CNH Industrial Capital 10-Q 2019 Q3 Quarterly report

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, 2019
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: 000-55510

CNH INDUSTRIAL CAPITAL LLC

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		39-1937630 (I.R.S. Employer Identification Number)
5729 Washington Avenue Racine, Wisconsin (Address of principal executive offices)	(262) 636-6011 (Registrant’s telephone number, including area code)	53406 (Zip code)

Securities registered pursuant to Section 12(b) of the Act: None

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. ☒ Yes  ☐ 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). ☒ Yes  ☐ 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 ☒     Emerging growth company ☐	Smaller reporting 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 Act). ☐ Yes  ☒ No

As of September 30, 2019, all of the limited liability company interests of the registrant were held by CNH Industrial America  LLC, a wholly-owned subsidiary of CNH Industrial N.V.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with certain reduced disclosures as permitted by those instructions.

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	1
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	2
	Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	5
	Consolidated Statements of Changes in Stockholder’s Equity for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	6
	Condensed Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	*
Item 4.	Controls and Procedures	44
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	45

*This item has been omitted pursuant to the reduced disclosure format as set forth in General Instruction (H)(2) of Form 10‑Q

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
REVENUES
Interest income on retail notes and finance leases	$	54,110	$	52,649	$	166,690	$	151,480
Interest income on wholesale notes		17,385		17,211		51,120		49,036
Interest and other income from affiliates		84,315		76,142		257,560		263,549
Rental income on operating leases		60,534		60,027		181,667		181,100
Other income		8,012		5,252		18,500		18,628
Total revenues		224,356		211,281		675,537		663,793
EXPENSES
Interest expense:
Interest expense to third parties		82,411		79,991		252,616		232,847
Interest expense to affiliates		6,368		1,566		9,791		5,942
Total interest expense		88,779		81,557		262,407		238,789
Administrative and operating expenses:
Fees charged by affiliates		11,568		11,777		35,523		35,036
Provision for credit losses		7,917		8,286		27,983		24,396
Depreciation of equipment on operating leases		56,070		54,920		172,670		173,174
Other expenses		10,536		8,349		26,795		32,033
Total administrative and operating expenses		86,091		83,332		262,971		264,639
Total expenses		174,870		164,889		525,378		503,428
INCOME BEFORE TAXES		49,486		46,392		150,159		160,365
Income tax provision		12,965		5,111		36,643		31,653
NET INCOME	$	36,521	$	41,281	$	113,516	$	128,712

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

1

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
NET INCOME	$	36,521	$	41,281	$	113,516	$	128,712
Other comprehensive income (loss):
Foreign currency translation adjustment		(5,720)		11,493		12,214		(23,475)
Pension liability adjustment		98		81		275		276
Change in derivative financial instruments		438		725		(2,573)		719
Total other comprehensive income (loss)		(5,184)		12,299		9,916		(22,480)
COMPREHENSIVE INCOME	$	31,337	$	53,580	$	123,432	$	106,232

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

2

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018

(Dollars in thousands)

(Unaudited)

	September 30,		December 31,
	2019		2018
ASSETS
Cash and cash equivalents	$	117,397	$	160,328
Restricted cash and cash equivalents		529,850		639,543
Receivables, less allowance for credit losses of $72,330 and $74,412, respectively		9,927,388		9,950,926
Affiliated accounts and notes receivable		24,070		43,389
Equipment on operating leases, net		1,741,913		1,724,217
Equipment held for sale		216,347		209,991
Goodwill		109,123		108,399
Other intangible assets, net		11,124		10,182
Other assets		82,003		84,937
TOTAL	$	12,759,215	$	12,931,912
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Short-term debt (including current maturities of long-term debt)	$	3,865,460	$	4,324,292
Accounts payable and other accrued liabilities		732,269		715,778
Affiliated debt		483,124		276,271
Long-term debt		6,363,764		6,259,839
Total liabilities		11,444,617		11,576,180
Commitments and contingent liabilities (Note 11)
Stockholder’s equity:
Member’s capital		—		—
Paid-in capital		844,077		843,643
Accumulated other comprehensive loss		(137,680)		(146,999)
Retained earnings		608,201		659,088
Total stockholder’s equity		1,314,598		1,355,732
TOTAL	$	12,759,215	$	12,931,912

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

3

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018

(Dollars in thousands)

(Unaudited)

The following table presents certain assets and liabilities of consolidated variable interest entities (“VIEs”), which are included in the consolidated balance sheets. The assets in the table include those assets that can only be used to settle obligations of consolidated VIEs. The liabilities in the table include third-party liabilities of the consolidated VIEs, for which creditors do not have recourse to the general credit of CNH Industrial Capital LLC.

	September 30,		December 31,
	2019		2018
Restricted cash and cash equivalents	$	529,850	$	639,543
Receivables, less allowance for credit losses of $49,028 and $54,124, respectively		6,871,451		6,687,828
TOTAL	$	7,401,301	$	7,327,371
Short-term debt (including current maturities of long-term debt)	$	3,326,333	$	3,241,347
Long-term debt		3,398,728		3,442,286
TOTAL	$	6,725,061	$	6,683,633

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

4

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	113,516	$	128,712
Adjustments to reconcile net income to net cash from (used in) operating activities:
Depreciation on property and equipment and equipment on operating leases		172,671		173,180
Amortization of intangibles		1,375		1,602
Provision for credit losses		27,983		24,396
Deferred income tax expense (benefit)		44,055		(10,368)
Changes in components of working capital:
Change in affiliated accounts and notes receivables		19,643		(24,322)
Change in other assets and equipment held for sale		(3,570)		(23,698)
Change in accounts payable and other accrued liabilities		(34,061)		(20,334)
Net cash from (used in) operating activities		341,612		249,168
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of receivables acquired		(8,149,836)		(8,185,725)
Collections of receivables		8,200,468		8,594,883
Purchase of equipment on operating leases		(514,369)		(431,457)
Proceeds from disposal of equipment on operating leases		337,284		324,304
Change in property, equipment and software, net		(2,317)		(4,143)
Net cash from (used in) investing activities		(128,770)		297,862
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of affiliated debt		1,370,930		674,596
Payment of affiliated debt		(1,164,078)		(1,040,598)
Proceeds from issuance of long-term debt		1,945,345		2,574,196
Payment of long-term debt		(2,475,771)		(3,091,688)
Change in short-term borrowings, net		123,108		138,997
Dividends paid to CNH Industrial America LLC		(165,000)		(60,000)
Net cash from (used in) financing activities		(365,466)		(804,497)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(152,624)		(257,467)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period		799,871		875,558
End of period	$	647,247	$	618,091
CASH PAID DURING THE PERIOD FOR INTEREST	$	243,398	$	221,751
CASH PAID (RECEIVED) DURING THE PERIOD FOR TAXES	$	(40,936)	$	50,761

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

5

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

					Accumulated
					Other
	Member’s		Paid-in		Comprehensive		Retained
	Capital		Capital		Income (Loss)		Earnings		Total
BALANCE - January 1, 2019	$	—	$	843,643	$	(146,999)	$	659,088	$	1,355,732
Net income		—		—		—		39,211		39,211
Dividends paid to CNH Industrial America LLC		—		—		—		—		—
Foreign currency translation adjustment		—		—		8,690		—		8,690
Stock compensation		—		164		—		—		164
Reclassification of certain tax effects		—		—		(597)		597		—
Pension liability adjustment, net of tax		—		—		88		—		88
Change in derivative financial instruments, net of tax		—		—		(1,950)		—		(1,950)
BALANCE - March 31, 2019	$	—	$	843,807	$	(140,768)	$	698,896	$	1,401,935
Net income		—		—		—		37,784		37,784
Dividends paid to CNH Industrial America LLC		—		—		—		(125,000)		(125,000)
Foreign currency translation adjustment		—		—		9,244		—		9,244
Stock compensation		—		94		—		—		94
Pension liability adjustment, net of tax		—		—		89		—		89
Change in derivative financial instruments, net of tax		—		—		(1,061)		—		(1,061)
BALANCE - June 30, 2019	$	—	$	843,901	$	(132,496)	$	611,680	$	1,323,085
Net income		—		—		—		36,521		36,521
Dividends paid to CNH Industrial America LLC		—		—		—		(40,000)		(40,000)
Foreign currency translation adjustment		—		—		(5,720)		—		(5,720)
Stock compensation		—		176		—		—		176
Pension liability adjustment, net of tax		—		—		98		—		98
Change in derivative financial instruments, net of tax		—		—		438		—		438
BALANCE - September 30, 2019	$	—	$	844,077	$	(137,680)	$	608,201	$	1,314,598

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

6

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (Continued)

(Dollars in thousands)

(Unaudited)

					Accumulated
					Other
	Member’s		Paid-in		Comprehensive		Retained
	Capital		Capital		Income (Loss)		Earnings		Total
BALANCE - January 1, 2018	$	—	$	843,559	$	(100,163)	$	632,243	$	1,375,639
Net income		—		—		—		39,803		39,803
Dividends paid to CNH Industrial America LLC		—		—		—		(20,000)		(20,000)
Foreign currency translation adjustment		—		—		(18,000)		—		(18,000)
Stock compensation		—		167		—		—		167
Pension liability adjustment, net of tax		—		—		106		—		106
Change in derivative financial instruments, net of tax		—		—		78		—		78
BALANCE - March 31, 2018	$	—	$	843,726	$	(117,979)	$	652,046	$	1,377,793
Net income		—		—		—		47,628		47,628
Dividends paid to CNH Industrial America LLC		—		—		—		(20,000)		(20,000)
Foreign currency translation adjustment		—		—		(16,968)		—		(16,968)
Stock compensation		—		96		—		—		96
Pension liability adjustment, net of tax		—		—		89		—		89
Change in derivative financial instruments, net of tax		—		—		(84)		—		(84)
BALANCE - June 30, 2018	$	—	$	843,822	$	(134,942)	$	679,674	$	1,388,554
Net income		—		—		—		41,281		41,281
Dividends paid to CNH Industrial America LLC		—		—		—		(20,000)		(20,000)
Foreign currency translation adjustment		—		—		11,493		—		11,493
Stock compensation		—		160		—		—		160
Pension liability adjustment, net of tax		—		—		81		—		81
Change in derivative financial instruments, net of tax		—		—		725		—		725
BALANCE - September 30, 2018	$	—	$	843,982	$	(122,643)	$	700,955	$	1,422,294

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

7

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

CNH Industrial Capital LLC and its primary operating subsidiaries, including New Holland Credit Company, LLC (“New Holland Credit”), CNH Industrial Capital America LLC (“CNH Industrial Capital America”), and CNH Industrial Capital Canada Ltd. (“CNH Industrial Capital Canada”) (collectively, “CNH Industrial Capital” or the “Company”), are each a subsidiary of CNH Industrial America LLC (“CNH Industrial America”), which is an indirect wholly-owned subsidiary of CNH Industrial N.V. (“CNHI” and, together with its consolidated subsidiaries, “CNH Industrial”). CNH Industrial America and CNH Industrial Canada Ltd. (collectively, “CNH Industrial North America”) design, manufacture, and sell agricultural and construction equipment. CNH Industrial Capital provides financial services for CNH Industrial North America dealers and end-use customers primarily located in the United States and Canada.

