UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-80775-01
Case Credit Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
76-0394710
(I.R.S. Employer Identification No.)
233 Lake Ave., Racine, WI 53403
(Address of principal executive offices including Zip Code)
Registrant's telephone number, including area code: (262) 636-6011
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 [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, par value $5.00 per share: 200 shares outstanding as of
March 29, 2002, all of which are owned by CNH Capital Corporation.
The registrant meets the conditions set forth in General Instruction
I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format permitted by General Instruction I of Form 10-K.
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business .................................................... 4
Item 2. Properties .................................................. 7
Item 3. Legal Proceedings ........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders ......... 7*
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ......................................... 8
Item 6. Selected Financial Data ..................................... 8*
Item 7. Management's Analysis of Results of Operations .............. 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .. 18
Item 8. Financial Statements and Supplementary Data ................. 19
Index to Financial Statements of Case Credit Corporation and
Consolidated Subsidiaries ................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .................................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 45*
Item 11. Executive Compensation ...................................... 45*
Item 12. Security Ownership of Certain Beneficial Owners and
Management .................................................. 45*
Item 13. Certain Relationships and Related Transactions .............. 45*
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 6-K .................................................... 45
Financial Statements Included in Item 8 ..................... 45
Index to Financial Statements and Schedule Included in
Item 14 ..................................................... 45
Schedules Omitted as Not Required or Inapplicable ........... 45
Exhibits. ................................................... 45
Reports on Form 6-K ......................................... 46
* No response to this item is included herein for the reason that it is
inapplicable, is not required pursuant to General Instruction I of Form 10-K, or
the answer to such item is negative.
2
* * * *
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
The information included in this report contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical fact contained or
incorporated by reference in this report, including statements regarding our
competitive strengths, business strategy, future financial position, budgets,
projected costs and plans and objectives of management, are forward-looking
statements. These statements may include terminology such as "may," "will,"
"expect," "should," "intend," "estimate," "anticipate," "believe," "continue,"
or similar terminology.
Case Credit's outlook is predominantly based on its interpretation of what
it considers key economic assumptions and involves risks and uncertainties that
could cause actual results to differ. Crop production and commodity prices are
strongly affected by weather and can fluctuate significantly. Housing starts and
other construction activity are sensitive to interest rates and government
spending. Some of the other significant factors for Case Credit include general
economic and capital market conditions, the cyclical nature of its business,
foreign currency exchange rate movements, its hedging practices, Case Credit's
and its customers' access to credit, political uncertainty and civil unrest in
various areas of the world, pricing, product initiatives and other actions taken
by competitors, disruptions in production capacity, excess inventory levels, the
effect of changes in laws and regulations (including government subsidies and
international trade regulations), technological difficulties, changes in
environmental laws, employee and labor relations, energy prices, real estate
values, animal diseases, crop pests, harvest yields, government farm programs
and consumer confidence, housing starts and construction activity, concerns
related to modified organisms and fuel and fertilizer costs. Additionally, CNH
Global N.V.'s achievement of the anticipated benefits of the merger of New
Holland and Case, including the realization of expected annual operating
synergies, depends upon, among other things, industry volumes as well as its
ability to integrate effectively the operations and employees of New Holland and
Case, and to execute its multi-branding strategy.
Case Credit can give no assurance that the expectations reflected in its
forward-looking statements will prove to be correct. The actual results could
differ materially from those anticipated in these forward-looking statements.
All written and oral forward-looking statements attributable to Case Credit are
expressly qualified in their entirety by the factors disclosed that could cause
the actual results to differ materially from management's expectations. Case
Credit undertakes no obligation to update or revise publicly any forward-looking
statements.
3
PART I.
Item 1. Business.
General
Case Credit Corporation is a wholly owned subsidiary of CNH Capital
Corporation ("CNH Capital"). CNH Capital, a wholly owned subsidiary of Case
Corporation ("Case"), provides broad-based financial services for the global
marketplace. Case Corporation is a wholly owned subsidiary of CNH Global N.V.
("CNH"). Through Fiat Netherlands Holding N.V. ("Fiat Netherlands Holding"),
formerly New Holland Holdings N.V., Fiat S.p.A. ("Fiat") owns approximately
84.6% of CNH's outstanding common shares.
Case Credit Corporation, its wholly owned operating subsidiaries, including
Case Credit Ltd. (Canada) and Case Credit Australia Pty Ltd, and Case Credit
Corporation's joint ventures, Case Credit Europe S.A.S. and UzCaseagroleasing
(collectively, "Case Credit" or the "Company") provide broad-based financial
services for various customers located primarily in the United States, Canada,
Australia and Europe. To support Case's sales of agricultural and construction
equipment products, Case Credit offers retail financing to end-use customers and
wholesale financing to Case equipment dealers. Wholesale financing consists
primarily of dealer floorplan financing and allows dealers the ability to
maintain a representative inventory of products. In addition, Case Credit
provides financing to dealers for equipment used in dealer owned rental yards.
Case Credit provides and administers retail financing, primarily retail
installment sales contracts and finance leases, to end-use customers for the
purchase or lease of new and used Case and other agricultural and construction
equipment sold through Case dealers and distributors. In addition, Case Credit
purchases equipment from dealers that is leased to retail customers under
operating lease agreements. In North America, customers use Case Credit's
private-label credit card to purchase parts, service, rentals, implements and
attachments from Case dealers. Case Credit also finances a variety of insurance
and other products for end-users and dealers in conjunction with the purchase of
new and used equipment.
In the past, Case Credit provided financing options to dealers and
non-captive third parties to finance inventory, working capital, real estate
acquisitions, construction and remodeling, business acquisitions, dealer systems
and service and maintenance equipment. Case Credit also offered a broad range of
retail and wholesale financing products, including equipment and commercial
loans and leases for non - CNH North American manufacturers' products, dealers,
distributors and their customers. During the fourth quarter of 2000, Case Credit
decreased its volume of loan origination activity in this diversified business
and made the strategic decision to exit certain diversified financing
activities. In the fourth quarter of 2001, Case Credit completed its
transformation into a financial services company dedicated solely to the support
of CNH dealers and customers across all its brands by exiting the commercial
lending business, ending retail financing activities outside its own dealer
networks, and reorganizing its European businesses to better support CNH's
customers and dealers.
Case Credit competes primarily with banks, finance companies and other
financial institutions. Typically, this competition is based upon customer
service and finance rates charged. Long-term profitability is largely dependent
on the cyclical nature of the agricultural and construction equipment industries
and on prevailing interest rates.
Case Credit's business is dependent on the ability of Case and its dealers
to generate sales and leasing activity, the willingness of customers to enter
into financing transactions with Case Credit and the availability of funds to
Case Credit to finance such transactions. Numerous factors affect the ability of
Case and its dealers to sell agricultural and construction equipment and thereby
generate retail receivables, including:
. the general level of activity in the agricultural and construction
industries;
. the rate of North American agricultural production and demand;
. weather conditions;
4
. commodity prices;
. consumer confidence;
. government subsidies for the agricultural sector;
. prevailing levels of construction (especially housing starts); and
. levels of total industry capacity and equipment inventory.
In addition, changes in market interest rates, which in turn are related to
general economic and capital market conditions, demand for credit, inflation,
governmental policies and other factors, affect Case's business.
Case Credit obtains funding for its operations from a variety of sources
including the sale of receivables in asset-backed securitization ("ABS")
transactions, affiliated debt, bank credit facilities, earnings retained in the
business when available, and advances and equity capital from Case. Case Credit
sells substantial amounts of retail receivables in ABS transactions that
typically involve the sale of a pool of retail installment sales contracts. Case
Credit remains as servicer of these receivables, for which it is paid a
servicing fee. Case Credit also uses a privately structured off-balance sheet
vehicle on a revolving basis to fund a significant portion of its United States
wholesale receivables.
Case Credit Corporation was incorporated in Delaware on January 26, 1993.
The principal offices of Case Credit are located in a leased facility at 233
Lake Avenue, Racine, Wisconsin 53403.
Business of Case Corporation
Case is a leading worldwide designer, manufacturer, marketer and
distributor of farm equipment and light to medium-sized construction equipment,
and offers a broad array of financial products and services through CNH Capital,
Case's financial services business. Case has a strong market position in several
product categories including loader/backhoes, skid steer loaders, large, high-
horsepower farm tractors and self-propelled combines.
