CNH Industrial Capital 10-Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 September 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 Nine Months Ended September 30, 2021 and 2020 (Unaudited)	1
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	2
	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)	5
	Consolidated Statements of Changes in Stockholder’s Equity for the Nine Months Ended September 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	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
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 NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
REVENUES
Interest income on retail notes and finance leases	$	43,531	$	46,995	$	123,582	$	143,015
Interest income on wholesale notes		7,577		12,673		24,906		41,814
Interest and other income from affiliates		71,322		75,233		226,399		242,745
Rental income on operating leases		66,870		64,406		202,894		188,600
Other income		16,791		10,367		29,220		23,021
Total revenues		206,091		209,674		607,001		639,195
EXPENSES
Interest expense:
Interest expense to third parties		46,093		68,122		149,643		212,738
Interest expense to affiliates		1,260		718		3,825		2,764
Total interest expense		47,353		68,840		153,468		215,502
Administrative and operating expenses:
Fees charged by affiliates		11,394		10,399		34,118		33,542
Provision (benefit) for credit losses		622		12,575		(8,917)		47,712
Depreciation of equipment on operating leases		59,577		59,722		181,273		176,848
Other expenses		5,209		8,208		17,084		23,609
Total administrative and operating expenses		76,802		90,904		223,558		281,711
Total expenses		124,155		159,744		377,026		497,213
INCOME BEFORE TAXES		81,936		49,930		229,975		141,982
Income tax provision		19,514		11,775		55,060		32,759
NET INCOME	$	62,422	$	38,155	$	174,915	$	109,223

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

1

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
NET INCOME	$	62,422	$	38,155	$	174,915	$	109,223
Other comprehensive income (loss):
Foreign currency translation adjustment		(16,310)		10,733		(661)		(14,225)
Pension liability adjustment		(42)		(17)		(157)		(72)
Change in derivative financial instruments		757		362		3,830		(8,184)
Total other comprehensive income (loss)		(15,595)		11,078		3,012		(22,481)
COMPREHENSIVE INCOME	$	46,827	$	49,233	$	177,927	$	86,742

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

2

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

(Dollars in thousands)

(Unaudited)

	September 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	375,629	$	392,929
Restricted cash and cash equivalents		508,813		625,622
Receivables, less allowance for credit losses of $119,825 and $136,136, respectively		8,895,667		8,896,811
Affiliated accounts and notes receivable		637,358		414,810
Equipment on operating leases, net		1,740,969		1,859,184
Equipment held for sale		27,072		36,515
Goodwill		110,161		110,158
Other intangible assets, net		13,585		13,333
Other assets		79,937		101,807
TOTAL	$	12,389,191	$	12,451,169
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Short-term debt (including current maturities of long-term debt)	$	4,226,014	$	4,229,428
Accounts payable and other accrued liabilities		977,292		904,399
Affiliated debt		4,000		187,310
Long-term debt		5,903,592		5,869,860
Total liabilities		11,110,898		11,190,997
Commitments and contingent liabilities (Note 11)
Stockholder’s equity:
Member’s capital		—		—
Paid-in capital		843,428		843,234
Accumulated other comprehensive loss		(117,223)		(120,235)
Retained earnings		552,088		537,173
Total stockholder’s equity		1,278,293		1,260,172
TOTAL	$	12,389,191	$	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 SEPTEMBER 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.

	September 30,		December 31,
	2021		2020
Restricted cash and cash equivalents	$	508,813	$	625,622
Receivables, less allowance for credit losses of $66,040 and $78,960, respectively		6,304,814		6,364,343
TOTAL	$	6,813,627	$	6,989,965
Short-term debt (including current maturities of long-term debt)	$	2,943,751	$	3,017,432
Long-term debt		3,282,575		3,262,842
TOTAL	$	6,226,326	$	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 NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Dollars in thousands)

(Unaudited)

	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	174,915	$	109,223
Adjustments to reconcile net income to net cash from (used in) operating activities:
Depreciation on property and equipment and equipment on operating leases		181,279		176,853
Amortization of intangibles		1,400		1,171
Provision (benefit) for credit losses		(8,917)		47,712
Deferred income tax expense		3,890		(10,783)
Changes in components of working capital:
Change in affiliated accounts and notes receivables		(222,541)		(248,652)
Change in other assets and equipment held for sale		21,988		(38,750)
Change in accounts payable and other accrued liabilities		71,616		81,704
Net cash from (used in) operating activities		223,630		118,478
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of receivables acquired		(8,733,466)		(7,327,903)
Collections of receivables		8,743,735		7,991,709
Purchase of equipment on operating leases		(334,539)		(375,458)
Proceeds from disposal of equipment on operating leases		281,336		285,890
Change in property, equipment and software, net		(1,652)		(1,010)
Net cash from (used in) investing activities		(44,586)		573,228
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of affiliated debt		259,793		765,415
Payment of affiliated debt		(443,103)		(764,889)
Proceeds from issuance of long-term debt		3,039,408		2,556,026
Payment of long-term debt		(3,002,563)		(2,625,939)
Change in short-term borrowings, net		(6,688)		(527,786)
Dividends paid to CNH Industrial America LLC		(160,000)		(130,000)
Net cash from (used in) financing activities		(313,153)		(727,173)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(134,109)		(35,467)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period		1,018,551		804,244
End of period	$	884,442	$	768,777
CASH PAID DURING THE PERIOD FOR INTEREST	$	156,617	$	187,712
CASH PAID DURING THE PERIOD FOR TAXES	$	43,459	$	24,511