CNHI is incorporated in and under the laws of The Netherlands. CNHI has its corporate seat in Amsterdam, The Netherlands, and its principal office in London, England. The common shares of CNHI are listed on the New York Stock Exchange under the symbol “CNHI,” as well as on the Mercato Telematico Azionario managed by Borsa Italiana S.p.A.

The Company has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information, which should be read in conjunction with the audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018. Certain financial information that is normally included in annual financial statements prepared in conformity with U.S. GAAP, which is not required for interim reporting purposes, has been condensed or omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our interim unaudited financial statements have been reflected.

The consolidated financial statements include the Company and its consolidated subsidiaries. The consolidated financial statements are expressed in U.S. dollars. The consolidated financial statements include the accounts of the Company’s subsidiaries in which the Company has a controlling financial interest and reflect the noncontrolling interests of the minority owners of the subsidiaries that are not fully owned for the periods presented, as applicable. A controlling financial interest may exist based on ownership of a majority of the voting interest of a subsidiary, or based on the Company’s determination that it is the primary beneficiary of a variable interest entity (“VIE”). The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the economic performance of the entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. The Company assesses whether it is the primary beneficiary on an ongoing basis, as prescribed by the accounting guidance on the consolidation of VIEs. The consolidated status of the VIEs with which the Company is involved may change as a result of such reassessments.

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and reported amounts of revenues and expenses. Significant estimates in these consolidated financial statements include the allowance for credit losses and residual values of equipment on operating leases. Actual results could differ from those estimates.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements Adopted in 2019

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes ASC 840, Leases (“ASC 840”). Subsequently, the FASB has issued additional ASUs, which further clarified this guidance. The ASU’s most prominent change is the requirement for lessees to recognize leased assets and liabilities classified as operating leases under the previous standard. The ASU did not significantly change the lessee’s recognition, measurement and

8

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

presentation of expenses and cash flows from the previous accounting standard. Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard. ASU 2016-02 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective approach, without recasting prior periods. The adoption of this standard did not have a material impact on its consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which amends ASC 815, Derivatives and Hedging. The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements and improve the disclosures of hedging arrangements. Among other provisions, the new standard (1) requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported, (2) eliminates the separate measurement and reporting of hedge ineffectiveness and (3) permits an entity to recognize in earnings the initial value of an excluded component under a systematic and rational method over the life of the derivative instrument. The Company adopted ASU 2017-12 on January 1, 2019. The adoption of this standard did not have a material impact on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which amends ASC 220, Income Statement – Reporting Comprehensive Income. In December 2017, the U.S. government enacted new tax legislation (“U.S. Tax Reform”). Included in the provisions of U.S. Tax Reform was a reduction of the corporate income tax rate from 35 percent to 21 percent. U.S. GAAP requires that the remeasurement of deferred taxes to the new corporate tax rate occur in the period in which the legislation is enacted, with the deferred tax adjustment being recorded in the provision for income taxes, including items for which the tax effects were originally recorded in other comprehensive income (“OCI”). This treatment results in the items in OCI reflecting a disproportionate tax rate, a result often referred to as stranded tax effects. This ASU allowed a reclassification from accumulated OCI to retained earnings for stranded tax effects resulting from U.S. Tax Reform. The Company adopted ASU 2018-02 on January 1, 2019, and reclassified $597 of tax effects from “Accumulated other comprehensive loss” to “Retained earnings” within its consolidated balance sheet.

In August 2018, the SEC adopted a final rule that amends certain disclosure requirements that have become duplicative, overlapping, or outdated in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. However, the guidance also added requirements for registrants to include in their interim financial statements a reconciliation of changes in stockholders’ equity for each period for which an income statement is required (both year-to-date and quarterly periods). The Company adopted the new interim disclosure requirement on January 1, 2019. The adoption of this standard did not have a material impact on its consolidated statements of changes in stockholder’s equity.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which establishes ASC 326, Financial Instruments – Credit Losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”), which supersedes existingASU 2016-13. The ASU introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Additional disclosures about significant estimates and credit quality are also required. ASU 2018-19 is effective for annual periods beginning after December 15, 2019. The Company has established a cross-functional implementation team. The team is in the process of validating and testing the models and procedures that will be used to calculate the allowance for credit losses and has started designing new processes and controls.

9

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2021, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2021 permitted for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement (“ASU 2018-15”), which expands upon the guidance set forth in ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2018-15 aligns the requirements for capitalization of implementation costs in a cloud computing service contract with those requirements for capitalization of implementation costs incurred for an internal-use software license. ASU 2018-15 may be applied prospectively from the date the guidance is first applied or retrospectively.

ASU 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The Company expects to adopt the ASU on a prospective basis. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”), which expands the application of a specific private company alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

10

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 3: ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income (“AOCI”) includes net income plus other comprehensive income, which includes foreign currency translation gains and losses, certain changes in pension plans and changes in fair value of certain derivatives designated as cash flow hedges.

The following table summarizes the change in the components of the Company’s AOCI balance and related tax effects for the three months ended September 30, 2019:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		on Derivatives		Total
Beginning balance, gross	$	(128,792)	$	(3,836)	$	(1,071)	$	(133,699)
Tax asset		—		919		284		1,203
Beginning balance, net of tax		(128,792)		(2,917)		(787)		(132,496)
Other comprehensive income (loss) before reclassifications		(5,720)		(97)		761		(5,056)
Amounts reclassified from accumulated other comprehensive income (loss)		—		227		(166)		61
Tax effects		—		(32)		(157)		(189)
Net current-period other comprehensive income (loss)		(5,720)		98		438		(5,184)
Total	$	(134,512)	$	(2,819)	$	(349)	$	(137,680)

The following table summarizes the change in the components of the Company’s AOCI balance and related tax effects for the nine months ended September 30, 2019:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		on Derivatives		Total
Beginning balance, gross	$	(146,726)	$	(4,070)	$	3,025	$	(147,771)
Tax asset		—		1,573		(801)		772
Beginning balance, net of tax		(146,726)		(2,497)		2,224		(146,999)
Other comprehensive income (loss) before reclassifications		12,214		(320)		(2,978)		8,916
Amounts reclassified from accumulated other comprehensive income (loss)		—		684		(523)		161
Tax effects		—		(89)		928		839
Net current-period other comprehensive income (loss)		12,214		275		(2,573)		9,916
Reclassification of stranded tax effects		—		(597)		—		(597)
Total	$	(134,512)	$	(2,819)	$	(349)	$	(137,680)

11

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The following table summarizes the change in the components of the Company’s AOCI balance and related tax effects for the three months ended September 30, 2018:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		Derivatives		Total
Beginning balance, gross	$	(133,685)	$	(4,693)	$	2,325	$	(136,053)
Tax asset		—		1,726		(615)		1,111
Beginning balance, net of tax		(133,685)		(2,967)		1,710		(134,942)
Other comprehensive income (loss) before reclassifications		11,493		(58)		1,114		12,549
Amounts reclassified from accumulated other comprehensive income (loss)		—		165		(128)		37
Tax effects		—		(26)		(261)		(287)
Net current-period other comprehensive income (loss)		11,493		81		725		12,299
Total	$	(122,192)	$	(2,886)	$	2,435	$	(122,643)

The following table summarizes the change in the components of the Company’s AOCI balance and related tax effects for the nine months ended September 30, 2018:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		Derivatives		Total
Beginning balance, gross	$	(98,717)	$	(4,952)	$	2,333	$	(101,336)
Tax asset		—		1,790		(617)		1,173
Beginning balance, net of tax		(98,717)		(3,162)		1,716		(100,163)
Other comprehensive income (loss) before reclassifications		(23,475)		(130)		1,031		(22,574)
Amounts reclassified from accumulated other comprehensive income (loss)		—		496		(53)		443
Tax effects		—		(90)		(259)		(349)
Net current-period other comprehensive income (loss)		(23,475)		276		719		(22,480)
Total	$	(122,192)	$	(2,886)	$	2,435	$	(122,643)

12

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The reclassifications out of AOCI and the location on the consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018		Affected Line Item
Amortization of defined benefit pension items:
	$	(227)	$	(165)	$	(684)	$	(496)	Various line items individually insignificant
		(227)		(165)		(684)		(496)	Income before taxes
		56		40		167		122	Income tax benefit
	$	(171)	$	(125)	$	(517)	$	(374)	Net of tax
Unrealized losses on derivatives:
	$	166	$	128	$	523	$	53	Interest expense to third parties
		166		128		523		53	Income before taxes
		(45)		(34)		(139)		(14)	Income tax benefit
	$	121	$	94	$	384	$	39	Net of tax

NOTE 4: RECEIVABLES

A summary of receivables included in the consolidated balance sheets as of September 30, 2019 and December 31, 2018 is as follows:

	September 30,		December 31,
	2019		2018
Retail	$	635,406	$	753,388
Wholesale		827,673		747,191
Wholesale factoring		15,673		—
Finance lease		68,789		63,936
Restricted receivables		8,452,177		8,460,823
Gross receivables		9,999,718		10,025,338
Less: Allowance for credit losses		(72,330)		(74,412)
Total receivables, net	$	9,927,388	$	9,950,926

Restricted Receivables and Securitization

As part of its overall funding strategy, the Company periodically transfers certain receivables into VIEs that are special purpose entities (“SPEs”) as part of its asset-backed securitization (“ABS”) programs.

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.