In 2001, Case's sales of farm and construction equipment represented 90% of
total revenues, and financing operations accounted for 10% of total revenues. In
2001, Case's sales of farm equipment represented 64% of revenues from equipment
sales, and sales of construction equipment represented 36% of revenues from
equipment sales.
Relationship with Case, CNH, and Fiat
Case, CNH, Fiat and their subsidiaries provide the Company with operational
and financial support. This support is integral to the conduct of Case Credit's
business.
Employee Benefits, Intercompany Services and Tax Sharing
Case Credit and Case have entered into agreements relating to, among other
things, various employee benefit plans covering Case Credit's staff that Case
administers and Case Credit's reimbursement of Case and CNH Capital for its
staff and corporate services expenses. Case Credit has also entered into tax
sharing arrangements with Case.
Special Marketing Programs
In conjunction with Case and Case dealers, Case Credit periodically offers
below-market interest rate, including waived interest rate, financing to
customers as part of its marketing strategy. When Case Credit acquires retail
installment sales contracts and finance leases subject to below-market interest
rate financing, Case compensates Case Credit for the difference between market
interest rates and the amounts received by Case Credit from customers. Case
Credit refers to these amounts, collectively, as "financing subsidies." Case
Credit receives
5
payment from Case for the present value of the difference between the market
rate and the customer rate. Case Credit recognizes financing subsidies as income
over the term of the related financing contracts. If Case Credit subsequently
sells any of these contracts, Case Credit recognizes the related financing
subsidy on that contract as part of the gain on retail and wholesale notes sold.
Dividends
Case Credit did not pay dividends in 2001, 2000, or 1999.
Support Agreement
Case Credit and Case entered into a Support Agreement as of January 10,
1996. The Support Agreement provides, among other things, that Case will remain,
directly or indirectly, the sole owner of all of the voting stock of Case
Credit. The Support Agreement also provides that Case will make quarterly
payments to Case Credit to the extent necessary to ensure that Case Credit's
consolidated pre-tax earnings available for fixed charges plus payments received
from Case under the support agreement equal at least 1.10 times Case Credit's
fixed charges in all periods composed of four consecutive fiscal quarters. The
Support Agreement does not provide for any direct or indirect guarantee by Case
of any indebtedness, liability or other obligation of Case Credit. Either Case
or Case Credit may modify or amend the Support Agreement, and the parties may
also terminate the Support Agreement upon 30 days' prior written notice. The
Support Agreement further provides that the parties must send a copy of any
modification, amendment or notice of termination to Moody's Investors Service,
Inc., Standard & Poor's Ratings Group, and any other nationally recognized
statistical rating organizations then rating the debt of Case Credit. Any such
amendment or termination will become effective if:
(1) Moody's and S&P confirm in writing that their ratings on Case Credit
debt then rated or capable of being rated by them would not be downgraded
or withdrawn as a result of such modification, amendment or termination,
(2) the modification, amendment or notice of termination provides that the
Support Agreement will continue in effect with respect to debt of Case
Credit outstanding on the effective date of that modification, amendment or
termination, or
(3) the holders of at least a majority of the aggregate unpaid principal
amount of all outstanding debt of Case Credit with an original maturity in
excess of 270 days consent in writing, so long as the holders of debt of
Case Credit having an original maturity of 270 days or less shall continue
to have the benefit of the Support Agreement until the maturity of such
debt.
Under the terms of the Support Agreement, no portion of any debt is
"outstanding" if that debt has been, or is deemed to have been, discharged and
not outstanding in accordance with the indenture or other governing instrument
defining the rights of the holders of that debt.
The calculation of pre-tax earnings available for fixed charges under the
Support Agreement differs from the calculation of the ratio of earnings to fixed
charges mandated under the rules and regulations of the Securities and Exchange
Commission. Under the Support Agreement, the definition of "earnings" is before
the deduction for depreciation and includes all cash, extraordinary,
non-recurring items of income or expense (other than cash debt defeasance
costs). Under the Securities and Exchange Commission's rules and regulations,
the definition of "earnings" does not include these items. Prior to the third
quarter of 2001, Case had not been required to make any payment to meet its
commitments under the Support Agreement. However, in the fourth quarter of 2001,
Case remitted $21 million to ensure that the ratio was met for the four
consecutive fiscal quarters through September 30, 2001, due primarily to the
timing of retail securitization transactions in 2001 and 2000. The calculated
ratio of earnings to fixed charges for the four consecutive fiscal quarters
ended December 31, 2001 was 1.23. For this period, Case Credit had earnings in
excess of the 1.10 earnings to fixed charges required under the Support
Agreement of $26 million, which consisted of $5 million of operating earnings
and the $21 million payment received from Case under the Support Agreement in
the fourth quarter of 2001.
6
Item 2. Properties.
Case Credit does not own any real estate. Its principal executive offices
are located in a leased facility at 233 Lake Avenue, Racine, WI 53403.
As of December 31, 2001, Case Credit had additional offices in or near
Memphis, Tennessee; Dallas, Texas; Minneapolis, Minnesota; Lake Forest,
Illinois; Toronto, Ontario; Tashkent, Uzbekistan; New Holland, Pennsylvania;
Calgary, Alberta; and St. Mary's, Australia.
Item 3. Legal Proceedings.
Case Credit is the subject to various legal claims arising from its
operations. Management is of the opinion that the resolution of these claims,
individually and in the aggregate, will not have a material adverse effect on
Case Credit's financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Information for this Item 4 is not required pursuant to General Instruction
I(2) of Form 10-K.
7
Part II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
As of December 31, 2001, all of the Company's common stock was owned by CNH
Capital and was not publicly traded. CNH Capital is a wholly owned subsidiary of
Case Corporation. Case Corporation is a wholly owned subsidiary of CNH Global
N.V. Through Fiat Netherlands Holding N.V., formerly New Holland Holdings N.V.,
Fiat owns approximately 84.6% of CNH's outstanding common shares.
The Company did not pay dividends in 2001, 2000, or 1999.
Item 6. Selected Financial Data.
Information for Item 6 is not required pursuant to General Instruction I(2)
of Form 10-K.
Item 7. Management's Analysis of Results of Operations.
The following discussion and analysis provides information that management
believes to be relevant to an understanding of the Company's consolidated
results of operations and financial condition. The discussion should be read in
conjunction with the Consolidated Financial Statements and the notes thereto.
Significant Accounting Policies
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results may differ from these estimates under different
assumptions or conditions. Case Credit believes that the most significant
accounting policies, which are those that require management's most difficult,
subjective and complex judgments, are as follows:
Allowance for Credit Losses
The wholesale and retail note receivables have significant concentration of
credit risk in the agricultural and construction equipment industry and are
subject to potential credit losses. As the vast majority of the Company's
receivables are retail financing, which consist of large groups of homogeneous
contracts, the allowance for credit losses is generally established during the
period in which receivables are acquired and maintained at a level deemed
appropriate by management based on historical and other factors that affect
collectibility. Such factors include the historical trends of repossessions,
credit losses and recoveries; the careful monitoring of portfolio credit
quality; and current and projected economic and market conditions. Non-retail
receivables are evaluated based on these same criteria and an allowance for
credit losses is established for the difference between the investment in the
receivable and the anticipated proceeds from disposition of the receivable's
collateral when these factors indicate that collection is not probable. The
evaluation of these factors involves complex, subjective judgments. Thus,
changes in these factors may significantly impact the Consolidated Financial
Statements. Case Credit believes that the allowance for credit losses is
adequate; however, changes in the customer's financial condition resulting in an
impairment of the customer's ability to make payments or changes in economic
circumstances, could result in additional changes to the allowance for credit
losses. See Note 2, "Summary of Significant Accounting Policies" and Note 4,
"Receivables" in the Notes to Financial Statements.
Investments in Operating Leases
Investments in the residual values of the Company's leasing portfolio
represent an estimate of the values of the assets at the end of the lease
contract and are initially recorded based on historical evidence of equipment
values adjusted for known, current market conditions. Realization of the
residual values is dependent on the Company's future ability to market the
equipment under prevailing market conditions, which include the
strength of the
8
agricultural and construction equipment industries and the volume of used
equipment available in the market. Although realization is not assured,
management believes that the estimated residual values are realizable. Case
Credit continually evaluates whether events and circumstances have occurred
which impact the estimated residual values of equipment on operating leases. If
a decline in estimated residual values is not expected to be recoverable, the
investment in the equipment is adjusted for the difference between the carrying
value of the equipment and the present value of the equipment's expected
future cash flows including the estimated residual value. In addition, the
Company actively manages the remarketing of off-lease equipment to maximize the
realization of the recorded residuals. Changes in market conditions underlying
the estimate used to record the initial value of the residuals or the existence
of other external factors impacting the Company's future ability to market the
vehicles under then prevailing market conditions may significantly impact the
realization of residual values. See Note 2, "Summary of Significant Accounting
Policies" and Note 6, "Equipment on Operating Leases" in the Notes to Financial
Statements.