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

5

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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
Dividends paid to CNH Industrial America LLC		—		—		—		—		—
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
Net income		—		—		—		62,422		62,422
Dividends paid to CNH Industrial America LLC		—		—		—		(80,000)		(80,000)
Foreign currency translation adjustment		—		—		(16,310)		—		(16,310)
Stock compensation		—		(33)		—		—		(33)
Pension liability adjustment, net of tax		—		—		(42)		—		(42)
Change in derivative financial instruments, net of tax		—		—		757		—		757
BALANCE - September 30, 2021	$	—	$	843,428	$	(117,223)	$	552,088	$	1,278,293

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

6

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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
Net income		—		—		—		38,155		38,155
Dividends paid to CNH Industrial America LLC		—		—		—		(40,000)		(40,000)
Foreign currency translation adjustment		—		—		10,733		—		10,733
Stock compensation		—		(5)		—		—		(5)
Pension liability adjustment, net of tax		—		—		(17)		—		(17)
Change in derivative financial instruments, net of tax		—		—		362		—		362
BALANCE - September 30, 2020	$	—	$	843,815	$	(146,877)	$	503,116	$	1,200,054

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 September 30, 2021:

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		on Derivatives		Total
Beginning balance, gross	$	(97,635)	$	(85)	$	(5,360)	$	(103,080)
Tax asset		—		32		1,420		1,452
Beginning balance, net of tax		(97,635)		(53)		(3,940)		(101,628)
Other comprehensive income (loss) before reclassifications		(16,310)		(91)		833		(15,568)
Amounts reclassified from accumulated other comprehensive income (loss)		—		36		197		233
Tax effects		—		13		(273)		(260)
Net current-period other comprehensive income (loss)		(16,310)		(42)		757		(15,595)
Total	$	(113,945)	$	(95)	$	(3,183)	$	(117,223)

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 nine months ended September 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		(661)		(314)		4,665		3,690
Amounts reclassified from accumulated other comprehensive income (loss)		—		107		546		653
Tax effects		—		50		(1,381)		(1,331)
Net current-period other comprehensive income (loss)		(661)		(157)		3,830		3,012
Total	$	(113,945)	$	(95)	$	(3,183)	$	(117,223)

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

	Currency				Unrealized
	Translation		Pension		(Losses) Gains
	Adjustment		Liability		Derivatives		Total
Beginning balance, gross	$	(150,091)	$	(373)	$	(10,292)	$	(160,756)
Tax asset		—		74		2,727		2,801
Beginning balance, net of tax		(150,091)		(299)		(7,565)		(157,955)
Other comprehensive income (loss) before reclassifications		10,733		(109)		383		11,007
Amounts reclassified from accumulated other comprehensive income (loss)		—		52		110		162
Tax effects		—		40		(131)		(91)
Net current-period other comprehensive income (loss)		10,733		(17)		362		11,078
Total	$	(139,358)	$	(316)	$	(7,203)	$	(146,877)

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 nine months ended September 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		(14,225)		(283)		(11,193)		(25,701)
Amounts reclassified from accumulated other comprehensive income (loss)		—		154		59		213
Tax effects		—		57		2,950		3,007
Net current-period other comprehensive income (loss)		(14,225)		(72)		(8,184)		(22,481)
Total	$	(139,358)	$	(316)	$	(7,203)	$	(146,877)

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020		Affected Line Item
Amortization of defined benefit pension items:
	$	(36)	$	(52)	$	(107)	$	(154)	Various line items individually insignificant
		(36)		(52)		(107)		(154)	Income before taxes
		9		44		26		68	Income tax effects
	$	(27)	$	(8)	$	(81)	$	(86)	Net of tax
Unrealized losses on derivatives:
	$	(197)	$	(110)	$	(546)	$	(59)	Interest expense to third parties
		(197)		(110)		(546)		(59)	Income before taxes
		53		29		145		16	Income tax effects
	$	(144)	$	(81)	$	(401)	$	(43)	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 September 30, 2021 and December 31, 2020 is as follows:

	September 30,		December 31,
	2021		2020
Retail	$	1,075,051	$	833,864
Wholesale		638,682		639,934
Finance lease		175,799		156,161
Restricted receivables		7,125,960		7,402,988
Gross receivables		9,015,492		9,032,947
Less: Allowance for credit losses		(119,825)		(136,136)
Total receivables, net	$	8,895,667	$	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 September 30, 2021 and December 31, 2020:

	September 30,		December 31,
	2021		2020
Retail	$	5,193,736	$	5,280,423
Wholesale		1,932,224		2,122,565
Total restricted receivables	$	7,125,960	$	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 September 30, 2021 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	116,684	$	7,234	$	123,918
Charge-offs		(4,736)		—		(4,736)
Recoveries		368		108		476
Provision (benefit)		2,420		(1,798)		622
Foreign currency translation and other		(433)		(22)		(455)
Ending balance	$	114,303	$	5,522	$	119,825