13

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The secured borrowings related to the restricted receivables are obligations that are payable as the receivables are collected. The following table summarizes the restricted receivables as of September 30, 2019 and December 31, 2018:

	September 30,		December 31,
	2019		2018
Retail	$	5,644,600	$	5,623,730
Wholesale		2,807,577		2,837,093
Total restricted receivables	$	8,452,177	$	8,460,823

Within the U.S. retail receivables securitization programs, qualifying retail receivables are sold to bankruptcy remote SPEs. In turn, these SPEs either establish separate trusts to which the receivables are transferred in exchange for proceeds from asset-backed securities issued by the trusts or pledge the receivables as collateral in exchange for proceeds from a committed asset-backed facility. In Canada, the receivables are transferred directly to the trusts. These trusts were determined to be VIEs. In its role as servicer, the Company has the power to direct the trusts’ activities. Through its retained interests, the Company has an obligation to absorb certain losses, or the right to receive certain benefits, that could potentially be significant to the trusts. Consequently, the Company has consolidated these retail trusts.

With regard to the wholesale receivable securitization programs, the Company sells eligible receivables on a revolving basis to structured master trust facilities, which are bankruptcy-remote SPEs. These trusts were determined to be VIEs. In its role as servicer, CNH Industrial Capital has the power to direct the trusts’ activities. Through its retained interests, the Company provides security to investors in the event that cash collections from the receivables are not sufficient to make principal and interest payments on the securities. Consequently, CNH Industrial Capital has consolidated these wholesale trusts.

Allowance for Credit Losses

The allowance for credit losses is the Company’s estimate of losses for receivables owned by the Company and consists of two components, depending on whether the receivable has been individually identified as being impaired. The first component of the allowance for credit losses covers the receivables specifically reviewed by management for which the Company has determined it is probable that it will not collect all the principal and interest payments as per the terms of the contract. Receivables are individually reviewed for impairment based on, among other items, amounts outstanding, days past due and prior collection history. These receivables are subject to impairment measurement at the loan level based either on the fair value of the collateral for collateral-dependent receivables or on the present value of expected future cash flows discounted at the receivables’ effective interest rate.

The second component of the allowance for credit losses covers all receivables that have not been individually reviewed for impairment. The allowance for these receivables is based on aggregated portfolio evaluations, generally by financial product. The allowance for retail and wholesale credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. In addition, qualitative factors that are not fully captured in the loss forecast models, including industry trends, and macroeconomic factors are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Charge offs of principal amounts of receivables outstanding are deducted from the allowance at the point when it is estimated that amounts due are deemed uncollectible.

The Company’s allowance for credit losses is segregated into three portfolio segments: retail, wholesale and wholesale factoring. A portfolio segment is the level at which the Company develops a systematic methodology for determining its allowance for credit losses. The retail segment includes retail notes and finance lease receivables.

14

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The wholesale segment includes wholesale financing to CNH Industrial North America dealers and the wholesale factoring segment represents the short-term receivables purchased from Iveco Argentina S.A. (“Iveco Argentina”).

Further, the Company evaluates its retail and wholesale portfolio segments by class of receivable: United States and Canada. Typically, the Company’s receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk. These classes align with management reporting.

Allowance for credit losses activity for the three months ended September 30, 2019 is as follows:

	Retail		Wholesale		Wholesale Factoring		Total
Allowance for credit losses:
Beginning balance	$	70,311	$	7,239	$	60	$	77,610
Charge-offs		(11,233)		(2,416)		—		(13,649)
Recoveries		512		3		—		515
Provision		5,797		2,169		(49)		7,917
Foreign currency translation and other		(51)		(12)		—		(63)
Ending balance	$	65,336	$	6,983	$	11	$	72,330

Allowance for credit losses activity for the nine months ended September 30, 2019 is as follows:

	Retail		Wholesale		Wholesale Factoring		Total
Allowance for credit losses:
Beginning balance	$	66,944	$	7,468	$	—	$	74,412
Charge-offs		(27,799)		(4,581)		—		(32,380)
Recoveries		2,188		12		—		2,200
Provision		23,903		4,069		11		27,983
Foreign currency translation and other		100		15		—		115
Ending balance	$	65,336	$	6,983	$	11	$	72,330
Ending balance: individually evaluated for impairment	$	19,121	$	2,075	$	—	$	21,196
Ending balance: collectively evaluated for impairment	$	46,215	$	4,908	$	11	$	51,134
Receivables:
Ending balance	$	6,348,795	$	3,635,250	$	15,673	$	9,999,718
Ending balance: individually evaluated for impairment	$	37,289	$	4,698	$	—	$	41,987
Ending balance: collectively evaluated for impairment	$	6,311,506	$	3,630,552	$	15,673	$	9,957,731

Allowance for credit losses activity for the three months ended September 30, 2018 is as follows:

					Wholesale
	Retail		Wholesale		Factoring		Total
Allowance for credit losses:
Beginning balance	$	70,316	$	6,486	$	50	$	76,852
Charge-offs		(8,563)		—		—		(8,563)
Recoveries		765		3		—		768
Provision (benefit)		7,824		509		(47)		8,286
Foreign currency translation and other		66		8		2		76
Ending balance	$	70,408	$	7,006	$	5	$	77,419

15

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Allowance for credit losses activity for the nine months ended September 30, 2018 is as follows:

					Wholesale
	Retail		Wholesale		Factoring		Total
Allowance for credit losses:
Beginning balance	$	73,610	$	5,444	$	142	$	79,196
Charge-offs		(28,830)		(187)		—		(29,017)
Recoveries		2,912		67		—		2,979
Provision (benefit)		22,831		1,696		(131)		24,396
Foreign currency translation and other		(115)		(14)		(6)		(135)
Ending balance	$	70,408	$	7,006	$	5	$	77,419
Ending balance: individually evaluated for impairment	$	16,102	$	4,435	$	—	$	20,537
Ending balance: collectively evaluated for impairment	$	54,306	$	2,571	$	5	$	56,882
Receivables:
Ending balance	$	6,521,149	$	3,461,430	$	8,411	$	9,990,990
Ending balance: individually evaluated for impairment	$	32,464	$	26,504	$	—	$	58,968
Ending balance: collectively evaluated for impairment	$	6,488,685	$	3,434,926	$	8,411	$	9,932,022

Allowance for credit losses activity for the year ended December 31, 2018 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	73,610	$	5,586	$	79,196
Charge-offs		(39,375)		(1,567)		(40,942)
Recoveries		4,702		71		4,773
Provision		28,277		3,422		31,699
Foreign currency translation and other		(270)		(44)		(314)
Ending balance	$	66,944	$	7,468	$	74,412
Ending balance: individually evaluated for impairment	$	15,801	$	4,825	$	20,626
Ending balance: collectively evaluated for impairment	$	51,143	$	2,643	$	53,786
Receivables:
Ending balance	$	6,441,054	$	3,584,284	$	10,025,338
Ending balance: individually evaluated for impairment	$	31,148	$	24,513	$	55,661
Ending balance: collectively evaluated for impairment	$	6,409,906	$	3,559,771	$	9,969,677

16

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Utilizing an internal credit scoring model, which considers customers’ attributes, prior credit history and each retail transaction’s attributes, the Company assigns a credit quality rating to each retail customer, by specific transaction, as part of the retail underwriting process. This rating is used in setting the terms on the transaction, including the interest rate. A description of the general characteristics of the customers’ risk grades is as follows:

Titanium — Customers from whom the Company expects no loss or collection effort.

Platinum — Customers from whom the Company expects minimal, if any, loss or collection effort.

Gold, Silver, Bronze — Customers defined as those with the potential for loss and collection effort.

A breakdown of the retail portfolio by the customer’s risk grade at the time of origination as of September 30, 2019 and December 31, 2018 is as follows:

	September 30,		December 31,
	2019		2018
Titanium	$	3,228,363	$	3,367,239
Platinum		1,928,901		1,942,784
Gold		1,006,963		943,816
Silver		149,405		152,338
Bronze		35,163		34,877
Total	$	6,348,795	$	6,441,054

As part of the ongoing monitoring of the credit quality of the wholesale portfolio, the Company utilizes an internal credit scoring model that assigns a risk grade for each dealer. The scoring model considers the strength of the dealer’s financial condition and payment history. The Company considers the dealers’ ratings in the quarterly credit allowance analysis. A description of the general characteristics of the dealer risk grades is as follows:

Grades A and B — Includes receivables due from dealers that have significant capital strength, moderate leverage, stable earnings and growth, and excellent payment performance.

Grade C — Includes receivables due from dealers with moderate credit risk. Dealers of this grade are differentiated from higher grades on a basis of leverage or payment performance.

Grade D — Includes receivables due from dealers with additional credit risk. These dealers require additional monitoring due to their weaker financial condition or payment performance.

A breakdown of the wholesale portfolio by its credit quality indicators as of September 30, 2019 and December 31, 2018 is as follows:

	September 30,		December 31,
	2019		2018
A	$	1,485,994	$	1,582,179
B		1,373,071		1,292,331
C		611,222		527,735
D		164,963		182,039
Total	$	3,635,250	$	3,584,284

17

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The following tables present information at the level at which management assesses and monitors its credit risk. Receivables are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Delinquency is reported on receivables greater than 30 days past due.

The aging of receivables as of September 30, 2019 is as follows:

													Recorded
													Investment
					Greater								> 90 Days
	31 – 60 Days		61 – 90 Days		Than		Total				Total		and
	Past Due		Past Due		90 Days		Past Due		Current		Receivables		Accruing
Retail
United States	$	20,272	$	4,642	$	25,862	$	50,776	$	5,102,567	$	5,153,343	$	4,535
Canada	$	3,440	$	1,117	$	2,826	$	7,383	$	1,188,069	$	1,195,452	$	1,029
Wholesale
United States	$	776	$	—	$	89	$	865	$	2,868,305	$	2,869,170	$	50
Canada	$	5	$	—	$	16	$	21	$	766,059	$	766,080	$	—
Wholesale Factoring	$	3,717	$	3,673	$	—	$	7,390	$	8,283	$	15,673	$	—
Total
Retail	$	23,712	$	5,759	$	28,688	$	58,159	$	6,290,636	$	6,348,795	$	5,564
Wholesale	$	781	$	—	$	105	$	886	$	3,634,364	$	3,635,250	$	50
Wholesale factoring	$	3,717	$	3,673	$	—	$	7,390	$	8,283	$	15,673	$	—

The aging of receivables as of December 31, 2018 is as follows:

													Recorded
													Investment
					Greater								> 90 Days
	31 – 60 Days		61 – 90 Days		Than		Total				Total		and
	Past Due		Past Due		90 Days		Past Due		Current		Receivables		Accruing
Retail
United States	$	19,318	$	6,372	$	24,772	$	50,462	$	5,239,777	$	5,290,239	$	4,573
Canada	$	1,398	$	510	$	2,326	$	4,234	$	1,146,581	$	1,150,815	$	911
Wholesale
United States	$	484	$	10	$	1,368	$	1,862	$	2,788,655	$	2,790,517	$	387
Canada	$	3	$	—	$	436	$	439	$	793,328	$	793,767	$	1
Total
Retail	$	20,716	$	6,882	$	27,098	$	54,696	$	6,386,358	$	6,441,054	$	5,484
Wholesale	$	487	$	10	$	1,804	$	2,301	$	3,581,983	$	3,584,284	$	388