Securitization Accounting
The Company sells receivables, through the use of consolidated special
purpose entities, to limited purpose business trusts, and other privately
structured facilities, which then issue asset-backed securities to private or
public investors. These transactions are recorded as sales and the assets of the
trusts and other facilities are not consolidated in the Company's financial
statements in accordance with the provisions of Statement of Financial
Accounting Standards No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities-A Replacement of FASB
Statement 125" ("SFAS 140") and other applicable accounting principles generally
accepted in the United States. In conjunction with these sales, the Company
retains certain interests in the sold receivables including interest-only
strips, cash reserve accounts, subordinated tranches of the public securities
issued and rights to service the sold receivables.
Gains or losses on sales of the receivables depend in part on the previous
carrying amount of the financial assets involved in the transfer, allocated
between the assets sold and the retained interests based on their relative fair
values at the date of transfer. The Company estimates fair values based on the
present value of their future expected cash flows using key assumptions. The key
assumptions used in the present value calculations are credit loss, prepayment
and interest rates. These assumptions represent management's best estimates of
these rates based on historical information adjusted for current market
conditions.
The Company also monitors the fair value of its retained interests
outstanding each period by discounting their expected future cash flows based on
similar assumptions. The fair value is compared to the carrying value of the
retained interest and any excess of carrying value over fair value results in an
adjustment to the asset with a corresponding offset to earnings when they are
deemed to be other than temporary.
The selection of assumptions involves complex, subjective judgments which,
when changed, may significantly impact the financial statements. The selection
of different assumptions used in estimating fair value or the impact of changes
in economic circumstances could result in declines in fair value to the retained
interests in securitizations. For further information please see Note 2,"Summary
of Significant Accounting Policies" and Note 4, "Receivables" in the Notes to
Financial Statements.
Presentation and Results of Operations
On November 12, 1999, New Holland N.V. acquired Case for $4.6 billion in
cash, including related costs and expenses. Of the total purchase price, $674
million was allocated to Case Credit. This acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets and
liabilities of Case Credit based upon their respective estimated fair values,
including identifiable intangibles, with the remainder allocated to goodwill.
The allocation of the purchase price resulted in goodwill of approximately $129
million, which was amortized on a straight-line basis over 20 years through the
end of 2001. Effective with the adoption of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," goodwill will no
longer be amortized. Please see "New Accounting Pronouncements" for additional
discussion on the impact of the adoption of this standard. For detailed
discussion of the effects of purchase accounting on other balance sheet
categories, see Note 3, "Merger" in the Notes to Financial Statements. The
effects of adjustments, other than goodwill, are amortized in the Consolidated
Statements of Income over periods of one to eight years.
9
In conjunction with the merger, CNH Capital's management assessed and
formulated a plan to integrate the operations of the Case and New Holland
finance businesses at the time that the original purchase price allocation was
made in 1999. In October 2000 the Company finalized the merger integration plan
and recorded approximately $1 million of restructuring liabilities related to
the Case Credit business, resulting in additional goodwill. The merger
integration plan took into consideration the elimination of duplicate capacity
and opportunities to create other synergies. As part of its merger integration
plan, CNH Capital closed Case Credit's Columbus, Ohio, and Lincolnshire,
Illinois, facilities. The execution of these integration plans was completed in
2001.
Related Party Transactions
During 2000, Case Credit acquired Case Wholesale Receivable Inc. ("CWRI")
from Case for its net book value of $175 million. CWRI's purpose is to acquire
selected wholesale receivables from Case. This acquisition was done to be
consistent with New Holland Credit Company's (the financial services business of
New Holland) practice of consolidating U.S. wholesale receivables within the
financial services company. Additionally, the financial services support for
Case's Latin American equipment sales was shifted to New Holland Credit
Company's operations in that region of the world.
In conjunction with the below-market interest rate marketing programs
offered by Case, Case Credit receives payments from Case equal to the present
value of the difference between the market rate and the customer rate. Case
Credit recognizes financing subsidies as income over the term of the related
financing contracts. If Case Credit subsequently sells any of these contracts,
Case Credit recognizes the related financing subsidy on that contract as part of
the gain on retail and wholesale notes sold.
The Company reimburses Case for administrative expenses related to
employees who perform specific functions for Case Credit. Such charges are
included in "Administrative and operating expenses" in the accompanying
Consolidated Statements of Income. Management believes that these charges
reasonably reflect the actual costs of services provided.
As part of CNH's ongoing funding and asset-backed securitization strategy,
Case Credit regularly purchases recently originated receivables from New Holland
Credit Company. The receivables are purchased at a slight premium to book value,
which management believes approximates fair market compensation as the
receivables are generally purchased within a month of origination. In addition,
the Company regularly purchases wholesale receivables from Case. Through
December 31, 2001, the wholesale receivables were purchased at a discount from
book value. As most of these wholesale receivables bear no interest for periods
of up to 12 months, the discount was based on the present value of the
difference between a market rate of interest and the payments received from the
dealers. Case Credit recognizes this discount as income over the interest free
period of the related wholesale receivables. Additionally, these receivables are
discounted for potential credit losses and this portion of the discount is
recorded as a transfer into Case Credit's allowance for credit losses. Effective
January 1, 2002, the Company eliminated the discount for the interest free
period and began billing Case monthly for the difference between a market rate
of interest and the payments received from the dealers.
2001 Compared to 2000
Case Credit reported a net loss of $25 million in 2001, an increase of $17
million from the net loss of $8 million reported in 2000. The results for 2001
suffered primarily from additional impairment recognized on retained interests
from previously securitized receivables, which increased $51 million to $76
million in 2001. This increase was driven by the continued elevation in the
credit losses recognized on sold notes in excess of historically experienced
levels and a corresponding increase in the assumption used to estimate future
credit losses. Offsetting the impact of the additional impairment recognized was
a $32 million or 14% reduction in interest expense to $197 million due to a 21%
decrease in the average leveraged cost of funds year over year offset by a
slight increase in the average amount of outstanding debt.
Revenues totaled $473 million in 2001, up $6 million from the $467 million
reported a year ago. Revenues increased primarily due to a 20% increase in
securitization related revenues to $133 million from $111 million in the prior
year. This increase was principally related to a $31 million increase in gains
recorded on securitization transactions. The average gain percentage on retail
asset-backed securitization transactions increased approximately 180 basis
points due to the falling interest rate environment of 2001. Offsetting the
increased transaction gains was a $9 million decrease in servicing and related
income due primarily to a lower average managed receivables balance compared
with the prior year. Finance and interest income earned on retail and wholesale
receivables decreased $12 million in 2001 to $203 million due principally to a
108 basis point decrease in the average yield offset by a 11% increase in the
average receivable balance outstanding. Rental income from operating leases
decreased $5 million mostly due to lower interest rates as the average portfolio
balance was basically unchanged.
Interest expense totaled $197 million in 2001, compared with $229 million
in 2000. This decrease was primarily due to the impact of the reduction in the
average leveraged cost of funds from all borrowings of 124 basis points from
5.83% in 2000 to 4.59% in 2001, partially offset by the impact of a 9%
increase in average debt levels.
Operating and administrative expenses, including fees charged by Case,
increased 5% from $59 million in 2000 to $62 million in 2001. Depreciation of
equipment on operating leases decreased $4 million to $65 million in 2001,
compared to $69 million in 2000 as a result of a slight increase in the average
remaining life of the portfolio during 2001.
The provision for credit losses was $109 million in 2001, compared with
$101 million in 2000. Total realized credit losses on retail and wholesale
receivables, net of recoveries, were $83 million during 2001, compared with $72
million in 2000. The increase in crdit losses from 2000 was chiefly related to
an increase in credit losses in the non-Case dealer originated trucking and
construction equipment portfolios partially offset by reduced credit losses in
the core Case dealer originated portfolios. The Company ceased originating
trucking industry receivables through non-Case dealers in the fourth quarter of
2000 and ceased originating any receivables through non-Case dealers in the
first quarter of 2002.
