | (38) | | 1 | | (37) | | — | |
Dividends paid | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | Dividends paid | — | | — | | — | | — | | — | | — | | — | | (1) | |
Acquisition of treasury stock | Acquisition of treasury stock | — | | | (21) | | | — | | | — | | | — | | | — | | | (21) | | | — | | Acquisition of treasury stock | — | | (71) | | — | | — | | — | | — | | (71) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | Common shares issued from treasury stock and capital increase for share-based compensation | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Common shares issued from treasury stock and capital increase for share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | |
Share-based compensation expense | Share-based compensation expense | — | | | — | | | 18 | | | — | | | — | | | — | | | 18 | | | — | | Share-based compensation expense | — | | — | | 24 | | — | | — | | — | | 24 | | — | |
Other changes | Other changes | — | | | — | | | (4) | | | — | | | — | | | (1) | | | (5) | | | — | | Other changes | — | | — | | — | | — | | — | | 74 | | 74 | | — | |
Balance, March 31, 2022 | $ | 25 | | | $ | (105) | | | $ | 1,434 | | | $ | 6,615 | | | $ | (2,367) | | | $ | 7 | | | $ | 5,609 | | | $ | 47 | | |
Net income | — | | | — | | | — | | | 548 | | | — | | | — | | | 548 | | | 4 | | |
Balance March 31, 2023 | | Balance March 31, 2023 | 25 | | (301) | | 1,528 | | 8,388 | | (2,316) | | 75 | | 7,399 | | 52 | |
Net income (loss) | | Net income (loss) | — | | — | | — | | 706 | | — | | — | | 706 | | 4 | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | 44 | | | (1) | | | 43 | | | — | | Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 70 | | 2 | | 72 | | — | |
Dividends paid | Dividends paid | — | | | — | | | — | | | (412) | | | — | | | — | | | (412) | | | (2) | | Dividends paid | — | | — | | — | | (527) | | — | | — | | (527) | | (1) | |
Acquisition of treasury stock | Acquisition of treasury stock | — | | | (19) | | | — | | | — | | | — | | | — | | | (19) | | | — | | Acquisition of treasury stock | — | | (98) | | — | | — | | — | | — | | (98) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | Common shares issued from treasury stock and capital increase for share-based compensation | — | | | 3 | | | (3) | | | — | | | — | | | — | | | — | | | — | | Common shares issued from treasury stock and capital increase for share-based compensation | — | | 17 | | (17) | | — | | — | | — | | — | | — | |
Share-based compensation expense | Share-based compensation expense | — | | | — | | | 21 | | | — | | | — | | | — | | | 21 | | | — | | Share-based compensation expense | — | | — | | 25 | | — | | — | | — | | 25 | | — | |
Other changes | Other changes | — | | | — | | | 4 | | | — | | | — | | | — | | | 4 | | | — | | Other changes | — | | — | | — | | — | | — | | (2) | | (2) | | — | |
Balance, June 30, 2022 | $ | 25 | | | $ | (121) | | | $ | 1,456 | | | $ | 6,751 | | | $ | (2,323) | | | $ | 6 | | | $ | 5,794 | | | $ | 49 | | |
Net income | — | | | — | | | — | | | 556 | | | — | | | (2) | | | 554 | | | 5 | | |
Balance June 30, 2023 | | Balance June 30, 2023 | 25 | | (382) | | 1,536 | | 8,567 | | (2,246) | | 75 | | 7,575 | | 55 | |
Net income (loss) | | Net income (loss) | — | | — | | — | | 567 | | — | | (2) | | 565 | | 5 | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | 59 | | | — | | | 59 | | | — | | Other comprehensive income (loss), net of tax | — | | — | | — | | — | | (54) | | (4) | | (58) | | — | |
Dividends paid | Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | Dividends paid | — | | — | | — | | — | | — | | — | | — | | (2) | |
Acquisition of treasury stock | Acquisition of treasury stock | — | | | (76) | | | — | | | — | | | — | | | — | | | (76) | | | — | | Acquisition of treasury stock | — | | (55) | | — | | — | | — | | — | | (55) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | Common shares issued from treasury stock and capital increase for share-based compensation | — | | | 4 | | | (4) | | | — | | | — | | | — | | | — | | | — | | Common shares issued from treasury stock and capital increase for share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | |
Share-based compensation expense | Share-based compensation expense | — | | | — | | | 23 | | | — | | | — | | | — | | | 23 | | | — | | Share-based compensation expense | — | | — | | 28 | | — | | — | | — | | 28 | | — | |
Other changes | Other changes | — | | | — | | | 4 | | | — | | | — | | | (1) | | | 3 | | | (1) | | Other changes | — | | — | | (1) | | — | | — | | 3 | | 2 | | — | |
Balance, September 30, 2022 | $ | 25 | | | $ | (193) | | | $ | 1,479 | | | $ | 7,307 | | | $ | (2,264) | | | $ | 3 | | | $ | 6,357 | | | $ | 52 | | |
Balance September 30, 2023 | | Balance September 30, 2023 | $ | 25 | | $ | (437) | | $ | 1,563 | | $ | 9,134 | | $ | (2,300) | | $ | 72 | | $ | 8,057 | | $ | 58 | |
See accompanying notes to the consolidated financial statements
CNH INDUSTRIAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Andand Nine Months Ended September 30, 20212022
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions of dollars) | Common Shares | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | Redeemable Noncontrolling Interest |
Balance December 31, 2021, as previously reported | $ | 25 | | $ | (84) | | $ | 4,464 | | $ | 4,818 | | $ | (2,445) | | $ | 30 | | $ | 6,808 | | $ | 45 | |
Demerger of Iveco Group | — | | — | | (3,044) | | 1,464 | | (52) | | (22) | | (1,654) | | — | |
Balance January 1, 2022 | 25 | | (84) | | 1,420 | | 6,282 | | (2,497) | | 8 | | 5,154 | | 45 | |
Net income (loss) | — | | — | | — | | 333 | | — | | — | | 333 | | 3 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 130 | | — | | 130 | | — | |
Dividends paid | — | | — | | — | | — | | — | | — | | — | | (1) | |
Acquisition of treasury stock | — | | (21) | | — | | — | | — | | — | | (21) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | |
Share-based compensation expense | — | | — | | 18 | | — | | — | | — | | 18 | | — | |
Other changes | — | | — | | (4) | | — | | — | | (1) | | (5) | | — | |
Balance March 31, 2022 | 25 | | (105) | | 1,434 | | 6,615 | | (2,367) | | 7 | | 5,609 | | 47 | |
Net income (loss) | — | | — | | — | | 548 | | — | | — | | 548 | | 4 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 44 | | (1) | | 43 | | — | |
Dividends paid | — | | — | | — | | (412) | | — | | — | | (412) | | (2) | |
Acquisition of treasury stock | — | | (19) | | — | | — | | — | | — | | (19) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | — | | 3 | | (3) | | — | | — | | — | | — | | — | |
Share-based compensation expense | — | | — | | 21 | | — | | — | | — | | 21 | | — | |
Other changes | — | | — | | 4 | | — | | — | | — | | 4 | | — | |
Balance June 30, 2022 | 25 | | (121) | | 1,456 | | 6,751 | | (2,323) | | 6 | | 5,794 | | 49 | |
Net income (loss) | — | | — | | — | | 556 | | — | | (2) | | 554 | | 5 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 59 | | — | | 59 | | — | |
Dividends paid | — | | — | | — | | — | | — | | — | | — | | (1) | |
Acquisition of treasury stock | — | | (76) | | — | | — | | — | | — | | (76) | | — | |
Common shares issued from treasury stock and capital increase for share-based compensation | — | | 4 | | (4) | | — | | — | | — | | — | | — | |
Share-based compensation expense | — | | — | | 23 | | — | | — | | — | | 23 | | — | |
Other changes | — | | — | | 4 | | — | | — | | (1) | | 3 | | (1) | |
Balance September 30, 2022 | $ | 25 | | $ | (193) | | $ | 1,479 | | $ | 7,307 | | $ | (2,264) | | $ | 3 | | $ | 6,357 | | $ | 52 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | Treasury Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total | | Redeemable Noncontrolling Interest |
| (in millions) |
Balance, January 1, 2021 | $ | 25 | | | $ | (109) | | | $ | 4,388 | | | $ | 3,279 | | | $ | (2,676) | | | $ | 82 | | | $ | 4,989 | | | $ | 40 | |
Net income | — | | | — | | | — | | | 408 | | | — | | | 15 | | | 423 | | | 2 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | 38 | | | 2 | | | 40 | | | — | |
Dividends paid | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | |
Common shares issued from treasury stock and capital increase for share-based compensation | — | | | 4 | | | (4) | | | — | | | — | | | — | | | — | | | — | |
Share-based compensation expense | — | | | — | | | 15 | | | — | | | — | | | — | | | 15 | | | — | |
Other changes | — | | | — | | | (2) | | | — | | | — | | | — | | | (2) | | | — | |
Balance, March 31, 2021 | $ | 25 | | | $ | (105) | | | $ | 4,397 | | | $ | 3,687 | | | $ | (2,638) | | | $ | 99 | | | $ | 5,465 | | | $ | 41 | |
Net income | — | | | — | | | — | | | 690 | | | — | | | 5 | | | 695 | | | 4 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | 38 | | | — | | | 38 | | | — | |
Dividends paid | — | | | — | | | — | | | (180) | | | — | | | (1) | | | (181) | | | (1) | |
Share-based compensation expense | — | | | — | | | 15 | | | — | | | — | | | — | | | 15 | | | — | |
Other changes | — | | | — | | | (1) | | | — | | | — | | | (1) | | | (2) | | | — | |
Balance, June 30, 2021 | $ | 25 | | | $ | (105) | | | $ | 4,411 | | | $ | 4,197 | | | $ | (2,600) | | | $ | 102 | | | $ | 6,030 | | | $ | 44 | |
Net income (loss) | — | | | — | | | — | | | 323 | | | — | | | 2 | | | 325 | | | 4 | |
Other comprehensive income (loss), net of tax | — | | | — | | | — | | | — | | | (28) | | | 1 | | | (27) | | | — | |
Dividends paid | — | | | — | | | — | | | — | | | — | | | (90) | | | (90) | | | (1) | |
Share-based compensation expense | — | | | — | | | 16 | | | — | | | — | | | — | | | 16 | | | — | |
Other changes | — | | | — | | | — | | | (6) | | | — | | | (3) | | | (9) | | | — | |
Balance, September 30, 2021 | $ | 25 | | | $ | (105) | | | $ | 4,427 | | | $ | 4,514 | | | $ | (2,628) | | | $ | 12 | | | $ | 6,245 | | | $ | 47 | |
See accompanying notes to the condensed consolidated financial statementsstatements.
CNH INDUSTRIAL N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in and under the laws of the Netherlands. CNH Industrial has its corporate seat in Amsterdam, the Netherlands, and its principal office in London,Basildon, England, United Kingdom. The Company was formed on September 29, 2013 as a result of the business combination transaction between Fiat Industrial S.p.A. (“Fiat Industrial”) and its majority owned subsidiary CNH Global N.V. (“CNH Global”). Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial”, "CNH" and the “Company” refer to CNH Industrial and its consolidated subsidiaries.
The condensed consolidated financial statements of CNH Industrial N.V. and its consolidated subsidiaries have been voluntarily prepared by the Company without audit. Although prepared on a voluntary basis, the condensed consolidated financial statements included in the report comply in all material respects with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) governing interim financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting only of normal recurring adjustments, have been reflected in these condensed consolidated financial statements. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. These interim financial statements should be read in conjunction with the financial statements and the notes thereto appearing in the Company’s annual report on Form 20-F10-K for the year ended December 31, 2021.2022. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related accompanying notes and disclosures. Significant uncertainties, including rising inflation, and geopolitical instability and the war in the Ukraineevents may impact the Company's business, which may cause actual results to differ materially from the estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with goodwill, indefinite life intangibles, definite life intangibles, long-lived impairment tests, determination of discount rates and other assumptions for pension and other post-retirement benefit expense and income taxes. Changes in estimates are recorded in results of operations in the period during which the events or circumstances giving rise to such changes occur.
Certain financial information in this report has been presented by geographic area. Beginning January 1, 2022, our geographicalregion. Our geographic regions are: (1) North America; (2) Europe, Middle East and Africa;Africa ("EMEA"); (3) South America and (4) Asia Pacific. Prior amounts have been conformed to these regions. The geographic designations have the following meanings:
•North America: United States, Canada and Mexico;
•Europe, Middle East and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Turkey, Uzbekistan, Pakistan, the African continent, and the Middle East;
•South America: Central and South America, and the Caribbean Islands; and
•Asia Pacific: Continental Asia (including the IndianIndia subcontinent), Indonesia and OceaniaOceania.
Discontinued Operations
Until December 31, 2021, CNH Industrial N.V. owned and controlled the Commercial and Specialty Vehicles business, the Powertrain business, and the related Financial Services business (together the “Iveco Group Business” or the “On-Highway Business”), as well as the Agriculture business, the Construction business, and the related Financial Services business (collectively, the “Off-Highway Business”). Effective January 1, 2022, the Iveco Group Business was separated from CNH Industrial N.V. by way of a demerger under Dutch law (the "Demerger") to Iveco Group N.V. (the "Iveco Group"), and the Iveco Group became a public listed company independent from CNH Industrial with its common shares trading on the Euronext Milan, a regulated market organized and managed by Borsa Italiana S.p.A. In connection with the Demerger, shares of Iveco Group N.V. were distributed to shareholders in CNH Industrial N.V. on a pro rata basis. The On-Highway Business' financial results for the periods prior to the Demerger have been reflected in our Condensed Consolidated Statement of Operations, retrospectively, as discontinued operations. Additionally, the related assets and liabilities associated with the On-Highway Business are classified as discontinued operations within Assets Held for Distribution and Liabilities Held for Distribution in the prior year of the Condensed Consolidated Balance Sheet. Pursuant to the terms of the deeds of demerger entered into between CNH Industrial N.V. and Iveco Group N.V. on January 1, 2022, assets related to the On-Highway Business were transferred to, and liabilities related to the On-Highway Business were retained or assumed by, Iveco Group N.V.
In order to present the financial effects of a Discontinued Operation, revenues and expenses arising from intercompany transactions were eliminated. Eliminations from transactions between Continuing and Discontinued Operations are allocated in full to Discontinued Operations. However, no profit or loss is recognized for intercompany transactions within the Condensed Consolidated Statement of Operations. The amounts of income statement items included in Discontinued Operations is detailed in the following sections.
Intercompany transactions between Continuing and Discontinued Operations have been eliminated in the consolidated statement of financial position. The net balance between Assets held for distribution and Liabilities held for distribution represents the net equity of the Discontinued Operations. This amount corresponds to the reduction in the total equity of CNH Industrial due to the Demerger that occurred on January 1, 2022.
All cash flows from Discontinued Operations are reported in the appropriate items for operating activities, investing activities and financing activities in the Statement of Cash Flows. The cash flows represent those arising from transactions with third parties.
The following table presents the assets and liabilities of the Iveco Group Business classified as Assets Held for Distribution and Liabilities Held for Distribution:
| | | | | | | | |
| | December 31, 2021 |
| (in millions) |
ASSETS HELD FOR DISTRIBUTION | | |
Cash and cash equivalents | | $ | 961 | |
Restricted cash | | 55 | |
Trade receivables, net | | 165 | |
Financing receivables, net | | 3,284 | |
Inventories, net | | 3,005 | |
Property, plant and equipment, net | | 3,221 | |
Investments in unconsolidated subsidiaries and affiliates | | 613 | |
Equipment under operating leases | | 66 | |
Goodwill, net | | 80 | |
Other intangible assets, net | | 141 | |
Deferred tax assets | | 1,059 | |
Other assets | | 896 | |
Total Assets Held for Distribution | | $ | 13,546 | |
| | |
LIABILITIES HELD FOR DISTRIBUTION | | |
Debt | | 2,343 | |
Trade payables | | 3,366 | |
Deferred tax liabilities | | 14 | |
Pension, postretirement and other postemployment benefits | | 560 | |
Other liabilities | | 5,609 | |
Total Liabilities Held for Distribution | | $ | 11,892 | |
Details of Statement of Operations line items included in Discontinued Operations, after the eliminations, for three and nine months ended September 30, 2021 are as follows:
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2021 |
| | (in millions) |
Revenues | | | | |
Net sales | | $ | 3,423 | | | $ | 10,955 | |
Finance, interest and other income | | 44 | | | 136 | |
Total Revenues | | $ | 3,467 | | | $ | 11,091 | |
Costs and Expenses | | | | |
Cost of goods sold | | 3,005 | | | 9,464 | |
Selling, general and administrative expenses | | 211 | | | 699 | |
Research and development expenses | | 133 | | | 429 | |
Restructuring expenses | | 7 | | | 11 | |
Interest expense | | 35 | | | 92 | |
Other, net | | 228 | | | 228 | |
Total Costs and Expenses | | $ | 3,619 | | | $ | 10,923 | |
Income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates | | (152) | | | 168 | |
Income tax (expense) benefit | | — | | | (77) | |
Equity in income of unconsolidated subsidiaries and affiliates | | 21 | | | 25 | |
Net Income (loss) from discontinued operations | | $ | (131) | | | $ | 116 | |
Cash flows from Discontinued Operations from the nine months ended September 30, 2021 are as follows:
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2021 |
| (in millions) |
Operating activities: | | |
Net income (loss) of discontinued operations | | $ | 116 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | |
Depreciation and amortization expense, net of depreciation and amortization of assets under operating leases and assets sold under buy-back commitments | | 233 | |
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments | | 223 | |
Loss on disposal of assets | | (43) | |
| | |
Undistributed income of unconsolidated subsidiaries | | (5) | |
Other non-cash items | | 144 | |
Changes in operating assets and liabilities: | | |
Provisions | | 108 | |
Deferred income taxes | | (2) | |
Trade and financing receivables related to sales, net | | 450 | |
Inventories, net | | (639) | |
Trade payables | | (204) | |
Other assets and liabilities | | 37 | |
Cash flow from operating activities of discontinued operation | | $ | 418 | |
Investing activities: | | |
Additions to retail receivables | | (24) | |
Collections of retail receivables | | 38 | |
Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments | | 1 | |
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments | | (167) | |
Expenditures for assets under operating leases and assets sold under buy-back commitments | | (536) | |
Other | | 822 | |
Cash flow provided by (used in) investing activities of discontinued operation | | $ | 134 | |
Financing activities: | | |
Proceeds from long-term debt | | 2,409 | |
Payments of long-term debt | | (2,906) | |
Net decrease in other financial liabilities | | 47 | |
Dividends paid | | — | |
Cash flow from financing activities of discontinued operation | | $ | (450) | |
Business Combinations
On November 30, 2021,March 13, 2023, CNH Industrial acquired Raven Industries, Inc.purchased Augmenta Holding SAS ("Raven"Augmenta"). Raven included three business divisions: Applied Technology, Engineered FilmsThe Company acquired the remaining 89.5% of Augmenta it did not own for cash consideration of approximately $79 million and Aerostar. The acquisitiona deferred payment of Raven has been accounted for as a business combination using the acquisition method of accounting.$10 million. At DecemberMarch 31, 2021,2023, CNH Industrial recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date, including $1.3 billion$76 million and $0.5 billion$35 million in preliminary goodwill and intangible assets, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. Applied Technology results for2023. Thus, goodwill associated with the three and nine months ended September 30, 2022 are includedacquisition is subject to adjustment during the measurement period. Measurement period adjustments were recorded in the Company's Agriculture segment. As of September 30, 2022, the Aerostar Division has been sold and as of June 30, 2022, the Engineered Films division has been sold. During the second and third quarter, we recordedquarters of 2023 reducing goodwill by $14 million primarily offset by increases in intangible assets as a result of updates of certain immaterial measurement period adjustments as we further refined certain valuations and recorded the sale of the Engineered Films and Aerostar Division.valuations. Pro forma results of operations have not been presented because the effects of the Augmenta acquisition were not material to the Company’s consolidated results of operations. Additionally, Augmenta's post-acquisition results were not material.
On December 30, 2021,March 15, 2023, CNH Industrial completed its previously announced purchaseacquired a controlling interest in Bennamann LTD ("Bennamann") (ownership interest of 90% capital stock50.0085%) by purchasing an additional 34.4% interest through cash consideration of Sampierana S.p.A. ("Sampierana").approximately $51 million. At DecemberMarch 31, 2021,2023, CNH Industrial had recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date, including approximately $51$118 million and $46 million in preliminary goodwill.goodwill and intangible assets, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. The results of Sampierana are included in2023. Thus, goodwill associated with the acquisition is subject to adjustment during the measurement period.
Company’s Construction segment. During the third quarter, we recorded certain immaterial measurementMeasurement period adjustments were made in the second and third quarters of 2023 reducing goodwill by $3 million, primarily offset by increases in intangible assets as we further refineda result of updates of certain valuations.
On May 16, 2022, CNH Industrial acquired Specialty Enterprises LLC, a manufacturer of agricultural spray booms and sprayer boom accessories. Thethe valuations. Pro forma results of Specialty Enterprises will be included inoperations have not been presented because the effects of the Bennamann acquisition were not material to the Company’s Agriculture segment.
consolidated results of operations. Additionally, Bennamann's post-acquisition results were not material.
2. NEW ACCOUNTING PRONOUNCEMENTS
Adopted in 2022
None
Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by Reference Rate Reform if certain criteria are met. ASU 2020-04 can be adopted beginning as of March 12, 2020 through December 31, 2022 and may be applied as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company has not adopted ASU 2020-04 as of September 30, 2022. ASU 2020-04 is not expected to have a significant impact on the Company's consolidated financial statements.2023
Revenue Contract Assets and Liabilities Acquired in a Business Combination
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) as applied by the acquiree to determine what to record for the acquired revenue contract assets and liabilities instead of at fair value on the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluatingadopted ASU 2021-08 and applied the timing ofguidance within ASU 2021-08 on business combinations beginning January 1, 2023. The adoption and itsdid not have a material impact toon our consolidated financial statements.
Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit LossesLosses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on vintage disclosures to require disclosure of current-periodcurrent period gross write-offs by year of origination. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition. The amendments related to disclosures should be adopted prospectively. The Company adopted ASU 2022-02 and applied the guidance within ASU 2022-02 to its consolidated financial statements and disclosures prospectively beginning January 1, 2023. The adoption did not have a material impact on the Company's consolidated financial statements and note disclosures.
Supplier Finance Programs Disclosures
In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations ("ASU 2022-04"). ASU 2022-04 requires the buyer in a supplier finance program to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a roll forward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. ASU 2022-04 is currently evaluatingeffective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the impactdisclosure of adoptionroll forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 and applied the guidance within ASU 2022-04 to its disclosures beginning January 1, 2023. As these amendments relate to disclosures only, there are no impacts to the Company’s consolidated financial statements.
Under the supply chain finance programs, administered by a third party, our suppliers are given the opportunity to sell receivables from us to participating financial institutions at their sole discretion. Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.
As of September 30, 2023 and December 31, 2022, $193 million and $189 million of obligations remain outstanding that we have confirmed as valid to the administrators of the supply chain finance programs. These balances are included within “Accounts payable” in our consolidated financial statements.balance sheets and are reflected as cash flow from operating activities in our consolidated statements of cash flows when settled.
There are other new accounting pronouncements issued byReference Rate Reform
In March 2020, the FASB that we willissued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by Reference Rate Reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (ASU 2022-06"). ASU 2022-06 extended the sunset date of ASC Topic 848 from December 31, 2022 to December 31, 2024. The Company elected to adopt but we doASU 2020-04 and ASU
2022-06 in the second quarter of 2023. The Company renegotiated its contract terms on its interest rate derivatives by changing the floating interest rate swap from LIBOR to overnight SOFR. The Company elected to make the change using the optional expedients under ASC 848, which allows the change in critical terms without de-designation and results in no change to the cumulative basis adjustment reflected in earnings. The elections did not believe the adoption of any of these accounting pronouncements will have a material impact on our consolidated financial statements.statements for the nine months ended September 30, 2023.
Leases between entities under common control
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"). ASU 2023-01 requires that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset. Additionally, the leasehold improvements are subject to the impairment guidance in Topic 360: Property, Plant and Equipment. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact, if any, of adoption to our consolidated financial statements.
Disclosure improvements
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification (“ASC”). These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not anticipate that the ASU will have a significant effect on its financial statements and related disclosures.
3. REVENUE
The following table summarizes revenues for the three and nine months ended September 30, 2023 and 2022 and 2021:(in millions of dollars):
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 |
| (in millions) |
Agriculture | $ | 4,501 | | | $ | 3,563 | |
Construction | 895 | | | 773 | |
Eliminations and Other | — | | | — | |
Total Industrial Activities | $ | 5,396 | | | $ | 4,336 | |
Financial Services | 482 | | | 405 | |
Eliminations and Other | 3 | | | 5 | |
Total Revenues | $ | 5,881 | | | $ | 4,746 | |
| | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Agriculture | Agriculture | $ | 12,600 | | | $ | 10,571 | | Agriculture | | $ | 4,384 | | | $ | 4,501 | | | $ | 13,201 | | | $ | 12,600 | |
Construction | Construction | 2,589 | | | 2,237 | | Construction | | 948 | | | 895 | | | 2,861 | | | 2,589 | |
Eliminations and Other | — | | | — | | |
Total Industrial Activities | Total Industrial Activities | $ | 15,189 | | | $ | 12,808 | | Total Industrial Activities | | 5,332 | | | 5,396 | | | 16,062 | | | 15,189 | |
Financial Services | Financial Services | 1,419 | | | 1,194 | | Financial Services | | 653 | | | 482 | | | 1,805 | | | 1,419 | |
Eliminations and Other | — | | | 14 | | |
Eliminations and other | | Eliminations and other | | 1 | | | 3 | | | 28 | | | — | |
Total Revenues | Total Revenues | $ | 16,608 | | | $ | 14,016 | | Total Revenues | | $ | 5,986 | | | $ | 5,881 | | | $ | 17,895 | | | $ | 16,608 | |
The following table disaggregates revenues by major source for the three and nine months ended September 30, 2023 and 2022 and 2021:(in millions of dollars):
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 |
| (in millions) |
Revenues from: | | | |
Sales of goods | $ | 5,388 | | | $ | 4,331 | |
Rendering of services and other revenues | 8 | | | 5 | |
| | | |
Revenues from sales of goods and services | 5,396 | | | 4,336 | |
Finance and interest income | 303 | | | 243 | |
Rents and other income on operating lease | 182 | | | 167 | |
Finance, interest and other income | 485 | | | 410 | |
Total Revenues | $ | 5,881 | | | $ | 4,746 | |
| | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Revenues from: | Revenues from: | | Revenues from: | | | | | | | | |
Sales of goods | Sales of goods | $ | 15,166 | | | $ | 12,794 | | Sales of goods | | $ | 5,322 | | | $ | 5,388 | | | $ | 16,031 | | | $ | 15,166 | |
Rendering of services and other revenues | Rendering of services and other revenues | 23 | | | 14 | | Rendering of services and other revenues | | 10 | | | 8 | | | 31 | | | 23 | |
| Revenues from sales of goods and services | Revenues from sales of goods and services | 15,189 | | | 12,808 | | Revenues from sales of goods and services | | 5,332 | | | 5,396 | | | 16,062 | | | 15,189 | |
Finance and interest income | Finance and interest income | 815 | | | 688 | | Finance and interest income | | 491 | | | 303 | | | 1,342 | | | 815 | |
Rents and other income on operating lease | Rents and other income on operating lease | 604 | | | 520 | | Rents and other income on operating lease | | 163 | | | 182 | | | 491 | | | 604 | |
Finance, interest and other income | Finance, interest and other income | 1,419 | | | 1,208 | | Finance, interest and other income | | 654 | | | 485 | | | 1,833 | | | 1,419 | |
Total Revenues | Total Revenues | $ | 16,608 | | | $ | 14,016 | | Total Revenues | | $ | 5,986 | | | $ | 5,881 | | | $ | 17,895 | | | $ | 16,608 | |
Contract liabilities recorded in Other liabilities were $26 million and $20 million at September 30, 2022 and December 31, 2021, respectively. Contract liabilities primarily relate to extended warranties/maintenance and repair contracts.
At September 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $23 million ($15 million as of December 31, 2021). The Company expects to recognize revenue on approximately 30% and 89% of the remaining performance obligations over the next 12 and 36 months, respectively (approximately 30% and 89% as of December 31, 2021), with the remaining recognized thereafter.
4. VARIABLE INTEREST ENTITIES
The Company consolidates various securitization trusts and facilities that have been determined to be variable interest entities (“VIEs”) and of which the Company is a primary beneficiary. The Company has both the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. For further information regarding VIEs, please see “Note 9: Receivables.”
The following table presents certain assets and liabilities of consolidated VIEs, which are included in the condensed consolidated balance sheets included in this report. The assets in the table below include only those assets that can be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third partythird-party liabilities of the consolidated VIEs for which creditors do not have recourse to the general credit of the Company.Company (in millions of dollars).
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (in millions) |
Restricted cash | $ | 649 | | | $ | 736 | |
Financing receivables | 9,548 | | | 8,838 | |
Total Assets | $ | 10,197 | | | $ | 9,574 | |
Debt | $ | 9,081 | | | $ | 8,528 | |
Total Liabilities | $ | 9,081 | | | $ | 8,528 | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Restricted cash | $ | 556 | | | $ | 595 | |
Financing receivables | 9,344 | | | 8,808 | |
Total Assets | $ | 9,900 | | | $ | 9,403 | |
Debt | $ | 8,930 | | | $ | 8,485 | |
Total Liabilities | $ | 8,930 | | | $ | 8,485 | |
5. EARNINGS PER SHARE
The Company’s basic earnings per share (“EPS”) is computed by dividing net income by the weighted-averageweighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock units and performance stock units are considered dilutive securities.
A reconciliation of basic and diluted earnings per share is as follows (in millions of dollars and shares, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net income attributable to CNH Industrial | $ | 556 | | | $ | 323 | | | $ | 1,437 | | | $ | 1,421 | |
Net income (loss) attributable to CNH Industrial from continuing operations | $ | 556 | | | $ | 457 | | | $ | 1,437 | | | $ | 1,330 | |
Net income (loss) attributable to CNH Industrial from discontinued operations | $ | — | | | $ | (134) | | | $ | — | | | $ | 91 | |
Basic earnings (loss) per share attributable to common shareholders: | | | | | | | |
Weighted average common shares outstanding—basic (in millions) | 1,350 | | | 1,354 | | | 1,354 | | | 1,354 | |
Continuing operations | $ | 0.41 | | | $ | 0.34 | | | $ | 1.06 | | | $ | 0.98 | |
Discontinued operations | $ | — | | | $ | (0.10) | | | $ | — | | | $ | 0.07 | |
Basic earnings per share attributable to CNH Industrial N.V. | $ | 0.41 | | | $ | 0.24 | | | $ | 1.06 | | | $ | 1.05 | |
Diluted earnings (loss) per share attributable to common shareholders | | | | | | | |
Weighted average common shares outstanding—basic (in millions) | 1,350 | | | 1,354 | | | 1,354 | | | 1,354 | |
Stock compensation plans (1) (in millions) | 5 | | | 7 | | | 5 | | | 6 | |
Weighted average common shares outstanding—diluted (in millions) | 1,355 | | | 1,361 | | | 1,359 | | | 1,360 | |
Continuing operations | $ | 0.41 | | | $ | 0.34 | | | $ | 1.06 | | | $ | 0.98 | |
Discontinued operations | $ | — | | | $ | (0.10) | | | $ | — | | | $ | 0.06 | |
Diluted earnings per share attributable to CNH Industrial N.V. | $ | 0.41 | | | $ | 0.24 | | | $ | 1.06 | | | $ | 1.04 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Basic EPS attributable to common shareholders | | | | | | | |
Net income (loss) attributable to CNH Industrial | $ | 567 | | | $ | 556 | | | $ | 1,755 | | | $ | 1,437 | |
Weighted average common shares outstanding—basic | 1,332 | | | 1,350 | | | 1,337 | | | 1,354 | |
Basic EPS attributable to CNH Industrial N.V. | $ | 0.43 | | | $ | 0.41 | | | $ | 1.31 | | | $ | 1.06 | |
Diluted EPS attributable to common shareholders | | | | | | | |
Weighted average common shares outstanding—basic | 1,332 | | | 1,350 | | | 1,337 | | | 1,354 | |
Stock compensation plans (1) | 19 | | | 5 | | | 18 | | | 5 | |
Weighted average common shares outstanding—diluted | 1,351 | | | 1,355 | | | 1,355 | | | 1,359 | |
Diluted EPS attributable to CNH Industrial N.V. | $ | 0.42 | | | $ | 0.41 | | | $ | 1.30 | | | $ | 1.06 | |
(1) For the three and nine months ended September 30, 2023, no shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact. For the three and nine months ended September 30, 2022, 4.7 million and 2.0 million shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact. For the three and nine months ended September 30, 2021, 131,000 and 252,000 shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact.
6. EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT BENEFITS
The following table summarizes the components of net periodic benefit cost of CNH Industrial’s defined benefit pension plans and postretirement health and life insurance plans for the three and nine months ended September 30, 2023 and 2022 and 2021:(in millions of dollars):
| | | Pension | | Healthcare | | Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Three Months Ended September 30, | | Three Months Ended September 30, | | Pension | | Healthcare | | Other |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | Three Months Ended September 30, | | Three Months Ended September 30, | | Three Months Ended September 30, |
| | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Service cost | Service cost | $ | 2 | | | $ | 3 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 2 | | Service cost | $ | 3 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | 2 | | | $ | 1 | |
Interest cost | Interest cost | 6 | | | 5 | | | 2 | | | 1 | | | 1 | | | — | | Interest cost | 14 | | | 6 | | | 3 | | | 2 | | | 1 | | | 1 | |
Expected return on assets | Expected return on assets | (11) | | | (13) | | | (1) | | | (2) | | | — | | | — | | Expected return on assets | (12) | | | (11) | | | (2) | | | (1) | | | — | | | — | |
Amortization of: | Amortization of: | | Amortization of: | |
Prior service credit | Prior service credit | — | | | — | | | (31) | | | (34) | | | — | | | — | | Prior service credit | — | | | — | | | (9) | | | (31) | | | — | | | — | |
Actuarial loss | 4 | | | 6 | | | 1 | | | 1 | | | — | | | 1 | | |
Actuarial loss (gain) | | Actuarial loss (gain) | 4 | | | 4 | | | — | | | 1 | | | (1) | | | — | |
Net periodic benefit cost | Net periodic benefit cost | $ | 1 | | | $ | 1 | | | $ | (28) | | | $ | (33) | | | $ | 2 | | | $ | 3 | | Net periodic benefit cost | $ | 9 | | | $ | 1 | | | $ | (7) | | | $ | (28) | | | $ | 2 | | | $ | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension | | Healthcare | | Other |
| Nine Months Ended September 30, | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) |
Service cost | $ | 8 | | | $ | 10 | | | $ | 3 | | | $ | 3 | | | $ | 4 | | | $ | 5 | |
Interest cost | 20 | | | 14 | | | 5 | | | 4 | | | 1 | | | — | |
Expected return on assets | (35) | | | (40) | | | (4) | | | (5) | | | — | | | — | |
Amortization of: | | | | | | | | | | | |
Prior service credit | — | | | — | | | (94) | | | (102) | | | — | | | — | |
Actuarial loss | 14 | | | 19 | | | 2 | | | 2 | | | — | | | 2 | |
Net periodic benefit cost | $ | 7 | | | $ | 3 | | | $ | (88) | | | $ | (98) | | | $ | 5 | | | $ | 7 | |
Net amounts recognized in the consolidated balance sheet as of December 31, 2021 consisted of:
| | | | | | | | | | | | | | | | | | | | |
| | Pension | | Healthcare | | Other |
| | December 31, 2021 | | December 31, 2021 | | December 31, 2021 |
| (in millions) |
Other assets | | $ | 40 | | | $ | — | | | $ | — | |
Pension, postretirement and other postemployment benefits | | (409) | | | (141) | | | (125) | |
Net liability recognized at end of year | | $ | (369) | | | $ | (141) | | | $ | (125) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension | | Healthcare | | Other |
| Nine Months Ended September 30, | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Service cost | $ | 7 | | | $ | 8 | | | $ | 2 | | | $ | 3 | | | $ | 4 | | | $ | 4 | |
Interest cost | 41 | | | 20 | | | 7 | | | 5 | | | 3 | | | 1 | |
Expected return on assets | (34) | | | (35) | | | (3) | | | (4) | | | — | | | — | |
Amortization of: | | | | | | | | | | | |
Prior service credit | — | | | — | | | (27) | | | (94) | | | — | | | — | |
Actuarial loss (gain) | 13 | | | 14 | | | — | | | 2 | | | (1) | | | — | |
Net periodic benefit cost | $ | 27 | | | $ | 7 | | | $ | (21) | | | $ | (88) | | | $ | 6 | | | $ | 5 | |
On February 20, 2018, CNH Industrial announced that the United States Supreme Court ruled in its favor in Reese vs. CNH Industrial N.V. and CNH Industrial America LLC. The decision allowed CNH Industrial to terminate or modify various retiree healthcare benefits previously provided to certain UAW Union represented Company retirees. On April 16, 2018, CNH Industrial announced its determination to modify the benefits provided to the applicable retirees (“Benefit Modification”) to make them consistent with the benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW. The Benefit Modification resulted in a reduction of the plan liability byof $527 million. This amount will bewas amortized from Other Comprehensive Income ("OCI") to the income statement over approximately 4.5 years, which represents the average service period to attain eligibility conditions for active participants. The amount was completely amortized as of December 31, 2022. For the three and nine months ended September 30, 2022, and 2021, $30 million and $90 million of amortization (“Benefit Modification Amortization”) was recorded as a pre-tax gain in Other, net, respectively.
In 2021, CNH Industrial communicated plan changes for the USU.S. retiree medical plan. The plan changes resulted in a reduction of the plan liability byof $100 million. This amount will be amortized from OCI to the income statement over approximately 4 years, which represents the average service period to attain eligibility conditions for active participants. For the three and nine months ended September 30, 2023 and 2022, $6 million and $18 million of amortization was recorded as a pre-tax gain in Other, net, respectively.
7. INCOME TAXES
The effective tax ratesrate for the three months ended September 30, 2023 and 2022 was 25.8% and 2021 were 26.3% and 15.1%, respectively. The 2023 effective tax ratesrate for the ninethree months ended September 30, 2022 and 2021 were 29.6% and 21.5%, respectively. The 20222023 was lower than the effective tax rate for the three months ended September 30, 2022 was negatively impacted bydue to a lower share of consolidated earnings in higher taxing jurisdictions compared to the increased profits in higher-tax jurisdictions, primarily Brazil. prior year.
The effective tax rate for the nine months ended September 30, 2023 and 2022 was negatively impacted25.2% and 29.6%, respectively. The 2023 effective tax rate was reduced by an increase inthe tax benefits related to the sale of CNH Industrial Russia, although these benefits were partially offset by discrete tax expenses associated with prior periods. The 2022 effective tax rate was increased by pre-tax losses for which deferred tax benefitsassets were not recognized, and the derecognitionde-recognition of certain deferred tax assets, both of which related to Russia. Further,increased charges for unrecognized tax benefits, and a discrete tax charge related toresulting from the sale of Raven’s Engineered Films Division and discrete tax charges associated with unrecognized tax benefits led to a higher effective tax rate for the nine months ended September 30, 2022. The sale of Raven’s Engineered Films Division increased effective tax rate for the nine months ended September 30, 2022 by 170 basis points.division.
As in all financial reporting periods, the Company assessed the realizability of its deferred tax assets, which relate to multiple tax jurisdictions in all regions of the world. During the nine-month period ended September 30, 2023, there were no changes in our assessment of deferred tax asset positions that impacted the Company’s tax rate for the period. During the nine-month period ended September 30, 2022, the Company changed its assessment regarding the recognition of its Russian deferred tax assets and applied a full valuation allowance as of the beginning of the period. In addition, the Company was unable to recognize deferred tax assets associated with the current year pre-tax losses in that jurisdiction. These two items combined increased the Company’s current period effective tax rate for the nine months ended September 30, 2022 by 100 basis point.
The Company operates in many jurisdictions around the world and is routinely subject to income tax audits. As various ongoing audits are concluded, or as the applicable statutes of limitations expire, it is possible the Company’s amount of unrecognized tax benefits
could change during the next twelve months. ThoseWe do not expect changes however, are not expectedto our assessment to have a material impact on the Company’sCompany's results of operations, balance sheet, or cash flows.
The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases by U.S. domestic corporations that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”) on the adjusted financial statement income of U.S. companies and their subsidiaries. The CAMT will be effective beginning in fiscal 2023. We currently do not expect the IRA to have a material adverse impact to the Company’s financial statements.
8. SEGMENT INFORMATION
The operating segments through which the Company manages its operations are based on the internal reporting used by the Company’s Chief Operating Decision Maker (“CODM”) to assess performance and make decisions about resource allocation. The segments are organized based on products and services provided by the Company. CNH Industrial has the following three operating segments:
Agriculture designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, (Quadtrac®), combines, cotton pickers, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements and material handling equipment. Agricultural equipment is sold under the New Holland Agriculture and Case IH brands. Regionally focused brands as well as theinclude: STEYR, for agricultural tractors; Flexi-Coil specializing in tillage and seeding systems; Miller manufacturing application equipment; and Kongskilde providing tillage, seeding and Överum brands in Europehay & forage implements. The Raven brand supports digital agriculture, precision technology and the Miller brand, primarily in North America and Australia.development of autonomous systems.
Construction designs, manufactures and distributes a full line of construction equipment, including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders and compact track loaders. Construction equipment is sold under the CASE Construction Equipment, New Holland Construction and Eurocomach brands.
Financial Services providesoffers retail note and administers retaillease financing to end-use customers for the purchase or lease of new and used agricultural and construction equipment and components sold bythrough CNH Industrial brand dealers. In addition,brands' dealer network, as well as revolving charge account financing and other financial services. Financial Services also provides wholesale financing to CNH Industrial brand dealers. Wholesale financing consists primarily of floor plan financingdealers and allows the dealers to purchase and maintain a representative inventory of products.distributors. Further, Financial Services also provides trade receivables factoring services to CNH Industrial companies. The European operations of CNH Industrial Financial Services are supported by the Iveco Group's Financial Services segment. CNH Industrial Financial Services provides financial services to Iveco Group companies in the North America, South America and Asia Pacific and North America regions.
The activities carried out by the two industrial segments Agriculture and Construction, as well as corporate functions, are collectively referred to as "Industrial Activities""Industrial Activities".
Revenues for each reported segment are those directly generated by or attributable to the segment as a result of its business activities and include revenues from transactions with third parties as well as those deriving from transactions with other segments, recognized at normal market prices. Segment expenses represent expenses deriving from each segment’s business activities both with third parties and other operating segments or which may otherwise be directly attributable to it. Expenses deriving from business activities with other segments are recognized at normal market prices.
With reference to Industrial Activities' segments, the CODM assesses segment performance and makes decisions about resource allocation based upon Adjusted EBIT. The Company believes Adjusted EBIT more fully reflects Industrial Activities segments' inherent profitability. Adjusted EBIT of Industrial Activities is defined as net income (loss) before: Income taxes, Financial Services' results, Industrial Activities’ interest expenses (net), foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. In particular, non-recurring items are specifically disclosed items that management considers to be rare or discrete events that are infrequent in nature and not reflective of on-goingongoing operational activities.
With reference to Financial Services, the CODM assesses the performance of the segment and makes decisions about resource allocation on the basis of net income prepared in accordance with U.S. GAAP.
The following table includes the reconciliation of Adjusted EBIT for Industrial Activities to net income, the most comparable U.S. GAAP financial measure, for the three and nine months ended September 30, 2023 and 2022 and 2021.(in millions of dollars):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | (in millions) | | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Agriculture | Agriculture | | $ | 666 | | | $ | 415 | | | $ | 1,755 | | | $ | 1,396 | | Agriculture | | $ | 672 | | | $ | 666 | | | $ | 2,063 | | | $ | 1,755 | |
Construction | Construction | | 24 | | | 21 | | | 90 | | | 70 | | Construction | | 60 | | | 24 | | | 176 | | | 90 | |
Unallocated items, eliminations and other | Unallocated items, eliminations and other | | (20) | | | (16) | | | (92) | | | (81) | | Unallocated items, eliminations and other | | (75) | | | (20) | | | (205) | | | (92) | |
Total Adjusted EBIT of Industrial Activities | Total Adjusted EBIT of Industrial Activities | | $ | 670 | | | $ | 420 | | | $ | 1,753 | | | $ | 1,385 | | Total Adjusted EBIT of Industrial Activities | | 657 | | | 670 | | | 2,034 | | | 1,753 | |
Financial Services Net Income | | 86 | | | 96 | | | 263 | | | 259 | | |
Financial Services Net income (loss) | | Financial Services Net income (loss) | | 86 | | | 86 | | | 258 | | | 263 | |
Financial Services Income Taxes | Financial Services Income Taxes | | 32 | | | 31 | | | 106 | | | 83 | | Financial Services Income Taxes | | 34 | | | 32 | | | 89 | | | 106 | |
Interest expense of Industrial Activities, net of interest income and eliminations | Interest expense of Industrial Activities, net of interest income and eliminations | | (27) | | | (21) | | | (97) | | | (92) | | Interest expense of Industrial Activities, net of interest income and eliminations | | (10) | | | (27) | | | (36) | | | (97) | |
Foreign exchange gains (losses), net of Industrial Activities | Foreign exchange gains (losses), net of Industrial Activities | | (14) | | | 21 | | | (14) | | | 6 | | Foreign exchange gains (losses), net of Industrial Activities | | (21) | | | (14) | | | (27) | | | (14) | |
Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | 35 | | | 33 | | | 112 | | | 102 | | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | — | | | 35 | | | 2 | | | 112 | |
Restructuring expense of Industrial Activities | Restructuring expense of Industrial Activities | | (11) | | | (15) | | | (19) | | | (21) | | Restructuring expense of Industrial Activities | | (5) | | | (11) | | | (8) | | | (19) | |
Other discrete items of Industrial Activities(2) | | (20) | | | (26) | | | (78) | | | (38) | | |
Other discrete items(2) | | Other discrete items(2) | | — | | | (20) | | | (10) | | | (78) | |
Income (loss) before taxes | Income (loss) before taxes | | $ | 751 | | | $ | 539 | | | $ | 2,026 | | | $ | 1,684 | | Income (loss) before taxes | | 741 | | | 751 | | | 2,302 | | | 2,026 | |
Income tax (expense) benefit | Income tax (expense) benefit | | (192) | | | (79) | | | (579) | | | (347) | | Income tax (expense) benefit | | (171) | | | (192) | | | (536) | | | (579) | |
Net income (loss) of discontinued operations | | — | | | (131) | | | — | | | 116 | | |
Net income (loss) | Net income (loss) | | $ | 559 | | | $ | 329 | | | $ | 1,447 | | | $ | 1,453 | | Net income (loss) | | $ | 570 | | | $ | 559 | | | $ | 1,766 | | | $ | 1,447 | |
(1) ThisIn the three and nine months ended September 30, 2023 and 2022, this item includes athe pre-tax gain of $30$6 million and $90$18 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S. In the three and nine months ended September 30, 2022, this item includes the pre-tax gain of $30 million and 2021, respectively,$90 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 modification of a healthcare plan in the U.S. and a pre-tax gain of $6 million and $18 million in the three and nine months ended September 30, 2022, respectively, as a result of the amortization over 4 years of the $101 million positive impact from 2021 modifications of a healthcare plan in the U.S.
(2) In the three months ended September 30, 2023 this item did not include any discrete items, while the three months ended September 30, 2022 included $14 million of costs related to the Raven segments held for sale and $7 million of spin off costs related to the Iveco Group business. The nine months ended September 30, 2023 included a loss of $23 million on the sale of CNH Industrial Russia and CNH Capital Russia businesses, partially offset by a gain of $13 million for the fair value remeasurement of Augmenta and Bennamann. The nine months ended September 30, 2022 this item included $7 million and $13 million of separation costs incurred in connection with our spin-off of the Iveco Group Business and $14 million and $22 million of loss from the activity of the two Raven businesses held for sale, including the loss on the sale of the Engineered Films and Aerostar Divisions. In the nine month ended September 30, 2022, this item also included $43 million of asset write-downs. Inwrite-downs related to the three and nine months ended September 30, 2021, this item includes $24 million and $32Industrial Activities of our Russian Operations, $22 million of separation costs incurred in connection with our spin-offrelated to the Raven segments held for sale, and $13 million of spin off costs related to the Iveco Group Business.
business.
9. RECEIVABLES
Financing Receivables, net
A summary of financing receivables as of September 30, 20222023 and December 31, 20212022 is as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Retail | Retail | $ | 10,538 | | | $ | 9,955 | | Retail | $ | 12,826 | | | $ | 11,446 | |
Wholesale | Wholesale | 6,335 | | | 5,373 | | Wholesale | 9,379 | | | 7,785 | |
Other | Other | 28 | | | 48 | | Other | 35 | | | 29 | |
Total | Total | $ | 16,901 | | | $ | 15,376 | | Total | $ | 22,240 | | | $ | 19,260 | |
CNH Industrial provides and administers retail note and lease financing to end-use customers for the purchase of new and used equipment and components sold through its dealer network, as well as revolving charge account financing. The terms of retail notes and finance leases generally range from two to six years, and interest rates vary depending on the prevailing market interest rates and certain incentive programs offered on behalf of and sustained by Industrial Activities. Revolving charge accounts are generally accompanied by higher interest rates than the Company's other retail financing products, require minimum monthly payments and do not have pre-determined maturity dates.
Wholesale receivables arise primarily from dealer floorplan financing, and to a lesser extent, the financing of dealer operations. Under the standard terms of the wholesale receivable agreements, these receivables typically have "interest-
free" periods of up to twelve months and stated original maturities of up to twenty-four months, with repayment accelerated upon the sale of the underlying equipment by the dealer. Financial Services is compensated by Industrial Activities for providing the "interest-free" period based on market interest rates. After the expiration of any "interest-free" period, interest is charged to dealers on outstanding balances until CNH Industrial receives payment in full. The "interest-free" periods are determined based on the type of equipment sold and the time of year of the sale. The Company evaluates and assesses dealers on an ongoing basis as to their creditworthiness. CNH Industrial may be obligated to repurchase the dealer's equipment upon cancellation or termination of the dealer's contract for such causes as change in ownership, closeout of the business, or default. There were no significant losses in the three and nine months ended September 30, 2023 and 2022 relating to the termination of dealer contracts.
Transfers of Financial Assets
As part of its overall funding strategy, CNH Industrial periodically transfers certain receivables into special purpose entities (“SPE”) as part of its asset backed securitization ("ABS") programs or into factoring transactions.
SPEs utilized in the securitization programs differ from other entities included in the Company's consolidated financial statements because the assets they hold are legally isolated from the Company's assets. For bankruptcy analysis purposes, the Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs' creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of the SPEs' investors. The Company's interests in the SPEs' receivables are subordinate to the interests of third-party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay the Company's creditors until all obligations of the SPE have been fulfilled or the receivables are removed from the SPE.
Certain securitization trusts are also VIEs and consequently, the VIEs are consolidated since the Company has both the power to direct the activities that most significantly impact the VIEs' economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.
The Company may retain all or a portion of the subordinated interests in the SPEs. No recourse provisions exist that allow holders of the asset-backed securities issued by the trusts to put those securities back to the Company, although the Company provides customary representations and warranties that could give rise to an obligation to repurchase from the trusts any receivables for which there is a breach of the representations and warranties. Moreover, the Company does not guarantee any securities issued by the trusts. The trusts have a limited life and generally terminate upon final distribution of amounts owed to investors or upon exercise of a cleanup call option by the Company, in its role as servicer.
Factoring transactions may be either with recourse or without recourse; certain without recourse transfers include deferred payment clauses (i.e., when the payment by the factor of a minor part of the purchase price is dependent on the total amount collected from the receivables), requiring first loss cover, meaning that the transferor takes priority participation in the losses, or requires a significant exposure to the cash flows arising from the transferred receivables to be retained. These types of transactions do not qualify for the derecognition of the assets, since the risks and rewards connected with collection are not substantially transferred and, accordingly, CNH Industrial continued to recognize the receivable transferred by this means in its consolidated statement of financial position and recognizes a financial liability of the same amount under asset-backed financing.
The secured borrowings related to the transferred receivables are obligations that are payable as the receivables are collected. At September 30, 2023 and December 31, 2022, the carrying amount of such restricted assets included in financing receivables are the following (in millions of dollars):
| | | | | | | | | | | |
| Restricted Receivables |
| September 30, 2023 | | December 31, 2022 |
Retail note and finance lease receivables | $ | 7,117 | | | $ | 6,766 | |
Wholesale receivables | 5,953 | | | 4,582 | |
Total | $ | 13,070 | | | $ | 11,348 | |
Allowance for Credit Losses
Allowance for credit losses for the three and nine months ended September 30, 2023 is as follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| Retail | | Wholesale | | Retail | | Wholesale |
Opening Balance | $ | 280 | | | $ | 60 | | | $ | 270 | | | $ | 64 | |
Provision | 31 | | | (3) | | | 67 | | | (6) | |
Charge-offs | (4) | | | (1) | | | (25) | | | (1) | |
Recoveries | — | | | — | | | 1 | | | — | |
Foreign currency translation and other | (6) | | | — | | | (12) | | | (1) | |
Ending Balance | $ | 301 | | | $ | 56 | | | $ | 301 | | | $ | 56 | |
At September 30, 2023, the allowance for credit losses included an increase in reserves due to specific reserve needs primarily in South America, partially offset by a decrease in reserves of $15 million due to the sale of CNH Capital Russia. CNH Industrial will update the macroeconomic factors in future periods as warranted. The provision for credit losses is included in selling, general and administrative expenses.
Allowance for credit losses for the three and nine months ended September 30, 2022 is as follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| Retail | | Wholesale | | Retail | | Wholesale |
Opening Balance | $ | 246 | | | $ | 61 | | | $ | 220 | | | $ | 65 | |
Provision | 15 | | | (3) | | | 41 | | | — | |
Charge-offs, net of recoveries | (4) | | | (1) | | | (13) | | | (6) | |
Foreign currency translation and other | (8) | | | (2) | | | 1 | | | (4) | |
Ending Balance | $ | 249 | | | $ | 55 | | | $ | 249 | | | $ | 55 | |
CNH Industrial assesses and monitors the credit quality of its financing receivables based on whether a receivable is classified as Performingperforming or Non-Performing. Financing receivablesnon-performing. Receivables are considered past due if the required principal and interest payments have not yet been received as of the date such payments were due. Delinquency is reported on financing receivables greater than 30 days past due. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. These receivables are generally more than 90 days past due. Finance income for non-performing receivables is recognized on a cash basis. Accrued interest is charged-off to interest income. Interest income charged-off was not material for the three and nine months ended September 30, 20222023 and 2021.2022. Interest accrual is resumed if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at such time. As the terms for retail financing receivables are greater than one
year, the performing/non-performing information is presented by year of origination for North America, South America and Asia Pacific.
The aging of financing receivables and charge-offs as of September 30, 2023 is as follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 31-60 Days Past Due | | 61-90 Days Past Due | | Total Past Due | | Current | | Total Performing | | Non- Performing | | Total | | Charge-offs |
Retail | | | | | | | | | | | | | | | |
North America | | | | | | | | | | | | | | | |
2023 | | | | | | | | | $ | 2,824 | | | $ | 2 | | | $ | 2,826 | | | $ | — | |
2022 | | | | | | | | | 2,444 | | | 2 | | | 2,446 | | | 8 | |
2021 | | | | | | | | | 1,516 | | | 2 | | | 1,518 | | | 3 | |
2020 | | | | | | | | | 672 | | | 1 | | | 673 | | | 3 | |
2019 | | | | | | | | | 275 | | | 1 | | | 276 | | | 3 | |
Prior to 2019 | | | | | | | | | 118 | | | 1 | | | 119 | | | 2 | |
Total | $ | 38 | | | $ | 9 | | | $ | 47 | | | $ | 7,802 | | | $ | 7,849 | | | $ | 9 | | | $ | 7,858 | | | $ | 19 | |
South America | | | | | | | | | | | | | | | |
2023 | | | | | | | | | $ | 1,572 | | | $ | 4 | | | $ | 1,576 | | | $ | — | |
2022 | | | | | | | | | 934 | | | 34 | | | 968 | | | — | |
2021 | | | | | | | | | 576 | | | 17 | | | 593 | | | 1 | |
2020 | | | | | | | | | 303 | | | 7 | | | 310 | | | 4 | |
2019 | | | | | | | | | 126 | | | 3 | | | 129 | | | — | |
Prior to 2019 | | | | | | | | | 105 | | | 2 | | | 107 | | | 1 | |
Total | $ | 34 | | | $ | 2 | | | $ | 36 | | | $ | 3,580 | | | $ | 3,616 | | | $ | 67 | | | $ | 3,683 | | | $ | 6 | |
Asia Pacific | | | | | | | | | | | | | | | |
2023 | | | | | | | | | $ | 543 | | | $ | 1 | | | $ | 544 | | | $ | — | |
2022 | | | | | | | | | 381 | | | 1 | | | 382 | | | — | |
2021 | | | | | | | | | 216 | | | 2 | | | 218 | | | — | |
2020 | | | | | | | | | 94 | | | 1 | | | 95 | | | — | |
2019 | | | | | | | | | 26 | | | 1 | | | 27 | | | — | |
Prior to 2019 | | | | | | | | | 3 | | | — | | | 3 | | | — | |
Total | $ | 6 | | | $ | 7 | | | $ | 13 | | | $ | 1,250 | | | $ | 1,263 | | | $ | 6 | | | $ | 1,269 | | | $ | — | |
Europe, Middle East, Africa | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | 10 | | | $ | 16 | | | $ | — | |
Total Retail | $ | 78 | | | $ | 18 | | | $ | 96 | | | $ | 12,638 | | | $ | 12,734 | | | $ | 92 | | | $ | 12,826 | | | $ | 25 | |
Wholesale | | | | | | | | | | | | | | | |
North America | $ | — | | | $ | — | | | $ | — | | | $ | 4,825 | | | $ | 4,825 | | | $ | — | | | $ | 4,825 | | | $ | — | |
South America | 1 | | | — | | | 1 | | | 1,366 | | | 1,367 | | | — | | | 1,367 | | | — | |
Asia Pacific | 4 | | | 1 | | | 5 | | | 779 | | | 784 | | | — | | | 784 | | | 1 | |
Europe, Middle East, Africa | 5 | | | — | | | 5 | | | 2,398 | | | 2,403 | | | — | | | 2,403 | | | — | |
Total Wholesale | $ | 10 | | | $ | 1 | | | $ | 11 | | | $ | 9,368 | | | $ | 9,379 | | | $ | — | | | $ | 9,379 | | | $ | 1 | |
The aging of financing receivables as of September 30, 2022 and December 31, 2021 is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| 31-60 Days Past Due | | 61-90 Days Past Due | | Total Past Due | | Current | | Total Performing | | Non- Performing | | Total |
Retail | | | | | | | | | | | | | |
North America | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 2,695 | | | $ | — | | | $ | 2,695 | |
2021 | | | | | | | | | 2,271 | | | — | | | 2,271 | |
2020 | | | | | | | | | 1,125 | | | — | | | 1,125 | |
2019 | | | | | | | | | 550 | | | — | | | 550 | |
2018 | | | | | | | | | 290 | | | — | | | 290 | |
Prior to 2018 | | | | | | | | | 113 | | | — | | | 113 | |
Total | $ | 13 | | | $ | 4 | | | $ | 17 | | | $ | 7,027 | | | $ | 7,044 | | | $ | — | | | $ | 7,044 | |
South America | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 739 | | | $ | 1 | | | $ | 740 | |
2021 | | | | | | | | | 726 | | | 3 | | | 729 | |
2020 | | | | | | | | | 412 | | | 3 | | | 415 | |
2019 | | | | | | | | | 213 | | | 1 | | | 214 | |
2018 | | | | | | | | | 122 | | | 1 | | | 123 | |
Prior to 2018 | | | | | | | | | 94 | | | — | | | 94 | |
Total | $ | 16 | | | $ | — | | | $ | 16 | | | $ | 2,290 | | | $ | 2,306 | | | $ | 9 | | | $ | 2,315 | |
Asia Pacific | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 696 | | | $ | 3 | | | $ | 699 | |
2021 | | | | | | | | | 240 | | | — | | | 240 | |
2020 | | | | | | | | | 131 | | | 1 | | | 132 | |
2019 | | | | | | | | | 55 | | | 1 | | | 56 | |
2018 | | | | | | | | | 27 | | | — | | | 27 | |
Prior to 2018 | | | | | | | | | 4 | | | — | | | 4 | |
Total | $ | 8 | | | $ | 9 | | | $ | 17 | | | $ | 1,136 | | | $ | 1,153 | | | $ | 5 | | | $ | 1,158 | |
Europe, Middle East, Africa | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | 15 | | | $ | 21 | |
Total Retail | $ | 37 | | | $ | 13 | | | $ | 50 | | | $ | 10,459 | | | $ | 10,509 | | | $ | 29 | | | $ | 10,538 | |
Wholesale | | | | | | | | | | | | | |
North America | $ | — | | | $ | — | | | $ | — | | | $ | 2,818 | | | $ | 2,818 | | | $ | — | | | $ | 2,818 | |
South America | — | | | — | | | — | | | 1,052 | | | 1,052 | | | — | | | 1,052 | |
Asia Pacific | 3 | | | 2 | | | 5 | | | 564 | | | 569 | | | 6 | | | 575 | |
Europe, Middle East, Africa | 1 | | | 3 | | | 4 | | | 1,886 | | | 1,890 | | | — | | | 1,890 | |
Total Wholesale | $ | 4 | | | $ | 5 | | | $ | 9 | | | $ | 6,320 | | | $ | 6,329 | | | $ | 6 | | | $ | 6,335 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| 31-60 Days Past Due | | 61-90 Days Past Due | | Total Past Due | | Current | | Total Performing | | Non- Performing | | Total |
Retail | | | | | | | | | | | | | |
North America | | | | | | | | | | | | | |
2021 | | | | | | | | | $ | 3,159 | | | $ | — | | | $ | 3,159 | |
2020 | | | | | | | | | 1,688 | | | 1 | | | 1,689 | |
2019 | | | | | | | | | 901 | | | 1 | | | 902 | |
2018 | | | | | | | | | 531 | | | — | | | 531 | |
2017 | | | | | | | | | 229 | | | — | | | 229 | |
Prior to 2017 | | | | | | | | | 73 | | | — | | | 73 | |
Total | $ | 13 | | | $ | — | | | $ | 13 | | | $ | 6,568 | | | $ | 6,581 | | | $ | 2 | | | $ | 6,583 | |
South America | | | | | | | | | | | | | |
2021 | | | | | | | | | $ | 881 | | | $ | — | | | $ | 881 | |
2020 | | | | | | | | | 524 | | | — | | | 524 | |
2019 | | | | | | | | | 295 | | | — | | | 295 | |
2018 | | | | | | | | | 190 | | | — | | | 190 | |
2017 | | | | | | | | | 105 | | | — | | | 105 | |
Prior to 2017 | | | | | | | | | 72 | | | — | | | 72 | |
Total | $ | 1 | | | $ | — | | | $ | 1 | | | $ | 2,066 | | | $ | 2,067 | | | $ | — | | | $ | 2,067 | |
Asia Pacific | | | | | | | | | | | | | |
2021 | | | | | | | | | $ | 579 | | | $ | — | | | $ | 579 | |
2020 | | | | | | | | | 357 | | | 4 | | | 361 | |
2019 | | | | | | | | | 167 | | | 1 | | | 168 | |
2018 | | | | | | | | | 99 | | | 1 | | | 100 | |
2017 | | | | | | | | | 45 | | | — | | | 45 | |
Prior to 2017 | | | | | | | | | 5 | | | — | | | 5 | |
Total | $ | 10 | | | $ | 8 | | | $ | 18 | | | $ | 1,234 | | | $ | 1,252 | | | $ | 6 | | | $ | 1,258 | |
Europe, Middle East, Africa | $ | 4 | | | $ | — | | | $ | 4 | | | $ | 43 | | | $ | 47 | | | $ | — | | | $ | 47 | |
Total Retail | $ | 28 | | | $ | 8 | | | $ | 36 | | | $ | 9,911 | | | $ | 9,947 | | | $ | 8 | | | $ | 9,955 | |
Wholesale | | | | | | | | | | | | | |
North America | $ | — | | | $ | — | | | $ | — | | | $ | 2,339 | | | $ | 2,339 | | | $ | — | | | $ | 2,339 | |
South America | — | | | — | | | — | | | 633 | | | 633 | | | 22 | | | 655 | |
Asia Pacific | 2 | | | 1 | | | 3 | | | 446 | | | 449 | | | — | | | 449 | |
Europe, Middle East, Africa | 5 | | | 1 | | | 6 | | | 1,924 | | | 1,930 | | | — | | | 1,930 | |
Total Wholesale | $ | 7 | | | $ | 2 | | | $ | 9 | | | $ | 5,342 | | | $ | 5,351 | | | $ | 22 | | | $ | 5,373 | |
Allowance for credit losses (activity) for the three and nine months ended September 30, 2022 is as follows (in millions)millions of dollars):
| | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| Retail | | Wholesale |
Opening Balance | $ | 246 | | | $ | 61 | |
Provision | 15 | | | (3) | |
Charge-offs, net of recoveries | (4) | | | (1) | |
Foreign currency translation and other | (8) | | | (2) | |
Ending Balance | $ | 249 | | | $ | 55 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 31-60 Days Past Due | | 61-90 Days Past Due | | Total Past Due | | Current | | Total Performing | | Non- Performing | | Total |
Retail | | | | | | | | | | | | | |
North America | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 3,558 | | | $ | — | | | $ | 3,558 | |
2021 | | | | | | | | | 2,035 | | | 1 | | | 2,036 | |
2020 | | | | | | | | | 994 | | | — | | | 994 | |
2019 | | | | | | | | | 472 | | | — | | | 472 | |
2018 | | | | | | | | | 225 | | | — | | | 225 | |
Prior to 2018 | | | | | | | | | 65 | | | — | | | 65 | |
Total | $ | 42 | | | $ | 16 | | | $ | 58 | | | $ | 7,291 | | | $ | 7,349 | | | $ | 1 | | | $ | 7,350 | |
South America | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 1,179 | | | $ | 2 | | | $ | 1,181 | |
2021 | | | | | | | | | 725 | | | 3 | | | 728 | |
2020 | | | | | | | | | 408 | | | 2 | | | 410 | |
2019 | | | | | | | | | 207 | | | 1 | | | 208 | |
2018 | | | | | | | | | 116 | | | — | | | 116 | |
Prior to 2018 | | | | | | | | | 95 | | | — | | | 95 | |
Total | $ | 12 | | | $ | — | | | $ | 12 | | | $ | 2,718 | | | $ | 2,730 | | | $ | 8 | | | $ | 2,738 | |
Asia Pacific | | | | | | | | | | | | | |
2022 | | | | | | | | | $ | 601 | | | $ | — | | | $ | 601 | |
2021 | | | | | | | | | 400 | | | 1 | | | 401 | |
2020 | | | | | | | | | 220 | | | 1 | | | 221 | |
2019 | | | | | | | | | 84 | | | — | | | 84 | |
2018 | | | | | | | | | 35 | | | — | | | 35 | |
Prior to 2018 | | | | | | | | | 3 | | | — | | | 3 | |
Total | $ | 8 | | | $ | 8 | | | $ | 16 | | | $ | 1,327 | | | $ | 1,343 | | | $ | 2 | | | $ | 1,345 | |
Europe, Middle East, Africa | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | 11 | | | $ | 13 | |
Total Retail | $ | 62 | | | $ | 24 | | | $ | 86 | | | $ | 11,338 | | | $ | 11,424 | | | $ | 22 | | | $ | 11,446 | |
Wholesale | | | | | | | | | | | | | |
North America | $ | — | | | $ | — | | | $ | — | | | $ | 3,378 | | | $ | 3,378 | | | $ | — | | | $ | 3,378 | |
South America | — | | | — | | | — | | | 1,416 | | | 1,416 | | | — | | | 1,416 | |
Asia Pacific | — | | | — | | | — | | | 494 | | | 494 | | | — | | | 494 | |
Europe, Middle East, Africa | 7 | | | 2 | | | 9 | | | 2,488 | | | 2,497 | | | — | | | 2,497 | |
Total Wholesale | $ | 7 | | | $ | 2 | | | $ | 9 | | | $ | 7,776 | | | $ | 7,785 | | | $ | — | | | $ | 7,785 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Retail | | Wholesale |
Opening Balance | $ | 220 | | | $ | 65 | |
Provision | 41 | | | — | |
Charge-offs, net of recoveries | (13) | | | (6) | |
Foreign currency translation and other | 1 | | | (4) | |
Ending Balance | $ | 249 | | | $ | 55 | |
At September 30, 2022, the allowance for credit losses included an increase in reserves of $16 million for domestic Russian receivables. The Company continues to monitor the situation in Eastern Europe and will update the macroeconomic factors and qualitative factors in future periods, as warranted. The provision for credit losses is included in selling, general, and administrative expenses.