18

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Impaired receivables are receivables for which the Company has determined it will not collect all the principal and interest payments as per the terms of the contract. As of September 30, 2019 and December 31, 2018, the Company’s recorded investment in impaired receivables individually evaluated for impairment and the related unpaid principal balances, allowances and average recorded investment (based on a ten-month average and thirteen-month average, respectively) are as follows:

	September 30, 2019
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Retail
United States	$	36,105	$	34,480	$	18,439	$	37,658
Canada	$	1,184	$	1,165	$	682	$	1,317
Wholesale
United States	$	4,698	$	4,616	$	2,075	$	7,943
Total
Retail	$	37,289	$	35,645	$	19,121	$	38,975
Wholesale	$	4,698	$	4,616	$	2,075	$	7,943

	December 31, 2018
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
Retail
United States	$	30,959	$	29,783	$	15,347	$	32,787
Canada	$	189	$	180	$	454	$	248
Wholesale
United States	$	24,513	$	22,985	$	4,825	$	27,269
Total
Retail	$	31,148	$	29,963	$	15,801	$	33,035
Wholesale	$	24,513	$	22,985	$	4,825	$	27,269

As of September 30, 2019 and December 31, 2018, the Company’s impaired receivables individually evaluated for impairment without an allowance were immaterial. Interest income recognized on impaired receivables for the three and nine months ended September 30, 2019 and 2018 was immaterial.

Recognition of income is generally suspended when management determines that collection of future finance income is not probable or when an account becomes 120 days delinquent, whichever occurs first. Interest accrual is resumed if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at that time.

The receivables on nonaccrual status as of September 30, 2019 and December 31, 2018 are as follows:

	September 30, 2019						December 31, 2018
	Retail		Wholesale		Total		Retail		Wholesale		Total
United States	$	26,633	$	4,616	$	31,249	$	27,069	$	22,985	$	50,054
Canada	$	1,815	$	—	$	1,815	$	1,428	$	—	$	1,428

19

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

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, 2019, the Company had 284 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $10,587 and the post-modification value was $9,553. Additionally, the Company had 346 accounts with a balance of $14,890 undergoing bankruptcy proceedings where a concession has not yet been determined. As of September 30, 2018, the Company had 278 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $9,408 and the post-modification value was $8,509. Additionally, the Company had 365 accounts with a balance of $17,028 undergoing bankruptcy proceedings where a concession has not yet been determined. As the outcome of the bankruptcy cases is determined by a court based on available assets, subsequent re-defaults are unusual and were not material for retail and finance lease contracts that were modified in a TDR during the previous 12 months ended September 30, 2019 and 2018.

As of September 30, 2019 and 2018, the Company’s wholesale TDRs were immaterial.

NOTE 5: EQUIPMENT ON OPERATING LEASES

Lease payments owed to the Company for equipment under non-cancelable operating leases (excluding deferred operating lease subsidy of $112,770) as of September 30, 2019 are as follows:

2019	$	47,088
2020		182,739
2021		124,085
2022		46,459
2023 and thereafter		16,968
Total lease payments	$	417,339

NOTE 6: CREDIT FACILITIES AND DEBT

On July 15, 2019, the Company repaid $500,000 of its 3.375% unsecured notes due 2019.

On September 26, 2019, the Company increased a short-term facility within its U.S. master trust facility from $500,000 to $670,000, of which $170,000 matures in January 2020 and $500,000 matures in May 2020.

On September 27, 2019, the Company extended the maturity date of the $1,200,000 U.S. retail committed asset-

20

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

backed facility to September 2021.

As of September 30, 2019, the Company had a fully-drawn uncommitted credit line totaling $150,000, which matures in October 2019.

Committed unsecured facilities with banks as of September 30, 2019 totaled $837,794. These credit facilities, which are eligible for renewal at various future dates, are used primarily for working capital and other general corporate purposes. As of September 30, 2019, the Company had $437,794 outstanding under these credit facilities. Included in the remaining available credit commitments is $389,780 maintained primarily to provide backup liquidity for commercial paper borrowings.

NOTE 7: INCOME TAXES

The effective tax rates for the three months ended September 30, 2019 and 2018 were 26.2% and 11.0%, respectively. The effective tax rate was 24.4% for the nine months ended September 30, 2019, compared to 19.7% for the same period in 2018. The effective tax rates were slightly higher than the 21% U.S. federal income tax rate primarily due to state income taxes as well as the combined federal and provincial income taxes levied on the Company’s non-U.S. earnings, the impact of which was partly offset by certain income tax credits. Excluding the discrete tax benefits, which included a revision to the Company’s provisional estimate of accounting for U.S. Tax Reform, the Company’s effective tax rates would have been 23.1% and 23.2% for the three and nine months ended September 30, 2018, respectively.

NOTE 8: FINANCIAL INSTRUMENTS

The Company 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 Company has not elected the fair value measurement option for eligible items.

Fair-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-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.

21

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

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

The Company utilizes derivative instruments to mitigate its exposure to interest rate and foreign currency exposures. Derivatives used as hedges are effective at reducing the risk associated with the exposure being hedged and are designated as a hedge at the inception of the derivative contract. The Company 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 consolidated statements of cash flows.

Interest Rate Derivatives

The Company has entered into interest rate derivatives 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 the Company recognizes interest expense on the related debt. As of September 30, 2019, the maximum length of time over which the Company is hedging its interest rate exposure through the use of derivative instruments designated in cash flow hedge relationships is 54 months. As of September 30, 2019, the after-tax losses deferred in accumulated other comprehensive income (loss) that will be recognized in interest expense over the next 12 months are approximately $(441).

The Company also enters into offsetting interest rate derivatives with substantially similar economic terms that are not designated as hedging instruments to mitigate interest rate risk related to the Company’s committed asset-backed facilities. Unrealized and realized gains and losses resulting from fair value changes in these instruments are recognized directly in income and were insignificant for the three and nine months ended September 30, 2019 and 2018.

All of the Company’s interest rate derivatives as of September 30, 2019 and December 31, 2018 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 the Company’s interest rate derivatives was $2,950,608 and $2,960,191 at September 30, 2019 and December 31, 2018, respectively. The ten-month average notional amounts for the nine months ended September 30, 2019 and 2018 were $2,966,980 and $2,915,781, respectively.

22

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Foreign Exchange Contracts

The Company uses forward contracts to hedge certain assets and liabilities denominated in foreign currencies. Such derivatives are considered economic hedges and are not designated as hedging instruments. The changes in the fair value of these instruments are recognized directly as income in “Other expenses” and are expected to offset the foreign exchange gains or losses on the exposures being managed.

All of the Company’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.

Financial Statement Impact of the Company’s Derivatives

The fair values of the Company’s derivatives as of September 30, 2019 and December 31, 2018 in the consolidated balance sheets are recorded as follows:

	September 30,		December 31,
	2019		2018
Derivatives Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	42,155	$	15,422
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	1,296	$	8,107
Derivatives Not Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	347	$	1,157
Foreign exchange contracts		93		86
Total	$	440	$	1,243
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	347	$	1,157
Foreign exchange contracts		118		—
Total	$	465	$	1,157

Pre-tax gains (losses) on the consolidated statements of income and comprehensive income related to the Company’s derivatives for the three and nine months ended September 30, 2019 and 2018 are recorded in the following accounts:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cash Flow Hedges
Recognized in accumulated other comprehensive income (loss) (effective portion):
Interest rate derivatives	$	761	$	1,114	$	(2,978)	$	1,031
Reclassified from accumulated other comprehensive income (loss) (effective portion):
Interest rate derivatives—Interest expense to third parties		166		128		523		53
Not Designated as Hedges
Foreign exchange contracts—Other expenses	$	(1,381)	$	(168)	$	1,812	$	(11,691)

23

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Items Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, all of which are measured as Level 2:

	September 30,		December 31,
	2019		2018
Assets
Interest rate derivatives	$	42,502	$	16,579
Foreign exchange contracts		93		86
Total assets	$	42,595	$	16,665
Liabilities
Interest rate derivatives	$	1,643	$	9,264
Foreign exchange contracts		118		—
Total liabilities	$	1,761	$	9,264

There were no transfers between Level 1, Level 2 and Level 3 hierarchy levels during the periods presented.

Fair Value of Other Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash and cash equivalents, floating-rate affiliated accounts and notes receivable, floating-rate short-term debt, interest payable and short-term affiliated debt was assumed to approximate its fair value. Under the fair value hierarchy, cash and cash equivalents and restricted cash and cash equivalents are classified as Level 1 and the remainder of the financial instruments listed is classified as Level 2.

Financial Instruments Not Carried at Fair Value

The carrying amount and estimated fair value of assets and liabilities considered financial instruments as of September 30, 2019 and December 31, 2018 are as follows:

	September 30, 2019				December 31, 2018
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value *		Amount		Fair Value *
Receivables	$	9,927,388	$	9,907,837	$	9,950,926	$	9,589,920
Long-term debt	$	6,363,764	$	6,435,446	$	6,259,839	$	6,149,778

______________

*Under the fair value hierarchy, receivables measurements are classified as Level 3 and long‑term debt measurements are classified as Level 2.

Receivables

The fair value of receivables was determined by discounting the estimated future payments using a discount rate which includes an estimate for credit risk.

Long-term debt

The fair values of long-term debt were based on current market quotes for identical or similar borrowings and credit risk.