Allowance for credit losses activity for the nine months ended September 30, 2021 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance	$	126,851	$	9,285	$	136,136
Charge-offs		(9,056)		(179)		(9,235)
Recoveries		1,719		114		1,833
Provision (benefit)		(5,218)		(3,699)		(8,917)
Foreign currency translation and other		7		1		8
Ending balance	$	114,303	$	5,522	$	119,825
Receivables:
Ending balance	$	6,444,586	$	2,570,906	$	9,015,492

At September 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 September 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 September 30, 2020 is as follows:

	Retail		Wholesale		Total
Allowance for credit losses:
Beginning balance, as previously reported	$	112,492	$	7,333	$	119,825
Charge-offs		(3,244)		(1)		(3,245)
Recoveries		578		5		583
Provision		11,331		1,244		12,575
Foreign currency translation and other		190		17		207
Ending balance	$	121,347	$	8,598	$	129,945

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 nine months ended September 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		(18,028)		(213)		(18,241)
Recoveries		1,905		8		1,913
Provision		46,882		830		47,712
Foreign currency translation and other		(39)		(28)		(67)
Ending balance	$	121,347	$	8,598	$	129,945
Receivables:
Ending balance	$	6,204,990	$	2,995,497	$	9,200,487

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 September 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	$	2,611	$	185	$	253	$	3,049		$	1,738,339	$	1,741,388
2020		3,853		1,172		1,732		6,757			1,547,686		1,554,443
2019		3,300		1,043		3,991		8,334			857,872		866,206
2018		2,164		1,159		2,517		5,840			539,249		545,089
2017		871		537		2,476		3,884			258,104		261,988
2016		439		73		2,422		2,934			86,723		89,657
Prior to 2016		43		55		2,147		2,245			23,747		25,992
Total	$	13,281	$	4,224	$	15,538	$	33,043		$	5,051,720	$	5,084,763
Canada
2021	$	409	$	6	$	—	$	415		$	518,468	$	518,883
2020		1,243		280		626		2,149			430,712		432,861
2019		553		200		1,330		2,083			209,156		211,239
2018		873		121		1,247		2,241			117,751		119,992
2017		239		24		437		700			53,567		54,267
2016		164		47		573		784			16,987		17,771
Prior to 2016		27		—		312		339			4,471		4,810
Total	$	3,508	$	678	$	4,525	$	8,711		$	1,351,112	$	1,359,823
Wholesale
United States	$	22	$	—	$	—	$	22		$	2,044,650	$	2,044,672
Canada		—		—		—		—			526,234		526,234
Total
Retail	$	16,789	$	4,902	$	20,063	$	41,754		$	6,402,832	$	6,444,586
Wholesale		22		—		—		22			2,570,884		2,570,906

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 September 30, 2021 and December 31, 2020 is accrued interest of $44,986 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 nine months ended September 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 September 30, 2021 and December 31, 2020 are as follows:

	September 30, 2021						December 31, 2020
	Retail		Wholesale		Total		Retail		Wholesale		Total
United States	$	27,798	$	—	$	27,798	$	28,882	$	35,402	$	64,284
Canada		4,525		—		4,525		8,597		—		8,597

As of September 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 nine months ended September 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 September 30, 2021, the Company had 187 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $5,244 and the post-modification value was $4,707. Additionally, the Company had 337 accounts with a balance of $23,523 undergoing bankruptcy proceedings where a concession has not yet been determined. As of September 30, 2020, the Company had 254 retail and finance lease contracts classified as TDRs where a court has determined the concession. The pre-modification value of these contracts was $7,876 and the post-modification value was $7,065. Additionally, the Company had 394 accounts with a balance of $26,338 undergoing bankruptcy proceedings where a concession has not yet been determined. As the outcome of the bankruptcy cases is determined by a court based on available assets, subsequent re-defaults are unusual and were not material for retail and finance lease contracts that were modified in a TDR during the previous 12 months ended September 30, 2021 and 2020.

As of September 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 $94,583) as of September 30, 2021 are as follows:

2021	$	61,605
2022		189,279
2023		112,317
2024		48,089
2025 and thereafter		21,506
Total lease payments	$	432,796

NOTE 6: CREDIT FACILITIES AND DEBT

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.

On September 24, 2021, the Company extended the maturity date of the U.S. retail committed asset-backed facility to September 2023 and lowered the total facility from $1,200,000 to $1,000,000.

18

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

On September 28, 2021, CNH Industrial Capital Canada Ltd. completed an offering of C$300,000 ($236,499) in aggregate principal amount of its 1.500% unsecured notes due 2024, issued at 99.936% in a private placement.

Committed unsecured facilities with banks as of September 30, 2021 totaled $588,404. These credit facilities, which are eligible for renewal at various future dates, are used primarily for working capital and other general corporate purposes. As of September 30, 2021, the Company had $125,603 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 September 30, 2021.

NOTE 7: INCOME TAXES

The effective tax rates for the three months ended September 30, 2021 and 2020 were 23.8% and 23.6%, respectively. The effective tax rate was 23.9% for the nine months ended September 30, 2021, compared to 23.1% 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 September 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 39 months. As of September 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 $880.