Allowance for credit losses activity for the three and nine months ended September 30, 2021 and for the year ended December 31, 2021 is as follows (in millions):
| | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Retail | | Wholesale |
Opening Balance | $ | 226 | | | $ | 73 | |
Provision | 10 | | | (1) | |
Charge-offs, net of recoveries | (10) | | | 1 | |
Foreign currency translation and other | (6) | | | (4) | |
Ending Balance | $ | 220 | | | $ | 69 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Retail | | Wholesale |
Opening Balance | $ | 231 | | | $ | 62 | |
Provision | 16 | | | 3 | |
Charge-offs, net of recoveries | (16) | | | — | |
Foreign currency translation and other | (11) | | | 4 | |
Ending Balance | $ | 220 | | | $ | 69 | |
| | | | | | | | | | | |
| Twelve Months Ended December 31, 2021 |
| Retail | | Wholesale |
Opening Balance | $ | 231 | | | $ | 62 | |
Provision | 22 | | | 6 | |
Charge-offs, net of recoveries | (22) | | | 1 | |
Foreign currency translation and other | (11) | | | (4) | |
Ending Balance | $ | 220 | | | $ | 65 | |
At both September 30, 2021 and December 31, 2021, the allowance for credit losses was reduced by a release of reserves primarily due to the improved outlook for the agricultural industry and a reduced expected impact on credit conditions from the COVID-19 pandemic.
Troubled Debt Restructurings
A restructuring of a receivable constitutes a troubled debt restructuring (“TDR”) when the lender grants a concession it would not otherwise consider to a borrower that is experiencing financial difficulties. As a collateral-based lender, the Company typically will repossess collateral in lieu of restructuring receivables. As such, for retail receivables, concessions are typically provided based on bankruptcy court proceedings. For wholesale receivables, concessions granted may include extended contract maturities, inclusion of interest-only periods, modification of a contractual interest rate to a below market interest rate and waiving of interest and principal.
TDRs are reviewed along with other receivables as part of management’s ongoing evaluation of the adequacy of the allowance for credit losses. The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of the collateral. In determining collateral value, the Company estimates the current fair market value of the equipment collateral and considers credit enhancements such as additional collateral and third-party guarantees.
Before removing a receivable from TDR classification, a review of the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations based on a credit review, the TDR classification is not removed from the receivable.
As of September 30, 20222023 and 2021, the2022, CNH Industrial's retail and wholesale TDRs were immaterial.
Transfers of Financial AssetsCNH Industrial transfers a number of its financial receivables to securitization programs or factoring transactions.
A securitization transaction entails the sale of a portfolio of receivables to a securitization vehicle. This special purpose entity (“SPE”) finances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the cash flow generated by the portfolio). SPEs utilized in the securitization programs differ from other entities included in CNH Industrial's condensed consolidated financial statements because the assets they hold are legally isolated from CNH Industrial's assets. For bankruptcy analysis purposes, CNH Industrial has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of the SPEs’ investors. CNH Industrial's interests in the SPEs’ receivables are subordinate to the interests of third-party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay CNH Industrial's creditors until all obligations of the SPE have been fulfilled or the receivables are removed from the SPE.
Certain securitization trusts are also VIEs and consequently, the VIEs are consolidated since CNH Industrial has both the power to direct the activities that most significantly impact the VIEs' economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.
No recourse provisions exist that allow holders of the asset-backed securities issued by the trusts to put those securities back to CNH Industrial although CNH Industrial provides customary representations and warranties that could give rise to an obligation to repurchase from the trusts any receivables for which there is a breach of the representations and warranties. Moreover, CNH Industrial does not guarantee any securities issued by the trusts. The trusts have a limited life and generally terminate upon final distribution of amounts owed to investors or upon exercise of a cleanup-call option by CNH Industrial in its role as servicer.
Furthermore, factoring transactions may be either with recourse or without recourse; certain without recourse transfers include deferred payment clauses (for example, when the payment by the factor of a minor part of the purchase price is dependent on the total amount collected from the receivables), requiring first loss cover, meaning that the transferor takes priority participation in the losses, or requires a significant exposure to the cash flows arising from the transferred receivables to be retained.
These types of transactions do not qualify for the derecognition of the assets, since the risks and rewards connected with collection are not substantially transferred and, accordingly, the Group continues to recognize the receivables transferred by this means in its consolidated statement of financial position and recognizes a financial liability of the same amount under asset-backed financing.
At September 30, 2022 and December 31, 2021, the carrying amount of such restricted assets included in financing receivables above are the following (in millions):
| | | | | | | | | | | |
| Restricted Receivables |
| September 30, 2022 | | December 31, 2021 |
Retail note and finance lease receivables | $ | 7,393 | | | $ | 6,878 | |
Wholesale receivables | 4,154 | | | 3,443 | |
Total | $ | 11,547 | | | $ | 10,321 | |
10. INVENTORIES
Inventories as of September 30, 20222023 and December 31, 20212022 consist of the following:following (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Raw materials | Raw materials | $ | 2,009 | | | $ | 1,517 | | Raw materials | $ | 2,111 | | | $ | 1,955 | |
Work-in-process | Work-in-process | 789 | | | 570 | | Work-in-process | 637 | | | 471 | |
Finished goods | Finished goods | 2,564 | | | 2,129 | | Finished goods | 3,699 | | | 2,385 | |
Total inventories | Total inventories | $ | 5,362 | | | $ | 4,216 | | Total inventories | $ | 6,447 | | | $ | 4,811 | |
11. LEASES
Lessee
The Company has mainlyCompany's leases are primarily operating lease contracts for buildings, plant and machinery, vehicles, ITinformation technology ("IT") equipment and machinery.
Leases with a term of 12 months or less are not recorded in the balance sheet. For these leases the Company recognized on a straight-line basis over the lease term, lease expense of $4$1 million and $1$4 million in the three months ended September 30, 20222023 and 2021,2022, respectively, and $7$4 million and $4$7 million in the nine months ended September 30, 20222023 and 2021.2022.
For the three months ended September 30, 20222023 and 2021,2022, the Company incurred operating lease expenses of $18$25 million and $16$18 million, respectively, and $53$64 million and $50$53 million in the nine months ended September 30, 20222023 and 2021,2022, respectively.
At September 30, 2022,2023, the Company has recorded approximately $214$237 million of right-of-use assets and $215$241 million of related lease liability included in Other Assetsassets and Other Liabilities,liabilities, respectively. At September 30, 2022,2023, the weighted average remaining lease term (calculated on the basis of the remaining lease term and the lease liability balance for each lease) and the weighted average discount rate for operating leases were 6.05.3 years and 3.7%4.3%, respectively.
During the nine months ended September 30, 20222023 and 20212022 leased assets obtained in exchange for operating lease obligations were $82$77 million and $25$82 million, respectively. The operating cash outflow for amounts included in the measurement of operating lease obligations was $52$61 million and $50$52 million as of September 30, 20222023 and 2021,2022, respectively.
Lessor
The Company, primarily through its Financial Services segment, leases equipment to retail customers under operating leases. Our leases typically have terms of 3 to 5 years with options available for the lessee to purchase the equipment at the lease term date. Revenue for non-lease components is accounted for separately.
12. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
A summary of investments in unconsolidated subsidiaries and affiliates as of September 30, 20222023 and December 31, 20212022 is as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Equity method | Equity method | $ | 280 | | | $ | 286 | | Equity method | $ | 423 | | | $ | 331 | |
Cost method | Cost method | 47 | | | 47 | | Cost method | 54 | | | 54 | |
Total | Total | $ | 327 | | | $ | 333 | | Total | $ | 477 | | | $ | 385 | |
13. GOODWILL AND OTHER INTANGIBLES
Changes in the carrying amount of goodwill for the nine months ended September 30, 2022 are2023 were as follows:follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Agriculture | | Construction | | Financial Services | | Total |
| (in millions) |
Balance at January 1, 2022 | $ | 3,020 | | | $ | 49 | | | $ | 141 | | | $ | 3,210 | |
Acquisition | 43 | | | — | | | — | | | 43 | |
Foreign currency translation and other | (10) | | | (8) | | | (2) | | | (20) | |
Balance at September 30, 2022 | $ | 3,053 | | | $ | 41 | | | $ | 139 | | | $ | 3,233 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Agriculture | | Construction | | Financial Services | | Total |
Balance at January 1, 2023 | $ | 3,136 | | | $ | 46 | | | $ | 140 | | | $ | 3,322 | |
Acquisition | 177 | | | — | | | — | | | 177 | |
Foreign currency translation and other | (9) | | | — | | | — | | | (9) | |
Balance at September 30, 2023 | $ | 3,304 | | | $ | 46 | | | $ | 140 | | | $ | 3,490 | |
Goodwill and other indefinite-lived intangible assets are tested for impairment annually or more frequently if a triggering event occursoccurred that would indicate it is more likely than not that the fair value of a reporting unit is less than book value. CNH Industrial performed its most recent annual impairment review as of December 31, 20212022 and concluded that there was no impairment to goodwill for any of the reporting entities.
The acquisitionacquisitions of Specialty Enterprises LLC (Specialty)Augmenta Holding SAS and Bennamann LTD during the secondfirst quarter of 2022 led to the increase in Goodwill for Agriculture of $43 million. Goodwill related to the acquisition was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. Thus, goodwill associated with the acquisitions is subject to adjustment during the measurement period.
The acquisitions of Raven and Sampierana during the fourth quarter of 20212023 led to an increase in goodwill for Agriculture of $76 million and Construction of $1.3 billion and $51$118 million, respectively. Goodwill related to the acquisitions was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. During the second and third quarters of 2023, measurement period adjustments were recorded reducing goodwill by $14 million and $3 million for Augmenta and Bennamann, respectively. The valuationvaluations of assets acquired and liabilities assumed hashave not yet been finalized as of September 30, 2022.2023. Thus, goodwill associated with the acquisitions is subject to adjustment during the measurement period. Measurement period adjustments were recorded in the current year that decreased Goodwill by $11 million for Agriculture, primarily related to updates of certain of the valuations.
As of September 30, 20222023 and December 31, 2021,2022, the Company’s other intangible assets and related accumulated amortization consisted of the following:following (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted Avg. Life | | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net | | September 30, 2023 | | December 31, 2022 |
| | | | (in millions) | | Weighted Avg. Life | | Gross | Accumulated Amortization | Net | | Gross | Accumulated Amortization | Net |
Other intangible assets subject to amortization: | Other intangible assets subject to amortization: | | Other intangible assets subject to amortization: | | |
Dealer networks | Dealer networks | 15 | | $ | 289 | | | $ | 238 | | | $ | 51 | | | $ | 290 | | | $ | 231 | | | $ | 59 | | Dealer networks | 15 | | $ | 252 | | $ | 227 | | $ | 25 | | | $ | 291 | | $ | 242 | | $ | 49 | |
Patents, concessions, licenses and other | Patents, concessions, licenses and other | 5-25 | | 1,946 | | | 1,111 | | | 835 | | | 1,973 | | | 1,097 | | | 876 | | Patents, concessions, licenses and other | 5-25 | | 1,991 | | 1,262 | | 729 | | | 1,796 | | 1,153 | | 643 | |
| | 2,235 | | | 1,349 | | | 886 | | | 2,263 | | | 1,328 | | | 935 | | | 2,243 | | 1,489 | | 754 | | | 2,087 | | 1,395 | | 692 | |
Other intangible assets not subject to amortization: | Other intangible assets not subject to amortization: | | | | | | | | | | | | | Other intangible assets not subject to amortization: | | | | |
In-process research and development | | In-process research and development | | 211 | | — | | 211 | | | 165 | | — | | 165 | |
Trademarks | Trademarks | | 272 | | | — | | | 272 | | | 272 | | | — | | | 272 | | Trademarks | | 272 | | — | | 272 | | | 272 | | — | | 272 | |
Total Other intangible assets | | $ | 2,507 | | | $ | 1,349 | | | $ | 1,158 | | | $ | 2,535 | | | $ | 1,328 | | | $ | 1,207 | | |
Total other intangible assets | | Total other intangible assets | | $ | 2,726 | | $ | 1,489 | | $ | 1,237 | | | $ | 2,524 | | $ | 1,395 | | $ | 1,129 | |
During the fourthfirst quarter of 2021,2023, the Company recorded $0.5 billion$81 million in intangible assets based on the preliminary valuation for the Raven Industries, Inc.Augmenta and Sampierana S.p.A.Bennamann acquisitions. Measurement period adjustments were recorded in the second and third quarters increasing intangible assets by $12 million and $5 million for Augmenta and Bennamann, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. Thus, the2023. The intangible assets associated with the acquisitions are subject to adjustment during the measurement period. Measurement period adjustments were recorded in the second quarter that increased other intangibles subject to amortization by $20 million primarily related to updates of certain of the valuations.
CNH Industrial recorded amortization expense of $35$43 million and $20$35 million for the three months ended September 30, 20222023 and 2021,2022, respectively, and $101$119 million and $60$101 million for the nine months ended September 30, 20222023 and 2021,2022, respectively.
14. OTHER LIABILITIES
A summary of Otherother liabilities as of September 30, 20222023 and December 31, 20212022 is as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Warranty and campaign programs | Warranty and campaign programs | $ | 475 | | | $ | 526 | | Warranty and campaign programs | $ | 566 | | | $ | 544 | |
Marketing and sales incentive programs | Marketing and sales incentive programs | 1,372 | | | 1,325 | | Marketing and sales incentive programs | 2,159 | | | 1,556 | |
Tax payables | Tax payables | 351 | | | 671 | | Tax payables | 507 | | | 506 | |
Accrued expenses and deferred income | Accrued expenses and deferred income | 449 | | | 559 | | Accrued expenses and deferred income | 886 | | | 700 | |
Accrued employee benefits | Accrued employee benefits | 424 | | | 544 | | Accrued employee benefits | 511 | | | 535 | |
Lease liabilities | Lease liabilities | 215 | | | 196 | | Lease liabilities | 241 | | | 228 | |
Legal reserves and other provisions | Legal reserves and other provisions | 236 | | | 187 | | Legal reserves and other provisions | 304 | | | 263 | |
Contract reserve | Contract reserve | 12 | | | 12 | | Contract reserve | 19 | | | 16 | |
Contract liabilities | Contract liabilities | 26 | | | 20 | | Contract liabilities | 43 | | | 33 | |
Restructuring reserve | Restructuring reserve | 23 | | | 29 | | Restructuring reserve | 17 | | | 30 | |
Other | Other | 455 | | | 692 | | Other | 372 | | | 436 | |
Total | Total | $ | 4,038 | | | $ | 4,761 | | Total | $ | 5,625 | | | $ | 4,847 | |
Warranty and Campaign Programs
CNH Industrial pays for basic warranty and other service action costs. A summary of recorded activity for the three and nine months ended September 30, 20222023 and 20212022 for the basic warranty and accruals for campaign programs are as follows:follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) | | (in millions) |
Balance at beginning of period | $ | 484 | | | $ | 526 | | | $ | 526 | | | $ | 507 | |
Current year additions | 118 | | | 94 | | | 303 | | | 286 | |
Claims paid | (110) | | | (95) | | | (320) | | | (273) | |
Currency translation adjustment and other | (17) | | | (20) | | | (34) | | | (15) | |
Balance at end of period | $ | 475 | | | $ | 505 | | | $ | 475 | | | $ | 505 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Balance beginning of period | $ | 588 | | | $ | 484 | | | $ | 544 | | | $ | 526 | |
Current year additions | 131 | | | 118 | | | 396 | | | 303 | |
Claims paid | (143) | | | (110) | | | (370) | | | (320) | |
Currency translation adjustment and other | (10) | | | (17) | | | (4) | | | (34) | |
Balance end of period | $ | 566 | | | $ | 475 | | | $ | 566 | | | $ | 475 | |
Restructuring Expense
The Company incurred restructuring expenses of $11$5 million and $15$11 million during the three months ended September 30, 20222023 and 2021,2022, respectively. The Company incurred restructuring expenses of $19$8 million and $21$19 million during the nine months ended September 30, 20222023 and 2021,2022, respectively.
15. COMMITMENTS AND CONTINGENCIES
As a global company with a diverse business portfolio, CNH Industrial in the ordinary course of business is exposed to numerous legal risks, including, without limitation, dealer and supplier litigation, intellectual property right disputes, product warranty and defective product claims, product performance, asbestos, personal injury, emissions and/or fuel economy regulatory and contractual issues, competition law and other investigations and environmental claims. The most significant of these matters are described below.
The outcome of any current or future proceedings, claims, or investigations cannot be predicted with certainty. Adverse decisions in one or more of these proceedings, claims or investigations could require CNH Industrial to pay substantial damages or fines or undertake service actions, recall campaigns or other costly actions. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect CNH Industrial’s financial position and results. When it is probable that such a loss has been incurred and the amount can be reasonably estimated, an accrual has been made against CNH Industrial earnings and included in “Other liabilities” on the condensed consolidated balance sheets.
Although the ultimate outcome of legal matters pending against CNH Industrial and its subsidiaries cannot be predicted, CNH Industrial believes the reasonable possible range of losses for these unresolved legal matters in addition to the amounts accrued would not have a material effect on its condensed consolidated financial statementsstatements.
Environmental
Pursuant to the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), which imposes strict and, under certain circumstances, joint and several liability for remediation and liability for natural resource damages, and other federal and state laws that impose similar liabilities, CNH Industrial has received inquiries for information or notices of its potential liability regarding 66 non-owned U.S. sites at which regulated materials allegedly generated by CNH Industrial were released or disposed (“Waste Sites”). Of the Waste Sites, 16 are on the National Priority List (“NPL”) promulgated pursuant to CERCLA. For 60 of the Waste Sites, the monetary amount or extent of the Company’s liability has either been resolved, it has not been named as a potentially responsible party (“PRP”), or its liability is likely de minimis.
Because estimates of remediation costs are subject to revision as more information becomes available about the extent and cost of remediation and settlement agreements can be reopened under certain circumstances, the Company’s potential liability for remediation costs associated with the 66 Waste Sites could change. Moreover, because liability under CERCLA and similar laws can be joint and several, CNH Industrial could be required to pay amounts in excess of its pro rata share of remediation costs. However, when appropriate, the financial strength of other PRPs has been considered in the determination of the Company’s potential liability. CNH Industrial believes that the costs associated with the Waste Sites will not have a material effect on the Company’s business, financial position, or results of operations.
The Company is conducting environmental investigatory or remedial activities at certain properties that are currently or were formerly owned and/or operated or that are being decommissioned. The Company believes that the outcome of these activities will not have a material adverse effect on its business, financial position, or results of operations.
The actual costs for environmental matters could differ materially from those costs currently anticipated due to the nature of historical handling and disposal of hazardous substances typical of manufacturing and related operations, the discovery of currently unknown conditions and as a result of more aggressive enforcement by regulatory authorities and changes in existing laws and regulations. As in the past, CNH Industrial plans to continue funding its costs of environmental compliance from operating cash flows.
Investigation, analysis and remediation of environmental sites is a time-consuming activity. The Company expects such costs to be incurred and claims to be resolved over an extended period of time that could exceed 30 years for some sites. As of September 30, 20222023 and December 31, 2021,2022, environmental reserves of approximately $25$24 million and $29$25 million, respectively, were established to address these specific estimated potential liabilities. Such reserves are undiscounted and do not include anticipated recoveries, if any, from insurance companies. After considering these reserves, management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
Other Litigation and InvestigationInvestigations
Follow-up onIveco Follow-on Damages Claims:Claims: in 2011 Iveco S.p.A. (“Iveco”), which, following the Demerger, is a wholly-controlled subsidiarynow part of Iveco Group N.V., and its competitors in the European Union were subject to an investigation by the European Commission (the “Commission”) into certain business practices in the European Union (in the period 1997-2011) in relation to mediumMedium and heavyHeavy trucks. On July 19, 2016, the Commission announced a settlement with Iveco (the “Decision”). Following the Decision, the Company, Iveco and Iveco Magirus AG (“IMAG”) have been named as defendantdefendants in proceedings across Europe. The consummation of the Demerger will not result inallow CNH Industrial beingto be excluded from current and future follow-on proceedings originating from the Decision because under EU competition law a company cannot use corporate reorganizations to avoid liability for private damage claims. In the event one or more of these judicial proceedings would result (directly or indirectly) in a binding decision against CNH Industrial ordering it to compensate such claimants as a result of the conduct that was the subject matter of the Decision, and where Iveco and IMAG do not comply with such decisions, as a result of various intercompany arrangements, then CNH Industrial will ultimately have recourse against Iveco and IMAG for the reimbursement of the damages effectively paid to such claimants. The extent and outcome of these claims cannot be predicted at this time. The Company believes that the risk of either Iveco or IMAG or Iveco Group defaulting on potential payment obligations arising from such follow-up on damage claims is remote.
FPT Emissions Investigation: on July 22, 2020, a number of FPT Industrial S.p.A.'s offices in Europe were visited by investigators in the context of a request for assistance by the public prosecutors of Frankfurt am Main, Germany and Turin, Italy in relation to alleged noncompliance of two engine models produced by FPT Industrial S.p.A., which is a wholly-controlled subsidiary Iveco Group N.V., installed in certain Ducato (a vehicle distributed by Stellantis N.V.) and Iveco Daily vehicles. In certain instances CNH Industrial and other third parties have also received various requests for compensation by German and Austrian customers on various contractual and tort grounds, including requests for damages resulting from the termination of the purchase contracts, or in the form of requests for an alleged lower residual value of their vehicles as a consequence of the alleged non-compliance with other approval regulations regarding emissions. In certain instances, other customers have brought judicial claims on the same legal and factual bases. While
the Company had no role in the design and sale of such engine models and vehicles, the Company cannot predict at this time the extent and outcome of these requests and directly or indirectly related legal proceedings, including customer claims or potential class actions alleging emissions non-compliance. The Company believes that the risk of either FPT Industrial or Iveco Group N.V. defaulting on potential payment obligations arising from such proceedings is remote.
Guarantees
CNH Industrial provided guarantees on the debt or commitments of third parties and performance guarantees on non-consolidated affiliates as of September 30, 20222023 and December 31, 20212022 totaling of $31 million and $19 million, and $15 million, respectively.
16. FINANCIAL INSTRUMENTS
The CompanyCNH Industrial may elect to measure financial instruments and certain other items at fair value. This fair value option would be applied on an instrument-by-instrument basis with changes in fair value reported in earnings. The election can be made at the acquisition of an eligible financial asset, financial liability or firm commitment or, when certain specified reconsideration events occur. The fair value election may not be revoked once made. The CompanyCNH Industrial has not elected the fair value measurement option for eligible items.
Fair-ValueFair Value Hierarchy
The hierarchy of valuation techniques for financial instruments is based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-valuefair value hierarchy:
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
This hierarchy requires the use of observable market data when available.
Determination of Fair Value
When available, the Company uses quoted market prices to determine fair value and classifies such items in Level 1. In some cases where a market price is not available, the Company will use observable market-based inputs to calculate fair value, in which case the items are classified in Level 2.
If quoted or observable market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters such as interest rates, currency rates, or yield curves. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.
The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, and the key inputs to those models as well as any significant assumptions.
Derivatives
CNH Industrial utilizes derivative instruments to mitigate its exposure to interest rate and foreign currency exposures. Derivatives used as hedgesCNH Industrial designates derivatives that are effective at reducing the risk associated with the exposure being hedged and are designated as a hedgeaccounting hedges at the inception of the derivative contract. CNH Industrialcontract and does not hold or enter into derivative or other financial instruments for speculative purposes. The credit and market risk related to derivatives is reduced through diversification among various counterparties, utilizing mandatory termination clauses and/or collateral support agreements. Derivative instruments are generally classified as Level 2 in the fair value hierarchy. The cash flows underlying all derivative contracts were recorded in operating activities in the condensed consolidated statements of cash flows.
Foreign Exchange Derivatives
CNH Industrial has entered into foreign exchange forward contracts and swaps in order to manage and preserve the economic value of cash flows in a currency different from the functional currency of the relevant legal entity. CNH Industrial conducts its business on a global basis in a wide variety of foreign currencies and hedges foreign currency exposures arising from various receivables, liabilities, and expected inventory purchases and sales. Derivative instruments utilized to hedge the foreign currency risk associated with anticipated inventory purchases and sales in foreign currencies are designated as cash flow hedges. Gains and losses on these instruments are deferred in accumulated other comprehensive income/(loss) and recognized in earnings when the related transaction occurs. If a derivative instrument is terminated because the hedge relationship is no longer effective or because the hedged item is a
forecasted transaction that is no longer determined to be probable, the cumulative amount recorded in accumulated other comprehensive income (loss) is recognized immediately in earnings. Such amounts were insignificant in all periods presented.
CNH Industrial also uses forwards and swaps to hedge certain assets and liabilities denominated in foreign currencies. Such derivatives are considered economic hedges and not designated as hedging instruments. The changes in the fair values of these instruments are recognized directly in income in “Other, net” and are expected to offset the foreign exchange gains or losses on the exposures being managed.
All of CNH Industrial’s foreign exchange derivatives are considered Level 2 as the fair value is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s foreign exchange derivatives was $5.7$6.9 billion and $8.2$5.9 billion at September 30, 20222023 and December 31, 2021,2022, respectively.
Interest Rate Derivatives
CNH Industrial has entered into interest rate derivatives (swaps and caps) in order to manage interest rate exposures arising in the normal course of business. Interest rate derivatives that have been designated as cash flow hedges are being used by the Company to mitigate the risk of rising interest rates related to existing debt and anticipated issuance of fixed-rate debt in future periods. Gains and losses on these instruments are deferred in accumulated other comprehensive income (loss) and recognized in interest expense over the period in which CNH Industrial recognizes interest expense on the related debt.
Interest rate derivatives that have been designated as fair value hedge relationships have been used by CNH Industrial to mitigate the volatility in the fair value of existing fixed rate bonds and medium-term notes due to changes in floating interest rate benchmarks. Gains and losses on these instruments are recorded in “Interest expense” in the period in which they occur and an offsetting gain or loss is also reflected in “Interest expense” based on changes in the fair value of the debt instrument being hedged due to changes in floating interest rate benchmarks.
CNH Industrial also enters into offsetting interest rate derivatives with substantially similar terms that are not designated as hedging instruments to mitigate interest rate risk related to CNH Industrial’s committed asset-backed facilities. Unrealized and realized gains and losses resulting from fair value changes in these instruments are recognized directly in income. Net gains and losses on these instruments were insignificant for the three and nine months ended September 30, 20222023 and 2021.2022.
All of CNH Industrial’s interest rate derivatives outstanding as of September 30, 20222023 and December 31, 20212022 are considered Level 2. The fair market value of these derivatives is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s interest rate derivatives was approximately $6.4$8.1 billion and $6.4 billion at September 30, 20222023 and December 31, 2021,2022, respectively.
As a result of the reform and replacement of specific benchmark interest rates, uncertainty remains regarding the timingCompany elected to make the replacement using the optional expedient under ASC 848, which allows the change in critical terms without de-designation and exact nature of those changes. At September 30, 2022, the notional amount of hedging instrumentsCompany also elected the optional expedient to apply a spread adjustment to hedged items cash flows that could be affected byresulted in no change to the reform of benchmark interest rates is $1.3 billion.cumulative basis adjustment reflected in earnings.