24

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 9: GEOGRAPHICAL INFORMATION

A summary of the Company’s geographical information is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues
United States	$	182,277	$	170,988	$	543,926	$	523,185
Canada		44,832		42,107		138,340		146,687
Eliminations		(2,753)		(1,814)		(6,729)		(6,079)
Total	$	224,356	$	211,281	$	675,537	$	663,793
Interest expense
United States	$	75,112	$	69,761	$	219,471	$	203,717
Canada		16,420		13,610		49,665		41,151
Eliminations		(2,753)		(1,814)		(6,729)		(6,079)
Total	$	88,779	$	81,557	$	262,407	$	238,789
Net income
United States	$	26,179	$	30,810	$	80,194	$	84,449
Canada		10,342		10,471		33,322		44,263
Total	$	36,521	$	41,281	$	113,516	$	128,712
Depreciation and amortization
United States	$	45,593	$	44,514	$	141,495	$	141,215
Canada		10,878		10,937		32,551		33,567
Total	$	56,471	$	55,451	$	174,046	$	174,782
Expenditures for equipment on operating leases
United States	$	139,986	$	160,179	$	419,570	$	343,485
Canada		27,208		29,490		94,799		87,972
Total	$	167,194	$	189,669	$	514,369	$	431,457
Provision for credit losses
United States	$	7,159	$	7,661	$	25,219	$	22,475
Canada		758		625		2,764		1,921
Total	$	7,917	$	8,286	$	27,983	$	24,396

25

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	As of		As of
	September 30,		December 31,
	2019		2018
Total assets
United States	$	10,420,840	$	10,482,805
Canada		2,538,795		2,511,839
Eliminations		(200,420)		(62,732)
Total	$	12,759,215	$	12,931,912
Managed receivables
United States	$	8,022,513	$	8,080,756
Canada		1,977,205		1,944,582
Total	$	9,999,718	$	10,025,338

NOTE 10: RELATED-PARTY TRANSACTIONS

The Company receives compensation from CNH Industrial North America for retail, wholesale and operating lease sales programs offered by CNH Industrial North America on which finance charges are waived or below market rate financing programs are offered. The Company receives compensation from CNH Industrial North America based on the Company’s estimated costs and a targeted return on equity. The Company is also compensated for lending funds to CNH Industrial North America.

In addition, the Company receives income from Iveco Argentina for wholesale factoring receivables purchased at a discount.

The summary of sources included in “Interest and other income from affiliates” in the accompanying consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018			2019		2018
Subsidy from CNH Industrial North America
Retail	$	40,161	$	35,618		$	119,674	$	112,115
Wholesale		28,230		24,658			90,610		93,508
Operating lease		14,891		14,996			44,956		46,002
Income from Iveco Argentina
Wholesale factoring		978		589			2,184		10,881
Income from affiliated receivables
CNH Industrial North America		55		281			136		1,043
Total interest and other income from affiliates	$	84,315	$	76,142		$	257,560	$	263,549

Interest expense to affiliates was $6,368 and $1,566, respectively, for the three months ended September 30, 2019 and 2018 and $9,791 and $5,942, respectively, for the nine months ended September 30, 2019 and 2018. Fees charged by affiliates were $11,568 and $11,777, respectively, for the three months ended September 30, 2019 and 2018, and $35,523 and $35,036, respectively, for the nine months ended September 30, 2019 and 2018, and represents payroll and other human resource services CNH Industrial America performs on behalf of the Company.

26

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

As of September 30, 2019 and December 31, 2018, the Company had various accounts and notes receivable and debt with the following affiliates:

	September 30,		December 31,
	2019		2018
Affiliated receivables
CNH Industrial America	$	—	$	24,724
CNH Industrial Canada Ltd.		11,621		6,233
Other affiliates		12,449		12,432
Total affiliated receivables	$	24,070	$	43,389
Affiliated debt
CNH Industrial America	$	483,124	$	99,455
CNH Industrial Canada Ltd.		—		176,816
Total affiliated debt	$	483,124	$	276,271

Included in “Other Assets” in the accompanying balance sheet were tax receivables due from related parties of $154 and $39,174 as of September 30, 2019 and December 31, 2018, respectively. Accounts payable and other accrued liabilities, including tax payables, of $37,672 and $4,740 were payable to related parties as of September 30, 2019 and December 31, 2018, respectively.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is party to various litigation matters and claims arising from its operations. Management believes that the outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or results of operations.

Guarantees

The Company provides payment guarantees on the financial debt of various foreign financial services subsidiaries of CNHI for approximately $30,000. The guarantees are in effect for the term of the underlying funding facilities.

Commitments

The Company has various agreements to extend credit for the wholesale and dealer financing managed portfolio. At September 30, 2019, the total credit limit available was $5,984,494, of which $3,633,899 was utilized.

27

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 12: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

CNH Industrial Capital America and New Holland Credit, which are 100%-owned subsidiaries of CNH Industrial Capital LLC (the “Guarantor Entities”), guarantee certain indebtedness of CNH Industrial Capital LLC. As the guarantees are full, unconditional, and joint and several and because the Guarantor Entities are 100%-owned by CNH Industrial Capital LLC, the Company has included the following condensed consolidating financial information as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018. The condensed consolidating financial information reflects investments in consolidated subsidiaries under the equity method of accounting.

	Condensed Statements of Comprehensive Income for the
	Three Months Ended September 30, 2019
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
REVENUES
Interest income on retail notes and finance leases	$	—	$	2,192	$	51,918	$	—	$	54,110
Interest income on wholesale notes		—		(254)		17,639		—		17,385
Interest and other income from affiliates		10,499		50,229		34,086		(10,499)		84,315
Rental income on operating leases		—		47,034		13,500		—		60,534
Other income		—		24,338		471		(16,797)		8,012
Total revenues		10,499		123,539		117,614		(27,296)		224,356
EXPENSES
Interest expense:
Interest expense to third parties		36,867		(5,154)		50,698		—		82,411
Interest expense to affiliates		—		16,199		668		(10,499)		6,368
Total interest expense		36,867		11,045		51,366		(10,499)		88,779
Administrative and operating expenses:
Fees charged by affiliates		—		11,133		17,232		(16,797)		11,568
Provision for credit losses		—		1,918		5,999		—		7,917
Depreciation of equipment on operating leases		—		45,191		10,879		—		56,070
Other expenses		6		7,201		3,329		—		10,536
Total administrative and operating expenses		6		65,443		37,439		(16,797)		86,091
Total expenses		36,873		76,488		88,805		(27,296)		174,870
Income (loss) before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method		(26,374)		47,051		28,809		—		49,486
Income tax provision (benefit)		(6,440)		11,555		7,850		—		12,965
Equity in income of consolidated subsidiaries accounted for under the equity method		56,455		20,959		—		(77,414)		—
NET INCOME	$	36,521	$	56,455	$	20,959	$	(77,414)	$	36,521
COMPREHENSIVE INCOME	$	31,337	$	51,271	$	16,708	$	(67,979)	$	31,337

28

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Statements of Comprehensive Income for the
	Nine Months Ended September 30, 2019
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
REVENUES
Interest income on retail notes and finance leases	$	—	$	15,823	$	150,867	$	—	$	166,690
Interest income on wholesale notes		—		(788)		51,908		—		51,120
Interest and other income from affiliates		41,947		152,738		104,822		(41,947)		257,560
Rental income on operating leases		—		141,290		40,377		—		181,667
Other income		—		66,365		1,644		(49,509)		18,500
Total revenues		41,947		375,428		349,618		(91,456)		675,537
EXPENSES
Interest expense:
Interest expense to third parties		137,093		(33,240)		148,763		—		252,616
Interest expense to affiliates		—		73,842		(22,104)		(41,947)		9,791
Total interest expense		137,093		40,602		126,659		(41,947)		262,407
Administrative and operating expenses:
Fees charged by affiliates		—		34,126		50,906		(49,509)		35,523
Provision for credit losses		—		10,650		17,333		—		27,983
Depreciation of equipment on operating leases		—		140,119		32,551		—		172,670
Other expenses		18		17,558		9,219		—		26,795
Total administrative and operating expenses		18		202,453		110,009		(49,509)		262,971
Total expenses		137,111		243,055		236,668		(91,456)		525,378
Income (loss) before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method		(95,164)		132,373		112,950		—		150,159
Income tax provision (benefit)		(23,236)		32,619		27,260		—		36,643
Equity in income of consolidated subsidiaries accounted for under the equity method		185,444		85,690		—		(271,134)		—
NET INCOME	$	113,516	$	185,444	$	85,690	$	(271,134)	$	113,516
COMPREHENSIVE INCOME	$	123,432	$	195,360	$	93,615	$	(288,975)	$	123,432

29

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Balance Sheets as of September 30, 2019
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
ASSETS
Cash and cash equivalents	$	—	$	85,683	$	31,714	$	—	$	117,397
Restricted cash and cash equivalents		—		—		529,850		—		529,850
Receivables, less allowance for credit losses		—		1,468,898		8,458,490		—		9,927,388
Affiliated accounts and notes receivable		1,679,397		2,164,385		2,423,068		(6,242,780)		24,070
Equipment on operating leases, net		—		1,372,994		368,919		—		1,741,913
Equipment held for sale		—		197,233		19,114		—		216,347
Investments in consolidated subsidiaries accounted for under the equity method		2,991,844		2,532,439		—		(5,524,283)		—
Goodwill and intangible assets, net		—		92,696		27,551		—		120,247
Other assets		6,472		67,500		11,242		(3,211)		82,003
TOTAL	$	4,677,713	$	7,981,828	$	11,869,948	$	(11,770,274)	$	12,759,215
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Short-term debt, including current maturities of long-term debt	$	539,126	$	—	$	3,326,334	$	—	$	3,865,460
Accounts payable and other accrued liabilities		296,683		3,219,723		1,165,827		(3,949,964)		732,269
Affiliated debt		—		1,770,261		1,008,890		(2,296,027)		483,124
Long-term debt		2,527,306		—		3,836,458		—		6,363,764
Total liabilities		3,363,115		4,989,984		9,337,509		(6,245,991)		11,444,617
Stockholder’s equity		1,314,598		2,991,844		2,532,439		(5,524,283)		1,314,598
TOTAL	$	4,677,713	$	7,981,828	$	11,869,948	$	(11,770,274)	$	12,759,215

30

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Statements of Cash Flows for the
	Nine Months Ended September 30, 2019
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash from (used in) operating activities	$	573,636	$	400,476	$	(116,918)	$	(515,582)	$	341,612
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of receivables acquired		—		(6,504,409)		(6,975,212)		5,329,785		(8,149,836)
Collections of receivables		—		6,497,730		7,032,713		(5,329,975)		8,200,468
Purchase of equipment on operating leases, net		—		(152,641)		(24,444)		—		(177,085)
Change in property and equipment and software, net		—		(2,317)		—		—		(2,317)
Net cash from (used in) investing activities		—		(161,637)		33,057		(190)		(128,770)
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany activity		—		(271,666)		(37,254)		515,772		206,852
Net change in indebtedness		(408,636)		2		1,316		—		(407,318)
Dividends paid to CNH Industrial America LLC		(165,000)		—		—		—		(165,000)
Net cash from (used in) financing activities		(573,636)		(271,664)		(35,938)		515,772		(365,466)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		—		(32,825)		(119,799)		—		(152,624)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		—		118,508		681,363		—		799,871
End of period	$	—	$	85,683	$	561,564	$	—	$	647,247