As previously mentioned, the impairment recognized on retained interests
from previously securitized receivables increased $51 million to $76 million in
2001. This increase was driven by the continued elevation in the credit losses
realized on sold notes in excess of historically experienced levels and the
increase in the average assumptions used to estimate future credit losses from
0.60% and 0.55% to 1.48% and 1.10% annually for the United States and Canadian
portfolios, respectively.
10
Originations and Serviced Portfolio
As of December 31, 2001, Case Credit's serviced portfolio decreased 7% from
year end 2000 to $6.5 billion. Net receivables originated in 2001 were $2.4
billion versus $2.7 billion in 2000 primarily due to the reduction in non-core
industry originations through non-Case dealers. Case Credit's portfolio's credit
losses increased to $135 million in 2001 as compared to $128 million in 2000.
This increase is attributable to a proliferation in credit losses in the
non-Case dealer originated trucking and construction equipment portfolios,
partially offset by a decrease in credit losses in the core Case dealer
originated portfolio. The Company ceased originating trucking industry
receivables through non-Case dealers in the fourth quarter of 2000 and ceased
originating any receivables through non-Case dealers in the first quarter of
2002.
During 2001, Case Credit sold $73 million of retail notes in connection
with a prefunded 2000 securitization and $2.1 billion of retail notes in
connection with 2001 securitizations. Of the $2.2 billion of retail receivables
sold during 2001, Case Credit originated $1.3 billion, and New Holland Credit
Company and New Holland (Canada) Credit Company, wholly owned subsidiaries of
CNH, together originated $0.9 billion. During 2000, Case Credit sold $2,621
million of retail notes in connection with securitization transactions. Of the
$2,621 million of retail receivables sold, Case Credit originated $1,595
million, and New Holland Credit Company and New Holland (Canada) Credit Company,
wholly owned subsidiaries of CNH, together originated $1,026 million. The
proceeds from the sale of retail notes during 2001 and 2000 were used to repay
outstanding debt and to finance the purchase of additional receivables.
Liquidity and Capital Resources
The discussion of liquidity and capital resources focuses on the balance
sheets, statements of cash flows and off-balance sheet financing. Whenever
necessary, funds from operating activities are supplemented from external
sources. Liquidity in the structured ABS market and funding from asset-backed
commercial paper facilities, banks and affiliates, including Fiat, are critical
sources of capital to meet the Company's plan to finance the acquisition of
additional receivables. During 2001, the Company increased its proportionate
level of ABS activity and borrowed from its CNH affiliates to repay maturing
debt and finance new receivables.
Net Indebtedness
Case Credit's consolidated net indebtedness, defined as short- and
long-term borrowings less cash and cash equivalents, is as follows (in
millions):
At December 31,
2001 2000
---- ----
Short-term borrowings $ 577 $ 389
Long term-borrowings, including current maturities 467 1,437
Affiliated borrowings 1,990 1,170
Cash and cash equivalents (69) (38)
----------- ---------
Net indebtedness $ 2,965 $ 2,958
=========== =========
The year-over-year increase in total net indebtedness at December 31, 2001
was mainly due the excess of the net cash requirement for acquisitions of new
receivables and equipment for operating leases over the excess of cash provided
from operating activities. The increase in the Company's affiliated borrowings
at December 31, 2001 primarily reflects the refinancing of maturing long-term
debt.
Cash Flow from Operating Activities
Net cash provided by operating activities decreased $112 million to $34
million in 2001 as compared to $146 million in 2000. The decrease was primarily
due to an increase in working capital requirements and an increase in current
tax provision, partially offset by the impact of an improvement in net interest
margin.
11
Cash Flow from Investing Activities
Net cash used by investing activities was $54 million and $74 million for
2001 and 2000, respectively. The decrease was primarily attributable to a net
decrease in investments and other assets as a result of the return of a portion
of investment in long-term certificates of deposits and a decrease in the net
investment made in equipment on operating leases. This was offset by a net
increase in cash expended on wholesale and retail receivable acquisitions in
excess of collections and sales proceeds.
Cash Flow from Financing Activities
Net cash provided by financing activities increased by $152 million in
2001, primarily due to an increase in the use of revolving credit facilities and
a small capital contribution from Case, offset by a decrease in proceeds from
the issuance of affiliated debt and other long-term debt and an increase in
repayments of long-term debt, which matured in 2001.
Off-Balance Sheet Financing
Retail
The Company securitizes and transfers financial assets, using financial
asset securitization procedures, as an alternative funding source to borrowing.
Securitization of assets allows the Company to diversify funding sources in an
attempt to lower its overall cost of funds. Termination of the activities
described below would reduce the number of funding resources currently available
to the Company for funding its finance activities. Any such reduction of funding
sources would create a risk of increasing the Company's cost of funds and
reducing its profit margins.
The Company's finance receivables asset securitization program is further
described in Note 2, "Summary of Significant Accounting Policies" and Note 4,
"Receivables" of the Notes to Financial Statements. In the program, retail
finance receivables are sold to limited purpose bankruptcy-remote subsidiaries
of the Company. In turn, these subsidiaries establish separate trusts to which
they transfer the receivables in exchange for the proceeds from asset-backed
securities issued by the trusts. The trusts' activities are limited to acquiring
the receivables, issuing asset-backed securities and making payments on the
securities. At December 31, 2001, $3.4 billion and $0.4 billion of asset-backed
securities issued to investors out of U.S. and Canadian trusts, respectively,
were still outstanding with weighted average remaining maturities of 17 months
and 16 months, respectively.
Due to the nature of the assets held by the trusts and the limited nature
of each trust's activities, they are each classified as a qualifying special
purpose entity ("QSPE") under SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." In accordance
with SFAS No. 140, assets and liabilities of the QSPEs are not consolidated in
the Company's Consolidated Balance Sheets.
The Company agrees to service the receivables transferred to the QSPEs for
a fee and earns other related ongoing income customary with the programs and in
accordance with generally accepted accounting principles. The Company also may
retain all or a portion of senior and subordinated interests in the QSPEs; these
interests are reported as assets in the Company's Consolidated Balance Sheets.
The amount of the fees earned and the levels of retained interests that the
Company maintains are quantified and described in Note 4, "Receivables" of the
Notes to Financial Statements.
12
No recourse provisions exist that allow holders of the QSPEs' asset-backed
securities to put those securities back to the Company. Moreover, the Company
does not guarantee any securities issued by the QSPEs. The Company's exposure
related to these QSPEs is limited to the cash deposits held for the benefit of
the QSPEs' investors and the retained interests in the QSPEs, all of which are
reported in the Company's Consolidated Balance Sheets. The retained interests
are subject to similar prepayment and credit loss risks as the ownership of the
underlying receivables sold to the trusts. The QSPEs have a limited life and
generally terminate upon final distribution of amounts owed to investors or upon
exercise of a cleanup-call option by the Company, in its role as Servicer, when
the servicing of the sold contracts becomes burdensome. The QSPEs do not own
stock of the Company or any of its affiliates.
Wholesale
Case Credit uses a privately structured off-balance sheet vehicle on a
revolving basis to fund a significant portion of its wholesale receivables. This
facility consisted of a 364-day, $475 million multi-purchaser facility that is
renewable annually at the sole discretion of the purchasers. This facility was
renewed for four months on June 28, 2001 for $405 million, extended another
month on October 29, 2001 for $375 million, and through a series of amendments,
was further extended until March 6, 2002 for $400 million. Effective March 6,
2002, this facility was amended as a 364-day, $450 million co-purchase facility
that is renewable annually (in March) at the sole discretion of the purchasers.
Failure of the committed facility providers to renew their commitments would
require Case Credit to find alternative financing sources for these receivables.
Credit Agreement
On July 27, 2000, the Company, together with Fiat, CNH, Fiat Finance and
Trade Ltd. S.A., New Holland Credit Company LLC and Case, as co-borrowers,
entered into a $2.0 billion five-year Credit Agreement with Chase Manhattan
International Limited, as Facility Agent and Euro Swing-line Agent, The Chase
Manhattan Bank, as US Swing-line Agent, and ABN Amro Bank N.V., Banca Intesa
S.p.A. and Chase Manhattan plc, as Arrangers, on behalf of additional banks.