The Company also enters into offsetting interest rate derivatives with substantially similar economic terms that are not designated as hedging instruments to mitigate interest rate risk related to the Company’s committed asset-backed facilities. Unrealized and realized gains and losses resulting from fair value changes in these instruments are recognized directly in income and were insignificant for the three and nine months ended September 30, 2021 and 2020.

All of the Company’s interest rate derivatives as of September 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 $3,995,925 and $4,369,574 at September 30, 2021 and December 31, 2020, respectively. The ten-month average notional amounts for the nine months ended September 30, 2021 and 2020 were $4,167,183 and $3,205,481, 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 September 30, 2021 and December 31, 2020 in the consolidated balance sheets are recorded as follows:

	September 30,		December 31,
	2021		2020
Derivatives Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	39,321	$	58,008
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	3,891	$	4,882
Derivatives Not Designated as Hedging Instruments
Other assets:
Interest rate derivatives	$	5,079	$	1,053
Foreign exchange contracts		1,994		2
Total	$	7,073	$	1,055
Accounts payable and other accrued liabilities:
Interest rate derivatives	$	5,079	$	1,053
Foreign exchange contracts		3,768		3,815
Total	$	8,847	$	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 nine months ended September 30, 2021 and 2020 are recorded in the following accounts:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Cash Flow Hedges
Recognized in accumulated other comprehensive income (loss):
Interest rate derivatives	$	833	$	383	$	4,665	$	(11,193)
Reclassified from accumulated other comprehensive income (loss):
Interest rate derivatives—Interest expense to third parties		(197)		(110)		(546)		(59)
Not Designated as Hedges
Foreign exchange contracts—Other expenses	$	(4,150)	$	1,290	$	(2,038)	$	(1,910)

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

	September 30,		December 31,
	2021		2020
Assets
Interest rate derivatives	$	44,400	$	59,061
Foreign exchange contracts		1,994		2
Total assets	$	46,394	$	59,063
Liabilities
Interest rate derivatives	$	8,970	$	5,935
Foreign exchange contracts		3,768		3,815
Total liabilities	$	12,738	$	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 September 30, 2021 and December 31, 2020 are as follows:

	September 30, 2021				December 31, 2020
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value *		Amount		Fair Value *
Receivables	$	8,895,667	$	9,018,755	$	8,896,811	$	8,987,830
Long-term debt	$	5,903,592	$	5,914,616	$	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				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues
United States	$	165,669	$	169,661	$	484,528	$	516,624
Canada		41,915		41,054		126,382		126,388
Eliminations		(1,493)		(1,041)		(3,909)		(3,817)
Total	$	206,091	$	209,674	$	607,001	$	639,195
Interest expense
United States	$	39,064	$	57,837	$	127,264	$	180,498
Canada		9,782		12,044		30,113		38,821
Eliminations		(1,493)		(1,041)		(3,909)		(3,817)
Total	$	47,353	$	68,840	$	153,468	$	215,502
Net income
United States	$	50,377	$	29,397	$	136,919	$	82,954
Canada		12,045		8,758		37,996		26,269
Total	$	62,422	$	38,155	$	174,915	$	109,223
Depreciation and amortization
United States	$	47,292	$	48,738	$	144,373	$	145,140
Canada		12,760		11,354		38,306		32,884
Total	$	60,052	$	60,092	$	182,679	$	178,024
Expenditures for equipment on operating leases
United States	$	81,918	$	75,148	$	250,488	$	297,566
Canada		25,883		26,846		84,051		77,892
Total	$	107,801	$	101,994	$	334,539	$	375,458
Provision (benefit) for credit losses
United States	$	83	$	9,848	$	(9,274)	$	37,441
Canada		539		2,727		357		10,271
Total	$	622	$	12,575	$	(8,917)	$	47,712

23

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

	September 30,		December 31,
	2021		2020
Total assets
United States	$	10,090,240	$	10,186,808
Canada		2,519,069		2,442,180
Eliminations		(220,118)		(177,819)
Total	$	12,389,191	$	12,451,169
Managed receivables
United States	$	7,129,435	$	7,195,558
Canada		1,886,057		1,837,389
Total	$	9,015,492	$	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 nine months ended September 30, 2021 and 2020 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Subsidy from CNH Industrial North America
Retail	$	34,793	$	36,807	$	108,634	$	117,190
Wholesale		22,566		23,387		71,945		79,501
Operating lease		13,620		14,780		45,096		45,550
Income from affiliated receivables
CNH Industrial North America		291		229		590		392
Other affiliates		52		30		134		112
Total interest and other income from affiliates	$	71,322	$	75,233	$	226,399	$	242,745

Interest expense to affiliates was $1,260 and $718, respectively, for the three months ended September 30, 2021 and 2020 and $3,825 and $2,764, respectively, for the nine months ended September 30, 2021 and 2020. Fees charged by affiliates were $11,394 and $10,399, respectively, for the three months ended September 30, 2021 and 2020, and $34,118 and $33,542, respectively, for the nine months ended September 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 September 30, 2021 and December 31, 2020, the Company had various accounts and notes receivable and debt with the following affiliates:

	September 30,		December 31,
	2021		2020
Affiliated receivables
CNH Industrial America	$	549,614	$	391,445
CNH Industrial Canada Ltd.		75,071		10,906
Other affiliates		12,673		12,459
Total affiliated receivables	$	637,358	$	414,810
Affiliated debt
CNH Industrial Canada Ltd.		—		187,310
Other affiliates		4,000		—
Total affiliated debt	$	4,000	$	187,310

Accounts payable and other accrued liabilities, including tax payables, of $171,127 and $31,795 were payable to related parties as of September 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 September 30, 2021, the total credit limit available was $6,065,506, of which $2,484,752 was utilized.

