CNH Industrial Capital 10-Q 2021 Q2 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 June 30, 2021
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 June 30, 2021, 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 Six Months Ended June 30, 2021 and 2020 (Unaudited)	1
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	2
	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)	5
	Consolidated Statements of Changes in Stockholder’s Equity for the Six Months Ended June 30, 2021 and 2020 (Unaudited)	6
	Condensed Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	*
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38

* 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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
REVENUES
Interest income on retail notes and finance leases	$	38,899	$	48,489	$	80,051	$	96,020
Interest income on wholesale notes		8,400		13,569		17,329		29,141
Interest and other income from affiliates		75,312		82,069		155,077		167,512
Rental income on operating leases		68,049		62,109		136,024		124,194
Other income		6,600		7,468		12,429		12,654
Total revenues		197,260		213,704		400,910		429,521
EXPENSES
Interest expense:
Interest expense to third parties		47,370		67,739		103,550		144,616
Interest expense to affiliates		1,755		235		2,565		2,046
Total interest expense		49,125		67,974		106,115		146,662
Administrative and operating expenses:
Fees charged by affiliates		11,185		10,995		22,724		23,143
Provision (benefit) for credit losses		(8,001)		20,659		(9,539)		35,137
Depreciation of equipment on operating leases		60,628		58,836		121,696		117,126
Other expenses		9,562		8,693		11,875		15,401
Total administrative and operating expenses		73,374		99,183		146,756		190,807
Total expenses		122,499		167,157		252,871		337,469
INCOME BEFORE TAXES		74,761		46,547		148,039		92,052
Income tax provision		18,248		10,556		35,546		20,984
NET INCOME	$	56,513	$	35,991	$	112,493	$	71,068

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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
NET INCOME	$	56,513	$	35,991	$	112,493	$	71,068
Other comprehensive income (loss):
Foreign currency translation adjustment		9,891		19,311		15,649		(24,958)
Pension liability adjustment		(59)		(49)		(115)		(55)
Change in derivative financial instruments		810		(790)		3,073		(8,546)
Total other comprehensive income (loss)		10,642		18,472		18,607		(33,559)
COMPREHENSIVE INCOME	$	67,155	$	54,463	$	131,100	$	37,509

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

2

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

(Dollars in thousands)

(Unaudited)

	June 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	168,421	$	392,929
Restricted cash and cash equivalents		498,015		625,622
Receivables, less allowance for credit losses of $123,918 and $136,136, respectively		8,960,193		8,896,811
Affiliated accounts and notes receivable		549,000		414,810
Equipment on operating leases, net		1,800,373		1,859,184
Equipment held for sale		18,767		36,515
Goodwill		110,924		110,158
Other intangible assets, net		13,216		13,333
Other assets		87,163		101,807
TOTAL	$	12,206,072	$	12,451,169
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Short-term debt (including current maturities of long-term debt)	$	4,098,992	$	4,229,428
Accounts payable and other accrued liabilities		1,023,353		904,399
Affiliated debt		211,772		187,310
Long-term debt		5,560,456		5,869,860
Total liabilities		10,894,573		11,190,997
Commitments and contingent liabilities (Note 11)
Stockholder’s equity:
Member’s capital		—		—
Paid-in capital		843,461		843,234
Accumulated other comprehensive loss		(101,628)		(120,235)
Retained earnings		569,666		537,173
Total stockholder’s equity		1,311,499		1,260,172
TOTAL	$	12,206,072	$	12,451,169

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

3

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

(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.

	June 30,		December 31,
	2021		2020
Restricted cash and cash equivalents	$	498,015	$	625,622
Receivables, less allowance for credit losses of $65,275 and $78,960, respectively		5,948,222		6,364,343
TOTAL	$	6,446,237	$	6,989,965
Short-term debt (including current maturities of long-term debt)	$	2,935,900	$	3,017,432
Long-term debt		2,938,522		3,262,842
TOTAL	$	5,874,422	$	6,280,274

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

4

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	112,493	$	71,068
Adjustments to reconcile net income to net cash from (used in) operating activities:
Depreciation on property and equipment and equipment on operating leases		121,700		117,129
Amortization of intangibles		927		803
Provision (benefit) for credit losses		(9,539)		35,137
Deferred income tax expense		1,872		(4,304)
Changes in components of working capital:
Change in affiliated accounts and notes receivables		(134,190)		(135,571)
Change in other assets and equipment held for sale		16,806		(66,512)
Change in accounts payable and other accrued liabilities		115,910		67,454
Net cash from (used in) operating activities		225,979		85,204
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of receivables acquired		(5,706,759)		(4,793,000)
Collections of receivables		5,708,040		5,290,616
Purchase of equipment on operating leases		(226,738)		(273,464)
Proceeds from disposal of equipment on operating leases		191,897		223,875
Change in property, equipment and software, net		(810)		(154)
Net cash from (used in) investing activities		(34,370)		447,873
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of affiliated debt		214,818		557,352
Payment of affiliated debt		(196,202)		(771,208)
Proceeds from issuance of long-term debt		1,959,069		1,956,026
Payment of long-term debt		(2,461,472)		(2,034,118)
Change in short-term borrowings, net		20,063		(304,356)
Dividends paid to CNH Industrial America LLC		(80,000)		(90,000)
Net cash from (used in) financing activities		(543,724)		(686,304)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(352,115)		(153,227)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period		1,018,551		804,244
End of period	$	666,436	$	651,017
CASH PAID DURING THE PERIOD FOR INTEREST	$	110,602	$	141,472
CASH PAID DURING THE PERIOD FOR TAXES	$	22,403	$	10,310

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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

					Accumulated
					Other
	Member’s		Paid-in		Comprehensive		Retained
	Capital		Capital		Income (Loss)		Earnings		Total
BALANCE - January 1, 2021	$	—	$	843,234	$	(120,235)	$	537,173	$	1,260,172
Net income		—		—		—		55,980		55,980
Foreign currency translation adjustment		—		—		5,758		—		5,758
Stock compensation		—		111		—		—		111
Pension liability adjustment, net of tax		—		—		(56)		—		(56)
Change in derivative financial instruments, net of tax		—		—		2,263		—		2,263
BALANCE - March 31, 2021	$	—	$	843,345	$	(112,270)	$	593,153	$	1,324,228
Net income		—		—		—		56,513		56,513
Dividends paid to CNH Industrial America LLC		—		—		—		(80,000)		(80,000)
Foreign currency translation adjustment		—		—		9,891		—		9,891
Stock compensation		—		116		—		—		116
Pension liability adjustment, net of tax		—		—		(59)		—		(59)
Change in derivative financial instruments, net of tax		—		—		810		—		810
BALANCE - June 30, 2021	$	—	$	843,461	$	(101,628)	$	569,666	$	1,311,499