This new Credit Agreement replaces the Case Credit Corporation $1.2 billion
Revolving Credit and Guarantee Agreement dated August 23, 1996 with Chase
Manhattan Bank, as administrative agent. Case Credit's borrowing availability
under this facility is limited by the borrowings of the co-borrowers and the
commitment of $0.2 billion of the availability solely to Fiat. Total
availability to the co-borrowers, excluding the component committed to Fiat was
$1.8 billion as of December 31, 2001 and 2000.
Future Liquidity and Capital Resources
As previously mentioned, the Company's ability to originate new receivables
and operating results are dependent on its access to the capital markets at a
reasonable cost of capital. The Company's access is dependent on its stand-alone
credit rating as well as that of its direct and indirect parents, Case, CNH and
Fiat. Adverse ratings actions can materially impact the Company's access to
funding. In April 2001, Standard & Poor's downgraded the long-term corporate
credit ratings of CNH, Case and Case Credit and related entities to BB from BBB-
and also lowered the short-term debt ratings of such entities to B, with a
negative outlook. At the same time, Moody's downgraded Fiat's long-term debt
rating from A3 to Baa2 as well as lowered its long-term and short-term debt
ratings of Case and Case Credit to Ba2 and NP from Baa3 and P-3, respectively,
also with a negative outlook. In addition, in June 2001, Standard & Poor's
downgraded Fiat's short-term rating from A-2 to A-3. The impact of these ratings
downgrades on Case Credit's short-term funding was to preclude access to the
commercial paper market through the Company's programs. In view of these rating
agency actions, Case Credit has decided to access the asset-backed commercial
paper markets in various countries in which the Company operates as a core
source of funding for its operations.
In February 2002, Moody's announced that it was reviewing the long-term
debt rating of Ba2 for Case and Case Credit, as well as Fiat's Baa2 long-term
and P-2 short term debt ratings for possible downgrade. Further ratings
downgrades of either the Company's, its parents' or Fiat's debt could adversely
affect their ability to access the capital markets or borrow funds at similar
rates. An aggregate of approximately $200 million of Case Credit's off balance
sheet financing and indebtedness is subject to ratings triggers which will
require the Company, in the event of a ratings downgrade of Fiat's debt to
certain levels, to terminate the sale of receivables into the facility. Since
the beginning of 2002, CNH has been able to restructure one other facility and
link the ratings trigger to an increase in the level of the collateral, instead
of the termination of the facility. CNH intends to restructure the remaining
agreements; however, CNH cannot ensure its efforts will be successful.
Case Credit relies upon loan agreements, commercial paper, lines of credit
and liquidity facilities to support its financing needs. A significant portion
of the Company's financing has historically come directly or indirectly from
Fiat and Fiat affiliates. The Company maintains sufficient committed lines of
credit and asset-backed commercial paper facilities to cover its expected
funding needs on a short-term basis. The Company manages its aggregate
short-term borrowings so as not to exceed its availability under its committed
lines of credit including those lines from affiliates. The Company accesses
short-term debt markets, predominantly through asset-backed commercial paper
issuances, bank credit facilities, and loans from affiliates to fund its
short-term financing requirements and to ensure
13
liquidity. As funding needs are determined to be of a longer-term nature, the
Company accesses the term ABS markets to refinance short-term borrowings and,
thus, replenish its short-term liquidity. The Company's long-term financing
strategy is to maintain continuous access to the United States and Canadian
asset-backed securities and bank debt markets to accommodate its liquidity
needs. In addition, the Company gained access to the Australian market for
asset-backed commercial paper facilities in 2001.
Loan Agreements
The Company established medium-term note programs prior to 2000. As of
December 31, 2001, Case Credit has remaining availability of $425 million in
medium-term notes issuable pursuant to an $800 million U.S. shelf registration
statement; $266 million of medium-term notes issuable under a $470 million
Canadian program; and $179 million of medium-term notes issuable under a $306
million Australian program. Future use of these programs will be limited as a
result of the Company's long-term credit rating.
Lines of Credit and Credit Facilities
At December 31, 2001, the Company had approximately $1.2 billion available
of the $2.0 billion total lines of credit. These lines of credit included $428
million of credit facilities with Fiat or Fiat affiliates that mature in 2003
and of which $154 million had been utilized. The Company had available $139
million of credit facilities and uncommitted lines from third parties on which
$128 million had been drawn. The Company had $941 million of availability within
its $1.4 billion asset-backed commercial paper facility as shown below. The $463
million of utilization on the asset-backed commercial paper facilities includes
$14 million of utilization by New Holland Credit Australia Pty. Borrowings under
the revolving credit facilities bear interest at (1) EURIBOR plus an applicable
margin, (2) LIBOR, plus an applicable margin, or (3) banker's bills of
acceptance rates, plus an applicable margin. Borrowings against commercial paper
and asset-backed commercial paper liquidity facilities bear interest at
prevailing commercial paper rates. The weighted-average interest rate on
consolidated short-term borrowings at December 31, 2001, was 3.26%.
Asset-Backed Commercial Paper
(in millions)
December 31, 2001
-----------------------------
Program Size Availability
------------ ------------
United States (expiring in January 2003) $1,200 $941
Australia (expiring in 2008) 204 --
------ ----
Total asset-backed commercial paper $1,404 $941
====== ====
14
Liquidity Facilities
The Company has a securitization program through which it may sell, on a
revolving basis, wholesale receivables generated in the United States. Under
this facility, following its March 6, 2002 amendment, the maximum amount of
proceeds that can be accessed at one time is $450 million, subject to change
based on the level of eligible wholesale receivables. Case Credit expects to
sell additional pools of receivables in the future.
Other Funding Sources
The Company also maintains access to the asset-backed term market in the
United States and Canada. In the United States, the Company executed
asset-backed securitization transactions of $900 million and $1.0 billion in May
and December 2001, respectively. In November 2001, the Company executed an
asset-backed securitization transaction in Canada in the amount of C$278
million. The asset-backed securities issued are backed by retail receivable
contracts, secured by liens against agricultural and construction equipment and
originated through CNH dealerships. The Company applied the proceeds from the
securitizations to repay outstanding debt.
In March 2002, the Company executed a $1.0 billion asset-backed
securitization transaction. The asset-backed securities issued are backed by
retail receivable contracts, secured by liens against agricultural and
construction equipment and originated through CNH dealerships. The transaction
closed on March 28, 2002.
Case Credit intends to continue its financing activity in the United States
and Canadian asset-backed term markets and to enter the asset-backed term market
in Australia in 2002.
The Company maintains sufficient committed lines of credit and liquidity
facilities to cover its expected funding needs on both a short-term and
long-term basis. Case Credit manages its aggregate short-term borrowings so as
not to exceed availability under its committed lines of credit. The Company
accesses capital and banking markets, predominantly through asset-backed
commercial paper issuances and committed and uncommitted credit facilities, to
fund its short-term financing requirements and to ensure near-term liquidity. As
funding needs are determined to be of a longer-term nature, the Company accesses
medium- and long-term debt, as appropriate, to refinance short-term borrowings
and replenish the short-term liquidity.
In managing future liquidity requirements, the Company expects to pursue a
financing strategy that includes:
o consolidating existing bank credit arrangements and other borrowing
facilities available, developing common standards for borrowing terms
and conditions;
o maintaining a relationship with Fiat, including credit support when
appropriate;
o maintaining continuous access to a variety of financing sources,
including U.S. and international capital markets and commercial bank
lines; and
o funding receivables originations with a combination of financing and
receivables securitizations.
The outstanding debt with Fiat and its affiliates, including other
companies wholly owned by CNH, was approximately 66% and 39% of the total debt
at December 31, 2001 and 2000, respectively. In 2001, Case Credit paid a
guarantee fee of between 0.0625% per annum and 0.125% per annum on the average
amount outstanding under facilities guaranteed by Fiat. Fiat has agreed to
maintain its existing treasury and debt financing arrangements with CNH for as
long as it maintains control of CNH and, in any event, at least until December
31, 2004. After that time, Fiat has committed that it will not terminate CNH's
access to these financing arrangements without affording CNH an appropriate time
period to develop suitable substitutes.
Outlook
The outlook for CNH's agricultural equipment and construction equipment
markets is consistent with statements made by CNH in its Form F-3 filing on
March 27, 2002. The financial services operations are directly impacted by
the performance of CNH. In the fourth quarter of 2001, the Company completed its
transformation into a financial services company dedicated solely to the support
of CNH dealers and customers across all its brands. In the final phase of the
transition, begun in the first quarter of 2001, Case Credit exited the
commercial lending business, ended retail financing activities outside its own
dealer networks, and reorganized its European businesses to better support the
Company's customers and dealers.