31

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Statements of Comprehensive Income for the
	Three Months Ended September 30, 2018
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
REVENUES
Interest income on retail notes and finance leases	$	—	$	4,384	$	48,265	$	—	$	52,649
Interest income on wholesale notes		—		(253)		17,464		—		17,211
Interest and other income from affiliates		17,719		46,041		65,642		(53,260)		76,142
Rental income on operating leases		—		46,659		13,368		—		60,027
Other income		—		21,711		431		(16,890)		5,252
Total revenues		17,719		118,542		145,170		(70,150)		211,281
EXPENSES
Interest expense:
Interest expense to third parties		37,971		(1,845)		43,865		—		79,991
Interest expense to affiliates		—		44,554		10,272		(53,260)		1,566
Total interest expense		37,971		42,709		54,137		(53,260)		81,557
Administrative and operating expenses:
Fees charged by affiliates		—		11,248		17,419		(16,890)		11,777
Provision for credit losses		—		2,667		5,619		—		8,286
Depreciation of equipment on operating leases		—		43,982		10,938		—		54,920
Other expenses		6		7,389		954		—		8,349
Total administrative and operating expenses		6		65,286		34,930		(16,890)		83,332
Total expenses		37,977		107,995		89,067		(70,150)		164,889
Income (loss) before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method		(20,258)		10,547		56,103		—		46,392
Income tax provision (benefit)		(4,907)		4,493		5,525		—		5,111
Equity in income of consolidated subsidiaries accounted for under the equity method		56,632		50,578		—		(107,210)		—
NET INCOME	$	41,281	$	56,632	$	50,578	$	(107,210)	$	41,281
COMPREHENSIVE INCOME	$	53,580	$	68,931	$	61,309	$	(130,240)	$	53,580

32

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Statements of Comprehensive Income for the
	Nine Months Ended September 30, 2018
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
REVENUES
Interest income on retail notes and finance leases	$	—	$	10,144	$	141,336	$	—	$	151,480
Interest income on wholesale notes		—		(765)		49,801		—		49,036
Interest and other income from affiliates		52,789		152,299		223,010		(164,549)		263,549
Rental income on operating leases		—		140,075		41,025		—		181,100
Other income		—		67,583		1,970		(50,925)		18,628
Total revenues		52,789		369,336		457,142		(215,474)		663,793
EXPENSES
Interest expense:
Interest expense to third parties		101,982		8,815		122,050		—		232,847
Interest expense to affiliates		—		149,902		20,589		(164,549)		5,942
Total interest expense		101,982		158,717		142,639		(164,549)		238,789
Administrative and operating expenses:
Fees charged by affiliates		—		33,646		52,315		(50,925)		35,036
Provision for credit losses		—		5,578		18,818		—		24,396
Depreciation of equipment on operating leases		—		139,607		33,567		—		173,174
Other expenses		16		11,879		20,138		—		32,033
Total administrative and operating expenses		16		190,710		124,838		(50,925)		264,639
Total expenses		101,998		349,427		267,477		(215,474)		503,428
Income (loss) before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method		(49,209)		19,909		189,665		—		160,365
Income tax provision (benefit)		(11,919)		6,814		36,758		—		31,653
Equity in income of consolidated subsidiaries accounted for under the equity method		166,002		152,907		—		(318,909)		—
NET INCOME	$	128,712	$	166,002	$	152,907	$	(318,909)	$	128,712
COMPREHENSIVE INCOME	$	106,232	$	143,522	$	133,371	$	(276,893)	$	106,232

33

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Balance Sheets as of December 31, 2018
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
ASSETS
Cash and cash equivalents	$	—	$	118,508	$	41,820	$	—	$	160,328
Restricted cash and cash equivalents		—		—		639,543		—		639,543
Receivables, less allowance for credit losses		—		1,472,678		8,478,248		—		9,950,926
Affiliated accounts and notes receivable		2,310,137		2,122,129		2,268,477		(6,657,354)		43,389
Equipment on operating leases, net		—		1,357,493		366,724		—		1,724,217
Equipment held for sale		—		192,772		17,219		—		209,991
Investments in consolidated subsidiaries accounted for under the equity method		2,796,050		2,461,139		—		(5,257,189)		—
Goodwill and intangible assets, net		—		91,754		26,827		—		118,581
Other assets		11,140		56,517		20,681		(3,401)		84,937
TOTAL	$	5,117,327	$	7,872,990	$	11,859,539	$	(11,917,944)	$	12,931,912
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Short-term debt, including current maturities of long-term debt	$	987,559	$	—	$	3,336,733	$	—	$	4,324,292
Accounts payable and other accrued liabilities		286,527		3,035,024		1,243,183		(3,848,956)		715,778
Affiliated debt		—		2,041,926		1,046,144		(2,811,799)		276,271
Long-term debt		2,487,509		(10)		3,772,340		—		6,259,839
Total liabilities		3,761,595		5,076,940		9,398,400		(6,660,755)		11,576,180
Stockholder’s equity		1,355,732		2,796,050		2,461,139		(5,257,189)		1,355,732
TOTAL	$	5,117,327	$	7,872,990	$	11,859,539	$	(11,917,944)	$	12,931,912

34

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	Condensed Statements of Cash Flows for the
	Nine Months Ended September 30, 2018
	CNH
	Industrial		Guarantor		All Other
	Capital LLC		Entities		Subsidiaries		Eliminations		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash from (used in) operating activities	$	32,158	$	146,608	$	58,353	$	12,049	$	249,168
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of receivables acquired		—		(6,283,817)		(7,080,363)		5,178,455		(8,185,725)
Collections of receivables		—		6,262,320		7,511,294		(5,178,731)		8,594,883
Purchase of equipment on operating leases, net		—		(72,766)		(34,387)		—		(107,153)
Change in property and equipment and software, net		—		(4,143)		—		—		(4,143)
Net cash from (used in) investing activities		—		(98,406)		396,544		(276)		297,862
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany activity		—		(100,535)		(253,694)		(11,773)		(366,002)
Net change in indebtedness		27,842		(36,385)		(369,952)		—		(378,495)
Dividends paid to CNH Industrial America LLC		(60,000)		—		—		—		(60,000)
Net cash from (used in) financing activities		(32,158)		(136,920)		(623,646)		(11,773)		(804,497)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		—		(88,718)		(168,749)		—		(257,467)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		—		160,339		715,219		—		875,558
End of period	$	—	$	71,621	$	546,470	$	—	$	618,091

NOTE 13: SUBSEQUENT EVENTS

On October 23, 2019, the Company, through a bankruptcy-remote trust, issued $952,230 of amortizing asset-backed notes secured by U.S. retail receivables.

35

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Organization

We offer a range of financial products and services to the dealers and customers of CNH Industrial North America. The principal products offered are retail financing for the purchase or lease of new and used CNH Industrial North America equipment and wholesale financing to CNH Industrial North America dealers. Wholesale financing consists primarily of floor plan financing as well as financing equipment used in dealer‑owned rental yards, parts inventory and working capital needs. In addition, we purchase equipment from dealers that is leased to retail customers under operating lease agreements.

Trends and Economic Conditions

CNH Industrial recently announced the separation of its “On-Highway” (commercial vehicle and powertrain segments) and its “Off-Highway” (agriculture, construction and specialty segments) businesses. CNH Industrial announced that the spin-off is expected to be completed in early 2021, subject to approval at an extraordinary general meeting of shareholders of CNH Industrial, which is anticipated to be held in the second half of 2020.

Our business is closely related to the agricultural and construction equipment industries because we offer financing products for such equipment. For the three months ended September 30, 2019, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $877 million and $341 million, respectively, representing decreases of 7.2% and 12.1% from the same period in 2018, respectively. For the nine months ended September 30, 2019, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $2,843 million and $1,035 million, respectively, representing an increase of 1.8% and a decrease of 7.0% from the same period in 2018, respectively.

In general, our receivable mix between agricultural and construction equipment financing directionally reflects the mix of equipment sales by CNH Industrial North America. As such, changes in the agricultural industry or with respect to our agricultural equipment borrowers may affect the majority of our portfolio.

Net income was $36.5 million for the three months ended September 30, 2019, compared to $41.3 million for the same period in 2018, primarily due to higher income taxes and increased expenses related to the operating lease portfolio, partially offset by a higher average yield for the managed portfolio. Net income was $113.5 million and $128.7 million for the nine months ended September 30, 2019 and 2018, respectively. The decrease in net income was primarily due to reduced net interest income and higher provision for credit losses and higher income taxes, partially offset by decreased expenses related to the operating lease portfolio. The receivables balance greater than 30 days past due as a percentage of managed receivables was 0.7% at September 30, 2019 and 0.6% at both December 31, 2018 and September 30, 2018.

Macroeconomic issues for us include the uncertainty of governmental actions with respect to monetary, fiscal and legislative policies, the global economic recovery, changes in demand and pricing for used equipment, capital market disruptions, trade agreements and financial regulatory reform. Significant volatility in the price of certain commodities could also impact CNH Industrial North America’s and our results.

36

Results of Operations

Three and Nine Months Ended September 30, 2019 Compared to Three and Nine Months Ended September 30, 2018

Revenues

Revenues for the three and nine months ended September 30, 2019 and 2018 were as follows (dollars in thousands):

	Three Months Ended
	September 30,
	2019		2018		$ Change		% Change
Interest income on retail notes and finance leases	$	54,110	$	52,649	$	1,461	2.8	%
Interest income on wholesale notes		17,385		17,211		174	1.0
Interest and other income from affiliates		84,315		76,142		8,173	10.7
Rental income on operating leases		60,534		60,027		507	0.8
Other income		8,012		5,252		2,760	52.6
Total revenues	$	224,356	$	211,281	$	13,075	6.2	%

	Nine Months Ended
	September 30,
	2019		2018		$ Change		% Change
Interest income on retail notes and finance leases	$	166,690	$	151,480	$	15,210	10.0	%
Interest income on wholesale notes		51,120		49,036		2,084	4.2
Interest and other income from affiliates		257,560		263,549		(5,989)	(2.3)
Rental income on operating leases		181,667		181,100		567	0.3
Other income		18,500		18,628		(128)	(0.7)
Total revenues	$	675,537	$	663,793	$	11,744	1.8	%

Revenues totaled $224.4 million and $675.5 million for the three and nine months ended September 30, 2019, respectively, compared to $211.3 million and $663.8 million for the same periods in 2018. The quarter-over-quarter increase was driven by a higher average yield. The year-over-year increase was driven by a higher average yield, partially offset by a lower average portfolio. The average yield for the managed portfolio was 7.3% and 7.0% for the three months ended September 30, 2019 and 2018, respectively, and 7.5% and 7.3% for the nine months ended September 30, 2019 and 2018, respectively.