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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Continued)

(Dollars in thousands)

(Unaudited)

					Accumulated
					Other
	Member’s		Paid-in		Comprehensive		Retained
	Capital		Capital		Income (Loss)		Earnings		Total
BALANCE - January 1, 2020 as previously reported	$	—	$	843,749	$	(124,396)	$	543,688	$	1,263,041
Adoption of ASC 326		—		—		—		(19,790)		(19,790)
BALANCE - January 1, 2020 as recast		—		843,749		(124,396)		523,898		1,243,251
Net income		—		—		—		35,077		35,077
Dividends paid to CNH Industrial America LLC		—		—		—		(40,000)		(40,000)
Foreign currency translation adjustment		—		—		(44,269)		—		(44,269)
Stock compensation		—		(1)		—		—		(1)
Pension liability adjustment, net of tax		—		—		(6)		—		(6)
Change in derivative financial instruments, net of tax		—		—		(7,756)		—		(7,756)
BALANCE - March 31, 2020	$	—	$	843,748	$	(176,427)	$	518,975	$	1,186,296
Net income		—		—		—		35,991		35,991
Dividends paid to CNH Industrial America LLC		—		—		—		(50,000)		(50,000)
Foreign currency translation adjustment		—		—		19,311		(5)		19,306
Stock compensation		—		72		—		—		72
Pension liability adjustment, net of tax		—		—		(49)		—		(49)
Change in derivative financial instruments, net of tax		—		—		(790)		—		(790)
BALANCE - June 30, 2020	$	—	$	843,820	$	(157,955)	$	504,961	$	1,190,826

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 of America (“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, 2020. 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 these estimates.

The COVID-19 pandemic has resulted in uncertainties in the Company’s business, which may cause actual results to differ materially from the estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with the allowance for credit losses, the determination of end-of-lease market values for equipment on operating leases, goodwill and income taxes. Changes in estimates are recorded in the results of operations in the period that the events or circumstances giving rise to such changes occur.

8

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements Adopted in 2021

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU eliminates certain exceptions to the general principles in ASC 740, Income Taxes. Specifically, it eliminates the exception to (1) the incremental approach for intraperiod tax allocation where there is a loss from continuing operations, and income or a gain from other items; (2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of this standard did not have a material impact on its consolidated financial statements. The Company has elected, pursuant to this ASU, to include a portion of CNH Industrial America’s consolidated income tax expense in the results of certain entities included in these financial statements that are disregarded by the relevant tax authorities and, therefore, would not be subject to income tax on a stand-alone basis.

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 June 30, 2021:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		on Derivatives		Total
Beginning balance, gross	$	(107,526)	$	(7)	$	(6,462)	$	(113,995)
Tax asset		—		13		1,712		1,725
Beginning balance, net of tax		(107,526)		6		(4,750)		(112,270)
Other comprehensive income (loss) before reclassifications		9,891		(113)		945		10,723
Amounts reclassified from accumulated other comprehensive income (loss)		—		35		157		192
Tax effects		—		19		(292)		(273)
Net current-period other comprehensive income (loss)		9,891		(59)		810		10,642
Total	$	(97,635)	$	(53)	$	(3,940)	$	(101,628)

9

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 six months ended June 30, 2021:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		on Derivatives		Total
Beginning balance, gross	$	(113,284)	$	67	$	(9,542)	$	(122,759)
Tax asset		—		(5)		2,529		2,524
Beginning balance, net of tax		(113,284)		62		(7,013)		(120,235)
Other comprehensive income (loss) before reclassifications		15,649		(223)		3,832		19,258
Amounts reclassified from accumulated other comprehensive income (loss)		—		71		349		420
Tax effects		—		37		(1,108)		(1,071)
Net current-period other comprehensive income (loss)		15,649		(115)		3,073		18,607
Total	$	(97,635)	$	(53)	$	(3,940)	$	(101,628)

The following table summarizes the change in the components of the Company’s AOCI balance and related tax effects for the three months ended June 30, 2020:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		Derivatives		Total
Beginning balance, gross	$	(169,402)	$	(308)	$	(9,218)	$	(178,928)
Tax asset		—		58		2,443		2,501
Beginning balance, net of tax		(169,402)		(250)		(6,775)		(176,427)
Other comprehensive income (loss) before reclassifications		19,311		(115)		(1,187)		18,009
Amounts reclassified from accumulated other comprehensive income (loss)		—		50		112		162
Tax effects		—		16		285		301
Net current-period other comprehensive income (loss)		19,311		(49)		(790)		18,472
Total	$	(150,091)	$	(299)	$	(7,565)	$	(157,955)

10

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 six months ended June 30, 2020:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		Derivatives		Total
Beginning balance, gross	$	(125,133)	$	(302)	$	1,335	$	(124,100)
Tax asset		—		58		(354)		(296)
Beginning balance, net of tax		(125,133)		(244)		981		(124,396)
Other comprehensive income (loss) before reclassifications		(24,958)		(174)		(11,576)		(36,708)
Amounts reclassified from accumulated other comprehensive income (loss)		—		102		(51)		51
Tax effects		—		17		3,081		3,098
Net current-period other comprehensive income (loss)		(24,958)		(55)		(8,546)		(33,559)
Total	$	(150,091)	$	(299)	$	(7,565)	$	(157,955)

The reclassifications out of AOCI and the location on the consolidated statements of income for the three and six months ended June 30, 2021 and 2020 are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020		Affected Line Item
Amortization of defined benefit pension items:
	$	(35)	$	(50)	$	(71)	$	(102)	Various line items individually insignificant
		(35)		(50)		(71)		(102)	Income before taxes
		8		17		17		24	Income tax effects
	$	(27)	$	(33)	$	(54)	$	(78)	Net of tax
Unrealized losses on derivatives:
	$	(157)	$	(112)	$	(349)	$	51	Interest expense to third parties
		(157)		(112)		(349)		51	Income before taxes
		41		30		92		(13)	Income tax effects
	$	(116)	$	(82)	$	(257)	$	38	Net of tax

11

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES

A summary of receivables included in the consolidated balance sheets as of June 30, 2021 and December 31, 2020 is as follows:

	June 30,		December 31,
	2021		2020
Retail	$	1,359,870	$	833,864
Wholesale		644,395		639,934
Finance lease		174,221		156,161
Restricted receivables		6,905,625		7,402,988
Gross receivables		9,084,111		9,032,947
Less: Allowance for credit losses		(123,918)		(136,136)
Total receivables, net	$	8,960,193	$	8,896,811

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. NaN 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.