NOTE 12: SUBSEQUENT EVENTS

On October 15, 2021, the Company repaid $400,000 of its 3.875% unsecured notes due 2021.

On October 27, 2021, the Company, through a bankruptcy-remote trust, issued $940,430 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.

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), now named “Iveco Group”, 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 assets (mainly equity interests) and liabilities relating to Iveco Group to a company, (Iveco Group N.V.), whose shares will be allotted to CNH Industrial N.V. shareholders on a pro rata basis. Iveco Group N.V.'s common shares will be admitted by Borsa Italiana to the listing and trading on Euronext Milan by the effective date of the spin-off. Execution of the transaction is subject to various regulatory approvals, admission to listing on Euronext Milan, and the approval at an extraordinary general meeting of shareholders.

On October 13, 2021, CNH Industrial announced the temporary closure of several of its European agricultural, commercial vehicle and powertrain manufacturing facilities in response to ongoing disruptions to the procurement environment and shortages of core components, especially semiconductors. The global supply chain still shows increasing input costs and logistics pressures, with ongoing disruptions to the procurement environment forcing repeated reviews of production schedules. Critical conditions affecting the supply chain are expected to remain through the last quarter of the year and CNH Industrial has made no assurances that further temporary closures of its agricultural, commercial vehicle and powertrain manufacturing facilities will not be necessary.

Our business is closely related to the agricultural and construction equipment industries because we offer financing products for such equipment. For the three months ended September 30, 2021, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $1,290 million and $342 million, respectively, representing increases of 37.7% and 27.1% from the same period in 2020, respectively. For the nine months ended September 30, 2021, CNH Industrial’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $3,634 million and $994 million, respectively, representing increases of 36.5% and 65.7% 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.

26

Net income was $62.4 million and $174.9 million for the three and nine months ended September 30, 2021, compared to $38.2 million and $109.2 million for the three and nine months ended September 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 1.0% at September 30, 2021, December 31, 2020 and September 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.

Results of Operations

Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020

Revenues

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

	Three Months Ended
	September 30,
	2021		2020		$ Change		% Change
Interest income on retail notes and finance leases	$	43,531	$	46,995	$	(3,464)	(7.4)	%
Interest income on wholesale notes		7,577		12,673		(5,096)	(40.2)
Interest and other income from affiliates		71,322		75,233		(3,911)	(5.2)
Rental income on operating leases		66,870		64,406		2,464	3.8
Other income		16,791		10,367		6,424	62.0
Total revenues	$	206,091	$	209,674	$	(3,583)	(1.7)	%

	Nine Months Ended
	September 30,
	2021		2020		$ Change		% Change
Interest income on retail notes and finance leases	$	123,582	$	143,015	$	(19,433)	(13.6)	%
Interest income on wholesale notes		24,906		41,814		(16,908)	(40.4)
Interest and other income from affiliates		226,399		242,745		(16,346)	(6.7)
Rental income on operating leases		202,894		188,600		14,294	7.6
Other income		29,220		23,021		6,199	26.9
Total revenues	$	607,001	$	639,195	$	(32,194)	(5.0)	%

Revenues totaled $206.1 million and $607.0 million for the three and nine months ended September 30, 2021, respectively, compared to $209.7 million and $639.2 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 7.0% and 7.2% for the three months ended September 30, 2021 and 2020, respectively, and 7.1% and 7.3% for the nine months ended September 30, 2021 and 2020, respectively.

Interest income on retail notes and finance leases for the three and nine months ended September 30, 2021 was $43.5 million and $123.6 million, respectively, representing a decrease of $3.4 million and $19.4 million from the same periods in 2020, respectively. For the third quarter, the decrease was primarily due to a $5.1 million unfavorable impact from lower interest rates, partially offset by a $1.7 million favorable impact from higher average earning assets. For the nine months ended September 30, 2021, compared to the same period in 2020, the decrease was primarily due to a $23.3 million unfavorable impact from lower interest rates, partially offset by a $3.9 million favorable impact from higher average earning assets.

27

Interest income on wholesale notes for the three and nine months ended September 30, 2021 was $7.6 million and $24.9 million, respectively, representing a decrease of $5.1 million and $16.9 million from the same periods in 2020, respectively. For the third quarter, the decrease was due to the unfavorable impacts of $4.2 million from lower average earning assets and $0.9 million from lower interest rates. For the nine months ended September 30, 2021, compared to the same period in 2020, the decrease was due to the unfavorable impacts of $13.0 million from lower average earning assets and $3.9 million from lower interest rates.