Interest income on retail notes and finance leases for the three and nine months ended September 30, 2019 was $54.1 million and $166.7 million, respectively, representing an increase of $1.5 million and $15.2 million from the same periods in 2018, respectively. For the third quarter, the increase was primarily due to a $2.8 million favorable impact from higher interest rates, partially offset by a $1.3 million unfavorable impact from lower average earning assets. For the nine months ended September 30, 2019, compared to the same period in 2018, the increase was primarily due to a $20.5 million favorable impact from higher interest rates, partially offset by a $5.3 million unfavorable impact from lower average earning assets.

Interest income on wholesale notes for the three and nine months ended September 30, 2019 was $17.4 million and $51.1 million, respectively, representing an increase of $0.2 million and $2.1 million from the same periods in 2018, respectively. For the third quarter, the increase was primarily due to a $0.3 million favorable impact from higher interest rates, partially offset by a $0.1 million unfavorable impact from lower average earning assets. For the nine months ended September 30, 2019, compared to the same period in 2018, the increase was due to the favorable impacts of $1.7 million from higher interest rates and $0.4 million from higher average earning assets.

Interest and other income from affiliates for the three and nine months ended September 30, 2019 was $84.3 million and $257.6 million, respectively, compared to $76.1 million and $263.5 million, respectively, for the three and nine months ended September 30, 2018. For the three and nine months ended September 30, 2019, compensation from CNH Industrial North America for retail low‑rate financing programs and interest waiver programs offered to customers was $40.2 million and $119.7 million, respectively, an increase of $4.5 million and $7.6 million from the same periods in 2018, respectively. The increases were primarily due to pricing and mix of

37

programs. For the three and nine months ended September 30, 2019, compensation from CNH Industrial North America for wholesale marketing programs was $28.2 million and $90.6 million, respectively, an increase of $3.6 million and a decrease of $2.9 million from the same periods in 2018, respectively. Both the quarter-over-quarter increase and the year-over-year decrease were primarily due to pricing initiatives. For select operating leases, compensation from CNH Industrial North America for the difference between market rental rates and the amounts paid by customers was $14.9 million and $45.0 million for the three and nine months ended September 30, 2019, representing no change and a decrease of $1.0 million from the same periods in 2018, respectively. Also included in interest and other income from affiliates was $1.0 million and $2.2 million of wholesale factoring income for the three and nine months ended September 30, 2019, respectively, compared to $0.6 million and $10.9 million for the same periods in 2018.

Rental income on operating leases for the three and nine months ended September 30, 2019 was $60.5 million and $181.7 million, representing increases of $0.5 million from the same periods in 2018, respectively. The third quarter increase was primarily due to a $0.7 million favorable impact from higher average earning assets, partially offset by a $0.2 million unfavorable impact from lower rates. For the nine months ended September 30, 2019, compared to the same period in 2018, the increase was due to the favorable impacts of $0.3 million from higher interest rates and $0.2 million from higher average earning assets.

Other income for the three and nine months ended September 30, 2019 was $8.0 million and $18.5 million, representing an increase of $2.8 million and a decrease of $0.1 million from the same periods in 2018, respectively.

Expenses

Expenses for the three and nine months ended September 30, 2019 and 2018 were as follows (dollars in thousands):

	Three Months Ended				��
	September 30,
	2019		2018			$ Change		% Change
Total interest expense	$	88,779	$	81,557		$	7,222	8.9	%
Fees charged by affiliates		11,568		11,777			(209)	(1.8)
Provision for credit losses		7,917		8,286			(369)	(4.5)
Depreciation of equipment on operating leases		56,070		54,920			1,150	2.1
Other expenses		10,536		8,349			2,187	26.2
Total expenses	$	174,870	$	164,889		$	9,981	6.1	%

	Nine Months Ended
	September 30,
	2019		2018		$ Change		% Change
Total interest expense	$	262,407	$	238,789	$	23,618	9.9	%
Fees charged by affiliates		35,523		35,036		487	1.4
Provision for credit losses		27,983		24,396		3,587	14.7
Depreciation of equipment on operating leases		172,670		173,174		(504)	(0.3)
Other expenses		26,795		32,033		(5,238)	(16.4)
Total expenses	$	525,378	$	503,428	$	21,950	4.4	%

Interest expense totaled $88.8 million and $262.4 million for the three and nine months ended September 30, 2019, respectively, compared to $81.6 million and $238.8 million for the same periods in 2018. For the three months ended September 30, 2019, the increase was due to the unfavorable impacts of $6.3 million from higher average interest rates and $0.9 million from higher average total debt. For the nine months ended September 30, 2019, the increase was primarily due to a $27.0 million unfavorable impact from higher average interest rates, partially offset by a $3.4 million favorable impact from lower average total debt. The average debt cost was 3.3% for the nine months ended September 30, 2019 compared to 3.0% for the nine months ended September 30, 2018.

The provision for credit losses was $7.9 million and $28.0 million for the three and nine months ended September 30, 2019, respectively, compared to $8.3 million and $24.4 million for the same periods in 2018. The year-over-year increase was primarily due to higher wholesale losses.

38

Depreciation of equipment on operating leases was $56.1 million and $172.7 million for the three and nine months ended September 30, 2019, respectively, compared to $54.9 million and $173.2 million for the same periods in 2018. For the third quarter, the increase was primarily due to a higher average operating lease portfolio.

Other expenses were $10.5 million and $26.8 million for the three and nine months ended September 30, 2019, respectively, compared to $8.3 million and $32.0 million for the same periods in 2018. The quarter-over-quarter increase was due to higher losses on equipment held for sale and the year-over-year decrease was primarily due to lower losses on equipment held for sale.

The effective tax rates for the three months ended September 30, 2019 and 2018 were 26.2% and 11.0%, respectively. The effective tax rate was 24.4% for the nine months ended September 30, 2019, compared to 19.7% for the same period in 2018. Excluding discrete tax benefits, which included a revision to the Company’s provisional estimate of accounting for U.S. Tax Reform, the Company’s effective tax rates would have been 23.1% and 23.2% for the three months and nine months ended September 30, 2018, respectively.

Receivables and Equipment on Operating Leases Originated and Held

Receivables and equipment on operating lease originations for the three and nine months ended September 30, 2019 and 2018 were as follows (dollars in thousands):

	Three Months Ended
	September 30,
	2019		2018		$ Change		% Change
Retail	$	717,856	$	733,609	$	(15,753)	(2.1)	%
Wholesale		1,892,401		2,040,590		(148,189)	(7.3)
Equipment on operating leases		167,194		189,669		(22,475)	(11.8)
Total originations	$	2,777,451	$	2,963,868	$	(186,417)	(6.3)	%

	Nine Months Ended
	September 30,
	2019		2018		$ Change		% Change
Retail	$	2,074,525	$	2,040,534	$	33,991	1.7	%
Wholesale		5,931,271		5,967,433		(36,162)	(0.6)
Wholesale factoring		144,040		177,758		(33,718)	(19.0)
Equipment on operating leases		514,369		431,457		82,912	19.2
Total originations	$	8,664,205	$	8,617,182	$	47,023	0.5	%

Originations were lower for the three months ended September 30, 2019, compared to the same period in 2018, primarily due to decreased unit sales of CNH Industrial North America equipment. Originations for the nine months ended September 30, 2019 were relatively flat compared to the same period in 2018.

Total receivables and equipment on operating leases held as of September 30, 2019, December 31, 2018 and September 30, 2018 were as follows (dollars in thousands):

	September 30,		December 31,		September 30,
	2019		2018		2018
Retail	$	6,348,795	$	6,441,054	$	6,521,149
Wholesale		3,635,250		3,584,284		3,461,430
Wholesale factoring		15,673		—		8,411
Equipment on operating leases		1,741,913		1,724,217		1,709,839
Total receivables and equipment on operating leases	$	11,741,631	$	11,749,555	$	11,700,829

The total retail receivables balance greater than 30 days past due as a percentage of the retail receivables was 0.9% at September 30, 2019, 0.8% at December 31, 2018 and 0.9% at September 30, 2018. The total wholesale receivables balance greater than 30 days past due as a percentage of the wholesale receivables was not significant at September 30, 2019, December 31, 2018 or September 30, 2018. Total retail receivables on nonaccrual status, which represent receivables for which we have ceased accruing finance income, were $28.4 million, $28.5 million and $30.6 million at September 30, 2019, December 31, 2018 and September 30, 2018, respectively. Total wholesale

39

receivables on nonaccrual status were $4.6 million, $23.0 million and $25.4 million at September 30, 2019, December 31, 2018 and September 30, 2018, respectively.

Total receivable write‑off amounts and recoveries, by product, for the three and nine months ended September 30, 2019 and 2018 were as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Write-offs:
Retail	$	11,233	$	8,563	$	27,799	$	28,830
Wholesale		2,416		—		4,581		187
Total write-offs		13,649		8,563		32,380		29,017
Recoveries:
Retail		(512)		(765)		(2,188)		(2,912)
Wholesale		(3)		(3)		(12)		(67)
Total recoveries		(515)		(768)		(2,200)		(2,979)
Write-offs, net of recoveries:
Retail		10,721		7,798		25,611		25,918
Wholesale		2,413		(3)		4,569		120
Total write-offs, net of recoveries	$	13,134	$	7,795	$	30,180	$	26,038

Our allowance for credit losses on all receivables financed totaled $72.3 million at September 30, 2019, $74.4 million at December 31, 2018 and $77.4 million at September 30, 2018.

The allowance is subject to a quarterly evaluation based on many quantitative and qualitative factors, including historical loss experience by product category, portfolio duration, delinquency trends, economic conditions (in particular, those conditions directly affecting the profitability and financial strength of our customers), collateral value and credit risk quality. No single factor determines the adequacy of the allowance. Different assumptions or changes in economic conditions would result in changes to the allowance for credit losses and the provision for credit losses. These qualitative factors are subjective and require a degree of management judgment.

We believe our allowance is sufficient to provide for losses in our receivable portfolio as of September 30, 2019.

Liquidity and Capital Resources

The following discussion of liquidity and capital resources principally focuses on our statements of cash flows, balance sheets and capitalization. CNH Industrial Capital’s current funding strategy is to maintain sufficient liquidity and flexible access to a wide variety of financial instruments and funding options.