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 June 30, 2021 and December 31, 2020:

	June 30,		December 31,
	2021		2020
Retail	$	4,796,942	$	5,280,423
Wholesale		2,108,683		2,122,565
Total restricted receivables	$	6,905,625	$	7,402,988

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.

12

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

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 the lifetime expected credit losses inherent in the receivables owned by the Company. Retail receivables include retail and other notes and finance lease products offered for retail purchases of new and used equipment sold through CNH Industrial North America’s dealer network. Wholesale receivables include financing of the sale of goods to dealers and distributors by CNH Industrial North America, and to a lesser extent, the financing of dealer operations. Typically, the Company’s receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk.

Retail receivables that share the same risk characteristics such as, collateralization levels, geography, product type and other relevant factors are reviewed on a collective basis using measurement models and management judgment. The allowance for retail 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. The calculation is adjusted for forward looking macroeconomic factors, such as GDP and Net Farm Income. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors, such as the evolving impact of COVID-19, that are not fully captured in the loss forecast models 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.

Wholesale receivables that share the same risk characteristics such as, collateralization levels, term, geography and other relevant factors are reviewed on a collective basis using measurement models and management judgment. The allowance for 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. The calculation is adjusted for forward looking macroeconomic factors, such as industry sales volumes. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models 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.

Wholesale and retail receivables that do not have similar risk characteristics are individually reviewed based on, among other items, amounts outstanding, days past due and prior collection history. Expected credit losses are measured by considering: the probability-weighted estimates of cash flows and collateral value; the time value of money; current conditions and forecasts of future economic conditions. Expected credit losses are measured as the probability-weighted present value of all cash shortfalls (including the value of the collateral, if appropriate) over the expected life of each financial asset. 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.

13

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Allowance for credit losses activity for the three months ended June 30, 2021 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	122,541	$	9,780	$	132,321
Charge-offs		(1,088)		(179)		(1,267)
Recoveries		575		3		578
Provision (benefit)		(5,617)		(2,384)		(8,001)
Foreign currency translation and other		273		14		287
Ending balance	$	116,684	$	7,234	$	123,918

Allowance for credit losses activity for the six months ended June 30, 2021 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	126,851	$	9,285	$	136,136
Charge-offs		(4,320)		(179)		(4,499)
Recoveries		1,351		6		1,357
Provision (benefit)		(7,638)		(1,901)		(9,539)
Foreign currency translation and other		440		23		463
Ending balance	$	116,684	$	7,234	$	123,918
Receivables:
Ending balance	$	6,331,033	$	2,753,078	$	9,084,111

At June 30, 2021, the allowance for credit losses included a release of reserves primarily due to the improved outlook for the agricultural industry and a reduced expected impact on credit conditions from the COVID-19 pandemic. The Company continues to monitor the situation and will update the macroeconomic factors and qualitative factors in future periods, as warranted.

At both June 30, 2020 and December 31, 2020, the allowance for credit losses was based on the Company’s expectation of deteriorating credit conditions related to the COVID 19 pandemic.

Allowance for credit losses activity for the three months ended June 30, 2020 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	96,835	$	8,395	$	105,230
Charge-offs		(6,947)		(33)		(6,980)
Recoveries		600		—		600
Provision (benefit)		21,730		(1,071)		20,659
Foreign currency translation and other		274		42		316
Ending balance	$	112,492	$	7,333	$	119,825

14

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Allowance for credit losses activity for the six months ended June 30, 2020 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance, as previously reported	$	64,750	$	8,001	$	72,751
Adoption of ASC 326		25,877		—		25,877
Beginning balance, as recast	$	90,627	$	8,001	$	98,628
Charge-offs		(14,784)		(212)		(14,996)
Recoveries		1,327		3		1,330
Provision (benefit)		35,551		(414)		35,137
Foreign currency translation and other		(229)		(45)		(274)
Ending balance	$	112,492	$	7,333	$	119,825
Receivables:
Ending balance	$	6,076,780	$	3,250,544	$	9,327,324

Allowance for credit losses activity for the year ended December 31, 2020 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance, as previously reported	$	64,750	$	8,001	$	72,751
Adoption of ASC 326		25,877		—		25,877
Beginning balance, as recast	$	90,627	$	8,001	$	98,628
Charge-offs		(23,147)		(1,530)		(24,677)
Recoveries		2,481		10		2,491
Provision		56,252		2,792		59,044
Foreign currency translation and other		638		12		650
Ending balance	$	126,851	$	9,285	$	136,136
Receivables:
Ending balance	$	6,270,448	$	2,762,499	$	9,032,947

The Company assesses and monitors the credit quality of its receivables based on past due information. 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. As the terms for retail receivables are greater than one year, the past due information is presented by year of origination.

15

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The aging of receivables as of June 30, 2021 is as follows:

					Greater
	31 – 60 Days		61 – 90 Days		Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Receivables
Retail
United States
2021	$	651	$	—	$	—	$	651	$	1,167,331	$	1,167,982
2020		3,238		1,395		1,902		6,535		1,716,777		1,723,312
2019		3,373		1,821		3,380		8,574		964,258		972,832
2018		2,902		1,335		2,790		7,027		624,374		631,401
2017		2,073		281		2,604		4,958		308,375		313,333
2016		910		320		2,950		4,180		117,505		121,685
Prior to 2016		324		149		2,662		3,135		31,795		34,930
Total	$	13,471	$	5,301	$	16,288	$	35,060	$	4,930,415	$	4,965,475
Canada
2021	$	238	$	—	$	—	$	238	$	360,093	$	360,331
2020		1,867		716		665		3,248		504,849		508,097
2019		991		581		2,301		3,873		248,828		252,701
2018		1,038		312		812		2,162		140,236		142,398
2017		257		302		551		1,110		67,501		68,611
2016		173		70		765		1,008		25,372		26,380
Prior to 2016		34		—		327		361		6,679		7,040
Total	$	4,598	$	1,981	$	5,421	$	12,000	$	1,353,558	$	1,365,558
Wholesale
United States	$	14	$	4	$	136	$	154	$	2,105,397	$	2,105,551
Canada	$	2	$	—	$	—	$	2	$	647,525	$	647,527
Total
Retail	$	18,069	$	7,282	$	21,709	$	47,060	$	6,283,973	$	6,331,033
Wholesale	$	16	$	4	$	136	$	156	$	2,752,922	$	2,753,078

16

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

The aging of receivables as of December 31, 2020 is as follows:

					Greater
	31 – 60 Days		61 – 90 Days		Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Receivables
Retail
United States
2020	$	3,334	$	569	$	3,317	$	7,220	$	2,076,477	$	2,083,697
2019		7,912		1,201		4,243		13,356		1,264,842		1,278,198
2018		5,742		1,261		5,385		12,388		849,397		861,785
2017		3,841		461		2,655		6,957		454,256		461,213
2016		1,699		220		2,894		4,813		223,024		227,837
2015		781		173		2,091		3,045		53,981		57,026
Prior to 2015		256		47		2,874		3,177		15,459		18,636
Total	$	23,565	$	3,932	$	23,459	$	50,956	$	4,937,436	$	4,988,392
Canada
2020	$	1,613	$	30	$	707	$	2,350	$	588,691	$	591,041
2019		1,772		249		3,292		5,313		327,716		333,029
2018		1,254		218		1,508		2,980		197,895		200,875
2017		535		474		970		1,979		96,215		98,194
2016		265		127		1,209		1,601		43,480		45,081
2015		91		6		560		657		11,512		12,169
Prior to 2015		126		11		48		185		1,482		1,667
Total	$	5,656	$	1,115	$	8,294	$	15,065	$	1,266,991	$	1,282,056
Wholesale
United States	$	18	$	—	$	458	$	476	$	2,206,690	$	2,207,166
Canada	$	6	$	—	$	—	$	6	$	555,327	$	555,333
Total
Retail	$	29,221	$	5,047	$	31,753	$	66,021	$	6,204,427	$	6,270,448
Wholesale	$	24	$	—	$	458	$	482	$	2,762,017	$	2,762,499

Included in the receivables balance at June 30, 2021 and December 31, 2020 is accrued interest of $43,567 and $52,595, respectively. The Company does not include accrued interest in its allowance for credit losses. Recognition of income is generally suspended when management determines that collection of future finance income is not probable or when an account becomes 90 days past due, whichever occurs first. Accrued interest is charged off to interest income. Interest income charged off was not material for the three and six months ended June 30, 2021 and 2020. 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 June 30, 2021 and December 31, 2020 are as follows:

	June 30, 2021						December 31, 2020
	Retail		Wholesale		Total		Retail		Wholesale		Total
United States	$	27,942	$	18,612	$	46,554	$	28,882	$	35,402	$	64,284
Canada	$	5,792	$	—	$	5,792	$	8,597	$	—	$	8,597

As of June 30, 2021 and December 31, 2020, the Company’s receivables on non-accrual status without an allowance were immaterial. Interest income recognized for receivables on non-accrual status for the three and six months ended June 30, 2021 and 2020 was immaterial.

17

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 June 30, 2021, the Company had 204 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $5,609 and the post-modification value was $5,039. Additionally, the Company had 339 accounts with a balance of $22,482 undergoing bankruptcy proceedings where a concession has not yet been determined. As of June 30, 2020, the Company had 275 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $8,580 and the post-modification value was $7,549. Additionally, the Company had 330 accounts with a balance of $21,058 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 June 30, 2021 and 2020.

As of June 30, 2021 and 2020, 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 $101,531) as of June 30, 2021 are as follows:

2021	$	122,959
2022		178,055
2023		100,631
2024		39,167
2025 and thereafter		16,171
Total lease payments	$	456,983

NOTE 6: CREDIT FACILITIES AND DEBT

On April 1, 2021, the Company repaid $500,000 of its 4.875% unsecured notes due 2021.

On April 20, 2021, the Company, through a trust, issued C$511,825 ($405,903) of amortizing asset-backed notes secured by Canadian retail receivables.

18

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

On May 24, 2021, the Company completed an offering of $600,000 in aggregate principal amount of its 1.450% unsecured notes due 2026, issued at a price to the public of 99.208%.

Committed unsecured facilities with banks as of June 30, 2021 totaled $585,662. 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 June 30, 2021, the Company had $185,662 outstanding under these credit facilities. The remaining available credit commitments are maintained primarily to provide backup liquidity for commercial paper borrowings, as needed. There was 0 outstanding commercial paper as of June 30, 2021.

NOTE 7: INCOME TAXES

The effective tax rates for the three months ended June 30, 2021 and 2020 were 24.4% and 22.7%, respectively. The effective tax rate was 24.0% for the six months ended June 30, 2021, compared to 22.8% for the same period in 2020.

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.

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.

19

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

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 June 30, 2021, 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 42 months. As of June 30, 2021, 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 $763.

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 six months ended June 30, 2021 and 2020.

All of the Company’s interest rate derivatives as of June 30, 2021 and December 31, 2020 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 $4,191,438 and $4,369,574 at June 30, 2021 and December 31, 2020, respectively. The seven-month average notional amounts for the six months ended June 30, 2021 and 2020 were $4,210,894 and $3,124,169, respectively.

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.

20

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

Financial Statement Impact of the Company’s Derivatives

The fair values of the Company’s derivatives as of June 30, 2021 and December 31, 2020 in the consolidated balance sheets are recorded as follows:

	June 30,		December 31,
	2021		2020
Derivatives Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	45,940	$	58,008
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	3,944	$	4,882
Derivatives Not Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	6,058	$	1,053
Foreign exchange contracts		939		2
Total	$	6,997	$	1,055
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	6,058	$	1,053
Foreign exchange contracts		5,921		3,815
Total	$	11,979	$	4,868

Pre-tax gains (losses) on the consolidated statements of income and comprehensive income related to the Company’s derivatives for the three and six months ended June 30, 2021 and 2020 are recorded in the following accounts:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Cash Flow Hedges
Recognized in accumulated other comprehensive income (loss):
Interest rate derivatives	$	945	$	(1,187)	$	3,832	$	(11,576)
Reclassified from accumulated other comprehensive income (loss):
Interest rate derivatives—Interest expense to third parties		(157)		(112)		(349)		51
Not Designated as Hedges
Foreign exchange contracts—Other expenses	$	1,244	$	2,051	$	2,111	$	(3,200)

21

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 June 30, 2021 and December 31, 2020, all of which are measured as Level 2:

	June 30,		December 31,
	2021		2020
Assets
Interest rate derivatives	$	51,998	$	59,061
Foreign exchange contracts		939		2
Total assets	$	52,937	$	59,063
Liabilities
Interest rate derivatives	$	10,002	$	5,935
Foreign exchange contracts		5,921		3,815
Total liabilities	$	15,923	$	9,750

There were 0 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 June 30, 2021 and December 31, 2020 are as follows:

	June 30, 2021				December 31, 2020
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value *		Amount		Fair Value *
Receivables	$	8,960,193	$	9,092,826	$	8,896,811	$	8,987,830
Long-term debt	$	5,560,456	$	5,621,627	$	5,869,860	$	5,992,745

______________

* 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.