Interest and other income from affiliates for the three and nine months ended September 30, 2021 was $71.3 million and $226.4 million, respectively, compared to $75.2 million and $242.7 million, respectively, for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2021, compensation from CNH Industrial North America for retail low-rate financing programs and interest waiver programs offered to customers was $34.8 million and $108.6 million, respectively, a decrease of $2.0 million and $8.6 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 nine months ended September 30, 2021, compensation from CNH Industrial North America for wholesale marketing programs was $22.6 million and $71.9 million, respectively, a decrease of $0.8 million and $7.6 million from the same periods in 2020, respectively. The decreases were primarily due to lower CNH Industrial North 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 $13.6 million and $45.1 million for the three and nine months ended September 30, 2021, a decrease of $1.2 million and $0.5 million from the same periods in 2020, respectively.

Rental income on operating leases for the three and nine months ended September 30, 2021 was $66.9 million and $202.9 million, representing an increase of $2.5 million and $14.3 million from the same periods in 2020, respectively. The third quarter increase was due to the favorable impact of $2.5 million from higher interest rates. For the nine months ended September 30, 2021, compared to the same period in 2020, the increase was due to the favorable impacts of $8.8 million from higher interest rates and $5.5 million from higher average earning assets.

Other income for the three and nine months ended September 30, 2021 was $16.8 million and $29.2 million, representing an increase of $6.4 million and $6.2 million from the same periods in 2020, respectively.

Expenses

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

	Three Months Ended
	September 30,
	2021		2020		$ Change		% Change
Total interest expense	$	47,353	$	68,840	$	(21,487)	(31.2)	%
Fees charged by affiliates		11,394		10,399		995	9.6
Provision (benefit) for credit losses		622		12,575		(11,953)	(95.1)
Depreciation of equipment on operating leases		59,577		59,722		(145)	(0.2)
Other expenses		5,209		8,208		(2,999)	(36.5)
Total expenses	$	124,155	$	159,744	$	(35,589)	(22.3)	%

	Nine Months Ended
	September 30,
	2021		2020		$ Change		% Change
Total interest expense	$	153,468	$	215,502	$	(62,034)	(28.8)	%
Fees charged by affiliates		34,118		33,542		576	1.7
Provision (benefit) for credit losses		(8,917)		47,712		(56,629)	(118.7)
Depreciation of equipment on operating leases		181,273		176,848		4,425	2.5
Other expenses		17,084		23,609		(6,525)	(27.6)
Total expenses	$	377,026	$	497,213	$	(120,187)	(24.2)	%

28

Interest expense totaled $47.4 million and $153.5 million for the three and nine months ended September 30, 2021, respectively, compared to $68.8 million and $215.5 million for the same periods in 2020. For the three months ended September 30, 2021, the decrease was due to the favorable impacts of $18.1 million from lower average interest rates and $3.4 million from lower average total debt. For the nine months ended September 30, 2021, the decrease was due to the favorable impacts of $51.6 million from lower average interest rates and $10.4 million from lower average total debt. The average debt cost was 2.1% for the nine months ended September 30, 2021 compared to 2.8% for the nine months ended September 30, 2020.

The provision (benefit) for credit losses was a $0.6 million provision and a $8.9 million benefit for the three and nine months ended September 30, 2021, respectively, compared to provisions of $12.6 million and $47.7 million 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 $59.6 million and $181.3 million for the three and nine months ended September 30, 2021, respectively, compared to $59.7 million and $176.8 million for the same periods in 2020. The increase for the nine months ended September 30, 2021, compared to the same period in 2020, was primarily due to a higher average operating lease portfolio.

Other expenses were $5.2 million and $17.1 million for the three and nine months ended September 30, 2021, respectively, compared to $8.2 million and $23.6 million for the same periods in 2020.  For the three and nine months ended September 30, 2021, compared to the same periods in 2020, the decrease was due to improved pricing on used equipment sales.

The effective tax rates for the three months ended September 30, 2021 and 2020 were 23.8% and 23.6%, respectively. The effective tax rate was 23.9% for the nine months ended September 30, 2021, compared to 23.1% 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 nine months ended September 30, 2021 and 2020 were as follows (dollars in thousands):

	Three Months Ended
	September 30,
	2021		2020		$ Change		% Change
Retail	$	849,568	$	790,435	$	59,133	7.5	%
Wholesale		2,177,139		1,744,468		432,671	24.8
Equipment on operating leases		107,801		101,994		5,807	5.7
Total originations	$	3,134,508	$	2,636,897	$	497,611	18.9	%

	Nine Months Ended
	September 30,
	2021		2020		$ Change		% Change
Retail	$	2,507,618	$	2,178,958	$	328,660	15.1	%
Wholesale		6,225,848		5,148,945		1,076,903	20.9
Equipment on operating leases		334,539		375,458		(40,919)	(10.9)
Total originations	$	9,068,005	$	7,703,361	$	1,364,644	17.7	%

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 year-over-year decrease in operating lease originations was primarily due to customer’s preference for retail financing products.