15
Outlook for the First Quarter 2002
For the first quarter of 2002, CNH expects revenues to improve, as its
agricultural equipment business continues to grow, and the newly acquired
Kobelco operations begin to contribute incremental revenue in North America. CNH
will cut production and wholesales of construction equipment by over 25%
compared to the first quarter of 2001, resulting in lower dealer and company
inventory levels. CNH expects that there will be pressure on margins, due to mix
and capacity under-utilization. On a pre-tax basis, earnings in the first
quarter will be negatively impacted by approximately $17 million of increased
employee benefit and pension costs. As a result, CNH expects to report a loss
for the quarter of between $0.20 and $0.30 per share, before restructuring and
without goodwill amortization. This compares to a loss per share of $0.17 in the
first quarter of 2001, before restructuring and goodwill.
Outlook for the Full Year 2002
While the pressure on margins will likely continue into the second quarter,
CNH believes that the growing strength of the global agricultural business,
along with possible second-half improvements in the construction equipment
industry, will contribute significantly to the bottom line in the second half of
the year. Based on the progress achieved in the accelerated profit improvement
actions during the second half of 2001, CNH now expects to achieve most of the
remaining $170 million in merger-related profit improvements in 2002, bringing
CNH to the $600 million target ahead of schedule.
Overall, and for the third year in a row, CNH expects to record an improved
bottom line performance in spite of weakness in the agricultural equipment
industry and a declining market for construction equipment. Under the current
market scenario, CNH anticipates achieving a considerable improvement in the
industrial operating margin for the year. With significant improvement
anticipated in Financial Services' contribution to the bottom line, and lower
interest rates compared to 2001, as well as the favorable impact on interest
expense due to the reduction in debt attributable to the public offering and
Fiat debt exchange contemplated in its Form F-3 filed on March 27, 2002, CNH
expects to reduce the net loss substantially in 2002, before restructuring and
without goodwill amortization.
Through the supply chain initiatives, as well as the reengineering of other
processes, CNH believes that significant reductions in working capital may be
achieved during 2002. Specifically, inventories are targeted for a reduction of
$300 million, year-over-year, mostly in construction equipment inventories. CNH
expects to reduce the dealer inventories of agricultural equipment, already well
below industry averages, on a selective basis.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133 "Accounting for
Derivative Instruments and Hedging Activities," which has been amended by SFAS
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS 133, an amendment of SFAS 133" and SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an amendment of SFAS 133." SFAS 133 is effective for fiscal years beginning
after June 15, 2000 and will be applied to: (a) derivative instruments; and (b)
certain derivative instruments embedded in hybrid contracts that were issued,
acquired or substantively modified after December 31, 1998. SFAS 133 requires
that every derivative instrument be recorded on the balance sheet as an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met.
The Company adopted SFAS 133 on January 1, 2001. SFAS 133 requires that as
of the date of initial adoption, the difference between the fair market value of
derivative instruments recorded on the balance sheet and the previous carrying
amount of those derivatives be reported in net income or other comprehensive
income, as appropriate, as the cumulative effect of a change in accounting
principle in accordance with Accounting Principles Board Opinion 20, "Accounting
Changes." To the extent that these amounts are recorded in other comprehensive
income, they will be reversed into earnings in the period in which the hedged
transaction occurs. Adoption of this accounting standard resulted in cumulative
net of tax reductions in other comprehensive income of approximately $5 million
as of January 1, 2001 and had no material impact on net income. The adoption
also resulted in an increase to assets and
16
liabilities recorded on the balance sheet of approximately $4 million and $9
million, respectively.
In September 2000, the FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - A Replacement
of FASB Statement 125". SFAS 140 is effective for transfers occurring after
March 31, 2001 and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The Company adopted
the disclosure provisions related to the securitization of financial assets on
December 31, 2000. All remaining provisions were adopted in the second quarter
of 2001. This adoption did not have a material impact on the Company.
In January 2001, the Emerging Issues Task Force issued EITF Issue No.
99-20, "Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets." According to this
pronouncement, the Company must recognize cash flows in excess of the initial
investment's carrying value as interest income using the effective yield method.
Beneficial interests must be measured at fair value with other than temporary
impairments being recorded in income. The Company adopted this pronouncement on
April 1, 2001 and the adoption of this pronouncement did not have a significant
impact on the financial position or result of operations of the Company.
In June 2001, the FASB issued SFAS 141, "Business Combinations". SFAS 141
is effective for all business combinations initiated subsequent to June 30, 2001
and for all business combinations accounted for under the purchase method for
which the acquisition date is July 1, 2001 or thereafter. SFAS 141 requires all
business combinations to be accounted for using the purchase method and requires
that intangible assets be identified separately from goodwill in the allocation
of the purchase price in a business combination if they constitute either a
legal or contractual right or if they are separable from other assets acquired.
Consequently, this statement will only impact future business combinations the
Company initiates.
In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 142 requires that, effective January 1, 2002, existing goodwill
and intangible assets with indefinite lives are no longer subject to
amortization over their estimated useful life, but rather are subject to at
least an annual assessment for impairment by applying a fair value based test.
The impairment test for intangible assets with indefinite lives must be
performed, and its results recorded, in the first quarter of 2002. As part of
the impairment test for goodwill, the Company will compare the estimated fair
value of each reporting unit with allocated goodwill to the carrying amount of
the reporting units' assets and liabilities, including goodwill. If the fair
value exceeds its carrying amount, no goodwill impairment charge is taken. If
the fair value is less than the carrying amount, the second step of the test
must be performed in which the fair value is allocated to the reporting units'
assets and liabilities other than goodwill. If this allocation results in excess
fair value, this value is compared to recorded goodwill and an impairment loss
is recorded as a change in accounting principle. The first step of this test
must be completed by June 30, 2002 and the second step must be completed by
December 31, 2002. The results of the test must be recorded in the first quarter
of 2002 regardless of the date the test is performed. After the initial
adoption, annual impairment losses will be reported as operating expenses. The
Company is currently assessing the potential impact of applying the impairment
tests in this statement to its existing goodwill, and expects that, prior to the
application of such tests, adoption of the statement will reduce goodwill
amortization expense by $7 million annually.
In July 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations," which requires obligations associated with the
retirement of long-lived assets to be recorded as increases in costs of the
related asset. Finally, in 2001 the FASB issued Statement No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. This Statement retains the
previous cash flow test for impairment and broadens the presentation of
discontinued operations. These Statements are not expected to have a material
effect on the Company's financial position or net income.
In December 2001, the American Institute of Certified Public Accountants
issued Statement of Position 01-06 "Accounting by Certain Entities (including
entities with trade receivables) that Lend to or Finance the Activities of
Others". This statement establishes consistent accounting and reporting
guidelines for all entities involved in these activities. The Company will adopt
this statement on January 1, 2002 and does not expect it to have a significant
impact on its financial position or results of operations.
17
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Risk Management
Case Credit is exposed to market risk from changes in interest rates. Case
Credit monitors its exposure to this risk and manages the underlying exposure
both through the matching of financial assets and liabilities and through the
use of financial instruments, including swaps, caps, and forward rate
agreements, for the net exposure. These instruments aim to stabilize funding
costs by managing the exposure created by the differing maturities and interest
rate structures of Case Credit's financial assets and liabilities. Case Credit
does not hold or issue derivative or other financial instruments for speculative
or trading purposes.
Case Credit uses a model to monitor interest rate risk and to achieve a
predetermined level of matching between the interest rate structure of its
financial assets and liabilities. Fixed-rate financial instruments, including
receivables, debt, ABS certificates and other investments, are segregated from
floating-rate instruments in evaluating the potential impact of changes in
applicable interest rates. The potential change in fair market value of
financial instruments including derivative instruments held at December 31, 2001
and 2000, resulting from a hypothetical, instantaneous 10% change in the
interest rate applicable to such financial instruments would be approximately $2
million and $7 million, respectively, based on the discounted values of their
related cash flows.
The above sensitivity analyses are based on the assumption of a 10%
movement of the interest rates applicable to each homogeneous category of
financial assets and liabilities. A homogeneous category is defined according to
the currency in which financial assets and liabilities are denominated and
assumes the same interest rate movement within each homogeneous category. As a
result, Case Credit's inherent rate risk sensitivity model may overstate the
impact of interest rate fluctuations for such financial instruments, as
consistently unfavorable movements of all interest rates are unlikely.