22

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				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues
United States	$	154,717	$	173,322	$	318,859	$	346,963
Canada		43,726		41,593		84,467		85,334
Eliminations		(1,183)		(1,211)		(2,416)		(2,776)
Total	$	197,260	$	213,704	$	400,910	$	429,521
Interest expense
United States	$	40,278	$	56,895	$	88,200	$	122,661
Canada		10,030		12,290		20,331		26,777
Eliminations		(1,183)		(1,211)		(2,416)		(2,776)
Total	$	49,125	$	67,974	$	106,115	$	146,662
Net income
United States	$	41,938	$	27,454	$	86,542	$	53,557
Canada		14,575		8,537		25,951		17,511
Total	$	56,513	$	35,991	$	112,493	$	71,068
Depreciation and amortization
United States	$	48,030	$	48,543	$	97,081	$	96,402
Canada		13,055		10,698		25,546		21,530
Total	$	61,085	$	59,241	$	122,627	$	117,932
Expenditures for equipment on operating leases
United States	$	69,351	$	108,796	$	168,570	$	222,418
Canada		33,212		29,483		58,168		51,046
Total	$	102,563	$	138,279	$	226,738	$	273,464
Provision (benefit) for credit losses
United States	$	(6,852)	$	16,294	$	(9,357)	$	27,593
Canada		(1,149)		4,365		(182)		7,544
Total	$	(8,001)	$	20,659	$	(9,539)	$	35,137

23

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	As of		As of
	June 30,		December 31,
	2021		2020
Total assets
United States	$	9,837,686	$	10,186,808
Canada		2,593,279		2,442,180
Eliminations		(224,893)		(177,819)
Total	$	12,206,072	$	12,451,169
Managed receivables
United States	$	7,071,026	$	7,195,558
Canada		2,013,085		1,837,389
Total	$	9,084,111	$	9,032,947

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.

The summary of sources included in “Interest and other income from affiliates” in the accompanying consolidated statements of income for the three and six months ended June 30, 2021 and 2020 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Subsidy from CNH Industrial North America
Retail	$	36,703	$	39,243	$	73,841	$	80,383
Wholesale		23,880		27,138		49,379		56,114
Operating lease		14,588		15,591		31,476		30,770
Income from affiliated receivables
CNH Industrial North America		102		57		299		163
Other affiliates		39		40		82		82
Total interest and other income from affiliates	$	75,312	$	82,069	$	155,077	$	167,512

Interest expense to affiliates was $1,755 and $235, respectively, for the three months ended June 30, 2021 and 2020 and $2,565 and $2,046, respectively, for the six months ended June 30, 2021 and 2020. Fees charged by affiliates were $11,185 and $10,995, respectively, for the three months ended June 30, 2021 and 2020, and $22,724 and $23,143, respectively, for the six months ended June 30, 2021 and 2020, and represents payroll and other human resource services CNH Industrial America performs on behalf of the Company.

24

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

As of June 30, 2021 and December 31, 2020, the Company had various accounts and notes receivable and debt with the following affiliates:

	June 30,		December 31,
	2021		2020
Affiliated receivables
CNH Industrial America	$	536,123	$	391,445
CNH Industrial Canada Ltd.		—		10,906
Other affiliates		12,877		12,459
Total affiliated receivables	$	549,000	$	414,810
Affiliated debt
CNH Industrial Canada Ltd.	$	211,772	$	187,310
Total affiliated debt	$	211,772	$	187,310

Accounts payable and other accrued liabilities, including tax payables, of $192,715 and $31,795 were payable to related parties as of June 30, 2021 and December 31, 2020, 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 $55,000. The guarantees are in effect for the term of the underlying funding facilities.

Commitments

The Company has various agreements, on an uncommitted basis, to extend credit for the wholesale and dealer financing managed portfolio. At June 30, 2021, the total credit limit available was $6,053,708, of which $2,664,182 was utilized.

NOTE 12: SUBSEQUENT EVENTS

On July 27, 2021, the Company, through a bankruptcy-remote trust, issued $843,840 of amortizing asset-backed notes secured by U.S. retail receivables.

ds

25

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

The extent of the continuing impact of COVID-19 on our operational and financial performance will depend on certain developments, including the resurgence of COVID-19, its impact on our customers and suppliers and the efficacy of governmental and community vaccination efforts, which are uncertain. We will continue to proactively respond to the situation and may take further actions that alter our business operations as may be required by governmental authorities, or that we determine are in the best interests of our employees and customers.

Rising demand is adding pressure to CNH Industrial’s supply chain, requiring diligent coordination to keep its production at desired levels. CNH Industrial remains cautious about future impacts on its end-markets and business operations of restrictions on social interactions and business operations to limit the resurgence of the pandemic. CNH Industrial is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, its employees and its results of operations, financial condition and cash flows in 2021.

CNH Industrial has confirmed its intention to enhance its customer focus through the separation of its “On-Highway” (commercial and specialty vehicles, powertrain and the related financial services business) and “Off-Highway” (agriculture, construction and the related financial services business) businesses in early 2022. The separation is expected to be effected through the spin-off of CNH Industrial N.V.’s equity interest in “On-Highway” to CNH Industrial N.V. shareholders. Execution of the transaction requires further work on structure, management, governance and other significant matters as well as appropriate corporate approvals (including approval at an extraordinary general meeting of shareholders) and satisfaction of other conditions. CNH Industrial can make no assurance that any spin-off transaction will ultimately occur, or, if one does occur, its terms or timing.

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 June 30, 2021, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $1,286 million and $372 million, respectively, representing increases of 43.5% and 131.1% from the same period in 2020, respectively. For the six months ended June 30, 2021, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $2,344 million and $652 million, respectively, representing increases of 35.9% and 97.0% from the same period in 2020, 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 $56.5 million and $112.5 million for the three and six months ended June 30, 2021, compared to $36.0 million and $71.1 million for the three and six months ended June 30, 2020. The increase in net income was primarily due to an increased net interest margin and a lower provision for credit losses. The receivables balance greater than 30 days past due as a percentage of managed receivables was 0.5%, 0.7% and 0.6% at June 30, 2021, December 31, 2020 and June 30, 2020, respectively.

In addition to the impacts from COVID-19 previously discussed, 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.