29

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

	September 30,		December 31,		September 30,
	2021		2020		2020
Retail	$	6,444,586	$	6,270,448	$	6,204,990
Wholesale		2,570,906		2,762,499		2,995,497
Equipment on operating leases		1,740,969		1,859,184		1,769,774
Total receivables and equipment on operating leases	$	10,756,461	$	10,892,131	$	10,970,261

The total retail receivables balance greater than 30 days past due as a percentage of the retail receivables was 0.7% at September 30, 2021, 1.1% at December 31, 2020 and 1.4% at September 30, 2020. The total wholesale receivables balance greater than 30 days past due as a percentage of the wholesale receivables was not significant at September 30, 2021, December 31, 2020 or September 30, 2020. Total retail receivables on nonaccrual status, which represent receivables for which we have ceased accruing finance income, were $32.3 million, $37.5 million and $44.8 million at September 30, 2021, December 31, 2020 and September 30, 2020, respectively. Total wholesale receivables on nonaccrual status were $35.4 million and $32.3 million at December 31, 2020 and September 30, 2020, respectively.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Charge-offs:
Retail	$	4,736	$	3,244	$	9,056	$	18,028
Wholesale		—		1		179		213
Total charge-offs		4,736		3,245		9,235		18,241
Recoveries:
Retail		(368)		(578)		(1,719)		(1,905)
Wholesale		(108)		(5)		(114)		(8)
Total recoveries		(476)		(583)		(1,833)		(1,913)
Charge-offs, net of recoveries:
Retail		4,368		2,666		7,337		16,123
Wholesale		(108)		(4)		65		205
Total charge-offs, net of recoveries	$	4,260	$	2,662	$	7,402	$	16,328

Our allowance for credit losses on all receivables financed totaled $119.8 million at September 30, 2021, $136.1 million at December 31, 2020 and $129.9 million at September 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 September 30, 2021.

30

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.

Cash Flows

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

	2021		2020
Cash flows from (used in):
Operating activities	$	223,630	$	118,478
Investing activities		(44,586)		573,228
Financing activities		(313,153)		(727,173)
Net cash increase (decrease)	$	(134,109)	$	(35,467)

Operating activities in the nine months ended September 30, 2021 generated cash of $224 million, resulting primarily from net income of $175 million, adjusted by depreciation and amortization of $183 million and $4 million in deferred tax expense, partially offset by changes in working capital of $129 million and a benefit for credit losses of $9 million. The increase in cash provided by operating activities for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to $77 million related to changes in working capital, a $66 million increase in net income, a $15 million increase in deferred tax adjustment and a $4 million increase in depreciation and amortization, partially offset by a $57 million decrease in provision for credit losses.

Investing activities in the nine months ended September 30, 2021 used cash of $45 million, resulting primarily from net expenditures for equipment on operating leases of $53 million and net expenditures for property, equipment and software of $2 million, partially offset by a $10 million reduction in net expenditures for receivables. The increase in cash used by investing activities for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a $653 million increase in net expenditures for receivables and a $1 million increase in expenditures for property, equipment and software, partially offset by a $36 million decrease in net expenditures for equipment on operating leases.

Financing activities in the nine months ended September 30, 2021 used cash of $313 million, resulting primarily from net cash paid on affiliated debt and short-term borrowings of $183 million and $7 million, respectively, and $160 million in dividends paid to CNH Industrial America, partially offset by net cash received on long-term debt of $37 million. The decrease in cash used in financing activities in the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in net cash paid on short-term borrowings and long-term debt of $521 million and $107 million, respectively, partially offset by an increase in net cash paid on affiliated debt of $184 million and higher dividends of $30 million paid to CNH Industrial America.

Securitization

CNH Industrial Capital and its predecessor entities have been securitizing receivables since 1992. This market is a cost-effective financing source and allows access to a wide investor base. CNH Industrial Capital had approximately $4.1 billion of public and private asset-backed securities outstanding in both the U.S. and Canada as of September 30, 2021. Our securitizations are treated as financing arrangements for accounting purposes.

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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 $2.9 billion at September 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 September 30, 2021, approximately $0.3 billion of funding was available for use under these facilities.

Unsecured Facilities and Debt

Committed unsecured facilities with banks as of September 30, 2021 totaled $588 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 September 30, 2021, we had $126 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 September 30, 2021.

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

Issued by CNH Industrial Capital LLC (the “U.S. Senior Notes”): (1)
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		15,881
		3,115,881
Issued by CNH Industrial Capital Canada Ltd. (the “Canadian Senior Notes”): (2)
1.500% notes, due 2024		235,505
Discounts and unamortized issuance costs		(1,400)
		234,105
Total	$	3,349,986

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

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

On September 28, 2021, CNH Industrial Capital Canada completed an offering of C$300,000 ($236,499) in aggregate principal amount of its 1.500% unsecured notes due 2024, issued at 99.936% in a private placement.

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.

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The senior long-term and short-term debt ratings and outlook currently assigned to our unsecured debt securities by the rating agencies engaged by us are the same as those for CNHI. Those ratings as of September 30, 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 $4 million and $187 million as of September 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 September 30, 2021 and December 31, 2020. For the nine months ended September 30, 2021, CNH Industrial Capital LLC paid cash dividends of $160 million to CNH Industrial America.

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, which are 100%-owned subsidiaries of CNH Industrial Capital LLC, guarantee the U.S. Senior Notes (the “U.S. Notes Guarantees”). CNH Industrial Capital LLC, CNH Industrial Capital America and New Holland Credit (the “Guarantor Entities”) guarantee the Canadian Senior Notes (the “Canadian Notes Guarantees” and, together with the U.S. Notes Guarantees, the “Guarantees”). The Guarantees are full, unconditional, and joint and several.

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

The Guarantor Entities’ obligations under their applicable 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 applicable Guarantor Entities and, depending on the amount of the indebtedness, such Guarantor Entities’ liability on the Guarantees to which they are parties could be reduced to zero.