Commodity Price and Foreign Currency Risk Management
Commodity prices impact Case Corporation's sales, which may have an impact
on Case Credit's receivable originations. Commodity risk is managed through
geographic and enterprise diversification. It is not possible to determine the
impact of commodity prices on earnings, cash flows, or fair values of Case
Credit's portfolio.
Case Credit is subject to foreign currency risk in Canada, Australia and
Europe as the investments in and earnings from these areas are impacted by
currency fluctuations. The impact of currency fluctuations on the investments in
foreign operations result in non-cash gains and losses that do not impact net
income, but instead are recorded as adjustments to "Accumulated other
comprehensive income" in the accompanying Consolidated Balance Sheets. At
December 31, 2001, Case Credit performed a sensitivity analysis on its
significant investments in foreign operations that have foreign currency
exchange risk. Case Credit calculated that the impact of a 10% change in the
foreign currency exchange rates would be $14 million and $17 million at December
31, 2001 and 2000, respectively. A similar change would have had an
insignificant impact on the Company's earnings from these investments in 2001
and 2000.
Changes in Market Risk Exposure as Compared to 2000
Case Credit's exposure to and strategies for management of interest rate,
commodity price and foreign currency risks have not changed significantly since
2000.
18
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS OF CASE CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
Page
Report of independent public accountants 20
Consolidated Statements of Income for the years ended December 31, 2001 and 2000, periods January 1, 1999 21
through November 11, 1999 and November 12, 1999 through December 31, 1999
Consolidated Balance Sheets as of December 31, 2001 and 2000 22
Consolidated Statements of Cash Flows for the years ended December 31, 2001 and 2000, periods January 1, 1999
through November 11, 1999 and November 12, 1999 through December 31, 1999 23
Consolidated Statements of Changes in Stockholder's Equity for the years ended December 31, 2001 and 2000, 24
periods January 1, 1999 through November 11, 1999 and November 12, 1999 through December 31, 1999
Notes to consolidated financial statements 25
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of Case Credit Corporation:
We have audited the accompanying Consolidated Balance Sheets of Case Credit
Corporation (a Delaware corporation) and subsidiaries, as of December 31, 2001
and 2000, and the related Consolidated Statements of Income, Cash Flows, and
Changes in Stockholder's Equity, for the years ended December 31, 2001 and 2000,
and periods January 1, 1999 through November 11, 1999 and November 12, 1999
through December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Case Credit Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the years ended December 31, 2001 and 2000,
and periods January 1, 1999 through November 11, 1999 and November 12, 1999
through December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 7, 2002
20
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions)
Post-acquisition | Pre-acquisition
basis of accounting | basis of accounting
---------------------------------------- | -------------------
Year ended Year ended November 12 to | January 1 to
December 31, December 31, December 31, | November 11,
2001 2000 1999 | 1999
----------- ----------- -------------- | ------------
Revenues: |
Finance income earned on retail and other notes and $135 $169 $23 | $151
finance leases |
Interest income from Case Corporation 68 46 3 | 37
Net gain on retail and wholesale notes sold 95 64 1 | 50
Securitization and servicing fee income 38 47 6 | 43
Lease income on operating leases 106 111 16 | 86
Other income 31 30 1 | 22
---- ---- --- | ----
Total revenues 473 467 50 | 389
Expenses: |
Interest expense: |
Interest expense to third parties 107 199 25 | 162
Interest expense to affiliates 90 30 -- | 1
---- ---- --- | ----
Total interest expense 197 229 25 | 163
Operating expenses: |
Fees charged by Case Corporation 33 31 2 | 31
Administrative and operating expenses 29 28 4 | 15
Provision for credit losses 109 101 1 | 28
Other than temporary impairment of ABS retained interests 76 25 -- | --
Goodwill amortization 6 6 1 | --
Depreciation of equipment on operating leases 65 69 12 | 59
Other 1 (3) (1) | 3
---- ---- --- | ----
Total operating expenses 319 257 19 | 136
---- ---- --- | ----
Total expenses 516 486 44 | 299
---- ---- --- | ----
(Loss) income before taxes (43) (19) 6 | 90
Income tax (benefit) provision (18) (11) 3 | 32
---- ---- --- | ----
Net (loss) income $(25) $ (8) $ 3 | $ 58
==== ==== === | ====
The accompanying notes to financial statements are an integral part of these
Consolidated Statements of Income.
21
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
ASSETS
------
December 31, December 31,
2001 2000
---- ----
Cash and cash equivalents $ 69 $ 38
Retail and other notes and finance leases 1,665 1,648
Wholesale notes and accounts 924 888
Due from trusts 237 280
------ ------
Total receivables 2,826 2,816
Allowance for credit losses (148) (84)
------ ------
Total receivables--net 2,678 2,732
Affiliated accounts and notes receivable 173 18
Asset-backed certificates 204 204
Equipment on operating leases, at cost 569 624
Accumulated depreciation (96) (79)
------ ------
Net equipment on operating leases 473 545
Property and equipment, at cost 15 12
Accumulated depreciation (5) (2)
------ ------
Net property and equipment 10 10
Goodwill, net 113 121
Assets held for sale 89 20
Other assets 221 186
------ ------
Total $4,030 $3,874
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Short-term debt $ 717 $1,299
Accounts payable and other accrued liabilities 361 216
Affiliated debt 1,990 1,170
Deposits withheld from dealers 10 9
Long-term debt 327 527
------ ------
Total liabilities 3,405 3,221
------ ------
Stockholder's equity:
Common stock, $5 par value, 200 shares authorized, issued and outstanding -- --
Paid-in capital 695 674
Accumulated other comprehensive loss (40) (16)
Retained deficit (30) (5)
------ ------
Total stockholder's equity 625 653
------ ------
Total $4,030 $3,874
====== ======
The accompanying notes to financial statements are an integral part of these
Consolidated Balance Sheets.
22
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Post-acquisition basis Pre-acquisition
of accounting basis of accounting
------------------------------------------ -------------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11,
2001 2000 1999 1999
------------ ------------ -------------- -------------------
Operating activities:
Net (loss) income $ (25) $ (8) $ 3 $ 58
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 80 97 21 62
Provision for credit losses 109 101 1 28
Other than temporary impairment of ABS retained 76 25 -- --
interests
Deferred income tax (benefit) expense (40) (7) 2 9
Net gain on retail and wholesale notes sold (95) (64) (1) (50)
Unremitted equity method earnings from joint ventures (2) (1) -- (1)
Changes in components of working capital:
(Increase) decrease in affiliated receivables (155) 40 (2) (5)
Decrease (increase) in other assets (70) (12) (6) (11)
Increase (decrease) in accounts payable and other 169 (13) 46 58
accrued liabilities
Other, net (13) (12) (2) 2
-------- ------ ----- ------
Net cash provided by operating activities 34 146 62 150
-------- ------ ----- ------
Investing activities:
Cost of retail and wholesale receivables acquired (6,537) (4,669) (489) (2,732)
Proceeds from sales of retail and wholesale receivables 3,682 3,137 349 1,693
Collections of retail and wholesale receivables 2,811 1,615 189 644
Purchase of equipment on operating leases, net of disposals (52) (94) (16) (135)
Net decrease (increase) in investments and other assets 44 (55) (1) (113)
Expenditures for property and equipment (2) (8) -- (1)
-------- ------ ----- ------
Net cash (used) provided by investing activities (54) (74) 32 (644)
-------- ------ ----- ------
Financing activities:
Proceeds from issuance of long-term debt -- 43 -- 617
Proceeds from issuance of affiliate debt (net of repayment) 820 1,151 -- --
Payment of long-term debt (900) (534) -- --
Increase (decrease) in revolving credit facilities 110 (761) (62) (123)
Capital contributions from Case Corporation 21 -- -- --
-------- ------ ----- ------
Net cash provided (used) by financing activities 51 (101) (62) 494
-------- ------ ----- ------
Increase (decrease) in cash and cash equivalents 31 (29) 32 0
Cash and cash equivalents, beginning of period 38 67 35 35
-------- ------ ----- ------
Cash and cash equivalents, end of period $ 69 $ 38 $ 67 $ 35
-------- ------ ----- ------
Cash paid during the period for interest $ 210 $ 235 $ 16 $ 159
======== ====== ===== ======
Cash (received) paid during the period for taxes
$ -- $ (19) $ 6 $ 19
======== ====== ===== ======
The accompanying notes to financial statements are an integral part of these
Consolidated Statements of Cash Flows.