Financial Statement Impact of CNH Industrial Derivatives
The following table summarizes the gross impact of changes in the fair value of derivatives designated as cash flow hedges recognized in accumulated other comprehensive income (loss) and net income (loss) during the three and nine months ended September 30, 2023 and 2022 and 2021 (in millions)millions of dollars):
| | | Recognized in Net Income | | Recognized in Net Income |
For the Three Months Ended September 30, | For the Three Months Ended September 30, | | Gain (Loss) Recognized in Accumulated Other Comprehensive Income | | Classification of Gain (Loss) | | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | For the Three Months Ended September 30, | | Gain (Loss) Recognized in Accumulated Other Comprehensive Income | | Classification of Gain (Loss) | | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
2023 | | 2023 | | | | | |
Foreign exchange contracts | | Foreign exchange contracts | | $ | (33) | | |
| | | Net sales | | (3) | |
| | | Cost of goods sold | | 13 | |
| | | Other, net | | (15) | |
Interest rate contracts | | Interest rate contracts | | (12) | | | Interest expense | | 2 | |
Total | | Total | | $ | (45) | | | $ | (3) | |
2022 | 2022 | | | | | | 2022 | | | | |
Foreign exchange contracts | Foreign exchange contracts | | $ | (87) | | | Foreign exchange contracts | | $ | (87) | | |
| | Net sales | | — | | | Net sales | | — | |
| | Cost of goods sold | | (77) | | | Cost of goods sold | | (77) | |
| | Other, net | | 8 | | | Other, net | | 8 | |
Interest rate contracts | Interest rate contracts | | 1 | | | Interest expense | | 8 | | Interest rate contracts | | 1 | | | Interest expense | | 8 | |
Total | Total | | $ | (86) | | | $ | (61) | | Total | | $ | (86) | | | $ | (61) | |
2021 | | | | | |
Foreign exchange contracts | | $ | 27 | | | |
| Net sales | | 1 | | |
| Cost of goods sold | | (9) | | |
| Other, net | | — | | |
Interest rate contracts | | 8 | | | Interest expense | | 1 | | |
Total | | $ | 35 | | | $ | (7) | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Recognized in Net Income |
For the Nine Months Ended September 30, | | Gain (Loss) Recognized in Accumulated Other Comprehensive Income | | Classification of Gain (Loss) | | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
2022 | | | | | | |
Foreign exchange contracts | | $ | (248) | | | | | |
| | | | Net sales | | 2 | |
| | | | Cost of goods sold | | (135) | |
| | | | Other, net | | 4 | |
Interest rate contracts | | 41 | | | Interest expense | | 25 | |
Total | | $ | (207) | | | | | $ | (104) | |
2021 | | | | | | |
Foreign exchange contracts | | $ | (54) | | | | | |
| | | | Net sales | | (2) | |
| | | | Cost of goods sold | | 18 | |
| | | | Other, net | | (6) | |
Interest rate contracts | | 33 | | | Interest expense | | (2) | |
Total | | $ | (21) | | | | | $ | 8 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Recognized in Net Income |
For the Nine Months Ended September 30, | | Gain (Loss) Recognized in Accumulated Other Comprehensive Income | | Classification of Gain (Loss) | | Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |
2023 | | | | | | |
Foreign exchange contracts | | $ | (44) | | | | | |
| | | | Net sales | | (7) | |
| | | | Cost of goods sold | | (19) | |
| | | | Other, net | | 10 | |
Interest rate contracts | | (46) | | | Interest expense | | 10 | |
Total | | $ | (90) | | | | | $ | (6) | |
2022 | | | | | | |
Foreign exchange contracts | | $ | (248) | | | | | |
| | | | Net sales | | 2 | |
| | | | Cost of goods sold | | (135) | |
| | | | Other, net | | 4 | |
Interest rate contracts | | 41 | | | Interest expense | | 25 | |
Total | | $ | (207) | | | | | $ | (104) | |
The following table summarizes the activity in accumulated other comprehensive income related to the derivatives held by the Company during the nine months ended September 30, 2023 and 2022 and 2021:(in millions of dollars):
| | | | | | | | | | | | | | | | | | | | |
In Millions | | Before-Tax Amount | | Income Tax | | After-Tax Amount |
Accumulated derivative net losses as of December 31, 2021 | | $ | (3) | | | $ | (14) | | | $ | (17) | |
Impact of demerger | | 19 | | | — | | | 19 | |
Net changes in fair value of derivatives | | (207) | | | 27 | | | (180) | |
Net losses reclassified from accumulated other comprehensive income into income | | 104 | | | (13) | | | 91 | |
Accumulated derivative net losses as of September 30, 2022 | | $ | (87) | | | $ | — | | | $ | (87) | |
| | | | | | | | | | | | | | | | | | | | |
| | Before-Tax Amount | | Income Tax | | After-Tax Amount |
Accumulated derivative net gain as of December 31, 2022 | | $ | 71 | | | $ | (27) | | | $ | 44 | |
Net changes in fair value of derivatives | | (90) | | | 30 | | | (60) | |
Net losses reclassified from accumulated other comprehensive income into income | | 6 | | | (3) | | | 3 | |
Accumulated derivative net losses as of September 30, 2023 | | $ | (13) | | | $ | — | | | $ | (13) | |
| | | | | | | | | | | | | | | | | | | | |
In Millions | | Before-Tax Amount | | Income Tax | | After-Tax Amount |
Accumulated derivative net losses as of December 31, 2020 | | $ | (5) | | | $ | (1) | | | $ | (6) | |
Net changes in fair value of derivatives | | (21) | | | (4) | | | (25) | |
Net losses reclassified from accumulated other comprehensive income into income | | (8) | | | — | | | (8) | |
Accumulated derivative net losses as of September 30, 2021 | | $ | (34) | | | $ | (5) | | | $ | (39) | |
| | | | | | | | | | | | | | | | | | | | |
| | Before-Tax Amount | | Income Tax | | After-Tax Amount |
Accumulated derivative net losses as of December 31, 2021 | | $ | (3) | | | $ | (14) | | | $ | (17) | |
Impact of demerger | | 19 | | | — | | | 19 | |
Net changes in fair value of derivatives | | (207) | | | 27 | | | (180) | |
Net losses reclassified from accumulated other comprehensive income into income | | 104 | | | (13) | | | 91 | |
Accumulated derivative net losses as of September 30, 2022 | | $ | (87) | | | $ | — | | | $ | (87) | |
The following tables summarize the earnings impact thatrelated to changes in the fair value of fair value hedges and derivatives not designated as hedging instruments had on earningshedges during the three and nine months ended September 30, 2023 and 2022 (in millions)millions of dollars):
| | | For the Three Months Ended September 30, | | For the Three Months Ended September 30, |
| | Classification of Gain (Loss) | | 2022 | | 2021 | | Classification of Gain (Loss) | | 2023 | | 2022 |
Fair Value Hedges | Fair Value Hedges | | | | | | | Fair Value Hedges | | | | | | |
Interest rate derivatives | Interest rate derivatives | | Interest expense | | $ | (31) | | | $ | (6) | | Interest rate derivatives | | Interest expense | | $ | (3) | | | $ | (31) | |
| Not Designated as Hedges | Not Designated as Hedges | | Not Designated as Hedges | |
Foreign exchange contracts | Foreign exchange contracts | | Other, Net | | $ | 21 | | | $ | — | | Foreign exchange contracts | | Other, Net | | $ | (10) | | | $ | 21 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | For the Nine Months Ended September 30, |
| | Classification of Gain (Loss) | | 2022 | | 2021 |
Fair Value Hedges | | | | | | |
Interest rate derivatives | | Interest expense | | $ | (106) | | | $ | (28) | |
| | | | | | |
Not Designated as Hedges | | | | | | |
Foreign exchange contracts | | Other, Net | | $ | (25) | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | |
| | | | For the Nine Months Ended September 30, |
| | Classification of Gain (Loss) | | 2023 | | 2022 |
Fair Value Hedges | | | | | | |
Interest rate derivatives | | Interest expense | | $ | (2) | | | $ | (106) | |
| | | | | | |
Not Designated as Hedges | | | | | | |
Foreign exchange contracts | | Other, Net | | $ | (44) | | | $ | (25) | |
The fair values of CNH Industrial’s derivatives as of September 30, 20222023 and December 31, 20212022 in the condensed consolidated balance sheets are recorded as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
in millions of dollars | | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value | |
Derivatives designated as hedging instruments under Subtopic 815-20 | | | | | | | | | |
| | | Balance Sheet Location | | Fair Value | | Balance Sheet Location | | Fair Value |
Derivatives designated as hedging instruments | | Derivatives designated as hedging instruments | | | | | | | | |
Interest rate contracts | Interest rate contracts | | Derivative assets | | 76 | | | Derivative assets | | 65 | | Interest rate contracts | | Derivative assets | | $ | 54 | | | Derivative assets | | $ | 77 | |
Foreign currency contracts | Foreign currency contracts | | Derivative assets | | 93 | | | Derivative assets | | 77 | | Foreign currency contracts | | Derivative assets | | 38 | | | Derivative assets | | 70 | |
Total derivative assets designated as hedging instruments | | 169 | | | 142 | | |
Total derivative assets | | Total derivative assets | | $ | 92 | | | $ | 147 | |
Interest rate contracts | Interest rate contracts | | Derivative liabilities | | 124 | | | Derivative liabilities | | 28 | | Interest rate contracts | | Derivative liabilities | | $ | 125 | | | Derivative liabilities | | $ | 106 | |
Foreign currency contracts | Foreign currency contracts | | Derivative liabilities | | 192 | | | Derivative liabilities | | 101 | | Foreign currency contracts | | Derivative liabilities | | 67 | | | Derivative liabilities | | 56 | |
Total derivative liabilities designated as hedging instruments | | 316 | | | 129 | | |
Derivatives not designated as hedging instruments under Subtopic 815-20 | | | | | |
Total derivative liabilities | | Total derivative liabilities | | $ | 192 | | | $ | 162 | |
| Derivatives not designated as hedging instruments | | Derivatives not designated as hedging instruments | |
Interest rate contracts | Interest rate contracts | | Derivative assets | | 70 | | | Derivative assets | | 11 | | Interest rate contracts | | Derivative assets | | $ | 44 | | | Derivative assets | | $ | 28 | |
Foreign currency contracts | Foreign currency contracts | | Derivative assets | | 41 | | | Derivative assets | | 29 | | Foreign currency contracts | | Derivative assets | | 27 | | | Derivative assets | | 14 | |
Total derivative assets not designated as hedging instruments | | 111 | | | 40 | | |
Total derivative assets | | Total derivative assets | | $ | 71 | | | $ | 42 | |
Interest rate contracts | Interest rate contracts | | Derivative liabilities | | 70 | | | Derivative liabilities | | 12 | | Interest rate contracts | | Derivative liabilities | | $ | 44 | | | Derivative liabilities | | $ | 28 | |
Foreign currency contracts | Foreign currency contracts | | Derivative liabilities | | 26 | | | Derivative liabilities | | 40 | | Foreign currency contracts | | Derivative liabilities | | 10 | | | Derivative liabilities | | 14 | |
Total derivative liabilities not designated as hedging instruments | | 96 | | | 52 | | |
Total derivative liabilities | | Total derivative liabilities | | $ | 54 | | | $ | 42 | |
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair-valuefair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 20222023 and December 31, 2021:2022 (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Total |
| September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
| (in millions) |
Assets | | | | | | | | | | | |
Foreign exchange derivatives | $ | — | | | $ | — | | | $ | 134 | | | $ | 106 | | | $ | 134 | | | $ | 106 | |
Interest rate derivatives | — | | | — | | | 146 | | | 76 | | | 146 | | | 76 | |
Total Assets | $ | — | | | $ | — | | | $ | 280 | | | $ | 182 | | | $ | 280 | | | $ | 182 | |
Liabilities | | | | | | | | | | | |
Foreign exchange derivatives | $ | — | | | $ | — | | | $ | 218 | | | $ | 141 | | | $ | 218 | | | $ | 141 | |
Interest rate derivatives | — | | | — | | | 194 | | | 40 | | | 194 | | | 40 | |
Total Liabilities | $ | — | | | $ | — | | | $ | 412 | | | $ | 181 | | | $ | 412 | | | $ | 181 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Total |
| September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
Assets | | | | | | | | | | | |
Foreign exchange derivatives | $ | — | | | $ | — | | | $ | 65 | | | $ | 84 | | | $ | 65 | | | $ | 84 | |
Interest rate derivatives | — | | | — | | | 98 | | | 105 | | | 98 | | | 105 | |
Total Assets | $ | — | | | $ | — | | | $ | 163 | | | $ | 189 | | | $ | 163 | | | $ | 189 | |
Liabilities | | | | | | | | | | | |
Foreign exchange derivatives | $ | — | | | $ | — | | | $ | 77 | | | $ | 70 | | | $ | 77 | | | $ | 70 | |
Interest rate derivatives | — | | | — | | | 169 | | | 134 | | | 169 | | | 134 | |
Total Liabilities | $ | — | | | $ | — | | | $ | 246 | | | $ | 204 | | | $ | 246 | | | $ | 204 | |
Items Measured at Fair Value on a Non-Recurring Basis
The Company recorded fixed asset write-downs of $17 million related to the suspension of operations in Russia during the nine months ended September 30, 2022.
The following tables present the fair value for nonrecurring Level 3 measurements from impairments recorded in the quarternine months ended March 31, 2022. No impairments were recorded subsequent to March 31, 2022.September 30, 2023 and 2022 (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value | | Losses |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) |
Property, plant and equipment | $ | 7 | | | $ | — | | | $ | 17 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value | | Losses |
| 2023 | | 2022 | | 2023 | | 2022 |
Property, plant and equipment | $ | — | | | $ | 7 | | | $ | — | | | $ | 17 | |
The following is a description of the valuation methodologies the Company uses tofor non-monetary assets measured at fair value:
Property, plant and equipment, net: The impairments are measured at the lower of the carrying amount or fair value. The valuations were based on a cost approach. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence.
Fair Value of Other Financial Instruments
The carrying value of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable included in the condensed consolidated balance sheets approximates its fair value.
Financial Instruments Not Carried at Fair Value
The estimated fair market values of financial instruments not carried at fair value in the condensed consolidated balance sheets as of September 30, 20222023 and December 31, 2021 are2022 were as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | | | | | | | | | | | |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | September 30, 2023 | | December 31, 2022 |
| | (in millions) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Financing receivables | Financing receivables | $ | 16,901 | | | $ | 16,693 | | | $ | 15,376 | | | $ | 15,605 | | Financing receivables | $ | 22,240 | | | $ | 22,075 | | | $ | 19,260 | | | $ | 18,827 | |
Debt | Debt | $ | 20,922 | | | $ | 20,319 | | | $ | 20,897 | | | $ | 21,091 | | Debt | $ | 24,958 | | | $ | 24,884 | | | $ | 22,962 | | | $ | 22,651 | |
Financing Receivables
The fair value of financing receivables is based on the discounted values of their related cash flows at current market interest rates and they are classified as a Level 3 fair value measurement.
Debt
All debt is classified as a Level 2 fair value measurement with the exception of bonds issued by CNH Industrial Finance Europe S.A. and bonds issued by CNH Industrial N.V. that are classified as a Level 1 fair value measurement.
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The Company’s share of other comprehensive income (loss) includes net income plus other comprehensive income, which includes changes in fair value of certain derivatives designated as cash flow hedges, certain changes in pension and other retirement benefit plans, foreign currency translations gains and losses, changes in the fair value of available-for-sale securities, the Company’s share of other comprehensive income (loss) of entities accounted for using the equity method, and reclassifications for amounts included in net income (loss) less net income (loss) and other comprehensive income (loss) attributable to the non-controlling interest. For more information on derivative instruments, see “Note 16: Financial Instruments”. For more information on pensions and retirement benefit obligations, see “Note 6: Employee Benefit Plans and Postretirement Benefits”. The Company’s other comprehensive income (loss) amounts are aggregated within accumulated other comprehensive income (loss). The tax effect for each component of other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022 consisted of the following (in millions)millions of dollars):
| | | Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| | Gross Amount | | Income Taxes | | Net Amount | | Gross Amount | | Income Taxes | | Net Amount | | Gross Amount | | Income Taxes | | Net Amount |
Unrealized gain (loss) on cash flow hedges | Unrealized gain (loss) on cash flow hedges | $ | (23) | | | $ | 13 | | | $ | (10) | | Unrealized gain (loss) on cash flow hedges | $ | (42) | | | $ | 9 | | | $ | (33) | | | $ | (84) | | | $ | 25 | | | $ | (59) | |
Changes in retirement plans’ funded status | Changes in retirement plans’ funded status | (21) | | | 7 | | | (14) | | Changes in retirement plans’ funded status | (5) | | | 2 | | | (3) | | | (16) | | | 5 | | | (11) | |
Foreign currency translation | Foreign currency translation | 96 | | | — | | | 96 | | Foreign currency translation | (14) | | | — | | | (14) | | | 70 | | | — | | | 70 | |
Share of other comprehensive income (loss) of entities using the equity method | Share of other comprehensive income (loss) of entities using the equity method | (13) | | | — | | | (13) | | Share of other comprehensive income (loss) of entities using the equity method | (8) | | | — | | | (8) | | | (23) | | | — | | | (23) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | $ | 39 | | | $ | 20 | | | $ | 59 | | Other comprehensive income (loss) | $ | (69) | | | $ | 11 | | | $ | (58) | | | $ | (53) | | | $ | 30 | | | $ | (23) | |
| | | Nine Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| | Gross Amount | | Income Taxes | | Net Amount | | Gross Amount | | Income Taxes | | Net Amount | | Gross Amount | | Income Taxes | | Net Amount |
Unrealized gain (loss) on cash flow hedges | Unrealized gain (loss) on cash flow hedges | $ | (103) | | | $ | 14 | | | $ | (89) | | Unrealized gain (loss) on cash flow hedges | $ | (23) | | | $ | 13 | | | $ | (10) | | | $ | (103) | | | $ | 14 | | | $ | (89) | |
Changes in retirement plans’ funded status | Changes in retirement plans’ funded status | (89) | | | 25 | | | (64) | | Changes in retirement plans’ funded status | (21) | | | 7 | | | (14) | | | (89) | | | 25 | | | (64) | |
Foreign currency translation | Foreign currency translation | 427 | | | — | | | 427 | | Foreign currency translation | 96 | | | — | | | 96 | | | 427 | | | — | | | 427 | |
Share of other comprehensive income (loss) of entities using the equity method | Share of other comprehensive income (loss) of entities using the equity method | (42) | | | — | | | (42) | | Share of other comprehensive income (loss) of entities using the equity method | (13) | | | — | | | (13) | | | (42) | | | — | | | (42) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | $ | 193 | | | $ | 39 | | | $ | 232 | | Other comprehensive income (loss) | $ | 39 | | | $ | 20 | | | $ | 59 | | | $ | 193 | | | $ | 39 | | | $ | 232 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Gross Amount | | Income Taxes | | Net Amount |
Unrealized gain (loss) on cash flow hedges | $ | 41 | | | $ | (1) | | | $ | 40 | |
Changes in retirement plans’ funded status | 15 | | | (2) | | | 13 | |
Foreign currency translation | (34) | | | — | | | (34) | |
Share of other comprehensive income (loss) of entities using the equity method | (46) | | | — | | | (46) | |
Other comprehensive income (loss) | $ | (24) | | | $ | (3) | | | $ | (27) | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Gross Amount | | Income Taxes | | Net Amount |
Unrealized gain (loss) on cash flow hedges | $ | (29) | | | $ | (4) | | | $ | (33) | |
Changes in retirement plans’ funded status | (34) | | | 13 | | | (21) | |
Foreign currency translation | 172 | | | — | | | 172 | |
Share of other comprehensive income (loss) of entities using the equity method | (67) | | | — | | | (67) | |
Other comprehensive income (loss) | $ | 42 | | | $ | 9 | | | $ | 51 | |
The changes, net of tax, in each component of accumulated other comprehensive income (loss) in the nine months ended September 30, 2023 and 2022 consisted of the following (in millions)millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized Gain (Loss) on Cash Flow Hedges | | Change in Retirement Plans’ Funded Status | | Foreign Currency Translation | | Share of Other Comprehensive Income (Loss) of Entities Using the Equity Method | | Total |
Balance, January 1, 2021 | $ | (6) | | | $ | (653) | | | $ | (1,884) | | | $ | (133) | | | $ | (2,676) | |
Other comprehensive income (loss), before reclassifications | (25) | | | 82 | | | 169 | | | (67) | | | 159 | |
Amounts reclassified from other comprehensive income | (8) | | | (103) | | | — | | | — | | | (111) | |
Other comprehensive income (loss)* | (33) | | | (21) | | | 169 | | | (67) | | | 48 | |
Balance, September 30, 2021 | $ | (39) | | | $ | (674) | | | $ | (1,715) | | | $ | (200) | | | $ | (2,628) | |
| | | | | | | | | |
Balance, January 1, 2022 | $ | 2 | | | $ | (324) | | | $ | (1,951) | | | $ | (224) | | | $ | (2,497) | |
Other comprehensive income (loss), before reclassifications | (180) | | | 36 | | | 428 | | | (42) | | | 242 | |
Amounts reclassified from other comprehensive income | 91 | | | (100) | | | — | | | — | | | (9) | |
Other comprehensive income (loss)* | (89) | | | (64) | | | 428 | | | (42) | | | 233 | |
Balance, September 30, 2022 | $ | (87) | | | $ | (388) | | | $ | (1,523) | | | $ | (266) | | | $ | (2,264) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized Gain (Loss) on Cash Flow Hedges | | Change in Retirement Plans’ Funded Status | | Foreign Currency Translation | | Share of Other Comprehensive Income (Loss) of Entities Using the Equity Method | | Total |
Balance January 1, 2022 | $ | 2 | | | $ | (324) | | | $ | (1,951) | | | $ | (224) | | | $ | (2,497) | |
Other comprehensive income (loss), before reclassifications | (180) | | | 36 | | | 428 | | | (42) | | | 242 | |
Amounts reclassified from other comprehensive income | 91 | | | (100) | | | — | | | — | | | (9) | |
Other comprehensive income (loss)* | (89) | | | (64) | | | 428 | | | (42) | | | 233 | |
Balance September 30, 2022 | $ | (87) | | | $ | (388) | | | $ | (1,523) | | | $ | (266) | | | $ | (2,264) | |
| | | | | | | | | |
Balance January 1, 2023 | $ | 46 | | | $ | (285) | | | $ | (1,800) | | | $ | (239) | | | $ | (2,278) | |
Other comprehensive income (loss), before reclassifications | (62) | | | (1) | | | 71 | | | (23) | | | (15) | |
Amounts reclassified from other comprehensive income | 3 | | | (10) | | | — | | | — | | | (7) | |
Other comprehensive income (loss)* | (59) | | | (11) | | | 71 | | | (23) | | | (22) | |
Balance September 30, 2023 | $ | (13) | | | $ | (296) | | | $ | (1,729) | | | $ | (262) | | | $ | (2,300) | |
(*)Excluded from the table above is other comprehensive income (loss) allocated to noncontrollingnon-controlling interests of $1$(1) million and $3$1 million for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Significant amounts reclassified out of each component of accumulated other comprehensive income (loss) in the three and nine months ended September 30, 20222023 and 20212022 consisted of the following:following (in millions of dollars):
| | | Amounts Reclassified from Other Comprehensive Income (Loss) | | Amount Reclassified from Other Comprehensive Income (Loss) | Consolidated Statement of Operations Line | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Amounts Reclassified from Other Comprehensive Income (Loss) | | Consolidated Statement of Operations Line |
| | 2022 | | 2021 | | 2022 | | 2021 | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | (in millions) | | (in millions) | | | 2023 | | 2022 | | 2023 | | 2022 | |
Cash flow hedges | Cash flow hedges | $ | — | | | $ | (1) | | | $ | (2) | | | $ | 2 | | Net sales | Cash flow hedges | $ | 3 | | | $ | — | | | $ | 7 | | | $ | (2) | | | Net sales |
| | 77 | | | 9 | | | 135 | | | (18) | | Cost of goods sold | | (13) | | | 77 | | | 19 | | | 135 | | | Cost of goods sold |
| | (8) | | | — | | | (4) | | | 6 | | Other, net | | 15 | | | (8) | | | (10) | | | (4) | | | Other, net |
| | (8) | | | (1) | | | (25) | | | 2 | | Interest expense | | (2) | | | (8) | | | (10) | | | (25) | | | Interest expense |
| | (5) | | | (1) | | | (13) | | | — | | Income taxes | | — | | | (5) | | | (3) | | | (13) | | | Income taxes |
| | $ | 56 | | | $ | 6 | | | $ | 91 | | | $ | (8) | | | | $ | 3 | | | $ | 56 | | | $ | 3 | | | $ | 91 | | |
Change in retirement plans’ funded status: | Change in retirement plans’ funded status: | | | | | | | | | Change in retirement plans’ funded status: | | | | | | | | |
Amortization of actuarial losses | Amortization of actuarial losses | $ | 5 | | | $ | 8 | | | $ | 16 | | | $ | 23 | | * | Amortization of actuarial losses | $ | 3 | | | $ | 5 | | | $ | 12 | | | $ | 16 | | | * |
Amortization of prior service cost | Amortization of prior service cost | (31) | | | (34) | | | (94) | | | (102) | | * | Amortization of prior service cost | (9) | | | (31) | | | (27) | | | (94) | | | * |
| | (8) | | | (16) | | | (22) | | | (24) | | Income taxes | | 3 | | | (8) | | | 5 | | | (22) | | | Income taxes |
| | $ | (34) | | | $ | (42) | | | $ | (100) | | | $ | (103) | | | | $ | (3) | | | $ | (34) | | | $ | (10) | | | $ | (100) | | |
Total reclassifications, net of tax | Total reclassifications, net of tax | $ | 22 | | | $ | (36) | | | $ | (9) | | | $ | (111) | | | Total reclassifications, net of tax | $ | — | | | $ | 22 | | | $ | (7) | | | $ | (9) | | |
(*) These amounts are included in net periodic pension and other postretirement benefit cost. See “Note 6: Employee Benefit Plans and Postretirement Benefits” for additional information.
18. RELATED PARTY INFORMATION
As of September 30, 20222023, CNH Industrial’s related parties were primarily EXOR N.V. and the companies that EXOR N.V. controlled or had a significant influence over, including Stellantis N.V. (formerly Fiat Chrysler Automobiles N.V. which, effective January 16, 2021, merged with Peugeot S.A. by means of a cross-border legal merger) and its subsidiaries and affiliates ("Stellantis"), Ferrari N.V. and Iveco
Group N.V. which effective January 1, 2022 separated from CNH Industrial N.V. by way of a demerger under Dutch law and became a public listed company independent from CNH Industrial.
As of September 30, 2022,2023, EXOR N.V. held 42.7%41.7% of CNH Industrial’s voting power and had the ability to significantly influence the decisions submitted to a vote of CNH Industrial’s shareholders, including approval of annual dividends, the election and removal of directors, mergers or other business combinations, the acquisition or disposition of assets and issuances of equity and the incurrence of indebtedness. The percentage above has been calculated as the ratio of (i) the aggregate number of common shares and special voting shares owned by EXOR N.V. to (ii) the aggregate number of outstanding common shares and special voting shares of CNH Industrial as of September 30, 2022.2023. In addition, CNH Industrial engages in transactions with its unconsolidated subsidiaries and affiliates over which CNH Industrial has a significant influence or joint control.
The Company’s Audit Committee reviews and approves all significant related party transactions.
Transactions with EXOR N.V. and its Subsidiaries and Affiliates
EXOR N.V. is an investment holding company. As of September 30, 20222023 and December 31, 2021,2022, among other things, EXOR N.V. managed a portfolio that includes investments in Stellantis, Iveco Group and Ferrari. CNH Industrial did not enter into any significant transactions with EXOR N.V. during the three and nine months ended September 30, 20222023 and 2021.2022.
In connection with the establishment of Fiat Industrial (now CNH Industrial) through the demerger from Fiat (which was subsequently merged into Fiat Chrysler Automobiles N.V. which is now Stellantis), the two companies entered into a Master Services Agreement (“Stellantis MSA”) which sets forth the primary terms and conditions pursuant to which the service provider subsidiaries of CNH Industrial and Stellantis provide services to the service receiving subsidiaries. As structured, the applicable service provider and service receiver subsidiaries become parties to the Stellantis MSA through the execution of an Opt-in letter that may contain additional terms and conditions. Pursuant to the Stellantis MSA, service receivers are required to pay to service providers the actual cost of the services plus a negotiated margin. During the ninesix months ended SeptemberJune 30, 20222023 and 2021,full year 2022, Stellantis subsidiaries provided CNH Industrial with administrative services such as accounting, maintenance of plant and equipment, security, information systems and training under the terms and conditions of the Stellantis MSA and the applicable Opt-in letters. At June 30, 2023, the Stellantis MSA was terminated. Costs incurred by CNH Industrial related to the termination of the contract were not material.
Furthermore, CNH Industrial and Stellantis engage in other minor transactions in the ordinary course of business.
These transactions with Stellantis are reflected in the Company’s condensed consolidated financial statements as follows:follows (in millions of dollars):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | (in millions) | | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | Net sales | $ | — | | | $ | — | | | $ | — | | | $ | — | | Net sales | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Cost of goods sold | Cost of goods sold | $ | 3 | | | $ | 8 | | | $ | 14 | | | $ | 26 | | Cost of goods sold | 1 | | | 3 | | | 7 | | | 14 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | $ | 11 | | | $ | 15 | | | $ | 36 | | | $ | 43 | | Selling, general and administrative expenses | 7 | | | 11 | | | 29 | | | 36 | |
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (in millions) |
Trade receivables | $ | — | | | $ | — | |
Trade payables | $ | 13 | | | $ | 20 | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Trade receivables | $ | — | | | $ | — | |
Trade payables | 12 | | | 14 | |
Transactions with Iveco Group post-Demerger
CNH Industrial and Iveco Group post-Demerger entered into transactions consisting of the sale of engines from Iveco Group to CNH Industrial. Additionally, concurrent with the Demerger, the Companies entered into services contracts in relation to general administrative and specific technical matters, provided by either CNH Industrial to Iveco Group and vice versa as follows:
Master Service Agreements: CNH Industrial and Iveco Group entered into a two-year Master Services Agreement (“MSA”) whereby each Party (and its subsidiaries) may provide services to the other (and its subsidiaries). Services provided under the MSA relate mainly to lease of premises and depots and IT services.
Engine Supply Agreement: in relation to the design and supply of off-road engines from Iveco Group to CNH Industrial post-Demerger, Iveco Group and CNH Industrial entered into a ten-year Engine Supply Agreement (“ESA”) whereby Iveco Group will sell to CNH Industrial post-Demerger diesel, CNG and LNG engines and provide post-sale services.
Financial Service Agreement: in relation to certain financial services activities carried out by either CNH Industrial to Iveco Group post-Demerger or vice versa, in connection with the execution of the Demerger Deed, CNH Industrial and Iveco Group entered into
a three-year Master Services Agreement (“FS MSA”), whereby each Party (and its subsidiaries) may provide services and/or financial services activities to the other (and its subsidiaries). Services provided under the FS MSA relate mainly to wholesale and retail financing activities to suppliers, distribution network and customers.
The transactions with Iveco Group post-Demerger are reflected in the Condensed Combined Financial Statementsconsolidated financial statements as follows:follows (in millions of dollars):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net sales | $ | 68 | | | $ | 12 | | | $ | 125 | | | $ | 33 | |
Cost of goods sold | 274 | | | 218 | | | 808 | | | 721 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (in millions) | | (in millions) |
Net sales | $ | 12 | | | $ | 10 | | | $ | 33 | | | $ | 20 | |
Cost of goods sold | $ | 218 | | | $ | 228 | | | $ | 721 | | | $ | 717 | |
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Trade receivables | Trade receivables | $ | 18 | | | $ | 87 | | Trade receivables | $ | 24 | | | $ | 21 | |
Receivables from Iveco Group N.V. | Receivables from Iveco Group N.V. | $ | 224 | | | $ | — | | Receivables from Iveco Group N.V. | 229 | | | 298 | |
Trade payables | Trade payables | $ | 173 | | | $ | 181 | | Trade payables | 206 | | | 184 | |
Payables to Iveco Group N.V. | Payables to Iveco Group N.V. | $ | 95 | | | $ | 502 | | Payables to Iveco Group N.V. | 76 | | | 156 | |
Transactions with Unconsolidated Subsidiaries and Affiliates
CNH Industrial sells agricultural and construction equipment and provides technical services to unconsolidated subsidiaries and affiliates such as CNH de Mexico SA de CV, Turk Traktor ve Ziraat Makineleri A.S. and New Holland HFT Japan Inc.Inc.. CNH Industrial also purchases equipment from unconsolidated subsidiaries and affiliates, such as Turk Traktor ve Ziraat Makineleri A.S. These transactions primarily affected revenues, finance and interest income, cost of goods sold, trade receivables and payables, and are presented as follows:follows (in millions of dollars):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | (in millions) | | (in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | Net sales | $ | 79 | | | $ | 94 | | | $ | 301 | | | $ | 306 | | Net sales | $ | 137 | | | $ | 79 | | | $ | 430 | | | $ | 301 | |
Cost of goods sold | Cost of goods sold | $ | 138 | | | $ | 117 | | | $ | 382 | | | $ | 348 | | Cost of goods sold | 171 | | | 138 | | | 497 | | | 382 | |
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | |
| | (in millions) | | September 30, 2023 | | December 31, 2022 |
Trade receivables | Trade receivables | $ | — | | | $ | — | | Trade receivables | $ | 1 | | | $ | — | |
Trade payables | Trade payables | $ | 68 | | | $ | 101 | | Trade payables | 91 | | | 100 | |
At September 30, 20222023 and December 31, 2021,2022, CNH Industrial had provided guarantees totaling $31 million and $19 million, respectively, on certain commitments of its associated company for an amount of $19 million and $15 million, respectively, related toaffiliate CNH Industrial Capital Europe S.a.S.