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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 applicable Guarantor Entities to a person other than, for purposes of the U.S. Notes Guarantees, CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC, or, for purposes of the Canadian Notes Guarantees, CNH Industrial N.V. or any subsidiary of CNH Industrial N.V.;

(2) in connection with the sale or other disposition of all or substantially all of the assets or properties of the applicable Guarantor Entities, including by way of merger, consolidation or otherwise, to a person other than, for purposes of the U.S. Notes Guarantees, CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC or, for purposes of the Canadian Notes Guarantees, CNH Industrial N.V. or any subsidiary of CNH Industrial N.V.; or

(3) certain other circumstances.

The following tables present summarized financial information for the obligor groups of the U.S. Senior Notes and the Canadian Senior Notes. The obligor group consists of the issuer and guarantors for the applicable senior notes. Intercompany balances and transactions between the issuer and guarantors have been eliminated. The investments in, and equity in income from, non-guarantor subsidiaries has been excluded.

For the three and nine months ended September 30, 2021 and 2020, the summarized statement of income information for the obligor group of the U.S. Senior Notes was as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues	$	122,823	$	118,300	$	355,097	$	352,395
Interest expense		40,358		55,201		120,458		172,492
Administrative and operating expenses		57,113		70,324		185,739		206,075
Income tax provision (benefit)		6,180		(1,690)		11,910		(6,156)
Net income (loss)	$	19,172	$	(5,535)	$	36,990	$	(20,016)

As of September 30, 2021 and December 31, 2020, the summarized balance sheet information for the obligor group of the U.S. Senior Notes was as follows (dollars in thousands):

	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	293,190	$	158,334
Restricted cash and cash equivalents		—		—
Receivables, less allowance for credit losses of $33,716 and $35,710		1,648,579		1,479,160
Equipment on operating leases, net		1,326,597		1,434,253
Short-term debt, including current maturities of long-term debt		1,156,661		1,109,953
Accounts payable and other accrued liabilities		740,840		798,624
Long-term debt		2,386,891		2,528,576

For the U.S. Senior Notes, the obligors’ amounts due from and due to the non-guarantor subsidiaries of CNH Industrial Capital LLC as of September 30, 2021 and December 31, 2020 were as follows (dollars in thousands):

	September 30,		December 31,
	2021		2020
Affiliated accounts and notes receivable from non-guarantor subsidiaries	$	2,232,954	$	2,135,799
Accounts payable and other accrued liabilities to non-guarantor subsidiaries		3,064,444		2,810,187

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For the three and nine months ended September 30, 2021 and 2020, the summarized statement of income information for the obligor group of the Canadian Senior Notes was as follows (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues	$	164,143	$	159,184	$	480,253	$	477,805
Interest expense		49,545		67,074		149,345		210,336
Administrative and operating expenses		73,177		86,789		231,998		256,410
Income tax provision		10,176		1,559		24,406		2,465
Net income	$	31,245	$	3,762	$	74,504	$	8,594

As of September 30, 2021 and December 31, 2020, the summarized balance sheet information for the obligor group of the Canadian Senior Notes was as follows (dollars in thousands):

	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	301,111	$	177,581
Restricted cash and cash equivalents		100,916		117,645
Receivables, less allowance for credit losses of $49,795 and $52,151		3,518,557		3,300,108
Equipment on operating leases, net		1,740,969		1,859,184
Short-term debt, including current maturities of long-term debt		1,893,537		1,857,629
Accounts payable and other accrued liabilities		815,836		905,226
Long-term debt		3,346,966		3,314,796

For the Canadian Senior Notes, the obligors’ amounts due from and due to the non-guarantor subsidiaries of CNH Industrial Capital LLC as of September 30, 2021 and December 31, 2020 were as follows (dollars in thousands):

	September 30,		December 31,
	2021		2020
Affiliated accounts and notes receivable from non-guarantor subsidiaries	$	2,113,549	$	2,056,011
Accounts payable and other accrued liabilities to non-guarantor subsidiaries		3,177,222		2,923,954

Other Data

	As of or for the
	Nine Months Ended September 30,
	2021			2020
	(Dollars in thousands)
Total managed receivables	$	9,015,492		$	9,200,487
Operating lease equipment		1,740,969			1,769,774
Total managed portfolio	$	10,756,461		$	10,970,261
Delinquency (1)		0.46	%		0.97	%
Average managed receivables	$	9,009,768		$	9,539,726
Net credit loss (2)		0.15	%		0.25	%
Profitability: (3)
Return on average managed portfolio (4)		2.17	%		1.30	%
Asset Quality:
Allowance for credit losses/total receivables		1.33	%		1.41	%

(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) Nine months ended September 30, 2021 and 2020 annualized.

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

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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 effects 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 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).

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

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

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 September 30, 2021.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

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Item 6.  Exhibits

Exhibit	Description
22	Issuer and Guarantors of Guaranteed Securities
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 nine months ended September 30, 2021 and 2020, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020, (iii) Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020, (v) Consolidated Statements of Changes in Stockholder’s Equity for the nine months ended September 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: November 10, 2021	By:	/s/ Douglas MacLeod
		Name:	Douglas MacLeod
		Title:	Chairman and President

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