26

Results of Operations

Three and Six Months Ended June 30, 2021 Compared to Three and Six Months Ended June 30, 2020

Revenues

Revenues for the three and six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended
	June 30,
	2021		2020		$ Change		% Change
Interest income on retail notes and finance leases	$	38,899	$	48,489	$	(9,590)	(19.8)	%
Interest income on wholesale notes		8,400		13,569		(5,169)	(38.1)
Interest and other income from affiliates		75,312		82,069		(6,757)	(8.2)
Rental income on operating leases		68,049		62,109		5,940	9.6
Other income		6,600		7,468		(868)	(11.6)
Total revenues	$	197,260	$	213,704	$	(16,444)	(7.7)	%

	Six Months Ended
	June 30,
	2021		2020		$ Change		% Change
Interest income on retail notes and finance leases	$	80,051	$	96,020	$	(15,969)	(16.6)	%
Interest income on wholesale notes		17,329		29,141		(11,812)	(40.5)
Interest and other income from affiliates		155,077		167,512		(12,435)	(7.4)
Rental income on operating leases		136,024		124,194		11,830	9.5
Other income		12,429		12,654		(225)	(1.8)
Total revenues	$	400,910	$	429,521	$	(28,611)	(6.7)	%

Revenues totaled $197.3 million and $400.9 million for the three and six months ended June 30, 2021, respectively, compared to $213.7 million and $429.5 million for the same periods in 2020. The quarter-over-quarter and year-over-year decreases were primarily driven by a lower average managed portfolio and a slightly lower average yield. The average yield for the managed portfolio was 7.1% and 7.4% for the three months ended June 30, 2021 and 2020, respectively, and 7.2% and 7.4% for the six months ended June 30, 2021 and 2020, respectively.

Interest income on retail notes and finance leases for the three and six months ended June 30, 2021 was $38.9 million and $80.1 million, respectively, representing a decrease of $9.6 million and $16.0 million from the same periods in 2020, respectively. For the second quarter, the decrease was primarily due to a $11.7 million unfavorable impact from lower interest rates, partially offset by a $2.1 million favorable impact from higher average earning assets. For the six months ended June 30, 2021, compared to the same period in 2020, the decrease was primarily due to a $18.2 million unfavorable impact from lower interest rates, partially offset by a $2.2 million favorable impact from higher average earning assets.

Interest income on wholesale notes for the three and six months ended June 30, 2021 was $8.4 million and $17.3 million, respectively, representing a decrease of $5.2 million and $11.8 million from the same periods in 2020, respectively. For the second quarter, the decrease was due to the unfavorable impacts of $4.5 million from lower average earning assets and $0.7 million from lower interest rates. For the six months ended June 30, 2021, compared to the same period in 2020, the decrease was due to the unfavorable impacts of $8.8 million from lower average earning assets and $3.0 million from lower interest rates.

Interest and other income from affiliates for the three and six months ended June 30, 2021 was $75.3 million and $155.1 million, respectively, compared to $82.1 million and $167.5 million, respectively, for the three and six months ended June 30, 2020. For the three and six months ended June 30, 2021, compensation from CNH Industrial North America for retail low-rate financing programs and interest waiver programs offered to customers was $36.7 million and $73.8 million, respectively, a decrease of $2.5 million and $6.6 million from the same periods in 2020, respectively. Both the quarter-over-quarter and year-over year decreases were primarily due to pricing. For the three and six months ended June 30, 2021, compensation from CNH Industrial North America for wholesale marketing programs was $23.9 million and $49.4 million, respectively, a decrease of $3.2 million and $6.7 million from the same periods in 2020, respectively. The decreases were primarily due to lower CNH Industrial North

27

America volumes. For select operating leases, compensation from CNH Industrial North America for the difference between market rental rates and the amounts paid by customers was $14.6 million and $31.5 million for the three and six months ended June 30, 2021, a decrease of $1.0 million and an increase of $0.7 million from the same periods in 2020, respectively.

Rental income on operating leases for the three and six months ended June 30, 2021 was $68.0 million and $136.0 million, representing an increase of $5.9 million and $11.8 million from the same periods in 2020, respectively. The second quarter increase was due to the favorable impacts of $3.5 million from higher interest rates and $2.4 million from higher average earning assets. For the six months ended June 30, 2021, compared to the same period in 2020, the increase was due to the favorable impacts of $6.3 million from higher interest rates and $5.5 million from higher average earning assets.

Other income for the three and six months ended June 30, 2021 was $6.6 million and $12.4 million, representing a decrease of $0.9 million and $0.2 million from the same periods in 2020, respectively.

Expenses

Expenses for the three and six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended
	June 30,
	2021		2020		$ Change		% Change
Total interest expense	$	49,125	$	67,974	$	(18,849)	(27.7)	%
Fees charged by affiliates		11,185		10,995		190	1.7
Provision (benefit) for credit losses		(8,001)		20,659		(28,660)	(138.7)
Depreciation of equipment on operating leases		60,628		58,836		1,792	3.0
Other expenses		9,562		8,693		869	10.0
Total expenses	$	122,499	$	167,157	$	(44,658)	(26.7)	%

	Six Months Ended
	June 30,
	2021		2020		$ Change		% Change
Total interest expense	$	106,115	$	146,662	$	(40,547)	(27.6)	%
Fees charged by affiliates		22,724		23,143		(419)	(1.8)
Provision (benefit) for credit losses		(9,539)		35,137		(44,676)	(127.1)
Depreciation of equipment on operating leases		121,696		117,126		4,570	3.9
Other expenses		11,875		15,401		(3,526)	(22.9)
Total expenses	$	252,871	$	337,469	$	(84,598)	(25.1)	%

Interest expense totaled $49.1 million and $106.1 million for the three and six months ended June 30, 2021, respectively, compared to $68.0 million and $146.7 million for the same periods in 2020. For the three months ended June 30, 2021, the decrease was due to the favorable impacts of $15.3 million from lower average interest rates and $3.6 million from lower average total debt. For the six months ended June 30, 2021, the decrease was due to the favorable impacts of $33.5 million from lower average interest rates and $7.1 million from lower average total debt. The average debt cost was 2.2% for the six months ended June 30, 2021 compared to 2.9% for the six months ended June 30, 2020.

The provision (benefit) for credit losses was an $8.0 million benefit and a $9.5 million benefit for the three and six months ended June 30, 2021, respectively, compared to a $20.7 million provision and a $35.1 million provision for the same periods in 2020. The decreases in the provision for credit losses in 2021 was due to the improved outlook for the agricultural industry and a reduced expected impact on credit conditions from the COVID-19 pandemic.

Depreciation of equipment on operating leases was $60.6 million and $121.7 million for the three and six months ended June 30, 2021, respectively, compared to $58.8 million and $117.1 million for the same periods in 2020. The increase for the three and six months ended June 30, 2021, compared to the same periods in 2020, was primarily due to a higher average operating lease portfolio.

28

Other expenses were $9.6 million and $11.9 million for the three and six months ended June 30, 2021, respectively, compared to $8.7 million and $15.4 million for the same periods in 2020.  For the six months ended June 30, 2021, compared to the same period in 2020, the decrease was due to improved pricing on used equipment sales.