19. SUBSEQUENT EVENTS
OnEffective October 14, 2022,12, 2023, CNH Industrial Capital LLCclosed on its purchase of Hemisphere GNSS ("Hemisphere"), a global satellite navigation technology leader, for a total consideration of $175 million. The acquisition of Hemisphere consolidates our guidance and connectivity capabilities to advance CNH Industrial's in-house precision, automation and autonomy technology for the agriculture and construction industries.
CNH Industrial completed the sixth and final tranche of its offering$300 million buyback program ("Buyback Program") on November 6, 2023, with additional purchases of $400the Company's common stock of approximately $26 million.
On November 7, 2023, the Company announced that the Board of Directors approved a new share buyback program. Under the new share buyback program, the Company may repurchase periodically up to $1 billion worth of its common shares between November 8, 2023 and March 1, 2024.
On November 7, 2023, the Company announced a targeted restructuring action which includes the reduction of approximately 5% of the Company’s salaried workforce cost. In connection with the restructuring plan, the Company estimates that it will incur pre-tax restructuring and related charges of up to $200 million in aggregate principal amount of 5.450% notes due 2025, with an issue price of 99.349%.
primarily related to employee severance and benefits cost.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in, and under the laws of the Netherlands. CNH Industrial has its corporate seat in Amsterdam, the Netherlands, and its principal office in London,Basildon, England, United Kingdom. Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial” and the “Company” refer to CNH Industrial and its consolidated subsidiaries.
The Company has three reportable segments reflecting the three businesses directly managed by CNH Industrial N.V., consisting of: (i) Agriculture, which designs, produces and sells agricultural equipment (ii) Construction, which designs, produces and sells construction equipment, and (iii) Financial Services, which provides financial services to customers acquiring our products. The Company’s worldwide Agriculture and Construction operations, as well as corporate functions, are collectively referred to as “Industrial Activities.”
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to our unaudited condensed consolidated financial statements in this report, as well as our annual report on Form 20-F10-K for the year ended December 31, 20212022 ("20212022 Annual Report") filed with the U.S. Securities and Exchange Commission (“SEC”). Results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal and other factors.
Certain financial information in this report has been presented by geographic area. Beginning January 1, 2022, our geographicalregion. Our geographic regions are: (1) North America; (2) Europe, Middle East and Africa;Africa ("EMEA"); (3) South America and (4) Asia Pacific. Prior amounts have been conformed to these regions. The geographic designations have the following meanings:
•North America: United States, Canada and Mexico;
•Europe, Middle East and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Turkey, Uzbekistan, Pakistan, the African continent, and the Middle East;
•South America: Central and South America, and the Caribbean Islands; and
•Asia Pacific: Continental Asia (including the IndianIndia subcontinent), Indonesia and OceaniaOceania.
Non-GAAP Financial Measures
CNH Industrial monitors its operations through the use of several non-GAAP financial measures. CNH Industrial’s management believes that these non-GAAP financial measures provide useful and relevant information regarding its operating results and enhance the readers’ ability to assess CNH Industrial’s financial performance and financial position. Management uses these non-GAAP measures to identify operational trends, as well as to make decisions regarding future spending, resource allocations and other operational decisions as they provide additional transparency with respect to our core operations. These non-GAAP financial measures have no standardized meaning under U.S. GAAP or EU-IFRS and are unlikely to be comparable to other similarly titled measures used by other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with U.S. GAAP or EU-IFRS.GAAP.
Our primary non-GAAP financial measures are defined as follows:
Adjusted EBIT of Industrial Activities
Adjusted EBIT of Industrial Activities is defined as net income (loss) before: income taxes, Financial Services’ results, Industrial Activities’ interest expenses, net, foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. Such non-recurring items are specifically disclosed items that management considers rare or discrete events that are infrequent in nature and not reflective of on-goingongoing operational activities.
Net Cash (Debt) and Net Cash (Debt) of Industrial Activities
Net Cash (Debt) is defined as total debt less: intersegment notes receivable, cash and cash equivalents, restricted cash, other current financial assets (primarily current securities, short-term deposits and investments towards high-credit rating counterparties) and derivative hedging debt. CNH Industrial provides the reconciliation of Net Cash (Debt) to Total (Debt), which is the most directly comparable measure included in the consolidated balance sheets. Due to different sources of cash flows used for the repayment of the debt between Industrial Activities and Financial Services (by cash from operations for Industrial Activities and by collection of financing receivables for Financial Services), management separately evaluates the cash flow performance of Industrial Activities using Net Cash (Debt) of Industrial Activities.
Revenues on a Constant Currency Basis
We discuss the fluctuations in revenues on a constant currency basis by applying the prior-year average exchange rates to current year’s revenue expressed in local currency in order to eliminate the impact of foreign exchange (“FX”) rate fluctuations.
Free Cash Flow of Industrial Activities
Free Cash Flow of Industrial Activities (or Industrial Free Cash Flow) refers to Industrial Activities, only, and is computed as consolidated cash flow from operating activities less: cash flow from operating activities of Financial Services; investments of Industrial Activities in assets sold under operating leases, property, plant and equipment and intangible assets; change in derivatives hedging debt of Industrial Activities; as well as other changes and intersegment eliminations.
A. OPERATING RESULTS
The operations and key financial measures and financial analysis differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, management believes that certain supplemental disclosures are important in understanding of our consolidated operations and financial results. For further information, see “Supplemental Information” within this section, where we present supplemental consolidating data split by Industrial Activities and Financial Services. Transactions between Industrial Activities and Financial Services have been eliminated to arrive at the consolidated data.
Spin-off of On-Highway Business
Until December 31, 2021, CNH Industrial N.V. owned and controlled the Commercial and Specialty Vehicles business, the Powertrain business, and the related Financial Services business (together the “Iveco Group Business” or the “On-Highway Business”), as well as the Agriculture business, the Construction business, and the related Financial Services business (collectively, the “Off-Highway Business”). Effective January 1, 2022, the Iveco Group Business was separated from CNH Industrial N.V. by way of a demerger under Dutch law (the "Demerger") to Iveco Group N.V. (the "Iveco Group") and the Iveco Group became a public listed company independent from CNH Industrial, with its common shares trading on the Euronext Milan, a regulated market organized and managed by Borsa Italiana S.p.A. The On-Highway Business' financial results for the periods prior to the Demerger have been reflected in our Condensed Consolidated Statement of Operations, retrospectively, as discontinued operations. Additionally, the related assets and liabilities associated with the On-Highway Business in the prior year consolidated balance sheet are classified as discontinued operations within Assets Held for Distribution and Liabilities Held for Distribution on the Condensed Consolidated Balance Sheet.
Global Business Conditions
Significant uncertainties,In combination with the economic recovery factors and repercussions from geopolitical events, the global economy continues to experience volatile disruptions including rising inflation, geopolitical instability,to the commodity, labor and the war in the Ukraine,transportation markets. These disruptions have contributed to an inflationary environment which has affected, and may continue to create volatilityaffect, the price and availability of certain products and services necessary for the Company's operations. For example, the Company experienced supply chain disruptions and inflationary pressures in 2022 and, while these trends improved in 2023, the global economy. These factors leadCompany continues to inefficienciesexperience some disruptions. The reduction in supply chain disruptions contributed to improved efficiencies in our manufacturing operations, and impact costs. We continuebut purchasing costs remain elevated.
In addition, the Company continues to work to mitigatemonitor global economic conditions and the impact of these issuesmacroeconomic pressures, including repercussions from rising interest rates, fluctuating currency exchange rates, inflation and recession fears, on the Company’s business, customers and suppliers.
For a discussion of the Company’s risks and uncertainties, see Part 1, Item 1A: Risk Factors in order to meet end-market demand. We will continue to monitor the situation as conditions remain fluidCompany’s Form 10-K for the year ended December 31, 2022 and evolve.Part II, Item 1A: Risk Factors within this Form 10-Q.
During the first quarter of 2022, CNH Industrial announced it was suspendinghad suspended non-domestic operations in Russia. The Company is supporting its businesses in this market through the continuation of employee salaries and payment of other administrative expenses. As a result of the suspension, the Company evaluated the carrying value of assets held within the Company's Russia operations. Upon completion of the evaluation, during the quarter ended March 31, 2022, the Companyoperations and recorded charges of $71 million related to asset write downs,write-downs, financial receivable allowances and a valuation allowance against deferred tax assets. A prolonged war in Ukraine could have further adverse effects on usDuring the first quarter of 2023, CNH Industrial sold CNH Capital Russia at a loss of $6 million and our operations in Russia. The Russia-Ukraine conflict andduring the ensuing sanctions tosecond quarter of 2023, CNH Industrial sold CNH Industrial Russia and Belarus and Russian counter-sanctions have created additional tensions in the commodity markets. The Company has no critical supplier in the affected countries, but prices for certain commodities, including natural gas, might create further volatility.at a loss of $17 million.
Three Months Ended September 30, 20222023 Compared to Three Months Ended September 30, 20212022
Consolidated Results of Operations
| | | Three Months Ended September 30, | | | Three Months Ended September 30, | |
| 2022 | | 2021 | | |
| (in millions) | | |
Revenues: | | | |
(in millions of dollars) | | (in millions of dollars) | 2023 | | 2022 | |
Revenues | | Revenues | | | | |
Net sales | Net sales | $ | 5,396 | | | $ | 4,336 | | | Net sales | $ | 5,332 | | | $ | 5,396 | | |
Finance, interest and other income | Finance, interest and other income | 485 | | | 410 | | | Finance, interest and other income | 654 | | | 485 | | |
Total Revenues | Total Revenues | 5,881 | | | 4,746 | | | Total Revenues | 5,986 | | | 5,881 | | |
Costs and Expenses: | | | | | |
Costs and Expenses | | Costs and Expenses | | | | |
Cost of goods sold | Cost of goods sold | 4,156 | | | 3,452 | | | Cost of goods sold | 4,059 | | | 4,156 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 422 | | | 349 | | | Selling, general and administrative expenses | 462 | | | 422 | | |
Research and development expenses | Research and development expenses | 213 | | | 157 | | | Research and development expenses | 266 | | | 213 | | |
Restructuring expenses | Restructuring expenses | 11 | | | 15 | | | Restructuring expenses | 5 | | | 11 | | |
Interest expense | Interest expense | 190 | | | 127 | | | Interest expense | 346 | | | 190 | | |
Other, net | Other, net | 159 | | | 124 | | | Other, net | 186 | | | 159 | | |
Total Costs and Expenses | Total Costs and Expenses | 5,151 | | | 4,224 | | | Total Costs and Expenses | 5,324 | | | 5,151 | | |
Income from continuing operations before income taxes and equity in income of unconsolidated subsidiaries and affiliates | 730 | | | 522 | | | |
Income tax (expense) | (192) | | | (79) | | | |
Income of Consolidated Group before Income Taxes | | Income of Consolidated Group before Income Taxes | 662 | | | 730 | | |
Income tax (expense) benefit | | Income tax (expense) benefit | (171) | | | (192) | | |
Equity in income of unconsolidated subsidiaries and affiliates | Equity in income of unconsolidated subsidiaries and affiliates | 21 | | | 17 | | | Equity in income of unconsolidated subsidiaries and affiliates | 79 | | | 21 | | |
Net income from continuing operations | 559 | | | 460 | | | |
Net income from discontinued operations | — | | | (131) | | | |
Net income | 559 | | | 329 | | | |
Net income attributable to noncontrolling interests | 3 | | | 6 | | | |
Net income attributable to CNH Industrial N.V. | $ | 556 | | | $ | 323 | | | |
Net income (loss) | | Net income (loss) | 570 | | | 559 | | |
Net income (loss) attributable to noncontrolling interests | | Net income (loss) attributable to noncontrolling interests | 3 | | | 3 | | |
Net income (loss) attributable to CNH Industrial N.V. | | Net income (loss) attributable to CNH Industrial N.V. | $ | 567 | | | $ | 556 | | |
Revenues
We recorded revenues of $5,881$5,986 million for the three months ended September 30, 2022,2023, an increase of 23.9% (up 28.9%1.8% (down 0.1% on a constant currency basis) compared to the three months ended September 30, 2021.2022. Net sales of Industrial Activities were $5,396$5,332 million in the three months ended September 30, 2022, an increase2023, a decrease of 24.4% (up 29.7%1.2% (down 3.0% on a constant currency basis) compared to the three months ended September 30, 2021,2022. This decline is mainly due to lower industry demand in the Agriculture segment, especially in South America and EMEA for combines. Pricing continued to be favorable price realization offsetting adverse currency conversion.for both Industrial segments, and Construction net sales grew by 5.9%.
Cost of Goods Sold
Cost of goods sold werewas $4,059 million for the three months ended September 30, 2023 compared with $4,156 million for the three months ended September 30, 2022 compared with $3,452 million for the three months ended September 30, 2021.2022. As a percentage of net sales of Industrial Activities, cost of goods sold was 77.0%76.1% in the three months ended September 30, 2022 (79.6%2023 (77.0% for the three months ended September 30, 2021)2022), as a result of pricing, volumesfavorable price realization and favorable mix offset by cost escalation.improved operating performance.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $422$462 million during the three months ended September 30, 2023 (7.7% of total revenues), up $40 million compared to the three months ended September 30, 2022 (7.2% of total revenues), up $73 million compared. The year over year increase is primarily attributable to the three months ended September 30, 2021 (7.4% of total revenues) as expenses returned to more normal levels from the pandemic-affected low levels experienced in the prior year.increased labor costs.
Research and Development Expenses
For the three months ended September 30, 2022,2023, research and development expenses were $213$266 million compared to $157$213 million for the three months ended September 30, 2021.2022. The expense for the three months ended September 30, 20222023 and 20212022 was primarily attributable to continued investment in new products technologies, and digital growth.technologies.
Restructuring Expenses
Restructuring expenses for the three months ended September 30, 20222023 were $11$5 million, compared to $15$11 million for the three months ended September 30, 2021.2022.
Interest Expense
Interest expense was $346 million for the three months ended September 30, 2023 compared to $190 million for the three months ended September 30, 2022 compared to $127 million for the three months ended September 30, 2021.2022. The interest expense attributable to Industrial Activities for the three months ended September 30, 2022,2023, net of interest income and eliminations, was $27$10 million, compared to $21$27 million in the three months ended September 30, 2021.2022.
Other, net
Other, net expenses were $186 million for the three months ended September 30, 2023 and include a pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.
Other, net expenses were $159 million for the three months ended September 30, 2022 and includedinclude a pre-tax gain of $30 million ($23 million after-tax) as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, a pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification, $14 million ($11 million after-tax) of loss on the sale of Aerostar net of income from the business held for sale during the quarter, separation costs in connection with the spin-off of the On-Highway business of $7 million ($5 million after-tax), and foreign exchange losses of $14 million.
Other, net expenses were $124 million for the three months ended September 30, 2021 and included a pre-tax gain of $30 million ($23 million after-tax) as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, separation costs in connection with the spin-off of the On-Highway business of $24 million, and foreign exchange gains of $21 million.
Income Taxes
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2022 | | 2021 |
| (in millions, except percentages) |
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates | $ | 730 | | | $ | 522 | |
Income tax (expense) | $ | (192) | | | $ | (79) | |
Effective tax rate | 26.3 | % | | 15.1 | % |
| | | | | | | | | | | |
| Three Months Ended September 30, |
(in millions of dollars, except percentages) | 2023 | | 2022 |
Income of Consolidated Group before Income Taxes | $ | 662 | | | $ | 730 | |
Income tax (expense) benefit | $ | (171) | | | $ | (192) | |
Effective tax rate | 25.8 | % | | 26.3 | % |
Income tax expense for the three months ended September 30, 20222023 was $192$171 million compared to $79$192 million for the three months ended September 30, 2021.2022. The effective tax ratesrate for the three months ended September 30, 2023 and 2022 was 25.8% and 26.3%, respectively. The effective tax rate for the three months ended September 30, 2023 was lower than the effective tax rate for the three months ended September 30, 2022 and 2021 were 26.3% and 15.1%, respectively.
Excludingdue to a lower share of consolidated earnings in higher taxing jurisdictions compared to the pre-tax and tax impacts of restructuring charges, the Benefit Modification Amortization, the amortization related to employee benefit changes implemented during 2021, certain operations of Raven Industries, Inc., changes associated with the Company's spin-off of its On-Highway business, and the sale of Raven’s Aerostar Division, the effective tax rate was 26.2% for the three months ended September 30, 2022. Excluding the pre-tax and tax impacts of restructuring charges, the Benefit Modification Amortization, Raven acquisition costs, separation costs in connection with the spin-off of the On-Highway business, and non-cash discrete tax benefits, the effective tax rate was 16.3% for the three months ended September 30, 2021.prior year.
Equity in Income of Unconsolidated Subsidiaries and Affiliates
Equity in income of unconsolidated subsidiaries and affiliates was $21$79 million and $17$21 million for the three months ended September 30, 20222023 and 2021,2022, respectively.
Net Income (Loss)
Net income was $570 million for the three months ended September 30, 2023, compared to net income of $559 million for the three months ended September 30, 2022, compared to net2022. Net income from continuing operations of $460 million for the three months ended September 30, 2021. 2023 included restructuring expenses of $5 million, partially offset by a pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over four years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.
Net income for the three months ended September 30, 2022 included a pre-tax gain of $30 million ($23 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, a pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification offset by $14 million ($11 million after-tax) of loss from the activity of the Raven business held for sale, including the loss on the sale of the Aerostar Division during the quarter, separation costs in connection with the spin-off of the On-Highway business of $7 million ($5 million after-tax) and restructuring expenses of $11 million ($9 million after-tax).
Net income of continuing operations was $460 million for the three months ended September 30, 2021, and included a pre-tax gain of $30 million ($23 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, separation costs in connection with the spin-off of the On-Highway business of $24 million and restructuring expenses of $15 million ($13 million after-tax).
Industrial Activities and Business Segments
The following tables show revenues and Adjusted EBIT by segment. We have also included a discussion of our results by Industrial Activities and each of our business segments.segments:
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2022 | | 2021 | | % Change | | % Change Excl. FX | |
| (in millions, except percentages) | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change | | % Change Excl. FX |
Revenues: | Revenues: | | Revenues: | | | | | | | |
Agriculture | Agriculture | $ | 4,501 | | | $ | 3,563 | | | 26.3 | % | | 31.9 | % | Agriculture | $ | 4,384 | | | $ | 4,501 | | | (2.6) | % | | (4.4) | % |
Construction | Construction | 895 | | | 773 | | | 15.8 | % | | 19.8 | % | Construction | 948 | | | 895 | | | 5.9 | % | | 4.1 | % |
Eliminations and other | Eliminations and other | — | | | — | | | Eliminations and other | — | | | — | | |
Total Net sales of Industrial Activities | Total Net sales of Industrial Activities | 5,396 | | | 4,336 | | | 24.4 | % | | 29.7 | % | Total Net sales of Industrial Activities | 5,332 | | | 5,396 | | | (1.2) | % | | (3.0) | % |
Financial Services | Financial Services | 482 | | | 405 | | | 19.0 | % | | 21.1 | % | Financial Services | 653 | | | 482 | | | 35.5 | % | | 33.2 | % |
Eliminations and other | Eliminations and other | 3 | | | 5 | | | Eliminations and other | 1 | | | 3 | | |
Total Revenues | Total Revenues | $ | 5,881 | | | $ | 4,746 | | | 23.9 | % | | 28.9 | % | Total Revenues | $ | 5,986 | | | $ | 5,881 | | | 1.8 | % | | (0.1) | % |
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2022 | | 2021 | | $ Change | | 2022 Adj EBIT Margin | | 2021 Adj EBIT Margin | |
| (in millions, except percentages) | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | $ Change | | 2023 Adj EBIT Margin | | 2022 Adj EBIT Margin |
Adjusted EBIT by segment: | Adjusted EBIT by segment: | | Adjusted EBIT by segment: | | | | | | | | | |
Agriculture | Agriculture | $ | 666 | | | $ | 415 | | | $ | 251 | | | 14.8 | % | | 11.6 | % | Agriculture | $ | 672 | | | $ | 666 | | | $ | 6 | | | 15.3 | % | | 14.8 | % |
Construction | Construction | 24 | | | 21 | | | 3 | | | 2.7 | % | | 2.7 | % | Construction | 60 | | | 24 | | | 36 | | | 6.3 | % | | 2.7 | % |
Unallocated items, eliminations and other | Unallocated items, eliminations and other | (20) | | | (16) | | | (4) | | | Unallocated items, eliminations and other | (75) | | | (20) | | | (55) | | |
Total Adjusted EBIT of Industrial Activities | Total Adjusted EBIT of Industrial Activities | $ | 670 | | | $ | 420 | | | $ | 250 | | | 12.4 | % | | 9.7 | % | Total Adjusted EBIT of Industrial Activities | $ | 657 | | | $ | 670 | | | $ | (13) | | | 12.3 | % | | 12.4 | % |
Net sales of Industrial Activities were $5,396$5,332 million during the three months ended September 30, 2022, an increase2023, a decrease of 24.4%1.2% compared to the three months ended September 30, 2021 (up 29.7%2022 (down 3.0% on a constant currency basis),. Net sales decreased due to lower industry demand in the Agriculture segment, especially in South America and in EMEA for combines. Pricing continued favorable price realization offsetting adverse currency conditions.for both Industrial segments and Construction net sales grew by 5.9%.
Adjusted EBIT of Industrial Activities was $657 million during the three months ended September 30, 2023, compared to an adjusted EBIT of $670 million during the three months ended September 30, 2022, compared to an adjusted EBIT of $420 million during the three months ended September 30, 2021. The increase2022. Gross margin improvements in adjusted EBIT was primarily attributable to year over year increases in both the Agriculture and Construction segments.
segments were more than offset by increased SG&A and R&D.Segment Performance
Agriculture
Net Sales
The following table shows Agriculture net sales by geographic region for the three months ended September 30, 20222023 compared to the three months ended September 30, 2021:2022:
Agriculture Sales—by geographic region
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
(in millions, except percentages) | 2022 | | 2021 | | % Change | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change |
North America | North America | $ | 1,718 | | | $ | 1,291 | | | 33.1 | % | North America | $ | 1,807 | | | $ | 1,718 | | | 5.2 | % |
Europe, Middle East, and Africa | 1,244 | | | 1,285 | | | (3.2) | % | |
Europe, Middle East and Africa | | Europe, Middle East and Africa | 1,202 | | | 1,244 | | | (3.4) | % |
South America | South America | 1,034 | | | 625 | | | 65.4 | % | South America | 830 | | | 1,034 | | | (19.7) | % |
Asia Pacific | Asia Pacific | 505 | | | 362 | | | 39.5 | % | Asia Pacific | 545 | | | 505 | | | 7.9 | % |
Total | Total | $ | 4,501 | | | $ | 3,563 | | | 26.3 | % | Total | $ | 4,384 | | | $ | 4,501 | | | (2.6) | % |
Agriculture's net sales totaled $4,501$4,384 million in the three months ended September 30, 2022, an increase2023, a decline of 26.3%2.6% compared to the three months ended September 30, 2021 (up 31.9%2022 (down 4.4% on a constant currency basis). Net sales increaseddecreased primarily due to favorable price realization and better mix, mostly driven by North Americalower industry volume mainly in EMEA and South America, partially offset by the negative impact of foreign exchange rates.favorable mix in North America and continued price realization.
In North America, industry volume was up 9%19% year over year forin the third quarter for tractors over 140 HP and was down 16%7% for tractors under 140 HP; combines were up 13%.down 4% from prior year. In Europe, Middle East and Africa ("EMEA"),EMEA, tractor and combine demand was up 4% and down 5% and 30%18%, respectively; combine demandrespectively. Industry volume in Europe alone was up 12%.down 7% for tractors and down 40% for combines. South America tractor demand was up 12%down 16% and combine demand was up 20%down 47%. Asia Pacific tractor demand was up 8%down 10% and combine demand was up 12%33%.
Adjusted EBIT
Adjusted EBIT was $666$672 million ($415 million in the three months ended September 30, 2021) with adjusted2023, compared to $666 million in the three months ended September 30, 2022. The reduced volumes due to industry headwinds were compensated by better mix, higher gross margin, slight reduction in SG&A expenses while R&D investments continued growing and accounted for 5.5% of sales (4.3% in 2022). Income from unconsolidated subsidiaries increased $56 million in the quarter, primarily from our JV. Adjusted EBIT margin at 14.8% (Adjusted EBIT/revenue). The $251 million increase was driven by favorable price realization and better mix, partially offset by higher selling, general and administrative ("SG&A") costs, higher production and raw material costs, and increased R&D spend.15.3%.
Construction
Net Sales
The following table shows Construction net sales by geographic region for the three months ended September 30, 20222023 compared to the three months ended September 30, 2021:2022:
Construction Sales—by geographic region
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
(in millions, except percentages) | 2022 | | 2021 | | % Change | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change |
North America | North America | $ | 438 | | | $ | 343 | | | 27.7 | % | North America | $ | 544 | | | $ | 438 | | | 24.2 | % |
Europe, Middle East, and Africa | 224 | | | 199 | | | 12.6 | % | |
Europe, Middle East and Africa | | Europe, Middle East and Africa | 200 | | | 224 | | | (10.7) | % |
South America | South America | 174 | | | 152 | | | 14.5 | % | South America | 147 | | | 174 | | | (15.5) | % |
Asia Pacific | Asia Pacific | 59 | | | 79 | | | (25.3) | % | Asia Pacific | 57 | | | 59 | | | (3.4) | % |
Total | Total | $ | 895 | | | $ | 773 | | | 15.8 | % | Total | $ | 948 | | | $ | 895 | | | 5.9 | % |
Construction's net sales totaled $895$948 million in the three months ended September 30, 2022,2023, an increase of 15.8%5.9% compared to the three months ended September 30, 20212022 (up 19.8%4.1% on a constant currency basis), driven by favorable price realization and contribution from the Sampierana business acquiredpositive volume/mix mainly in December 2021.North America, partially offset by lower net sales in other regions.
Global industry volume for construction equipment decreased in both Heavy and Light sub-segmentswas down 13% year over year forin the third quarter withfor Heavy construction equipment; Light construction equipment was down 3% and Light down 4%, mostly driven by a 9% decrease in Light and Heavy equipment demand for Asia Pacific, particularly in China.year over year. Aggregated demand increased 1%2% in North America, decreased 5%3% in EMEA, and increased 21%decreased 27% in South America.
America and decreased 13% for Asia Pacific (excluding China, Asia Pacific markets decreased 1%).Adjusted EBIT
Adjusted EBIT was $60 million in the three months ended September 30, 2023, compared to $24 million in the three months ended September 30, 2022,2022. The $36 million increase was due to favorable product mix and price realization while SG&A and R&D spend was flat year-over-year. Adjusted EBIT margin was 6.3% an increase of $3 million360 bps compared to the three months ended September 30, 2021. The improvement was due to favorable volume and mix and positive price realization, partially offset by higher production, freight and raw material costs and increased SG&A spend. Adjusted EBIT margin was 2.7% (Adjusted EBIT/revenue).2022
Financial Services
Finance, Interest and Other Income
Financial Services' revenues totaled $482$653 million in the three months ended September 30, 2022,2023, up 19.0%35.5% compared to the three months ended September 30, 20212022 (up 21.1%33.2% on a constant currency basis), due to favorable volumes in all regions,and higher base rates across all regions, mainly in South America, and higherpartially offset by lower used equipment sales partially offset by changes in North America product mix.due to decreased operating lease maturities.
Net Income
Net income of Financial Services was $86 million in the three months ended September 30, 2022, a decrease of $10 million2023, flat compared to the three months ended September 30, 2021,2022, primarily due to favorable volumes in all regions, partially offset by margin compression in North America increased SG&A costs, specifically labor costs, and normalized risk costs, partially offset by favorable volumes in all regions and higher recoveries on used equipments sales.risk costs.
In the third quarter of 2022,2023, retail loan originations, including unconsolidated joint ventures, were $2.5$3.0 billion, up $0.1$0.6 billion compared to the third quarter of 2021.2022 (up $0.5 billion on a constant currency basis.) The managed portfolio (including unconsolidated joint ventures) was $21.2$26.8 billion as of September 30, 20222023 (of which retail was 70%65% and wholesale was 30%35%), up $1.2$5.6 billion compared to September 30, 20212022 (up $2.4$4.7 billion on a constant currency basis).
At September 30, 2022,2023, the receivables balance greater than 30 days past due as a percentage of receivables was 1.3% (1.4%1.6% (1.3% as of September 30, 2021)2022).
Reconciliation of Net Income (Loss) to Adjusted EBIT
The following table includes the reconciliation of Adjusted EBIT, a non-GAAP financial measure, to net income, the most comparable U.S. GAAP financial measure.measure:
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2022 | | 2021 | |
| (in millions) | |
(in millions of dollars) | | (in millions of dollars) | | 2023 | | 2022 |
Agriculture | Agriculture | | $ | 666 | | | $ | 415 | | Agriculture | | $ | 672 | | | $ | 666 | |
Construction | Construction | | 24 | | | 21 | | Construction | | 60 | | | 24 | |
Unallocated items, eliminations and other | Unallocated items, eliminations and other | | (20) | | | (16) | | Unallocated items, eliminations and other | | (75) | | | (20) | |
Total Adjusted EBIT of Industrial Activities | Total Adjusted EBIT of Industrial Activities | | $ | 670 | | | $ | 420 | | Total Adjusted EBIT of Industrial Activities | | 657 | | | 670 | |
Financial Services Net Income | | 86 | | | 96 | | |
Financial Services Net income (loss) | | Financial Services Net income (loss) | | 86 | | | 86 | |
Financial Services Income Taxes | Financial Services Income Taxes | | 32 | | | 31 | | Financial Services Income Taxes | | 34 | | | 32 | |
Interest expense of Industrial Activities, net of interest income and eliminations | Interest expense of Industrial Activities, net of interest income and eliminations | | (27) | | | (21) | | Interest expense of Industrial Activities, net of interest income and eliminations | | (10) | | | (27) | |
Foreign exchange gains (losses), net of Industrial Activities | Foreign exchange gains (losses), net of Industrial Activities | | (14) | | | 21 | | Foreign exchange gains (losses), net of Industrial Activities | | (21) | | | (14) | |
Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | 35 | | | 33 | | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | — | | | 35 | |
Restructuring expense of Industrial Activities | Restructuring expense of Industrial Activities | | (11) | | | (15) | | Restructuring expense of Industrial Activities | | (5) | | | (11) | |
Other discrete items of Industrial Activities(2) | | (20) | | | (26) | | |
Other discrete items(2) | | Other discrete items(2) | | — | | | (20) | |
Income (loss) before taxes | Income (loss) before taxes | | $ | 751 | | | $ | 539 | | Income (loss) before taxes | | 741 | | | 751 | |
Income tax (expense) benefit | Income tax (expense) benefit | | (192) | | | (79) | | Income tax (expense) benefit | | (171) | | | (192) | |
Net income (loss) from discontinued operations | | $ | — | | | $ | (131) | | |
Net income (loss) | Net income (loss) | | $ | 559 | | | $ | 329 | | Net income (loss) | | $ | 570 | | | $ | 559 | |
(1) In the three months ended September 30, 2023 this item includes the pre-tax gain of $6 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S. In the three months ended September 30, 2022, this item includes the pre-tax gain of $30 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 modification of a healthcare plan in the U.S. and athe pre-tax gain of $6 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S. In the three months ended September 30, 2021, this item includes the pre-tax gain of $30 million as a result of the 2018 modification.