In the past, securitization has been one of our most economical sources of funding and, therefore, the majority of our originated receivables are securitized, with the cash generated from such receivables utilized to repay the related debt or purchase new receivables.

In addition, we have secured and unsecured facilities, commercial paper, unsecured bonds, affiliate borrowings and cash to fund our liquidity needs. We expect continued changes to our funding profile, with less reliance on securitization.

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Cash Flows

For the nine months ended September 30, 2019 and 2018, our cash flows were as follows (dollars in thousands):

	2019		2018
Cash flows from (used in):
Operating activities	$	341,612	$	249,168
Investing activities		(128,770)		297,862
Financing activities		(365,466)		(804,497)
Net cash increase (decrease)	$	(152,624)	$	(257,467)

Operating activities in the nine months ended September 30, 2019 generated cash of $342 million, resulting primarily from net income of $114 million, adjusted by depreciation and amortization of $174 million, provision for credit losses of $28 million, and deferred tax expenses of $44 million, partially offset by changes in working capital of $18 million. The increase in cash provided by operating activities for the nine months ended September 30, 2019 compared to the same period in 2018 was primarily due to a $54 million change in the deferred income tax adjustment, $50 million related to changes in working capital and a $4 million increase in provision for credit losses, partially offset by a $15 million reduction in net income and a $1 million decrease in depreciation and amortization expense.

Investing activities in the nine months ended September 30, 2019 used cash of $129 million, resulting primarily from net expenditures of $177 million for equipment on operating leases and $2 million for property, equipment and software, partially offset by a net reduction in receivables of $50 million. The increase in cash used by investing activities for the nine months ended September 30, 2019 compared to the same period in 2018 was primarily due to a $359 million increase in net expenditures for receivables and a $70 million increase in net expenditures for equipment on operating leases, partially offset by a $2 million decrease in expenditures for property, equipment and software.

Financing activities in the nine months ended September 30, 2019 used cash of $365 million, resulting primarily from net cash paid on long-term debt of $530 million and $165 million in dividends paid to CNH Industrial America, partially offset by net cash received on affiliated debt and short-term borrowings of $207 million and $123 million, respectively. The decrease in cash used in financing activities in the nine months ended September 30, 2019 compared to the same period in 2018 was primarily due to a decrease in net cash paid on affiliated debt of $573 million, partially offset by higher net short-term borrowings of $16 million, increased net cash paid on long-term debt of $13 million and higher dividends of $105 million paid to CNH Industrial America.

Securitization

CNH Industrial Capital and its predecessor entities have been securitizing receivables since 1992. This market is a cost‑effective financing source and allows access to a wide investor base. CNH Industrial Capital had approximately $4.6 billion of public and private asset-backed securities outstanding in both the U.S. and Canada as of September 30, 2019. Our securitizations are treated as financing arrangements for accounting purposes.

Committed Asset‑Backed Facilities

CNH Industrial Capital has committed asset‑backed facilities with several banks or through their commercial paper conduit programs. Committed asset‑backed facilities for the U.S. and Canada totaled $3.0 billion at September 30, 2019, with original borrowing maturities of up to two years. The unused availability under the facilities varies during the year, depending on origination volume and the refinancing of receivables with term securitization transactions and/or other financing. At September 30, 2019, approximately $0.8 billion of funding was available for use under these facilities.

Unsecured Facilities and Debt

As of September 30, 2019, we had a fully-drawn uncommitted credit line totaling $150 million, which matures in October 2019.

In addition, committed unsecured facilities with banks as of September 30, 2019 totaled $838 million. These credit facilities, which are eligible for renewal at various future dates, are used primarily for working capital and

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other general corporate purposes. As of September 30, 2019, we had $438 million outstanding under these credit facilities. Included in the remaining available credit commitments is $390 million maintained primarily to provide backup liquidity for commercial paper borrowings.

Our outstanding commercial paper totaled $390 million as of September 30, 2019.

As of September 30, 2019, our unsecured senior notes were as follows (dollars in thousands):

4.375% notes, due 2020	$	600,000
4.875% notes, due 2021		500,000
3.875% notes, due 2021		400,000
4.375% notes, due 2022		500,000
4.200% notes, due 2024		500,000
Hedging, discounts and unamortized issuance costs		28,839
Total	$	2,528,839

These notes, which are senior unsecured obligations of CNH Industrial Capital LLC, are guaranteed by CNH Industrial Capital America and New Holland Credit.

Credit Ratings

Our ability to obtain funding is affected by credit ratings of our debt, which are closely related to the outlook for and the financial condition of CNHI, and the nature and availability of our support agreement with CNHI.

To access public debt capital markets, we rely on credit rating agencies to assign short-term and long-term credit ratings to our securities as an indicator of credit quality for fixed income investors. A credit rating agency may change or withdraw our ratings based on its assessment of our current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets.

The senior long-term and short-term debt ratings and outlook currently assigned to our unsecured debt securities by the rating agencies engaged by us are the same as those for CNHI. Those ratings as of September 30, 2019 were as follows:

	Senior Long-Term	Short-Term	Outlook
S&P Global Ratings	BBB	A-2	Stable
Fitch Ratings	BBB-	F3	Positive
Moody's Investors Service	Baa3	—	Stable

Affiliate Sources

CNH Industrial Capital borrows, as needed, from CNH Industrial. This source of funding is primarily used to finance various assets and provides additional flexibility when evaluating market conditions and potential third‑party financing options. We had affiliated debt of $483 million and $276 million as of September 30, 2019 and December 31, 2018, respectively.

Equity Position

Our equity position also supports our ability to access various funding sources. Our stockholder’s equity was $1.3 billion at September 30, 2019 and $1.4 billion at December 31, 2018. For the nine months ended September 30, 2019, CNH Industrial Capital LLC paid cash dividends of $165 million to CNH Industrial America.

Liquidity

The majority of CNH Industrial Capital’s debt is self-liquidating from the cash generated by the underlying receivables. Normally, additional liquidity should not be necessary for the repayment of such debt. New originations of retail receivables are usually warehoused in committed asset-backed facilities until being refinanced in the term

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ABS market or with other third party debt. The majority of new wholesale receivables are financed through a master trust and funded by variable funding notes.

The liquidity available for use varies due to: (a) changes in origination volumes, reflecting the financing needs of our customers, and is influenced by the timing of any refinancing of underlying receivables; and (b) the execution of our funding strategy of maintaining a sufficient level of liquidity and flexible access to a wide variety of financial instruments including both committed and uncommitted, unsecured facilities.

Other Data

	As of or for the Nine Months
	Ended September 30,
	2019			2018
	(Dollars in thousands)
Total managed receivables	$	9,999,718		$	9,990,990
Operating lease equipment		1,741,913			1,709,839
Total managed portfolio	$	11,741,631		$	11,700,829
Delinquency (1)		0.66	%		0.63	%
Average managed receivables	$	10,008,156		$	10,174,099
Net credit loss (2)		0.40	%		0.38	%
Profitability: (3)
Return on average managed portfolio (4)		1.29	%		1.46	%
Asset Quality:
Allowance for credit losses/total receivables		0.72	%		0.77	%

(1) Delinquency means managed receivables that are past due over 30 days, expressed as a percentage of the managed receivables as of the end of the respective period.

(2) Net credit losses on the managed receivables means write-offs, net of recoveries, for the preceding 12 months expressed as a percentage of the respective average managed receivables.

(3) Nine months ended September 30, 2019 and 2018 annualized.

(4) Net income for the period expressed as a percentage of the average managed portfolio.

Cautionary Note Regarding Forward‑Looking Statements

This quarterly report includes “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, including statements regarding our competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, capital expenditures, dividends, capital structure or other financial items; costs; and plans and objectives of management regarding operations, products and services, are forward-looking statements. 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 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 other assumptions underlying any of the forward-looking statements prove to be incorrect, 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: the many interrelated factors that affect customer confidence and demand for our financing products and services; general economic conditions; changes in government policies regarding banking, monetary and fiscal policies; legislation, particularly relating 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 protectionist trade policies such as higher tariffs, sanctions, import quotas, capital controls and new barriers to entry or consequent reactions by other governments against such policies; actions of competitors in the various industries in which CNH Industrial North

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America competes; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; restrictive covenants in our debt agreements; actions by rating agencies concerning the ratings on our debt and asset-backed securities and the credit rating of CNHI; a decline in the price of used equipment; political and civil unrest; volatility and deterioration of capital and financial markets, other similar risks and uncertainties and our success, and CNH Industrial North America’s success, in managing the risks involved in the foregoing.

Forward‑looking statements speak only as of the date on which such statements are made. Our outlook is based upon assumptions, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Our actual results could differ materially from those anticipated in such forward-looking statements. We undertake no obligation to update or revise publicly our forward-looking statements.

Additional factors which could cause actual results and developments to differ from those expressed or implied by the forward‑looking statements are included in the section “Item 1A. Risk Factors” in our most recent annual report on Form 10‑K.

Critical Accounting Policies and Estimates

See our critical accounting policies and estimates discussed in our annual report for the year ended December 31, 2018 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to our audited consolidated financial statements included in such annual report. There were no material changes to these policies or estimates during the three months ended September 30, 2019.

New Accounting Pronouncements Not Yet Adopted

See Note 2: New Accounting Pronouncements to this Form 10-Q.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

Under the supervision, and with the participation, of our management, including our President and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2019. Based on that evaluation, our President and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the three months ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

CNH Industrial Capital is party to various litigation matters and claims arising from its operations. Management believes that the outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on CNH Industrial Capital’s financial position or results of operations.

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Item 1A.  Risk Factors

See our most recent annual report on Form 10‑K (Part I, Item 1A). There was no material change in our risk factors during the nine months ended September 30, 2019.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

Item 6.  Exhibits

Exhibit	Description
31.1	Certifications of President Pursuant to Exchange Act Rule 13a‑14(a), as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2	Certifications of Chief Financial Officer Pursuant to Exchange Act Rule 13a‑14(a), as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1†	Certification required by Exchange Act Rule 13a‑14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
101	Interactive data files pursuant to Rule 405 of Regulation S‑T: (i) Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018, (iii) Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018, (v) Consolidated Statements of Changes in Stockholder’s Equity for the nine months ended September 30, 2019 and 2018 and (vi) Condensed Notes to Consolidated Financial Statements.

†These certifications are deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section; nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.

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.

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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 CAPITAL LLC
Date: November 12, 2019	By:	/s/ Carlo Alberto Sisto
		Name:	Carlo Alberto Sisto
		Title:	Chairman and President

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