The effective tax rates for the three months ended June 30, 2021 and 2020 were 24.4% and 22.7%, respectively. The effective tax rate was 24.0% for the six months ended June 30, 2021, compared to 22.8% for the same period in 2020.

Receivables and Equipment on Operating Leases Originated and Held

Receivables and equipment on operating lease originations for the three and six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended
	June 30,
	2021		2020		$ Change		% Change
Retail	$	903,865	$	771,381	$	132,484	17.2	%
Wholesale		2,268,604		1,702,633		565,971	33.2
Equipment on operating leases		102,563		138,279		(35,716)	(25.8)
Total originations	$	3,275,032	$	2,612,293	$	662,739	25.4	%

	Six Months Ended
	June 30,
	2021		2020		$ Change		% Change
Retail	$	1,658,050	$	1,388,523	$	269,527	19.4	%
Wholesale		4,048,709		3,404,477		644,232	18.9
Equipment on operating leases		226,738		273,464		(46,726)	(17.1)
Total originations	$	5,933,497	$	5,066,464	$	867,033	17.1	%

The quarter-over-quarter and year-over-year increase in retail and wholesale originations was primarily due to an increase in unit sales of CNH Industrial North America equipment. The quarter-over-quarter and year-over-year decrease in operating lease originations was primarily due to customer’s preference for retail financing products.

Total receivables and equipment on operating leases held as of June 30, 2021, December 31, 2020 and June 30, 2020 were as follows (dollars in thousands):

	June 30,		December 31,		June 30,
	2021		2020		2020
Retail	$	6,331,033	$	6,270,448	$	6,076,780
Wholesale		2,753,078		2,762,499		3,250,544
Equipment on operating leases		1,800,373		1,859,184		1,761,261
Total receivables and equipment on operating leases	$	10,884,484	$	10,892,131	$	11,088,585

The total retail receivables balance greater than 30 days past due as a percentage of the retail receivables was 0.7% at June 30, 2021, 1.1% at December 31, 2020 and 0.8% at June 30, 2020. The total wholesale receivables balance greater than 30 days past due as a percentage of the wholesale receivables was not significant at June 30, 2021, December 31, 2020 or June 30, 2020. Total retail receivables on nonaccrual status, which represent receivables for which we have ceased accruing finance income, were $33.7 million, $37.5 million and $38.7 million at June 30, 2021, December 31, 2020 and June 30, 2020, respectively. Total wholesale receivables on nonaccrual status were $18.6 million, $35.4 million and $25.3 million at June 30, 2021, December 31, 2020 and June 30, 2020, respectively.

29

Total receivable charge-off amounts and recoveries, by product, for the three and six months ended June 30, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Charge-offs:
Retail	$	1,088	$	6,947	$	4,320	$	14,784
Wholesale		179		33		179		212
Total charge-offs		1,267		6,980		4,499		14,996
Recoveries:
Retail		(575)		(600)		(1,351)		(1,327)
Wholesale		(3)		—		(6)		(3)
Total recoveries		(578)		(600)		(1,357)		(1,330)
Charge-offs, net of recoveries:
Retail		513		6,347		2,969		13,457
Wholesale		176		33		173		209
Total charge-offs, net of recoveries	$	689	$	6,380	$	3,142	$	13,666

Our allowance for credit losses on all receivables financed totaled $123.9 million at June 30, 2021, $136.1 million at December 31, 2020 and $119.8 million at June 30, 2020.

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, forward looking macroeconomic factors (in particular, those conditions directly affecting the profitability and financial strength of our customers), and collateral value. No single factor determines the adequacy of the allowance. Different assumptions or changes in forward looking economic assumptions 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 expected losses in our receivable portfolio as of June 30, 2021.

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.

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 notes, affiliate borrowings and cash to fund our liquidity needs.

30

Cash Flows

For the six months ended June 30, 2021 and 2020, our cash flows were as follows (dollars in thousands):

	2021		2020
Cash flows from (used in):
Operating activities	$	225,979	$	85,204
Investing activities		(34,370)		447,873
Financing activities		(543,724)		(686,304)
Net cash increase (decrease)	$	(352,115)	$	(153,227)

Operating activities in the six months ended June 30, 2021 generated cash of $226 million, resulting primarily from net income of $112 million, adjusted by depreciation and amortization of $123 million and $2 million in deferred tax expense, partially offset by changes in working capital of $1 million and a benefit for credit losses of $10 million. The increase in cash provided by operating activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to $134 million related to changes in working capital, a $41 million increase in net income, a $6 million increase in deferred tax adjustment and a $5 million increase in depreciation and amortization, partially offset by a $45 million decrease in provision for credit losses.

Investing activities in the six months ended June 30, 2021 used cash of $34 million, resulting primarily from net expenditures for equipment on operating leases of $35 million, partially offset by a $1 million reduction in net expenditures for receivables. The increase in cash used by investing activities for the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to a $496 million increase in net expenditures for receivables and a $1 million increase in expenditures for property, equipment and software, partially offset by a $15 million decrease in net expenditures for equipment on operating leases.

Financing activities in the six months ended June 30, 2021 used cash of $544 million, resulting primarily from net cash paid on long-term debt of $503 million and $80 million in dividends paid to CNH Industrial America, partially offset by net cash received on short-term borrowings and affiliated debt of $20 million and $19 million, respectively. The decrease in cash used in financing activities in the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to a decrease in net cash paid on short-term borrowings and affiliated debt of $324 million and $233 million, respectively, and lower dividends of $10 million paid to CNH Industrial America, partially offset by an increase in net cash paid on long-term debt of $424 million.

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 $3.9 billion of public and private asset-backed securities outstanding in both the U.S. and Canada as of June 30, 2021. 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 $3.1 billion at June 30, 2021, 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 June 30, 2021, approximately $0.6 billion of funding was available for use under these facilities.

Unsecured Facilities and Debt

Committed unsecured facilities with banks as of June 30, 2021 totaled $586 million. 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 June 30, 2021, we had $186 million outstanding under these credit facilities. The remaining available credit commitments are maintained primarily to provide backup liquidity for our commercial paper borrowings, as needed. There was no outstanding commercial paper as of June 30, 2021.

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As of June 30, 2021, our unsecured senior notes were as follows (dollars in thousands):

3.875% notes, due 2021	$	400,000
4.375% notes, due 2022		500,000
1.950% notes, due 2023		600,000
4.200% notes, due 2024		500,000
1.875% notes, due 2026		500,000
1.450% notes, due 2026		600,000
Hedging, discounts and unamortized issuance costs		21,112
Total	$	3,121,112

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

On April 1, 2021, we repaid $500 million of our 4.875% unsecured notes due 2021.