(2) In the three months ended September 30, 2022,2023, this item included his itemdid not include any discrete items, while the three months ended September 30, 2022, included $7 million of separation costs incurred in connection with our spin-off of the Iveco Group Business and $14 million of loss from the activity of the Raven business held for sale, including the loss on the sale of the Aerostar Division. In the three months ended September 30, 2021, this item included $24 million of separation costs incurred in connection with our spin-off of the Iveco Group Business.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Consolidated Results of Operations
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, | |
| 2022 | | 2021 | |
| (in millions) | |
Revenues: | | |
(in millions of dollars) | | (in millions of dollars) | 2023 | | 2022 | |
Revenues | | Revenues | | | | |
Net sales | Net sales | $ | 15,189 | | | $ | 12,808 | | Net sales | $ | 16,062 | | | $ | 15,189 | | |
Finance, interest and other income | Finance, interest and other income | 1,419 | | | 1,208 | | Finance, interest and other income | 1,833 | | | 1,419 | | |
Total Revenues | Total Revenues | 16,608 | | | 14,016 | | Total Revenues | 17,895 | | | 16,608 | | |
Costs and Expenses: | | | | |
Costs and Expenses | | Costs and Expenses | | | | |
Cost of goods sold | Cost of goods sold | 11,819 | | | 10,064 | | Cost of goods sold | 12,133 | | | 11,819 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 1,224 | | | 1,023 | | Selling, general and administrative expenses | 1,385 | | | 1,224 | | |
Research and development expenses | Research and development expenses | 609 | | | 453 | | Research and development expenses | 766 | | | 609 | | |
Restructuring expenses | Restructuring expenses | 19 | | | 21 | | Restructuring expenses | 8 | | | 19 | | |
Interest expense | Interest expense | 490 | | | 417 | | Interest expense | 941 | | | 490 | | |
Other, net | Other, net | 490 | | | 422 | | Other, net | 536 | | | 490 | | |
Total Costs and Expenses | Total Costs and Expenses | 14,651 | | | 12,400 | | Total Costs and Expenses | 15,769 | | | 14,651 | | |
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates | 1,957 | | | 1,616 | | |
Income tax (expense) | (579) | | | (347) | | |
Income of Consolidated Group before Income Taxes | | Income of Consolidated Group before Income Taxes | 2,126 | | | 1,957 | | |
Income tax (expense) benefit | | Income tax (expense) benefit | (536) | | | (579) | | |
Equity in income of unconsolidated subsidiaries and affiliates | Equity in income of unconsolidated subsidiaries and affiliates | 69 | | | 68 | | Equity in income of unconsolidated subsidiaries and affiliates | 176 | | | 69 | | |
Net income from continuing operations | 1,447 | | | 1,337 | | |
Net income from discontinued operations | — | | | 116 | | |
Net income | 1,447 | | | 1,453 | | |
Net income attributable to noncontrolling interests | 10 | | | 32 | | |
Net income attributable to CNH Industrial N.V. | $ | 1,437 | | | $ | 1,421 | | |
Net income (loss) | | Net income (loss) | 1,766 | | | 1,447 | | |
Net income (loss) attributable to noncontrolling interests | | Net income (loss) attributable to noncontrolling interests | 11 | | | 10 | | |
Net income (loss) attributable to CNH Industrial N.V. | | Net income (loss) attributable to CNH Industrial N.V. | $ | 1,755 | | | $ | 1,437 | | |
Revenues
We recorded revenues of $16,608$17,895 million for the nine months ended September 30, 2022,2023, an increase of 18.5%7.7% (up 21.5%8.1% on a constant currency basis) compared to the nine months ended September 30, 2021.2022. Net sales of Industrial Activities were $15,189$16,062 million in the nine months ended September 30, 2022,2023, an increase of 18.6%5.7% (up 21.9%6.1% on a constant currency basis) compared to the nine months ended September 30, 2021,2022 primarily due to favorable price realization.
Cost of Goods Sold
Cost of goods sold werewas $12,133 million for the nine months ended September 30, 2023 compared with $11,819 million for the nine months ended September 30, 2022 compared with $10,064 million for the nine months ended September 30, 2021.2022. As a percentage of net sales of Industrial Activities, cost of goods sold was 77.8%75.5% in the nine months ended September 30, 2022 (78.6%2023 (77.8% for the nine months ended September 30, 2021)2022), as a result of pricing and favorable fixed cost absorptionprice realization partially offset by cost escalation.higher manufacturing and purchasing costs. In the nine months ended September 30, 2022, this item includesincluded $34 million of asset write downswrite-downs as a result of the suspension of non-domestic operations in Russia.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $1,224$1,385 million during the nine months ended September 30, 2023 (7.7% of total revenues), up $161 million compared to the nine months ended September 30, 2022 (7.4% of total revenues), up $201 million compared. The year over year increase is primarily due to the nine months ended September 30, 2021 (7.3% of total revenues) as expenses returned to more normal levels from the pandemic-affected low levels experienced in the prior year.increased labor costs. For the nine months ended September 30, 2022, SG&A includesincluded $25 million in write-downs due to the suspension of non-domestic operations in Russia.
Research and Development Expenses
For the nine months ended September 30, 2022,2023, research and development expenses were $609$766 million compared to $453$609 million for the nine months ended September 30, 2021.2022. The expense for the nine months ended September 30, 20222023 and 20212022 was primarily attributable to continued investment in new products technologies, and digital growth.technologies.
Restructuring Expenses
Restructuring expenses for the nine months ended September 30, 20222023 were $19$8 million, compared to $21$19 million for the nine months ended September 30, 2021.2022.
Interest Expense
Interest expense was $941 million for the nine months ended September 30, 2023 compared to $490 million for the nine months ended September 30, 2022 compared to $417 million for the nine months ended September 30, 2021.2022. The interest expense attributable to Industrial Activities for the nine months ended September 30, 2022,2023, net of interest income and eliminations was $97$36 million, compared to $92$97 million in the nine months ended September 30, 2022.
Other, net
Other, net expenses were $536 million for the nine months ended September 30, 2021. In2023 and include a loss of $23 million on the nine months ended September 30,sale of CNH Industrial Russia offset by a pre-tax gain of $18 million ($14 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 interest expense includedU.S. healthcare plan modification and a chargegain of $8$13 million relatedin relation to the repurchasefair value remeasurement of €316 million (equivalent to $371 million) of outstanding notes due May 23, 2022 by CNH Industrial Finance Europe S.A.previously held investments in Augmenta and Bennamann.
Other, net
Other, net expenses were $490 million for the nine months ended September 30, 2022 and include a pre-tax gain of $90 million ($68 million after-tax) as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, a pre-tax gain of $18 million ($14 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification, $22 million ($54 million after-tax) of loss on the sale of Raven Engineered Films and Aerostar Divisions net of income from the Raven businesses held for sale during the period, separation costs in connection with the spin-off of the On-Highway business of $13 million ($10 million after-tax), and foreign exchange losses of $14 million.
Other, net expenses were $422 million for the nine months ended September 30, 2021 and includes a pre-tax gain of $90 million ($68 million after-tax) as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, separation costs in connection with the spin-off of the On-Highway business of $32 million and foreign exchange gain of $6 million.
Income Taxes
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| (in millions, except percentages) |
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates | $ | 1,957 | | | $ | 1,616 | |
Income tax (expense) | $ | (579) | | | $ | (347) | |
Effective tax rate | 29.6 | % | | 21.5 | % |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
(in millions of dollars, except percentages) | 2023 | | 2022 |
Income of Consolidated Group before Income Taxes | $ | 2,126 | | | $ | 1,957 | |
Income tax (expense) benefit | $ | (536) | | | $ | (579) | |
Effective tax rate | 25.2 | % | | 29.6 | % |
Income tax expense for the nine months ended September 30, 20222023 was $579$536 million compared to $347$579 million for the nine months ended September 30, 2021.2022. The effective tax ratesrate for the nine months ended September 30, 2023 and 2022 was 25.2% and 2021 were 29.6% and 21.5%, respectively. The 2023 effective tax rate was reduced by the tax benefits related to the sale of CNH Industrial Russia, although these benefits were partially offset by discrete tax expense associated with prior periods. The 2022 effective tax rate was negatively impactedincreased by pre-tax losses for which deferred tax assets were not recognized, the de-recognitionrecognition of certain deferred tax assets, increased charges for unrecognized tax benefits, and a discrete tax charge resulting from the sale of Raven’s Engineered Films Division. The impact from the sale of Raven's Engineered Films Division increased the current period effective tax rate by 170 basis points.
Excluding the pre-tax and tax impacts of restructuring charges, the Benefit Modification Amortization, the amortization related to employee benefit changes implemented during 2021, certain operations of Raven Industries, Inc., charges associated with the Company’s spin-off of its On-Highway business, charges associated with the Company’s Russian operations, and discrete tax charges resulting from the sale of Raven’s Engineered Films Division and Aerostar, the effective tax rate was 26.1% for the nine months ended September 30, 2022. Excluding the pre-tax and tax impacts of restructuring charges, the Benefit Modification Amortization, charges for retiring certain debt, Raven acquisition costs, charges associated with the Company’s spin-off of its On-Highway business, and non-cash discrete tax benefits, the effective tax rate was 21.3% for the nine months ended September 30, 2021.
Equity in Income of Unconsolidated Subsidiaries and Affiliates
Equity in income of unconsolidated subsidiaries and affiliates was $69$176 million and $68$69 million for the nine months ended September 30, 2023 and 2022, and 2021, respectively.
Net Income (Loss)
Net income was $1,766 million for the nine months ended September 30, 2023, compared to net income of $1,447 million for the nine months ended September 30, 2022, compared to net2022. Net income from continuing operations of $1,337 million for the nine months ended September 30, 2021. 2023 included a loss of $17 million related to the sale of CNH Industrial Russia, a loss of $6 million related to CNH Capital Russia, and restructuring expenses of $8 million, partially offset by a pre-tax gain of $18 million ($14 million after-tax) as a result of the amortization over four years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $13 million in relation to the fair value remeasurement of previously held investments in Augmenta and Bennamann.
Net income for the nine months ended September 30, 2022, included a pre-tax gain of $90 million ($68 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, a pre-tax gain of $18 million ($14 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification offset by $22 million ($54 million after-tax) of loss on the sale of Raven Engineered Films net of income from the Raven businesses held for sale during the quarter, a charge of $71 million related to asset write-downs, financial receivable allowances and valuation allowances on deferred tax assets as a result of the suspension of operations in Russia, separation costs in connection with the spin-offspinoff of the On-Highway business of $13 million ($10 million after-tax), and restructuring expenses of $19 million ($14 million after-tax).
Net income of continuing operations was $1,337 million for the nine months ended September 30, 2021, and included a pre-tax gain of $90 million ($68 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, separation costs in connection with the spin-off of the On-Highway business of $32 million and restructuring expenses of $21 million ($17 million).
Industrial Activities and Business Segments
The following tables show revenues and Adjusted EBIT by segment. We have also included a discussion of our results by Industrial Activities and each of our business segments.segments:
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | % Change | | % Change Excl. FX | |
| (in millions, except percentages) | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change | | % Change Excl. FX |
Revenues: | Revenues: | | Revenues: | | | | | | | |
Agriculture | Agriculture | $ | 12,600 | | | $ | 10,571 | | | 19.2 | % | | 22.7 | % | Agriculture | $ | 13,201 | | | $ | 12,600 | | | 4.8 | % | | 5.2 | % |
Construction | Construction | 2,589 | | | 2,237 | | | 15.7 | % | | 18.1 | % | Construction | 2,861 | | | 2,589 | | | 10.5 | % | | 10.6 | % |
Eliminations and other | Eliminations and other | — | | | — | | | Eliminations and other | — | | | — | | |
Total Net sales of Industrial Activities | Total Net sales of Industrial Activities | 15,189 | | | 12,808 | | | 18.6 | % | | 21.9 | % | Total Net sales of Industrial Activities | 16,062 | | | 15,189 | | | 5.7 | % | | 6.1 | % |
Financial Services | Financial Services | 1,419 | | | 1,194 | | | 18.8 | % | | 19.4 | % | Financial Services | 1,805 | | | 1,419 | | | 27.2 | % | | 27.4 | % |
Eliminations and other | Eliminations and other | — | | | 14 | | | Eliminations and other | 28 | | | — | | |
Total Revenues | Total Revenues | $ | 16,608 | | | $ | 14,016 | | | 18.5 | % | | 21.5 | % | Total Revenues | $ | 17,895 | | | $ | 16,608 | | | 7.7 | % | | 8.1 | % |
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | $ Change | | 2022 Adj EBIT Margin | | 2021 Adj EBIT Margin | |
| (in millions, except percentages) | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | $ Change | | 2023 Adj EBIT Margin | | 2022 Adj EBIT Margin |
Adjusted EBIT by segment: | Adjusted EBIT by segment: | | Adjusted EBIT by segment: | | | | | | | | | |
Agriculture | Agriculture | $ | 1,755 | | | $ | 1,396 | | | $ | 359 | | | 13.9 | % | | 13.2 | % | Agriculture | $ | 2,063 | | | $ | 1,755 | | | $ | 308 | | | 15.6 | % | | 13.9 | % |
Construction | Construction | 90 | | | 70 | | | 20 | | | 3.5 | % | | 3.1 | % | Construction | 176 | | | 90 | | | 86 | | | 6.2 | % | | 3.5 | % |
Unallocated items, eliminations and other | Unallocated items, eliminations and other | (92) | | | (81) | | | (11) | | | Unallocated items, eliminations and other | (205) | | | (92) | | | (113) | | |
Total Adjusted EBIT of Industrial Activities | Total Adjusted EBIT of Industrial Activities | $ | 1,753 | | | $ | 1,385 | | | $ | 368 | | | 11.5 | % | | 10.8 | % | Total Adjusted EBIT of Industrial Activities | $ | 2,034 | | | $ | 1,753 | | | $ | 281 | | | 12.7 | % | | 11.5 | % |
Net sales of Industrial Activities were $15,189$16,062 million during the nine months ended September 30, 2022,2023, an increase of 18.6%5.7% compared to the nine months ended September 30, 20212022 (up 21.9%6.1% on a constant currency basis), primarily due to favorable price realization.
Adjusted EBIT of Industrial Activities was $2,034 million during the nine months ended September 30, 2023, compared to an adjusted EBIT of $1,753 million during the nine months ended September 30, 2022, compared to an adjusted EBIT of $1,385 million during the nine months ended September 30, 2021.2022. The increase in adjusted EBIT was primarily attributable to year over year increasesgross margin improvement in both theour Agriculture and Construction segments.
segments, partially offset by increased SG&A expenditures and R&D investments.Segment Performance
Agriculture
Net Sales
The following table shows Agriculture net sales by geographic region for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021:2022:
Agriculture Sales—by geographic region:region
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except percentages) | 2022 | | 2021 | | % Change | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change |
North America | North America | $ | 4,651 | | | $ | 3,637 | | | 27.9 | % | North America | $ | 5,167 | | | $ | 4,651 | | | 11.1 | % |
Europe, Middle East, and Africa | 3,999 | | | 4,257 | | | (6.1) | % | |
Europe, Middle East and Africa | | Europe, Middle East and Africa | 4,225 | | | 3,999 | | | 5.7 | % |
South America | South America | 2,665 | | | 1,587 | | | 67.9 | % | South America | 2,410 | | | 2,665 | | | (9.6) | % |
Asia Pacific | Asia Pacific | 1,285 | | | 1,090 | | | 17.9 | % | Asia Pacific | 1,399 | | | 1,285 | | | 8.9 | % |
Total | Total | $ | 12,600 | | | $ | 10,571 | | | 19.2 | % | Total | $ | 13,201 | | | $ | 12,600 | | | 4.8 | % |
Agriculture's net sales totaled $12,600$13,201 million in the nine months ended September 30, 2022,2023, an increase of 19.2%4.8% compared to the nine months ended September 30, 20212022 (up 22.7%5.2% on a constant currency basis). Net sales increased due to improved market share, improved network stock,increase is driven by favorable price realization, and better mix, partially offset by the negative impact of foreign exchange rates.dealer destocking actions due to lower industry demand.
For the nine months ended September 30, 2022, worldwide2023 in North America, industry unit salesvolume was up 20% year over year for tractors over 140 HP and was down 10% for tractors under 140 HP; combines were up 23% from the prior year. In Europe, Middle
East and Africa (EMEA), tractor and combine demand was down 3% compared to2% and up 14%, respectively, which included Europe tractor and combine demand down 2% and up 10%, respectively. South America tractor demand was down 9% and combine demand was down 20%. Asia Pacific tractor demand was down 2% and combine demand was down 22%.
Adjusted EBIT
Adjusted EBIT was $2,063 million in the nine months ended September 30, 2021, while worldwide industry sales for combines were up 6%. In North America, industry volumes in the over 140 HP tractor market sector were up 6% and combines were up 3%. Industry volumes for under 140 HP tractors in North America were down 14%. European markets were down 5% and 25% for tractors and combines, respectively. In South America, the tractor market increased 9% and the combine market decreased 3%. Asia Pacific markets increased 1% for tractors and increased 29% for combines.
Adjusted EBIT
Adjusted EBIT was2023, compared to $1,755 million in the nine months ended September 30, 2022, an increase of $3592022. The $308 million compared to the nine months ended September 30, 2021. The increase was mostly driven by favorable net pricing and improved sales volume and mix,gross margin improvement, partially offset by higherincreased production costs, SG&A costsexpenses and increased R&D spend.investments. Adjusted EBIT margin was 13.9% (13.2% in the nine months ended September 30, 2021) (Adjusted EBIT/revenue)15.6%.
Construction
Net Sales
The following table shows Construction net sales by geographic region for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 2021:2022:
Construction Sales—by geographic region:region
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except percentages) | 2022 | | 2021 | | % Change | |
(in millions of dollars, except percentages) | | (in millions of dollars, except percentages) | 2023 | | 2022 | | % Change |
North America | North America | $ | 1,244 | | | $ | 997 | | | 24.8 | % | North America | $ | 1,594 | | | $ | 1,244 | | | 28.1 | % |
Europe, Middle East, and Africa | 660 | | | 596 | | | 10.7 | % | |
Europe, Middle East and Africa | | Europe, Middle East and Africa | 650 | | | 660 | | | (1.5) | % |
South America | South America | 481 | | | 356 | | | 35.1 | % | South America | 425 | | | 481 | | | (11.6) | % |
Asia Pacific | Asia Pacific | 204 | | | 288 | | | (29.2) | % | Asia Pacific | 192 | | | 204 | | | (5.9) | % |
Total | Total | $ | 2,589 | | | $ | 2,237 | | | 15.7 | % | Total | $ | 2,861 | | | $ | 2,589 | | | 10.5 | % |
Construction's net sales totaled $2,589$2,861 million in the nine months ended September 30, 2022,2023, an increase of 15.7%10.5% compared to the nine months ended September 30, 20212022 (up 18.1%10.6% on a constant currency basis), as a result of positivedriven by favorable price realization improved network stocking and contribution from the Sampierana business,positive volume/mix mainly in North America; partially offset by the negative impact of foreign exchange rates.lower net revenue from South America, and ceased activities in China and Russia.
Global demand inIn the nine months ended September 30, 2023 global industry volume for construction equipment decreased in both Heavy and Light sub-segments, with Heavywas down 14% and Light down 12%. Demandyear over year for Heavy construction equipment; light construction equipment was down 1%2% year over year. Aggregated demand increased 5% in North America, flatincreased 3% in Europe and increased 27%EMEA, decreased 22% in South America.America and decreased 20% for Asia Pacific demand decreased 28%(excluding China, Asia Pacific markets increased 1%).
Adjusted EBIT
Adjusted EBIT was $176 million in the nine months ended September 30, 2023, compared to $90 million in the nine months ended September 30, 2022, an increase of $20 million compared to the nine months ended September 30, 2021.2022. The improvement was due to favorable volume and mix and positivefavorable price realization, partially offset by higher costs.raw materials and manufacturing costs and increased R&D investments. Adjusted EBIT margin was 3.5% (Adjusted EBIT/revenue)6.2%.
Financial Services
Finance, Interest and Other Income
Financial Services' revenues totaled $1,419$1,805 million in the nine months ended September 30, 2022,2023, up 18.8%27.2% compared to the nine months ended September 30, 20212022 (up 19.4%27.4% on a constant currency basis), due to higher used equipment sales,favorable volumes and higher base rates across all regions, mainly in South America, and higher volume in all regions, partially offset by changes in product mix in North America. Retail loan and leases originations were up 5.9%lower used equipment sales due to higher industrial sales.decreased operating lease maturities.
Net Income
Net income of Financial Services was $263$258 million in the nine months ended September 30, 2022, an increase2023, a decrease of $4$5 million compared to the nine months ended September 30, 2021,2022, primarily as a result ofdue to margin compression in North America, higher recoveries on used equipment sales, higher base rates in all regions, mainly in South America,risk costs, and increased labor costs, partially offset by favorable volumes in all regions, partially offset by increased income taxes, increased SG&A, and additional risk costs, including $16 million for domestic Russian receivables.regions.
In the nine months ended September 30, 2022,2023, retail loan originations, including unconsolidated joint ventures, were $7.1$8.1 billion, up $0.3$1.0 billion compared to the nine months ended September 30, 2021.2022 (up $1.0 billion on a constant currency basis). The managed portfolio, including unconsolidated joint ventures, was $21.2$26.8 billion as of September 30, 20222023 (of which retail was 70%65% and wholesale 30%35%), up $1.2$5.6 billion compared to September 30, 20212022 (up $2.4$4.7 billion on a constant currency basis).
At September 30, 2023, the receivables balance greater than 30 days past due as a percentage of receivables was 1.6% (1.3% as of September 30, 2022).
Reconciliation of Net Income (Loss) to Adjusted EBIT
The following table includes the reconciliation of Adjusted EBIT, a non-GAAP financial measure, to net income, the most comparable U.S. GAAP financial measure.measure:
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | |
| (in millions) | |
(in millions of dollars) | | (in millions of dollars) | | 2023 | | 2022 |
Agriculture | Agriculture | | $ | 1,755 | | | $ | 1,396 | | Agriculture | | $ | 2,063 | | | $ | 1,755 | |
Construction | Construction | | 90 | | | 70 | | Construction | | 176 | | | 90 | |
Unallocated items, eliminations and other | Unallocated items, eliminations and other | | (92) | | | (81) | | Unallocated items, eliminations and other | | (205) | | | (92) | |
Total Adjusted EBIT of Industrial Activities | Total Adjusted EBIT of Industrial Activities | | $ | 1,753 | | | $ | 1,385 | | Total Adjusted EBIT of Industrial Activities | | 2,034 | | | 1,753 | |
Financial Services Net Income | | 263 | | | 259 | | |
Financial Services Net Income (loss) | | Financial Services Net Income (loss) | | 258 | | | 263 | |
Financial Services Income Taxes | Financial Services Income Taxes | | 106 | | | 83 | | Financial Services Income Taxes | | 89 | | | 106 | |
Interest expense of Industrial Activities, net of interest income and eliminations | Interest expense of Industrial Activities, net of interest income and eliminations | | (97) | | | (92) | | Interest expense of Industrial Activities, net of interest income and eliminations | | (36) | | | (97) | |
Foreign exchange gains (losses), net of Industrial Activities | Foreign exchange gains (losses), net of Industrial Activities | | (14) | | | 6 | | Foreign exchange gains (losses), net of Industrial Activities | | (27) | | | (14) | |
Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | 112 | | | 102 | | Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1) | | 2 | | | 112 | |
Restructuring expense of Industrial Activities | Restructuring expense of Industrial Activities | | (19) | | | (21) | | Restructuring expense of Industrial Activities | | (8) | | | (19) | |
Other discrete items of Industrial Activities(2) | | (78) | | | (38) | | |
Other discrete items(2) | | Other discrete items(2) | | (10) | | | (78) | |
Income (loss) before taxes | Income (loss) before taxes | | $ | 2,026 | | | $ | 1,684 | | Income (loss) before taxes | | 2,302 | | | 2,026 | |
Income tax (expense) benefit | Income tax (expense) benefit | | (579) | | | (347) | | Income tax (expense) benefit | | (536) | | | (579) | |
Net income (loss) from discontinued operations | | $ | — | | | $ | 116 | | |
Net income (loss) | Net income (loss) | | $ | 1,447 | | | $ | 1,453 | | Net income (loss) | | $ | 1,766 | | | $ | 1,447 | |
(1) In the nine months ended September 30, 2023, this item includes the pre-tax gain of $18 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S. In the nine months ended September 30, 2022, this item includes the pre-tax gain of $90 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 modification of a healthcare plan in the U.S. and athe pre-tax gain of $18 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S.
(2) In the nine months ended September 30, 2021,2023, this item includes the pre-taxincluded a gain of $90$13 million asin relation to the fair value remeasurement of Augmenta and Bennamann, offset by a result$23 million loss on the sale of the 2018 modification.
(2)CNH Industrial Russia and CNH Capital Russia. In the nine months ended September 30, 2022, this item included his item includedalso includes $13 million of separation costs incurred in connection with our spin-off of the Iveco Group Business, $22 million of loss from the activity of the two Raven businesses held for sale, including the loss on the sale of the Engineered Films and Aerostar Divisions, and $43 million in asset write downswrite-downs related to Russian operations. In the nine months ended September 30, 2021, this item includes $32 million of separation costs incurred in connection with our spin-off of the Iveco Group Business.
Supplemental Information
The operations, key financial measures, and financial analysis differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, management believes that certain supplemental disclosures are important in understanding the consolidated operations and financial results of CNH Industrial. This supplemental information does not purport to represent the operations of each group as if each group were to operate on a standalone basis. This supplemental data includes:
Industrial Activities—The financial information captioned “Industrial Activities” reflects the consolidation of all majority-owned subsidiaries except for the Financial Services business.
Financial Services—The financial information captioned “Financial Services” reflects the consolidation or combination of the Financial Services business.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations |
| | Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2022 |
(in millions of dollars) | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated |
Revenues | | | | | | | | | | | | | | | | |
Net sales | | $ | 5,332 | | | $ | — | | | $ | — | | | $ | 5,332 | | | $ | 5,396 | | | $ | — | | | $ | — | | | $ | 5,396 | |
Finance, interest and other income | | 49 | | | 653 | | | (48) | | (2) | 654 | | | 27 | | | 482 | | | (24) | | (2) | 485 | |
Total Revenues | | 5,381 | | | 653 | | | (48) | | | 5,986 | | | 5,423 | | | 482 | | | (24) | | | 5,881 | |
Costs and Expenses | | | | | | | | | | | | | | | | |
Cost of goods sold | | 4,059 | | | — | | | — | | | 4,059 | | | 4,156 | | | — | | | — | | | 4,156 | |
Selling, general & administrative expenses | | 398 | | | 64 | | | — | | | 462 | | | 377 | | | 45 | | | — | | | 422 | |
Research and development expenses | | 266 | | | — | | | — | | | 266 | | | 213 | | | — | | | — | | | 213 | |
Restructuring expenses | | 5 | | | — | | | — | | | 5 | | | 11 | | | — | | | — | | | 11 | |
Interest expense | | 59 | | | 335 | | | (48) | | (3) | 346 | | | 54 | | | 160 | | | (24) | | (3) | 190 | |
Other, net | | 47 | | | 139 | | | — | | | 186 | | | (3) | | | 162 | | | — | | | 159 | |
Total Costs and Expenses | | 4,834 | | | 538 | | | (48) | | | 5,324 | | | 4,808 | | | 367 | | | (24) | | | 5,151 | |
Income of Consolidated Group before Income Taxes | | 547 | | | 115 | | | — | | | 662 | | | 615 | | | 115 | | | — | | | 730 | |
Income tax (expense) benefit | | (137) | | | (34) | | | — | | | (171) | | | (160) | | | (32) | | | — | | | (192) | |
Equity in income of unconsolidated subsidiaries and affiliates | | 74 | | | 5 | | | — | | | 79 | | | 18 | | | 3 | | | — | | | 21 | |
Net income (loss) | | $ | 484 | | | $ | 86 | | | $ | — | | | $ | 570 | | | $ | 473 | | | $ | 86 | | | $ | — | | | $ | 559 | |
(1) Industrial Activities represents the enterprise without Financial Services. Industrial Activities includes the Company's Agriculture and Construction segments, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.
(2) Eliminations of Financial Services' interest income earned from Industrial Activities.
(3) Eliminations of Industrial Activities' interest expense to Financial Services.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations |
| | Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 |
| | Industrial Activities(1) | | Financial Services | | Eliminations | | | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | | | Consolidated |
| | (in millions) |
Revenues | | | | | | | | | | | | | | | | | | | | |
Net sales | | $ | 5,396 | | | $ | — | | | $ | — | | | | | $ | 5,396 | | | $ | 4,336 | | | $ | — | | | $ | — | | | | | $ | 4,336 | |
Finance, interest and other income | | 27 | | | 482 | | | (24) | | | (2) | | 485 | | | 16 | | | 405 | | | (11) | | | (2) | | 410 | |
Total Revenues | | $ | 5,423 | | | $ | 482 | | | $ | (24) | | | | | $ | 5,881 | | | $ | 4,352 | | | $ | 405 | | | $ | (11) | | | | | $ | 4,746 | |
Costs and Expenses | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | $ | 4,156 | | | $ | — | | | $ | — | | | | | $ | 4,156 | | | $ | 3,452 | | | $ | — | | | $ | — | | | | | $ | 3,452 | |
Selling, general & administrative expenses | | 377 | | | 45 | | | — | | | | | 422 | | | 317 | | | 32 | | | — | | | | | 349 | |
Research and development expenses | | 213 | | | — | | | — | | | | | 213 | | | 157 | | | — | | | — | | | | | 157 | |
Restructuring expenses | | 11 | | | — | | | — | | | | | 11 | | | 15 | | | — | | | — | | | | | 15 | |
Interest expense | | 54 | | | 160 | | | (24) | | | (3) | | 190 | | | 37 | | | 101 | | | (11) | | | (3) | | 127 | |
Other, net | | (3) | | | 162 | | | — | | | | | 159 | | | (24) | | | 148 | | | — | | | | | 124 | |
Total Costs and Expenses | | $ | 4,808 | | | $ | 367 | | | $ | (24) | | | | | $ | 5,151 | | | $ | 3,954 | | | $ | 281 | | | $ | (11) | | | | | $ | 4,224 | |
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries and affiliates | | 615 | | | 115 | | | — | | | | | 730 | | | 398 | | | 124 | | | — | | | | | 522 | |
Income tax (expense) benefit | | (160) | | | (32) | | | — | | | | | (192) | | | (48) | | | (31) | | | — | | | | | (79) | |
Equity in income of unconsolidated subsidiaries and affiliates | | 18 | | | 3 | | | — | | | | | 21 | | | 14 | | | 3 | | | — | | | | | 17 | |
Net income (loss) from continuing operations | | $ | 473 | | | $ | 86 | | | $ | — | | | | | $ | 559 | | | $ | 364 | | | $ | 96 | | | $ | — | | | | | $ | 460 | |
Net income (loss) from discontinued operations | | — | | | — | | | — | | | | | — | | | (153) | | | 22 | | | — | | | | | (131) | |
Net income (loss) | | $ | 473 | | | $ | 86 | | | $ | — | | | | | $ | 559 | | | $ | 211 | | | $ | 118 | | | $ | — | | | | | $ | 329 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations |
| | Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2022 |
(in millions of dollars) | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated |
Revenues | | | | | | | | | | | | | | | | |
Net sales | | $ | 16,062 | | | $ | — | | | $ | — | | | $ | 16,062 | | | $ | 15,189 | | | $ | — | | | $ | — | | | $ | 15,189 | |
Finance, interest and other income | | 153 | | | 1,805 | | | (125) | | (2) | 1,833 | | | 52 | | | 1,419 | | | (52) | | (2) | 1,419 | |
Total Revenues | | 16,215 | | | 1,805 | | | (125) | | | 17,895 | | | 15,241 | | | 1,419 | | | (52) | | | 16,608 | |
Costs and Expenses | | | | | | | | | | | | | | | | |
Cost of goods sold | | 12,133 | | | — | | | — | | | 12,133 | | | 11,819 | | | — | | | — | | | 11,819 | |
Selling, general & administrative expenses | | 1,219 | | | 166 | | | — | | | 1,385 | | | 1,087 | | | 137 | | | — | | | 1,224 | |
Research and development expenses | | 766 | | | — | | | — | | | 766 | | | 609 | | | — | | | — | | | 609 | |
Restructuring expenses | | 8 | | | — | | | — | | | 8 | | | 19 | | | — | | | — | | | 19 | |
Interest expense | | 189 | | | 877 | | | (125) | | (3) | 941 | | | 149 | | | 393 | | | (52) | | (3) | 490 | |
Other, net | | 109 | | | 427 | | | — | | | 536 | | | (41) | | | 531 | | | — | | | 490 | |
Total Costs and Expenses | | 14,424 | | | 1,470 | | | (125) | | | 15,769 | | | 13,642 | | | 1,061 | | | (52) | | | 14,651 | |
Income of Consolidated Group before Income Taxes | | 1,791 | | | 335 | | | — | | | 2,126 | | | 1,599 | | | 358 | | | — | | | 1,957 | |
Income tax (expense) benefit | | (447) | | | (89) | | | — | | | (536) | | | (473) | | | (106) | | | — | | | (579) | |
Equity in income of unconsolidated subsidiaries and affiliates | | 164 | | | 12 | | | — | | | 176 | | | 58 | | | 11 | | | — | | | 69 | |
Net income (loss) | | $ | 1,508 | | | $ | 258 | | | $ | — | | | $ | 1,766 | | | $ | 1,184 | | | $ | 263 | | | $ | — | | | $ | 1,447 | |
(1) Industrial Activities represents the enterprise without Financial Services. Industrial Activities includes the Company's Agriculture and Construction segments, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.