On May 24, 2021, we completed an offering of $600 million in aggregate principal amount of our 1.450% unsecured notes due 2026, issued at a price to the public of 99.208%.

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 June 30, 2021 were as follows:

	Senior Long-Term	Short-Term	Outlook
S&P Global Ratings	BBB	A-2	Stable
Fitch Ratings	BBB-	F3	Stable
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 $212 million and $187 million as of June 30, 2021 and December 31, 2020, respectively.

Equity Position

Our equity position also supports our ability to access various funding sources. Our stockholder’s equity was $1.3 billion at both June 30, 2021 and December 31, 2020. For the six months ended June 30, 2021, CNH Industrial Capital LLC paid cash dividends of $80 million to CNH Industrial America.

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Liquidity

While we expect securitization to continue to represent a material portion of our capital structure and affiliated borrowings to remain a marginal source of funding, we will continue to diversify our funding sources and expand our investor base to support our investment grade credit ratings. These diversified funding sources include committed asset-backed facilities, unsecured notes, bank facilities and a commercial paper program.

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.

Guarantor Statements

CNH Industrial Capital America and New Holland Credit (the “Guarantor Entities”), which are 100%-owned subsidiaries of CNH Industrial Capital LLC, guarantee the unsecured senior notes issued by CNH Industrial Capital LLC. The guarantees (“Guarantees”) are full, unconditional, and joint and several.

The Guarantor Entities’ guarantees are general unsecured obligations of the Guarantor Entities and rank senior in right of payment to all future obligations of the Guarantor Entities that are, by their terms, expressly subordinated in right of payment to the Guarantees and pari passu in right of payment with all existing and future unsecured indebtedness of the Guarantor Entities that are not so subordinated.

The Guarantor Entities’ obligations under the Guarantees are limited as necessary to prevent the Guarantees from constituting a fraudulent conveyance under applicable law. If the Guarantees were rendered voidable, they could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor Entities and, depending on the amount of the indebtedness, the Guarantor Entities’ liability on the Guarantees could be reduced to zero.

The Guarantees of the Guarantor Entities will be automatically released:

(1) in connection with any sale or other disposition of all of the capital stock of the Guarantor Entities to a person other than CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC;

(2) in connection with the sale or other disposition of all or substantially all of the assets or properties of the Guarantor Entities, including by way of merger, consolidation or otherwise, to a person other than CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC; or

(3) certain other circumstances.

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The following financial information consists of summarized financial information of CNH Industrial Capital LLC and the Guarantor Entities (the “Obligors”), presented on a combined basis. Intercompany balances and transactions between Obligors have been eliminated. The investments in, and equity in income from, non-guarantor subsidiaries has been excluded. The Obligors’ summarized financial information for the three and six months ended June 30, 2021 and as of June 30, 2021 and December 31, 2020 was as follows (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues	$	113,093	$	117,498	$	232,274	$	234,094
Interest expense		39,782		55,921		80,100		117,290
Administrative and operating expenses		61,655		70,152		128,626		135,750
Income tax provision (benefit)		2,832		(2,010)		5,731		(4,466)
Net income (loss)	$	8,824	$	(6,565)	$	17,817	$	(14,480)

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	June 30,		December 31,
	2021		2020
Cash and cash equivalents	$	102,412	$	158,334
Restricted cash and cash equivalents		—		—
Receivables, less allowance for credit losses of $37,727 and $35,710		1,895,754		1,479,160
Equipment on operating leases, net		1,369,555		1,434,253
Short-term debt, including current maturities of long-term debt		1,163,092		1,109,953
Accounts payable and other accrued liabilities		766,231		798,624
Long-term debt		2,436,255		2,528,576

The Obligors’ amounts due from and due to the non-guarantor subsidiaries as of June 30, 2021 and December 31, 2020 were as follows (dollars in thousands):

	June 30,		December 31,
	2021		2020
Affiliated accounts and notes receivable from non-guarantor subsidiaries	$	2,218,789	$	2,135,799
Accounts payable and other accrued liabilities to non-guarantor subsidiaries		2,980,649		2,810,187

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Other Data

		Investments
	As of or for the
	Six Months Ended June 30,
	2021			2020
	(Dollars in thousands)
Total managed receivables	$	9,084,111		$	9,327,324
Operating lease equipment		1,800,373			1,761,261
Total managed portfolio	$	10,884,484		$	11,088,585
Delinquency (1)		0.52	%		0.56	%
Average managed receivables	$	9,067,444		$	9,756,962
Net credit loss (2)		0.13	%		0.35	%
Profitability: (3)
Return on average managed portfolio (4)		2.09	%		1.26	%
Asset Quality:
Allowance for credit losses/total receivables		1.36	%		1.28	%

(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 charge-offs, net of recoveries, for the preceding 12 months expressed as a percentage of the respective average managed receivables.

(3) Six months ended June 30, 2021 and 2020 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 future responses to and effect of the COVID-19 pandemic; 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, including those related to the COVID-19 pandemic, are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize or 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; the unknown duration and economic, operational and financial impacts of the COVID-19 pandemic; 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; costs related to litigation or regulatory actions; actions of competitors in the various industries in which CNH Industrial North 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

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financial markets; the duration and scope of the COVID-19 pandemic and governmental, business and individuals’ response thereto; the ability of CNHI to complete the spin-off transaction considering the various conditions to the completion of the spin-off transaction (some of which are outside of CNHI’s control); 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 are based upon assumptions relating to the factors described in this filing, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Our actual results could differ materially from those anticipated in such forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update or revise publicly our forward-looking statements, whether as a result of new developments or otherwise.

The impact of COVID-19 has already exacerbated and is expected to further exacerbate all or part of the risks discussed in this section.

All future written and oral forward-looking statements by CNH Industrial Capital or persons acting on the behalf of CNH Industrial Capital are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.

Additional factors which could cause actual results to differ from those expressed or implied by the forward-looking statements are included in the Company’s filings with the SEC (including, but not limited to, the factors discussed in our annual report on Form 10-K and quarterly reports submitted on Form 10-Q).

Critical Accounting Policies and Estimates

See our critical accounting policies and estimates discussed in our annual report for the year ended December 31, 2020 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 June 30, 2021.

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 June 30, 2021. 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 June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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.

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 three months ended June 30, 2021.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

Item 6.  Exhibits

Exhibit	Description
22	Guarantor Subsidiaries
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 Inline data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020, (iii) Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, (v) Consolidated Statements of Changes in Stockholder’s Equity for the six months ended June 30, 2021 and 2020 and (vi) Condensed Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

† 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: August 5, 2021	By:	/s/ Carlo Alberto Sisto
		Name:	Carlo Alberto Sisto
		Title:	Chairman and President

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