(2) Eliminations of Financial Services' interest income earned from Industrial Activities.
(3) Eliminations of Industrial Activities' interest expense to Financial Services.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Statement of Operations |
| | Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2021 |
| | Industrial Activities(1) | | Financial Services | | Eliminations | | | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | | | Consolidated |
| | (in millions) |
Revenues | | | | | | | | | | | | | | | | | | | | |
Net sales | | $ | 15,189 | | | $ | — | | | $ | — | | | | | $ | 15,189 | | | $ | 12,808 | | | $ | — | | | $ | — | | | | | $ | 12,808 | |
Finance, interest and other income | | 52 | | | 1,419 | | | (52) | | | (2) | | 1,419 | | | 43 | | | 1,194 | | | (29) | | | (2) | | 1,208 | |
Total Revenues | | $ | 15,241 | | | $ | 1,419 | | | $ | (52) | | | | | $ | 16,608 | | | $ | 12,851 | | | $ | 1,194 | | | $ | (29) | | | | | $ | 14,016 | |
Costs and Expenses | | | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | $ | 11,819 | | | $ | — | | | $ | — | | | | | $ | 11,819 | | | $ | 10,064 | | | $ | — | | | $ | — | | | | | $ | 10,064 | |
Selling, general & administrative expenses | | 1,087 | | | 137 | | | — | | | | | 1,224 | | | 936 | | | 87 | | | — | | | | | 1,023 | |
Research and development expenses | | 609 | | | — | | | — | | | | | 609 | | | 453 | | | — | | | — | | | | | 453 | |
Restructuring expenses | | 19 | | | — | | | — | | | | | 19 | | | 21 | | | — | | | — | | | | | 21 | |
Interest expense | | 149 | | | 393 | | | (52) | | | (3) | | 490 | | | 135 | | | 311 | | | (29) | | | (3) | | 417 | |
Other, net | | (41) | | | 531 | | | — | | | | | 490 | | | (41) | | | 463 | | | — | | | | | 422 | |
Total Costs and Expenses | | $ | 13,642 | | | $ | 1,061 | | | $ | (52) | | | | | $ | 14,651 | | | $ | 11,568 | | | $ | 861 | | | $ | (29) | | | | | $ | 12,400 | |
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries and affiliates | | 1,599 | | | 358 | | | — | | | | | 1,957 | | | 1,283 | | | 333 | | | — | | | | | 1,616 | |
Income tax (expense) benefit | | (473) | | | (106) | | | — | | | | | (579) | | | (264) | | | (83) | | | — | | | | | (347) | |
Equity in income of unconsolidated subsidiaries and affiliates | | 58 | | | 11 | | | — | | | | | 69 | | | 59 | | | 9 | | | — | | | | | 68 | |
Net income (loss) from continuing operations | | $ | 1,184 | | | $ | 263 | | | $ | — | | | | | $ | 1,447 | | | $ | 1,078 | | | $ | 259 | | | $ | — | | | | | $ | 1,337 | |
Net income (loss) from discontinued operations | | — | | | — | | | — | | | | | — | | | 67 | | | 49 | | | — | | | | | 116 | |
Net income (loss) | | $ | 1,184 | | | $ | 263 | | | $ | — | | | | | $ | 1,447 | | | $ | 1,145 | | | $ | 308 | | | $ | — | | | | | $ | 1,453 | |
(1) Industrial Activities represents the enterprise without Financial Services. Industrial Activities includes the Company's Agriculture and Construction segments, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.
(2) Eliminations of Financial Services' interest income earned from Industrial Activities.
(3) Eliminations of Industrial Services' interest expense to Financial Services.
| | | Balance Sheets | | Balance Sheets |
| | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
| Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated | |
| (in millions) | |
ASSETS | | |
(in millions of dollars) | | (in millions of dollars) | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated | | Industrial Activities(1) | | Financial Services | | Eliminations | | Consolidated |
Assets | | Assets | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 2,736 | | | $ | 418 | | | — | | | $ | 3,154 | | | $ | 4,386 | | | $ | 658 | | | $ | — | | | $ | 5,044 | | Cash and cash equivalents | | $ | 2,458 | | | $ | 521 | | | $ | — | | | $ | 2,979 | | | $ | 3,802 | | | $ | 574 | | | $ | — | | | $ | 4,376 | |
Restricted cash | Restricted cash | | 131 | | | 529 | | | — | | | 660 | | | 128 | | | 673 | | | — | | | 801 | | Restricted cash | | 150 | | | 556 | | | — | | | 706 | | | 158 | | | 595 | | | — | | | 753 | |
Trade receivables, net | Trade receivables, net | | 202 | | | 2 | | | (4) | | | (2) | | 200 | | | 197 | | | 1 | | | (6) | | | (2) | | 192 | | Trade receivables, net | | 198 | | | 12 | | | (11) | | (2) | 199 | | | 175 | | | 3 | | | (6) | | (2) | 172 | |
Financing receivables, net | Financing receivables, net | | 601 | | | 17,068 | | | (768) | | | (3) | | 16,901 | | | 199 | | | 15,508 | | | (331) | | | (3) | | 15,376 | | Financing receivables, net | | 1,017 | | | 22,735 | | | (1,512) | | (3) | 22,240 | | | 898 | | | 19,313 | | | (951) | | (3) | 19,260 | |
Receivables from Iveco Group N.V. | Receivables from Iveco Group N.V. | | 151 | | | 73 | | | — | | | 224 | | | — | | | — | | | — | | | — | | Receivables from Iveco Group N.V. | | 163 | | | 66 | | | — | | | 229 | | | 234 | | | 64 | | | — | | | 298 | |
Inventories, net | Inventories, net | | 5,344 | | | 18 | | | — | | | 5,362 | | | 4,187 | | | 29 | | | — | | | 4,216 | | Inventories, net | | 6,428 | | | 19 | | | — | | | 6,447 | | | 4,798 | | | 13 | | | — | | | 4,811 | |
Property, plant and equipment, net | Property, plant and equipment, net | | 1,405 | | | — | | | — | | | 1,405 | | | 1,474 | | | 1 | | | — | | | 1,475 | | Property, plant and equipment, net | | 1,681 | | | — | | | — | | | 1,681 | | | 1,532 | | | — | | | — | | | 1,532 | |
Investments in unconsolidated subsidiaries and affiliates | Investments in unconsolidated subsidiaries and affiliates | | 224 | | | 103 | | | — | | | 327 | | | 227 | | | 106 | | | — | | | 333 | | Investments in unconsolidated subsidiaries and affiliates | | 352 | | | 125 | | | — | | | 477 | | | 272 | | | 113 | | | — | | | 385 | |
Equipment under operating leases | Equipment under operating leases | | 29 | | | 1,510 | | | — | | | 1,539 | | | 30 | | | 1,708 | | | — | | | 1,738 | | Equipment under operating leases | | 39 | | | 1,415 | | | — | | | 1,454 | | | 29 | | | 1,473 | | | — | | | 1,502 | |
Goodwill, net | Goodwill, net | | 3,094 | | | 139 | | | — | | | 3,233 | | | 3,068 | | | 142 | | | — | | | 3,210 | | Goodwill, net | | 3,350 | | | 140 | | | — | | | 3,490 | | | 3,182 | | | 140 | | | — | | | 3,322 | |
Other intangible assets, net | Other intangible assets, net | | 1,137 | | | 21 | | | — | | | 1,158 | | | 1,187 | | | 20 | | | — | | | 1,207 | | Other intangible assets, net | | 1,213 | | | 24 | | | — | | | 1,237 | | | 1,105 | | | 24 | | | — | | | 1,129 | |
Deferred tax assets | Deferred tax assets | | 347 | | | 91 | | | (87) | | | (4) | | 351 | | | 468 | | | 80 | | | (127) | | | (4) | | 421 | | Deferred tax assets | | 724 | | | 147 | | | (167) | | (4) | 704 | | | 440 | | | 107 | | | (114) | | (4) | 433 | |
Derivative assets | Derivative assets | | 147 | | | 160 | | | (27) | | | (5) | | 280 | | | 119 | | | 77 | | | (14) | | | (5) | | 182 | | Derivative assets | | 78 | | | 104 | | | (19) | | (5) | 163 | | | 82 | | | 128 | | | (21) | | (5) | 189 | |
Other assets | Other assets | | 1,037 | | | 81 | | | (68) | | | (2) | | 1,050 | | | 1,645 | | | 81 | | | (51) | | | (2) | | 1,675 | | Other assets | | 979 | | | 106 | | | (50) | | (2) | 1,035 | | | 1,172 | | | 126 | | | (79) | | (2) | 1,219 | |
Assets held for distribution | | — | | | — | | | — | | | — | | | 9,814 | | | 4,543 | | | (811) | | | 13,546 | | |
TOTAL ASSETS | | $ | 16,585 | | | $ | 20,213 | | | $ | (954) | | | $ | 35,844 | | | $ | 27,129 | | | $ | 23,627 | | | $ | (1,340) | | | $ | 49,416 | | |
LIABILITIES AND EQUITY | | | | | |
Total Assets | | Total Assets | | $ | 18,830 | | | $ | 25,970 | | | $ | (1,759) | | | $ | 43,041 | | | $ | 17,879 | | | $ | 22,673 | | | $ | (1,171) | | | $ | 39,381 | |
Liabilities and Equity | | Liabilities and Equity | | | | |
Debt | Debt | | 4,827 | | | 16,863 | | | (768) | | | (3) | | 20,922 | | | 5,485 | | | 15,743 | | | (331) | | | (3) | | 20,897 | | Debt | | $ | 4,622 | | | $ | 21,848 | | | $ | (1,512) | | | $ | 24,958 | | | $ | 4,972 | | | $ | 18,941 | | | $ | (951) | | (3) | $ | 22,962 | |
Payables from Iveco Group N.V. | Payables from Iveco Group N.V. | | 6 | | | 89 | | | — | | | 95 | | | 334 | | | 168 | | | — | | | 502 | | Payables from Iveco Group N.V. | | 4 | | | 72 | | | — | | | 76 | | | 5 | | | 151 | | | — | | | 156 | |
Trade payables | Trade payables | | 3,165 | | | 151 | | | (4) | | | (2) | | 3,312 | | | 3,353 | | | 207 | | | (30) | | | (2) | | 3,530 | | Trade payables | | 3,408 | | | 177 | | | (11) | | (2) | 3,574 | | | 3,492 | | | 216 | | | (6) | | (2) | 3,702 | |
Deferred tax liabilities | Deferred tax liabilities | | 3 | | | 218 | | | (87) | | | (4) | | 134 | | | 4 | | | 248 | | | (127) | | | (4) | | 125 | | Deferred tax liabilities | | 26 | | | 167 | | | (167) | | (4) | 26 | | | 4 | | | 195 | | | (114) | | (4) | 85 | |
Pension, postretirement and other postemployment benefits | Pension, postretirement and other postemployment benefits | | 516 | | | 6 | | | — | | | 522 | | | 669 | | | 6 | | | — | | | 675 | | Pension, postretirement and other postemployment benefits | | 415 | | | 6 | | | — | | | 421 | | | 444 | | | 5 | | | — | | | 449 | |
Derivative liabilities | Derivative liabilities | | 272 | | | 167 | | | (27) | | | (5) | | 412 | | | 153 | | | 42 | | | (14) | | | (5) | | 181 | | Derivative liabilities | | 124 | | | 141 | | | (19) | | (5) | 246 | | | 132 | | | 93 | | | (21) | | (5) | 204 | |
Other liabilities | Other liabilities | | 3,594 | | | 512 | | | (68) | | | (2) | | 4,038 | | | 4,247 | | | 541 | | | (27) | | | (2) | | 4,761 | | Other liabilities | | 4,726 | | | 949 | | | (50) | | (2) | 5,625 | | | 4,139 | | | 787 | | | (79) | | (2) | 4,847 | |
Liabilities held for distribution | | — | | | — | | | — | | | — | | | 8,985 | | | 3,718 | | | (811) | | | 11,892 | | |
TOTAL LIABILITIES | | $ | 12,383 | | | $ | 18,006 | | | $ | (954) | | | $ | 29,435 | | | $ | 23,230 | | | $ | 20,673 | | | $ | (1,340) | | | $ | 42,563 | | |
Total Liabilities | | Total Liabilities | | 13,325 | | | 23,360 | | | (1,759) | | | 34,926 | | | 13,188 | | | 20,388 | | | (1,171) | | | 32,405 | |
Redeemable noncontrolling interest | Redeemable noncontrolling interest | | 52 | | | — | | | — | | | 52 | | | 45 | | | — | | | — | | | 45 | | Redeemable noncontrolling interest | | 58 | | | — | | | — | | | 58 | | | 49 | | | — | | | — | | | 49 | |
Equity | Equity | | 4,150 | | | 2,207 | | | — | | | 6,357 | | | 3,854 | | | 2,954 | | | — | | | 6,808 | | Equity | | 5,447 | | | 2,610 | | | — | | | 8,057 | | | 4,642 | | | 2,285 | | | — | | | 6,927 | |
TOTAL LIABILITIES AND EQUITY | | $ | 16,585 | | | $ | 20,213 | | | $ | (954) | | | $ | 35,844 | | | $ | 27,129 | | | $ | 23,627 | | | $ | (1,340) | | | $ | 49,416 | | |
Total Liabilities and Equity | | Total Liabilities and Equity | | $ | 18,830 | | | $ | 25,970 | | | $ | (1,759) | | | $ | 43,041 | | | $ | 17,879 | | | $ | 22,673 | | | $ | (1,171) | | | $ | 39,381 | |
(1) Industrial Activities represents the enterprise without Financial Services. Industrial Activities includes the Company's Agriculture and Construction segments, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.
(2) Eliminations of primarily receivables/payables between Industrial Activities and Financial Services.
(3) Eliminations of financing receivables/payables between Industrial Activities and Financial Services.
(4) Reclassification of deferred tax assets/liabilities in the same jurisdiction and reclassification needed for appropriate consolidated presentation.
(5) Elimination of derivative assets/liabilities between Industrial Activities and Financial Services.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash Flow Statements |
| Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2021 |
| Industrial Activities(1) | Financial Services | Eliminations | | Consolidated | | Industrial Activities(1) | Financial Services | Eliminations | | Consolidated |
| (in millions) |
Operating activities: | | | | | | | | | | | |
Net income (loss) | $ | 1,184 | | $ | 263 | | $ | — | | | $ | 1,447 | | | $ | 1,078 | | $ | 259 | | $ | — | | | $ | 1,337 | |
Adjustments to reconcile net income to net cash provided (used) by operating activities: | | | | | | | | | | | |
Depreciation and amortization expense, net of assets under operating lease | 250 | | 2 | | — | | | 252 | | | 217 | | 2 | | — | | | 219 | |
Depreciation and amortization expense of assets under operating lease | 2 | | 153 | | — | | | 155 | | | 1 | | 181 | | — | | | 182 | |
(Gain) loss from disposal of assets | 22 | | — | | — | | | 22 | | | — | | — | | — | | | — | |
Loss on repurchase of notes | — | | — | | — | | | — | | | 8 | | — | | — | | | 8 | |
Undistributed income (loss) of unconsolidated subsidiaries | 90 | | (11) | | (115) | | (2) | (36) | | | 162 | | (9) | | (160) | | (2) | (7) | |
Other non-cash items | 87 | | 43 | | — | | | 130 | | | 54 | | 20 | | — | | | 74 | |
Changes in operating assets and liabilities: | | | | | | | | | | | |
Provisions | (21) | | — | | — | | | (21) | | | 59 | | (2) | | — | | | 57 | |
Deferred income taxes | 130 | | (47) | | — | | | 83 | | | (7) | | — | | — | | | (7) | |
Trade and financing receivables related to sales, net | 73 | | (1,352) | | — | | (3) | (1,279) | | | (6) | | 12 | | (3) | | (3) | 3 | |
Inventories, net | (1,498) | | 377 | | — | | | (1,121) | | | (1,119) | | 281 | | — | | | (838) | |
Trade payables | (71) | | (57) | | 8 | | (3) | (120) | | | 360 | | (47) | | 21 | | (3) | 334 | |
Other assets and liabilities | (430) | | 40 | | (8) | | (3) | (398) | | | 119 | | 11 | | (18) | | (3) | 112 | |
Cash flow from operating activities discontinued operation | — | | — | | — | | | — | | | (103) | | 523 | | (2) | | | 418 | |
Net cash provided by operating activities | $ | (182) | | $ | (589) | | $ | (115) | | | $ | (886) | | | $ | 823 | | $ | 1,231 | | $ | (162) | | | $ | 1,892 | |
Investing activities: | | | | | | | | | | | |
Additions to retail receivables | — | | (4,179) | | — | | | (4,179) | | | — | | (3,680) | | — | | | (3,680) | |
Collections of retail receivables | — | | 3,342 | | — | | | 3,342 | | | — | | 3,297 | | — | | | 3,297 | |
Proceeds from sale of assets, net of assets sold under operating leases | 25 | | — | | — | | | 25 | | | 15 | | — | | — | | | 15 | |
Expenditures for property, plant and equipment and intangible assets, net of assets under operating lease | (243) | | (2) | | — | | | (245) | | | (195) | | (2) | | — | | | (197) | |
Expenditures for assets under operating lease | (14) | | (354) | | — | | | (368) | | | (18) | | (334) | | — | | | (352) | |
Other(4) | (424) | | 238 | | 21 | | | (165) | | | (742) | | (72) | | 11 | | (4) | (803) | |
Cash flow from investing activities discontinued operation | — | | — | | — | | | — | | | 113 | | 19 | | 2 | | | 134 | |
Net cash used in investing activities | $ | (656) | | $ | (955) | | $ | 21 | | | $ | (1,590) | | | $ | (827) | | $ | (772) | | $ | 13 | | | $ | (1,586) | |
Financing activities: | | | | | | | | | | | |
Proceeds from long-term debt | — | | 7,727 | | — | | | 7,727 | | | 60 | | 6,332 | | — | | | 6,392 | |
Payments of long-term debt | (95) | | (6,638) | | — | | | (6,733) | | | (1,231) | | (5,897) | | — | | | (7,128) | |
Net increase (decrease) in other financial liabilities | 156 | | 184 | | — | | | 340 | | | (92) | | (230) | | — | | | (322) | |
Dividends paid | (416) | | (115) | | 115 | | (2) | (416) | | | (184) | | (162) | | 162 | | (2) | (184) | |
Other | (116) | | 21 | | (21) | | | (116) | | | — | | 13 | | (13) | | (4) | — | |
Cash flow from financing activities discontinued operation | — | | — | | — | | | — | | | (10) | | (440) | | — | | | (450) | |
Net cash provided by (used in) financing activities | $ | (471) | | $ | 1,179 | | $ | 94 | | | $ | 802 | | | $ | (1,457) | | $ | (384) | | $ | 149 | | | $ | (1,692) | |
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash | (338) | | (19) | | — | | | (357) | | | (300) | | (29) | | — | | | (329) | |
Increase (decrease) in cash and cash equivalents | $ | (1,647) | | $ | (384) | | $ | — | | | $ | (2,031) | | | $ | (1,761) | | $ | 46 | | $ | — | | | $ | (1,715) | |
Cash and cash equivalents, beginning of year | 4,514 | | 1,331 | | — | | | 5,845 | | | 8,116 | | 1,513 | | — | | | 9,629 | |
Cash and cash equivalents, end of period | 2,867 | | 947 | | — | | | 3,814 | | | 6,355 | | 1,559 | | — | | | 7,914 | |
Cash and cash equivalents, end of period, discontinued operation | $ | — | | $ | — | | $ | — | | | $ | — | | | $ | 510 | | $ | 210 | | $ | — | | | $ | 720 | |
Cash and cash equivalents, end of period, continuing Operations | $ | 2,867 | | $ | 947 | | $ | — | | | $ | 3,814 | | | $ | 5,845 | | $ | 1,349 | | $ | — | | | $ | 7,194 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash Flow Statements |
| Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2022 |
(in millions of dollars) | Industrial Activities(1) | Financial Services | Eliminations | | Consolidated | | Industrial Activities(1) | Financial Services | Eliminations | | Consolidated |
Cash flow from Operating Activities | | | | | | | | | | | |
Net income (loss) | $ | 1,508 | | $ | 258 | | $ | — | | | $ | 1,766 | | | $ | 1,184 | | $ | 263 | | $ | — | | | $ | 1,447 | |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | | | | | | | | | | | |
Depreciation and amortization expense excluding assets under operating lease | 273 | | 3 | | — | | | 276 | | | 250 | | 2 | | — | | | 252 | |
Depreciation and amortization expense of assets under operating lease | 6 | | 134 | | — | | | 140 | | | 2 | | 153 | | — | | | 155 | |
(Gain) loss from disposal of assets, net | 21 | | — | | — | | | 21 | | | 22 | | — | | — | | | 22 | |
Undistributed (income) loss of unconsolidated subsidiaries | (109) | | (12) | | (4) | | (2) | (125) | | | 90 | | (11) | | (115) | | (2) | (36) | |
Other non-cash items, net | 73 | | 63 | | — | | | 136 | | | 87 | | 43 | | — | | | 130 | |
Changes in operating assets and liabilities: | | | | | | | | | | | |
Provisions | 617 | | 1 | | — | | | 618 | | | (21) | | — | | — | | | (21) | |
Deferred income taxes | (271) | | (48) | | — | | | (319) | | | 130 | | (47) | | — | | | 83 | |
Trade and financing receivables related to sales, net | (25) | | (1,582) | | 5 | | (3) | (1,602) | | | 73 | | (1,352) | | — | | (3) | (1,279) | |
Inventories, net | (1,722) | | 279 | | — | | | (1,443) | | | (1,498) | | 377 | | — | | | (1,121) | |
Trade payables | (56) | | (40) | | (5) | | (3) | (101) | | | (71) | | (57) | | 8 | | (3) | (120) | |
Other assets and liabilities | (174) | | 199 | | — | | | 25 | | | (430) | | 40 | | (8) | | (3) | (398) | |
Net cash provided (used) by operating activities | 141 | | (745) | | (4) | | | (608) | | | (182) | | (589) | | (115) | | | (886) | |
Cash Flow from Investing Activities | | | | | | | | | | | |
Additions to retail receivables | — | | (5,689) | | — | | | (5,689) | | | — | | (4,179) | | — | | | (4,179) | |
Collections of retail receivables | — | | 4,308 | | — | | | 4,308 | | | — | | 3,342 | | — | | | 3,342 | |
Proceeds from sale of asset, excluding assets sold under operating leases | 1 | | — | | — | | | 1 | | | 25 | | — | | — | | | 25 | |
Expenditures for property, plant and equipment and intangible assets, excluding assets under operating lease | (397) | | (4) | | — | | | (401) | | | (243) | | (2) | | — | | | (245) | |
Expenditures for assets under operating lease | (26) | | (358) | | — | | | (384) | | | (14) | | (354) | | | | (368) | |
Other | 460 | | (441) | | 104 | | | 123 | | | (424) | | 238 | | 21 | | | (165) | |
Net cash provided (used) by investing activities | 38 | | (2,184) | | 104 | | | (2,042) | | | (656) | | (955) | | 21 | | | (1,590) | |
Cash Flow from Financing Activities | | | | | | | | | | | |
Proceeds from long-term debt | — | | 7,510 | | — | | | 7,510 | | | — | | 7,727 | | — | | | 7,727 | |
Payments of long-term debt | (1,002) | | (5,476) | | — | | | (6,478) | | | (95) | | (6,638) | | — | | | (6,733) | |
Net increase (decrease) in other financial liabilities | 225 | | 705 | | — | | | 930 | | | 156 | | 184 | | — | | | 340 | |
Dividends paid | (531) | | (4) | | 4 | | (2) | (531) | | | (416) | | (115) | | 115 | | (2) | (416) | |
Other | (224) | | 104 | | (104) | | | (224) | | | (116) | | 21 | | (21) | | | (116) | |
Net cash provided (used) by financing activities | (1,532) | | 2,839 | | (100) | | | 1,207 | | | (471) | | 1,179 | | 94 | | | 802 | |
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash | 1 | | (2) | | — | | | (1) | | | (338) | | (19) | | — | | | (357) | |
Net increase (decrease) in cash and cash equivalents | (1,352) | | (92) | | — | | | (1,444) | | | (1,647) | | (384) | | — | | | (2,031) | |
Cash and cash equivalents, beginning of year | 3,960 | | 1,169 | | — | | | 5,129 | | | 4,514 | | 1,331 | | — | | | 5,845 | |
Cash and cash equivalents, end of period | $ | 2,608 | | $ | 1,077 | | $ | — | | | $ | 3,685 | | | $ | 2,867 | | $ | 947 | | $ | — | | | $ | 3,814 | |
(1) Industrial Activities represents the enterprise without Financial Services. Industrial Activities includes the Company's Agriculture and Construction segments, and other corporate assets, liabilities, revenues and expenses not reflected within Financial Services.
(2) This item includes the elimination of dividends from Financial Services to Industrial Activities, which are included in Industrial Activities net cash used in operating activities.
(3) This item includes the elimination of certain minor activities between Industrial Activities and Financial Services.
(4) This item includes the elimination of paid in capital from Industrial Activities to Financial Services.
B. CRITICAL ACCOUNTING ESTIMATES
See our critical accounting estimates discussed in Part 1, Item 5. Operating and Financial Review and Prospects - Application of Critical Accounting Estimates of our 20212022 Annual report.Report. There have been no material changes to these estimates.
C. LIQUIDITY AND CAPITAL RESOURCES
The following discussion of liquidity and capital resources principally focuses on our condensed consolidated statement of cash flows and our condensed consolidated statement of financial position. Our operations are capital intensive and subject to seasonal variations in financing requirements for dealer receivables and dealer and company inventories. Whenever necessary, funds from operating activities are supplemented from external sources. CNH Industrial focuses on cash preservation and leveraging its good access to funding in order to maintain solid financial strength and liquidity.
Cash Flow Analysis
At September 30, 2022,2023, Cash and cash equivalents and Restricted cash were $3,814$3,685 million, a decrease of $2,031$1,444 million from $5,845$5,129 million at December 31, 20212022, primarily due to operating activities cash absorption, in the period, payment of a dividend, receivables portfolio absorption, dividends paid, investments in fixed assets, and paymentacquisition of businesses and other equity investments, partially offset by an increase in external borrowings to Iveco Group mainly related to the net debt outstanding at December 31, 2021.support working capital requirements.
At September 30, 2022,2023, Cash and cash equivalents were $3,154$2,979 million ($5,0444,376 million at December 31, 2021)2022) and Restricted cash was $660$706 million ($801753 million at December 31, 2021)2022), respectively. Undrawn medium-term unsecured committed facilities were $4,700$4,905 million ($5,1775,061 million at December 31, 2021) and other current financial assets were $2 million ($1 million at December 31, 2021)2022). At September 30, 2022,2023, the aggregate of Cash and cash equivalents, Restricted cash, undrawn medium-term unsecured committed facilities, other current financial assets, and net financial receivables from Iveco Group which we consider to constitute our principal liquid assets (or "available liquidity"), totaled $8,645$8,743 million ($10,52110,632 million at December 31, 2021)2022). At September 30, 2022,2023, this amount also included $129$153 million net financial receivables from Iveco Group ($502142 million net financial payablesreceivables at December 31, 2021)2022) consisting of net financial receivables mainly towards Financial Services of Iveco Group. At December 31, 2021, the net financial payables amount was mainly due to cash balances deposited by Iveco Group legal entities with CNH Industrial's central treasury, including cash management and /or cash pooling arrangements.
Net Cash from Operating Activities
Cash used by operating activities in the nine months ended September 30, 20222023 totaled $886$608 million and primarily comprised the following elements:
▪$1,4471,766 million net income;
▪plus $407$416 million in non-cash charges for depreciation and amortization ($252276 million excluding equipment on operating leases);
▪plus $130 millionchange in Other non-cash items primarily due to share based payments and write downsprovisions of assets under operating leases.$618 million;
▪less change in provisionsdeferred income taxes of $21$319 million;
▪less $2,918 million in change in working capital.capital of $3,121 million;
In the nine months ended September 30, 2021,2022, net cash provided byused in operating activities of continuing operations was $1,474$886 million primarily as a result of $1,337$2,918 million related tochange in working capital, partially offset by $1,447 million in net income and $401by $407 million in non-cash charges for depreciation partially offsetand amortization, along with $130 million in Other non-cash items driven by a $389 million change in working capital.share-based payments and the write down of assets under operating leases.
Net Cash from Investing Activities
Net cash used in investing activities was $2,042 million in the nine months ended September 30, 2023 and was primarily due to net additions to retail receivables ($1,381 million), expenditures for assets under operating leases ($384 million), and expenditures for property, plant and equipment and intangible assets, excluding assets under operating lease ($401 million).
Net cash used in investing activities was $1,590 million in the nine months ended September 30, 2022 and was primarily due to payment to Iveco Group of the $502 million debt outstanding with Iveco Group at December 31, 2021, expenditures for assets under operating leases ($368 million), addition to retail receivables ($837 million) partially offset by the proceeds from the sale of Raven Engineered Films division of $350 million.
For the nine months ended September 30, 2021, cash used in investing activities of continuing operations ($1,720 million) was primarily due to expenditures for assets under operating leases ($352 million), additions to retail receivables ($383 million) and other investing activities ($803 million).
Net Cash from Financing Activities
Net cash provided by financing activities was $1,207 million in the nine months ended September 30, 2023 compared to $802 million in the nine months ended September 30, 2022 compared to $1,242 million used in financing activities of continuing operations in the nine months ended September 30, 2021. Net cash provided by and used in financing activities for the nine months ended September 30, 2022 and 2021 was primarily due to the changesan increase in debtexternal borrowings to support working capital requirements and an increase to our Financial Services portfolio, partially offset by dividends paid.
Debt
Our consolidated debt as at September 30, 2022 and December 31, 2021 is as detailed in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated | | Industrial Activities | | Financial Services |
| September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
| (in millions) |
Total Debt including Payables to Iveco Group | $ | 21,017 | | | $ | 21,399 | | | $ | 4,833 | | | $ | 5,819 | | | $ | 16,952 | | | $ | 15,911 | |
A summary of total debt as of September 30, 20222023 and December 31, 2021,2022 is as follows:follows (in millions of dollars):
| | | September 30, 2022 | | December 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Industrial Activities | | Financial Services | | Total | | Industrial Activities | | Financial Services | | Total | | September 30, 2023 | | December 31, 2022 |
| | (in millions) | | Industrial Activities | | Financial Services | | Total | | Industrial Activities | | Financial Services | | Total |
Total bonds | Total bonds | $ | 4,507 | | | $ | 3,155 | | | $ | 7,662 | | | $ | 5,184 | | | $ | 3,280 | | | $ | 8,464 | | Total bonds | $ | 3,828 | | | $ | 5,017 | | | $ | 8,845 | | | $ | 4,836 | | | $ | 4,046 | | | $ | 8,882 | |
Asset-backed debt | Asset-backed debt | — | | | 9,057 | | | 9,057 | | | — | | | 8,875 | | | 8,875 | | Asset-backed debt | — | | | 10,537 | | | 10,537 | | | — | | | 9,751 | | | 9,751 | |
Other debt | Other debt | 137 | | | 4,066 | | | 4,203 | | | 151 | | | 3,407 | | | 3,558 | | Other debt | 289 | | | 5,287 | | | 5,576 | | | 73 | | | 4,256 | | | 4,329 | |
Intersegment debt | Intersegment debt | 183 | | | 585 | | | — | | | 150 | | | 181 | | | — | | Intersegment debt | 505 | | | 1,007 | | | — | | | 63 | | | 888 | | | — | |
Total Debt | | Total Debt | 4,622 | | | 21,848 | | | 24,958 | | | 4,972 | | | 18,941 | | | 22,962 | |
Payables to Iveco Group | Payables to Iveco Group | 6 | | | 89 | | | 95 | | | 334 | | | 168 | | | 502 | | Payables to Iveco Group | 4 | | | 72 | | | 76 | | | 5 | | | 151 | | | 156 | |
Total Debt | $ | 4,833 | | | $ | 16,952 | | | $ | 21,017 | | | $ | 5,819 | | | $ | 15,911 | | | $ | 21,399 | | |
Total Debt (including Payables to Iveco Group) | | Total Debt (including Payables to Iveco Group) | $ | 4,626 | | | $ | 21,920 | | | $ | 25,034 | | | $ | 4,977 | | | $ | 19,092 | | | $ | 23,118 | |
A summary of issued bonds outstanding as of September 30, 20222023 is as follows:follows (in millions of dollars, except percentages):
| | | Currency | | Face value of outstanding bonds (in millions) | | Coupon | | Maturity | | Outstanding amount ($ millions) | | Currency | | Face value of outstanding bonds | | Coupon | | Maturity | | Outstanding amount |
Industrial Activities | Industrial Activities | | | | | | | | | | Industrial Activities | | | | | | | | | |
Euro Medium Term Notes: | Euro Medium Term Notes: | | Euro Medium Term Notes: | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 369 | | | 2.875 | % | | May 17, 2023 | | 359 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 750 | | | — | % | | April 1, 2024 | | 795 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 750 | | | 0.000 | % | | April 1, 2024 | | 731 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 650 | | | 1.750 | % | | September 12, 2025 | | 689 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 650 | | | 1.750 | % | | September 12, 2025 | | 634 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 100 | | | 3.500 | % | | November 12, 2025 | | 106 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 100 | | | 3.500 | % | | November 12, 2025 | | 98 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 500 | | | 1.875 | % | | January 19, 2026 | | 529 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 500 | | | 1.875 | % | | January 19, 2026 | | 487 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 600 | | | 1.750 | % | | March 25, 2027 | | 636 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 600 | | | 1.750 | % | | March 25, 2027 | | 585 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 50 | | | 3.875 | % | | April 21, 2028 | | 53 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 50 | | | 3.875 | % | | April 21, 2028 | | 49 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 500 | | | 1.625 | % | | July 3, 2029 | | 529 | |
CNH Industrial Finance Europe S.A. (1) | CNH Industrial Finance Europe S.A. (1) | EUR | | 500 | | | 1.625 | % | | July 3, 2029 | | 487 | | CNH Industrial Finance Europe S.A. (1) | EUR | | 50 | | | 2.200 | % | | July 15, 2039 | | 53 | |
CNH Industrial Finance Europe S.A. (1) | EUR | | 50 | | | 2.200 | % | | July 15, 2039 | | 49 | | |
Other Bonds: | Other Bonds: | | Other Bonds: | |
CNH Industrial N.V. (2) | USD | | 600 | | | 4.500 | % | | August 15, 2023 | | 600 | | |
CNH Industrial N.V. (2) | CNH Industrial N.V. (2) | USD | | 500 | | | 3.850 | % | | November 15, 2027 | | 500 | | CNH Industrial N.V. (2) | USD | | 500 | | | 3.850 | % | | November 15, 2027 | | 500 | |
Hedging effects, bond premium/discount, and unamortized issuance costs | Hedging effects, bond premium/discount, and unamortized issuance costs | | (72) | | Hedging effects, bond premium/discount, and unamortized issuance costs | | (62) | |
Total Industrial Activities | Total Industrial Activities | | $ | 4,507 | | Total Industrial Activities | | $ | 3,828 | |
Financial Services | Financial Services | | | Financial Services | | |
CNH Industrial Capital Australia Pty Ltd. | AUD | | 175 | | | 2.100 | % | | December 12, 2022 | | 113 | | |
CNH Industrial Capital LLC | USD | | 600 | | | 1.950 | % | | July 2, 2023 | | 600 | | |
CNH Industrial Capital Argentina SA | USD | | 31 | | | 0.000 | % | | August 31, 2023 | | 31 | | |
CNH Industrial Capital LLC | USD | | 500 | | | 4.200 | % | | January 15, 2024 | | 500 | | |
CNH Industrial Capital Australia Pty Ltd. | AUD | | 200 | | | 1.750 | % | | July 8, 2024 | | 129 | | |
CNH Industrial Capital Australia Pty Ltd. | AUD | | 50 | | | 1.750 | % | | July 8, 2024 | | 32 | | |
CNH Industrial Capital Canada Ltd | CAD | | 300 | | | 1.500 | % | | October 1, 2024 | | 218 | | |
CNH Industrial Capital LLC | CNH Industrial Capital LLC | USD | | 500 | | | 3.950 | % | | May 23, 2025 | | 500 | | CNH Industrial Capital LLC | USD | | 500 | | | 4.200 | % | | January 15, 2024 | | 500 | |
CNH Industrial Capital LLC | CNH Industrial Capital LLC | USD | | 500 | | | 1.875 | % | | January 15, 2026 | | 500 | | CNH Industrial Capital LLC | USD | | 500 | | | 3.950 | % | | May 23, 2025 | | 500 | |
CNH Industrial Capital LLC | CNH Industrial Capital LLC | USD | | 600 | | | 1.450 | % | | July 15, 2026 | | 600 | | CNH Industrial Capital LLC | USD | | 400 | | | 5.450 | % | | October 14, 2025 | | 400 | |
CNH Industrial Capital LLC | | CNH Industrial Capital LLC | USD | | 500 | | | 1.875 | % | | January 15, 2026 | | 500 | |
CNH Industrial Capital LLC | | CNH Industrial Capital LLC | USD | | 600 | | | 1.450 | % | | July 15, 2026 | | 600 | |
CNH Industrial Capital LLC | | CNH Industrial Capital LLC | USD | | 600 | | | 4.550 | % | | April 10, 2028 | | 600 | |
CNH Industrial Capital LLC | | CNH Industrial Capital LLC | USD | | 500 | | | 5.500 | % | | January 12, 2029 | | 500 | |
CNH Industrial Capital Australia Pty Ltd. | | CNH Industrial Capital Australia Pty Ltd. | AUD | | 425 | | | 1.750% 5.800% | | 2024/2026 | | 276 | |
CNH Industrial Capital Canada Ltd | | CNH Industrial Capital Canada Ltd | CAD | | 300 | | | 1.500 | % | | October 1, 2024 | | 223 | |
CNH Industrial Capital Canada Ltd | | CNH Industrial Capital Canada Ltd | CAD | | 400 | | | 5.500 | % | | August 11, 2026 | | 298 | |
CNH Industrial Capital Argentina SA | | CNH Industrial Capital Argentina SA | USD | | 59 | | | — | % | | 2025 | | 59 | |
Banco CNH Industrial Capital S.A. | | Banco CNH Industrial Capital S.A. | BRL | | 3,212 | | | 13.210% 14.450% | | 2023/2028 | | 642 | |
Hedging effects, bond premium/discount, and unamortized issuance costs | Hedging effects, bond premium/discount, and unamortized issuance costs | | (68) | | Hedging effects, bond premium/discount, and unamortized issuance costs | | (81) | |
Total Financial Services | Total Financial Services | | $ | 3,155 | | Total Financial Services | | $ | 5,017 | |
(1) Bond listed on the Irish Stock Exchange.
(2) Bond listed on the New York Stock Exchange.
The calculation of Net Debt as atof September 30, 20222023 and December 31, 20212022 and the reconciliation of Total Debt, the U.S. GAAP financial measure that we believe to be most directly comparable to Net Debt are shown below:below (in millions of dollars):
| | | Consolidated | | Industrial Activities | | Financial Services | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | Consolidated | | Industrial Activities | | Financial Services |
| | (in millions) | | September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 | | September 30, 2023 | | December 31, 2022 |
Third party debt | Third party debt | $ | (20,922) | | | $ | (20,897) | | | $ | (4,644) | | | $ | (5,335) | | | $ | (16,278) | | | $ | (15,562) | | Third party debt | $ | (24,958) | | | $ | (22,962) | | | $ | (4,117) | | | $ | (4,909) | | | $ | (20,841) | | | $ | (18,053) | |
Intersegment notes payable | Intersegment notes payable | — | | | — | | | (183) | | | (150) | | | (585) | | | (181) | | Intersegment notes payable | — | | | — | | | (505) | | | (63) | | | (1,007) | | | (888) | |
Payable to Iveco Group N.V.(4) | (95) | | | (3,986) | | | (6) | | | (3,764) | | | (89) | | | (222) | | |
Payable to Iveco Group N.V. | | Payable to Iveco Group N.V. | (76) | | | (156) | | | (4) | | | (5) | | | (72) | | | (151) | |
Total Debt(1) | Total Debt(1) | (21,017) | | | (24,883) | | | (4,833) | | | (9,249) | | | (16,952) | | | (15,965) | | Total Debt(1) | (25,034) | | | (23,118) | | | (4,626) | | | (4,977) | | | (21,920) | | | (19,092) | |
Cash and cash equivalents | Cash and cash equivalents | 3,154 | | | 5,044 | | | 2,736 | | | 4,386 | | | 418 | | | 658 | | Cash and cash equivalents | 2,979 | | | 4,376 | | | 2,458 | | | 3,802 | | | 521 | | | 574 | |
Restricted cash | Restricted cash | 660 | | | 801 | | | 131 | | | 128 | | | 529 | | | 673 | | Restricted cash | 706 | | | 753 | | | 150 | | | 158 | | | 556 | | | 595 | |
Intersegment notes receivable | Intersegment notes receivable | — | | | — | | | 585 | | | 181 | | | 183 | | | 150 | | Intersegment notes receivable | — | | | — | | | 1,007 | | | 888 | | | 505 | | | 63 | |
Receivables from Iveco Group N.V.(4) | 224 | | | 3,484 | | | 151 | | | 3,430 | | | 73 | | | 54 | | |
Receivables from Iveco Group N.V. | | Receivables from Iveco Group N.V. | 229 | | | 298 | | | 163 | | | 234 | | | 66 | | | 64 | |
Other current financial assets(2) | Other current financial assets(2) | 2 | | | 1 | | | 2 | | | 1 | | | — | | | — | | Other current financial assets(2) | — | | | 300 | | | — | | | 300 | | | — | | | — | |
Derivatives hedging debt | Derivatives hedging debt | (44) | | | (3) | | | (44) | | | (3) | | | — | | | — | | Derivatives hedging debt | (41) | | | (43) | | | (41) | | | (43) | | | — | | | — | |
Net Cash (Debt)(3) | Net Cash (Debt)(3) | $ | (17,021) | | | $ | (15,556) | | | $ | (1,272) | | | $ | (1,126) | | | $ | (15,749) | | | $ | (14,430) | | Net Cash (Debt)(3) | $ | (21,161) | | | $ | (17,434) | | | $ | (889) | | | $ | 362 | | | $ | (20,272) | | | $ | (17,796) | |
(1) Total (Debt) of Industrial Activities includes Intersegment notes payable to Financial Services of $183$505 million and $150$63 million as of September 30, 20222023 and December 31, 2021,2022, respectively. Total (Debt) of Financial Services includes Intersegment notes payable to Industrial Activities of $585$1,007 million and $181$888 million as of September 30, 20222023 and December 31, 2021,2022, respectively.
(2) This item includes short-term deposits and investments towards high-credit rating counterparties.
(3) The net intersegment receivable/(payable) balance recorded by Financial Services relating to Industrial Activities was $(402)$(502) million and $(31)$(825) million as of September 30, 20222023 and December 31, 2021,2022, respectively.
(4) For December 31, 2021, this item is shown net on the CNH Industrial balance sheet.
Excluding positive exchange rate differences effect of $1,113$33 million, Net Debt at September 30, 20222023 increased by $2,578$3,694 million compared to December 31, 2021,2022, mainly reflecting a Free Cash Flow absorption from Industrial Activities of $(453)$414 million, during the nine months and the increase in portfolio receivables of Financial Services of $2,146 million.
The following table shows$2,890 million, and the change in Net Cash (Debt)cash out of Industrial Activities for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | |
(in millions) | 2022 | | 2021 |
Net Cash (Debt) of Industrial Activities at beginning of period | $ | (1,126) | | | $ | (893) | |
Adjusted EBIT of Industrial Activities | 1,753 | | | 1,385 | |
Depreciation and amortization | 250 | | | 217 | |
Depreciation of assets under operating leases | 2 | | | 1 | |
Cash interest and taxes | (511) | | | (308) | |
Changes in provisions and similar(1) | 294 | | | 261 | |
Change in working capital | (1,967) | | | (656) | |
Investments in property, plant and equipment, and intangible assets | (243) | | | (195) | |
Other changes | (31) | | | (2) | |
Free Cash Flow of Industrial Activities | (453) | | | 703 | |
Capital increases and dividends(2) | (532) | | | (184) | |
Currency translation differences and other(3) | 839 | | | 249 | |
Change in Net Cash (Debt) of Industrial Activities | (146) | | | 768 | |
Net Cash (Debt) of Industrial Activities at end of period | $ | (1,272) | | | $ | (125) | |
(1) Including other cash flow items related to operating lease.
(2) In the three and nine months ended September 30, 2022, this item also includes share buy-back transactions.
(3) In the nine months ended September 30, 2022 this item also includes the proceed of Raven Engineered Films Division for $350 million. In the nine months ended September 30, 2021, this item also includes the charge of $8$755 million related to the repurchase of notes.
For the nine months ended September 30, 2022, the Free Cash Flow of Industrial Activities was a negative $453 million primarily due to supply chain constraintsyearly dividend and high manufacturing inventories, partially offset by a positive Adjusted EBIT performance.
The following table shows the change in Net cash provided by (used in) Operating Activities to Free Cash Flow of Industrial Activities for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | |
(in millions) | | 2022 | | 2021 |
Net cash provided by (used in) Operating Activities | | $ | (886) | | | $ | 1,474 | |
Cash flows from Operating Activities of Financial Services net of eliminations | | 704 | | | (548) | |
Change in derivatives hedging debt of Industrial Activities and other | | 17 | | | (8) | |
Investments in assets sold under operating lease assets of Industrial Activities | | (14) | | | (18) | |
Investments in property, plant, and equipment, and intangible assets of Industrial Activities | | (243) | | | (195) | |
Other changes (1) | | (31) | | | (2) | |
Free Cash Flow of Industrial Activities | | $ | (453) | | | $ | 703 | |
(1) This item primarily includes change in intersegment financial receivables and capital increases in intersegment investments.share buyback program.
In March 2019, CNH Industrial signed a five-year committed revolving credit facility for €4 billion ($4.5 billion at March 31, 2019 exchange rate) due to mature in 2024 with two extension options of 1-yearone-year each, exercisable on the first and second anniversary of the signing date. CNH Industrial exercised the first of the two extension options as of February 28, 2020 and the second extension option as of February 26, 2021. The facility is now due to maturewill expire in March 2026 for €3,950.5 million; the remaining €49.5 million will mature in March 2025.
Available committed unsecured facilities expiring after twelve months amounted to approximately $4.7$4.9 billion at September 30, 20222023 ($5.25.1 billion at December 31, 2021)2022). Total committed secured facilities expiring after twelve months amounted to approximately $2.6$3.5 billion at September 30, 20222023 ($3.92.9 billion at December 31, 2021, $3.0 billion excluding Iveco Group)2022), of which $0.8$1.0 billion was available at September 30, 20222023 ($1.10.8 billion at December 31, 2021, $1.0 billion excluding Iveco Group)2022).
With the strong liquidity position at the end of September 20222023 and the demonstrated access to the financial markets, CNH Industrial believes that its cash and cash equivalents, access to credit facilities and cash flows from future operations will be adequate to fund its known cash needs.
Please refer to “Note 10: Debt” in our 2021 Annual Report2022 Form 10-K for more information related to our debt and credit facilities.
Contingencies
As a global company with a diverse business portfolio, CNH Industrial is exposed to numerous legal risks, including legal proceedings, claims and governmental investigations, particularly in the areas of product liability (including asbestos-related liability), product performance, emissions and fuel economy, retail and wholesale credit, competition and antitrust law, intellectual property matters (including patent infringement), disputes with dealers and suppliers and service providers, environmental risks, and tax and employment matters. For more information, please refer to the information presented in “Note 15: Commitments and Contingencies” to our condensed consolidated financial statements.
SAFE HARBOR STATEMENT
This Quarterly Reportincludes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact contained in this filing, includingcompetitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, earnings (or loss) per share, capital expenditures, dividends, liquidity, capital structure or other financial items; costs; and plans and objectives of management regarding operations and products, are forward-looking statements. Forward lookingForward-looking statements also include statements regarding the future performance of CNH Industrial and its subsidiaries on a standalone basis. These statements may include terminology such as “may”, “will”, “expect”, “could”, “should”, “intend”, “estimate”, “anticipate”, “believe”, “outlook”, “continue”, “remain”, “on track”, “design”, “target”, “objective”, “goal”, “forecast”, “projection”, “prospects”, “plan”, or similar terminology. Forward-looking statements including those related to the COVID-19 pandemic, are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize (or they occur with a degree of severity that the Company is unable to predict) or other assumptions underlying any of the forward-looking statements prove to be incorrect, including any assumptions regarding strategic plans, the actual results or developments may differ materially from any future results or developments expressed or implied by the forward-looking statements.
Factors, risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others: economic conditions in each of our markets, including the continued uncertainties related to the unknown durationsignificant uncertainty caused by geopolitical events; production and economic, operational and financial impacts of the global COVID-19 pandemic and the actions taken or contemplated by governmental authorities or others in connection with the pandemic on our business, our employees, customers and suppliers; supply chain disruptions, including delays caused by mandated shutdowns, industry capacity constraints, material availability, and global logistics delays and constraints; disruption caused by business responses to COVID-19, including remote working arrangements, which may create increased vulnerability to cybersecurity or data privacy incidents; our ability to execute business continuity plans as a result of COVID-19; the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related
products, including demand uncertainty caused by COVID-19; general economic conditions in each of our markets, including the significant economic uncertainty and volatility caused by the war in the Ukraine and COVID-19; changes in government policies regarding banking, monetary and fiscal policy; legislation, particularly pertaining to capital goods-related issues such as agriculture, the environment, debt relief and subsidy program policies, trade and commerce and infrastructure development; government policies on international trade and investment, including sanctions, import quotas, capital controls and tariffs; volatility in international trade caused by the imposition of tariffs, sanctions, embargoes, and trade wars; actions of competitors in the various industries in which we compete; development and use of new technologies and technological difficulties; the interpretation of, or adoption of new, compliance requirements with respect to engine emissions, safety or other aspects of our products; production difficulties, including capacity and supply constraints and excess inventory levels; labor relations; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities;commodities and material price increases; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; price pressure on new and used equipment; the resolution of pending litigation and investigations on a wide range of topics, including dealer and supplier litigation, intellectual property rights disputes, product warranty and defective product claims, and emissions and/or fuel economy regulatory and contractual issues; security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of CNH Industrial and its suppliers and dealers; security breaches with respect to our products; our pension plans and other post-employment obligations; political and civil unrest; volatility and deterioration of capital and financial markets, including other pandemics (such as the COVID-19 pandemic), terrorist attacks in Europe and elsewhere; the remediation of a material weakness; our ability to realize the anticipated benefits from our business initiatives as part of our strategic plan; including targeted restructuring actions to optimize our cost structure and improve the efficiency of our operations; our failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures, strategic alliances or divestitures and other similar risks and uncertainties, and our success in managing the risks involved in the foregoing.
Forward-looking statements are based upon assumptions relating to the factors described in this filing, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside CNH Industrial’s control. CNH Industrial expressly disclaims any intention or obligation to provide, update or revise any forward-looking statements in this announcement to reflect any change in expectations or any change in events, conditions or circumstances on which these forward-looking statements are based.
Further information concerning CNH Industrial, including factors that potentially could materially affect CNH Industrial’s financial results, is included in CNH Industrial’s reports and filings with the SEC, the Autoriteit Financiële Markten (“AFM”) and Commissione Nazionale per le Società e la Borsa (“CONSOB”).Borsa.
All future written and oral forward-looking statements by CNH Industrial or persons acting on the behalf of CNH Industrial are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.
Additional factors could cause actual results to differ from those express or implied by the forward-looking statements included in the Company’s filings with the SEC (including, but not limited to, the factors discussed in our 20212022 Annual Report and subsequent quarterly reports).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See our Part I,II, Item 117A of our 20212022 Annual Report. There has been no material change in this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, underwith the supervisionparticipation of our Chief Executive Officer (CEO)principal executive officer and Chief Financial Officer (CFO),our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the design and operationSecurities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022. Disclosure controls2023, our principal executive officer and procedures (as definedprincipal financial officer concluded that, as a result of the material weakness in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,our internal control over financial reporting as amended (the Exchange Act)), are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Based on their evaluation, our CEO and CFO concluded thatdescribed below, our disclosure controls and procedures were not effective as of September 30, 2022.2023.
Material Weakness in Internal Control over Financial Reporting
As of September 30, 2023, we determined that we have a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the design and implementation of information technology (IT) general controls in the areas of user access limits and segregation of duties related to enterprise resource planning (ERP) applications.
These control deficiencies have not resulted in an error or misstatements to our financial statements or the need to revise any previously published financial results. However, these deficiencies if not timely remediated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatements to one or more assertions, and IT controls and underlying data that support the effectiveness of IT system-generated data and reports).
The control deficiencies could have resulted in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented ordetected, and accordingly, we determined that these control deficiencies constitute a material weakness.
Management’s Plan to Remediate the Material Weakness
We are currently in the process of implementing measures and taking steps to address the underlying causes of the material weakness. Our efforts will include enhancing our IT general controls framework that addresses risks associated with user access and security, application change management and IT operations. We also expect to engage in focused training for control owners to help sustain effective control operations and comprehensive remediation efforts relating to segregation of duties to strengthen user access controls and security.
While we believe these efforts will improve our internal controls and address the underlying cause of the material weakness, the material weakness will not be remediated until our remediation plan has been fully implemented and we have concluded that the improvements added to our current control environment are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were
The Company is engaging in ongoing remediation efforts on the material weakness noted above; there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three-periodthree months ended September 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to the costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See “Note 15: Commitments and Contingencies” to our condensed consolidated financial statements.
ITEM 1A. RISK FACTORS
This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our 2022 Annual Report (Part I, Item 3D) based on information currently known to us and recent developments since the date of the 2022 Annual Report. The following updated risks and uncertaintiesmatters discussed below should be consideredread in conjunction with the main risks and uncertainties identifiedrisk factors set forth in our most recent annual report on Form 20-F (Part I, Item 3D). Thethe 2022 Annual Report. However, the risks described in the most recent annual report on Form 20-F,our 2022 Annual Report and in the "Safe Harbor Statement" within this reportbelow are not the only risks faced by us. Additional risks and uncertainties not currently known, or that are currently judged to be immaterial, may also materially affect our business, financial condition or operating results.
We have identified a material weakness in our internal control over financial reporting. If our remediation of this material weakness is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common shares may decline.
In connection with the preparation of our quarterly report for the three months ended September 30, 2023, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the design and implementation of information technology, or IT, general controls in the areas of user access limits and segregation of duties related to enterprise resource planning (ERP) applications. This material weakness has not resulted in an error or misstatement to our financial statements or the need to revise any of our previously published financial results.
We are exposedin the process of taking steps intended to political, economic, trade and other risks beyondremediate the material weakness. Our efforts have included enhancing our control as a result of operating a global business. We manufacture and sell products and offer services on several continents and in numerous countries around the world, including those experiencing varying degrees of political and economic instability. Given the global nature of our activities, we are exposed toIT general controls framework that addresses risks associated with international business activities that may increase our costs, impact our abilityuser access and security, application change management and IT operations. We also expect to manufactureengage in focused training for control owners to help sustain effective control operations and sell our products and require significant management attention. These risks include:
a.changes in laws, regulations and policies that affect, among other things:
i.import and exportcomprehensive remediation efforts relating to segregation of duties to strengthen user access controls and quotas, including as a resultsecurity.
While we believe these efforts will improve our internal controls and address the underlying causes of the warmaterial weakness, the material weakness will not be fully remediated until our remediation plan has been fully implemented and we have concluded that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weakness in Ukraine;our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.
ii.currency restrictions;
iii.If we fail to effectively remediate the design, manufacture and salematerial weakness in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may be unable to accurately or timely report our financial condition or results of operations. We also could become subject to sanctions or investigations by the securities exchange on which our common shares are listed, the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our products, including, for example, engine emissions regulations;
iv.interest ratesinternal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and the availabilitytrading price of credit to our dealers and customers;
v.property, contract rights and intellectual property;
vi.where, to whom, and what type of productscommon shares may be sold, including new or additional trade or economic sanctions imposed by the U.S., EU or other governmental authorities and supranational organizations (e.g., the United Nations); anddecline.
vii.taxes;
b.regulations from changing world organization initiatives and agreements;
c.changes in the dynamics of the industries and markets in which we operate;
d.labor disruptions;
e.disruption in the supply chain of raw materials, including rare materials (that might be more easily the target of sudden cost increases due to a variety of factors, including logistic difficulties, market volatility or political changes), oil, gas, and other energy sources and components (e.g., semiconductors);
f.changes in governmental debt relief and subsidy program policies in certain significant markets, including the Brazilian government discontinuing programs subsidizing interest rates on equipment loans;
g.withdrawal from, or changes to, trade agreements or trade terms, negotiation of new trade agreements and the imposition of new (and retaliatory) tariffs or other administrative restrictions like licenses in certain countries or covering certain products or raw materials or embargoes, including as a result of the war in Ukraine; and
h.war, civil unrest and acts of terrorism.
In recent years, acts of terrorism have occurred around the world, leading to personal safety anxieties and political instability in many countries and, ultimately, an impact on consumers’ confidence. More recently, growing populist and nationalist political movements in several major developed countries, changes in or uncertainty surrounding, global trade policies and other unanticipated changes to the previous geopolitical order may have negative effects on the global economy.
Further, the war in Ukraine, which began in February 2022, has given rise to regional instability and resulted in heightened economic sanctions from, among others, the U.S., EU, Switzerland, UK, and counter-sanctions from Russia. Our business in the Ukraine and Russia has been significantly impacted by the war and the Company has suspended all shipments to Russia. We have experienced, and may continue to experience, risks related to the impact of the war in Ukraine, including restrictions on our ability to do business with certain vendors or suppliers, the ability to repatriate funds from the region, increases in the cost of raw materials and commodities, supply chain and logistics challenges and foreign currency volatility. We also continue to monitor the impact of the sanctions and export controls imposed in the response to the war in Ukraine, including suspension or rationing of gas deliveries from Russia to certain European countries. The situation is rapidly evolving and significant uncertainties regarding the full impact of the war in
Ukraine and the related impacts on the global economy and geopolitical relations, in general and on our business in particular, remain andWe may be impacted by any ornot realize all of the foregoing risks. The waranticipated benefits from our business initiatives and cost reduction initiatives.
As part of our strategic plan, we are actively engaged in Ukraine may also heighten other risks disclosed ina number of initiatives to strengthen our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, anybusiness and increase our productivity, market positioning, efficiency and cash flow, all of which couldwe expect will have an adverse impact on our business, results of operation, cash flows or financial condition.
There can be no guarantee that we will be able to quickly and completely adapt our business model to changes that could result from the foregoing, and any such changes may have an adversea positive long-term effect on our business, results of operations and financial condition. These initiatives include our enhanced focus on digital, precision farming and alternative propulsion, as well as other initiatives aimed at improving our product portfolio, customer focus and manufacturing and business processes. There can be no assurance that these initiatives or others will be beneficial to the extent anticipated, or that the estimated efficiency or cash flow improvements will be realized as anticipated or at all. If these initiatives are not implemented successfully, they could have an adverse effect on our operations. We have announced targeted restructuring actions to optimize our cost structure and improve the efficiency of
our operations. In order to complete these actions, we will incur charges. Failure to realize anticipated savings or benefits from our business initiatives and cost reduction actions could have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 1, 2022 CNH Industrial N.V. has a share repurchase program that was announced the approval of the €100 million share buy-back program. The program involved the intermittent repurchase ofin July 2022 to purchase up to €100$300 million shares of the Company’s common shares and the program concluded on September 14, 2022. On September 19, 2022, CNH Industrial N.V. announced the launch of the first tranche of $50 million share buyback in the framework of its new $300 million share buyback program.shares. The Company’s purchases of its common shares under these programsthe Buyback Program during the three months ended September 30, 2022 2023,were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | Average Price Paid per Share (€) | | Average Price Paid per Share ($)(4) | | Approximate USD Value of Shares that May Yet Be Purchased under the Plans or Programs ($)(1) |
7/1/2022 - 7/31/2022 | | 2,591,541 | | | 11.23 | | | 11.43 | | | 36,253,991 | |
8/1/2022 - 8/31/2022 | | 2,352,640 | | | 12.44 | | | 12.57 | | | 6,681,306 | |
9/1/2022 - 9/30/2022 (2)(3) | | 1,477,131 | | | 11.93 | | | 11.82 | | | 39,221,618 | |
Total | | 6,421,312 | | | | | | | 39,221,618 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Average Price Paid per Share (€) | | Average Price Paid per Share ($)(2) | | Approximate USD Value of Shares that May Yet Be Purchased under the Plans or Programs ($) |
7/1/2023 - 7/31/2023 | | 2,119,533 | | | 13.32 | | | 14.69 | | | 2,626,614 | |
8/1/2023 - 8/31/2023(1) | | 1,009,724 | | | 12.52 | | | 13.69 | | | 38,806,777 | |
9/1/2023 - 9/30/2023 | | 761,410 | | | 12.12 | | | 12.95 | | | 28,948,581 | |
Total | | 3,890,667 | | | | | | | 28,948,581 | |
1) On March 1, 2022, the Company announced a share buyback program which involved the repurchase of up to 100 million Euros worth of the Company’s common shares up until October 14, 2022. On July 28, 2022, the Board of Directors approved a $300 million share buyback program to be launched at the completion of the previous €100 million program announced on March 1, 2022.
2) On September 14, 2022, the €100 million share buyback program concluded.
3) On September 19, 2022,August 9, 2023, CNH Industrial N.V. launched a firstthe sixth and final tranche of $50 million share buyback in the framework of its $300 million share buyback program and the amount in this column represents the approximate value of shares that may be purchased under this first tranche.
4)2) Share repurchases are made on Euronext Milan and have been translated from Euros at the exchange rate reported by the European Central Bank on the respective transaction dates.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
| | | | | | | | |
ITEM 6. EXHIBITS |
Exhibit Number | | Description |
3.1 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32.1 | | |
| | |
101.INS | | Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| | |
101.SCH | | Inline XBRL Taxonomy Extension Schema |
| | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase |
| | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase |
| | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase |
| | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase |
| | |
104 | | Cover page Interactive Data File is formatted in Inline XBRL and is contained in Exhibits 101 |
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosures other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular any warranties or representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of holders of certain long-term debt have not been filed. The registrant will furnish copies thereof to the SEC upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | CNH INDUSTRIAL N.V. |
| | | |
| | | /s/ SCOTT W. WINE |
| | | Scott W. Wine |
| | | Chief Executive Officer |
| | | |
| | | |
| | | /s/ ODDONE INCISA |
| | | Oddone Incisa |
| | | Chief Financial Officer |
November 9, 20228, 2023 | | | |