23
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in millions)
Accumulated
Other Retained
Common Paid-in Comprehensive Earnings Comprehensive
Stock Capital Income/(Loss) (Deficit) Total Income(Loss)
------ ------- ------------- --------- ----- -------------
Pre-acquisition basis of accounting
- -----------------------------------
Balance, December 31, 1998 $-- $269 $(24) $214 $459
Comprehensive income:
Net income -- -- -- 58 58 $ 58
Translation adjustment -- -- 3 -- 3 3
----
Total $ 61
---- ---- ---- ---- ---- ====
Balance, November 11, 1999 $-- $269 $(21) $272 $520
Post-acquisition basis of accounting
- ------------------------------------
Balance, November 11, 1999 $-- $269 $(21) $272 $520
Elimination of paid-in capital, cumulative
translation adjustment, and retained earnings (269) 21 (272) (520)
Purchase price allocation -- 674 -- -- 674
Comprehensive income:
Net income -- -- -- 3 3 $ 3
Translation adjustment -- -- 4 -- 4 4
----
Total $ 7
---- ---- ---- ---- ---- ====
Balance, December 31, 1999 $-- $674 $ 4 $ 3 $681
Comprehensive loss:
Net loss -- -- -- (8) (8) $(8)
Translation adjustment -- -- (20) -- (20) (20)
----
Total $(28)
---- ---- ---- ----- ---- ====
Balance, December 31, 2000 $-- $674 $(16) $(5) $653
Capital injection 21 21
Comprehensive loss:
Net loss -- -- -- (25) (25) $(25)
Translation adjustment -- -- (13) -- (13) (13)
Unrealized loss on effective hedges:
Cumulative effect of change in
accounting principle (5) (5) (5)
Reclassification of deferred loss
to earnings 3 3 3
Unrealized loss for the period (9) (9) (9)
---- ---- ----
Balance of unrealized loss on
effective hedges (11) (11) (11)
----
Total $(49)
---- ---- ---- ---- ---- ====
Balance, December 31, 2001 $-- $695 $(40) $(30) $625
=== ==== ===== ===== ====
The accompanying notes to financial statements are an integral part of
these Consolidated Statements of Changes in Stockholder's Equity.
24
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1: Nature of Operations
Case Credit Corporation is a subsidiary of CNH Capital Corporation ("CNH
Capital"). CNH Capital, a wholly owned subsidiary of Case Corporation ("Case"),
provides broad-based financial services for the global marketplace. Case
Corporation is a wholly owned subsidiary of CNH Global N.V. ("CNH"). Through
Fiat Netherlands Holding N.V. ("Fiat Netherlands Holding"), formerly New Holland
Holdings N.V., Fiat S.p.A. ("Fiat") owns approximately 84.6% of CNH's
outstanding common shares.
Case Credit Corporation, its wholly owned operating subsidiaries, including
Case Credit Ltd. (Canada) and Case Credit Australia Pty Ltd, and Case Credit
Corporation's joint ventures, Case Credit Europe S.A.S. and UzCaseagroleasing
(collectively, "Case Credit" or the "Company") provide broad-based financial
services for various customers located primarily in the United States, Canada,
Australia, and Europe. To support Case's sales of agricultural and construction
equipment products, Case Credit offers retail financing to end-use customers and
wholesale financing to Case equipment dealers. Wholesale financing consists
primarily of dealer floorplan financing and allows dealers the ability to
maintain a representative inventory of products. In addition, Case Credit
provides financing to dealers for equipment used in dealer owned rental yards.
Case Credit provides and administers retail financing, primarily retail
installment sales contracts and finance leases, to end-use customers for the
purchase or lease of new and used Case and other agricultural and construction
equipment sold through Case dealers and distributors. In addition, Case Credit
purchases equipment from dealers that is leased to retail customers under
operating lease agreements. In North America, customers use Case Credit's
private-label credit card to purchase parts, service, rentals, implements and
attachments from Case dealers. Case Credit also finances a variety of insurance
and other products for end-users and dealers in conjunction with the purchase of
new and used equipment.
In the past, Case Credit provided financing options to dealers and
non-captive third parties to finance inventory, working capital, real estate
acquisitions, construction and remodeling, business acquisitions, dealer systems
and service and maintenance equipment. Case Credit also offered a broad range of
retail and wholesale financing products, including equipment and commercial
loans and leases for non-CNH North American manufacturers' products, dealers,
distributors and their customers. During the fourth quarter of 2000, Case Credit
decreased its volume of loan origination activity in this diversified business
and made the strategic decision to exit certain diversified financing
activities. In the fourth quarter of 2001, Case Credit completed its
transformation into a financial services company dedicated solely to the support
of CNH dealers and customers across all its brands by exiting the commercial
lending business, ending retail financing activities outside its own dealer
networks, and reorganizing its European businesses to better support CNH's
customers and dealers.
Case Credit competes primarily with banks, finance companies and other
financial institutions. Typically, this competition is based upon customer
service and finance rates charged. The Company's long-term profitability is
largely dependent on the cyclical nature of the agricultural and construction
equipment industries and on prevailing interest rates.
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation and Presentation
The accompanying financial statements reflect the consolidated results of
Case Credit Corporation and its consolidated subsidiaries and joint ventures.
All significant intercompany transactions have been eliminated in consolidation.
25
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
All references to balance sheet items for 2001 and 2000 are on a
post-acquisition basis. Consolidated Statements of Income and Cash Flows for
2001 and 2000 are on a post-acquisition basis and include the impact of purchase
accounting. Consolidated Statements of Income and Cash Flows for 1999 include
both pre-acquisition totals and post- acquisition totals including the impacts
of purchase accounting.
Certain reclassifications have been made to conform prior years' financial
statements to the 2001 presentation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated into U.S.
dollars using year-end exchange rates. Revenues and expenses are translated at
average rates during the year. Adjustments resulting from this translation are
deferred and included in "Accumulated other comprehensive loss " in the
accompanying Consolidated Balance Sheets.
Purchase Accounting Amortization
Amortization of purchase accounting adjustments, excluding goodwill, are
recognized over the remaining term of the related asset or liability account
based on the weighted average change during the month for each asset class. The
remaining term, primarily related to long-term debt, is 70 months as of December
31, 2001.
Recognition of Income
The Company records finance income earned on retail and other notes and
finance leases using the effective interest method. A portion of the earned
finance income arises from sales programs offered by Case on which finance
charges are waived or below-market rate financing programs are offered. When the
Company acquires retail installment sales contracts and finance leases subject
to below-market interest rates, including waived interest rate financing, the
Company is compensated by Case in an amount equal to the present value of the
difference between the market rate and the customer rate. This amount is
initially recognized as an unearned finance charge and is recognized as interest
income over the term of the retail notes and finance leases. The amounts
recognized from Case for below-market interest rate financing are included in
"Interest income from Case Corporation" in the accompanying Consolidated
Statements of Income, and amounted to $26 million, $17 million and $21 million
in 2001, 2000, and 1999, respectively.
When the receivables are sold, (see "Securitization Accounting" below) the
unrecognized portion of the unearned finance charges is included in the
calculation of the net gain on retail notes sold. The Company included in its
gain calculations income from Case amounting to $56 million, $65 million and $55
million in 2001, 2000, and 1999, respectively, as part of the sale of retail
notes. These amounts are included in "Net gain on retail and wholesale notes
sold" in the accompanying Consolidated Statements of Income.
For selected operating leases, the Company is also compensated from Case
for the difference between the market rental rates and the amount paid by the
customer. The amounts recognized were $6 million, $2 million, and $7 million in
2001, 2000, and 1999, respectively, and are included in "Interest income from
Case Corporation."
For selected wholesale receivables, the Company is compensated by Case for
the difference between market rates and the amount paid by the dealer. The
amount recognized for the years ended December 31, 2001 and 2000 is $34 million
and $16 million, respectively, and is included in either "Interest income from
Case Corporation" or "Net gain on retail and wholesale notes sold" in the
26
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
accompanying Consolidated Statements of Income based on whether the receivables
were retained or sold.
The Company is also compensated for lending funds to Case for various
purposes. The amounts earned were $9 million, $14 million, and $12 million in
2001, 2000, and 1999, respectively, and are included in "Interest income from
Case Corporation" in the accompanying Consolidated Statements of Income.
Purchase accounting adjustments due to the merger, (see Note 3, "Merger"),
resulted in a $33 million increase in receivables, which is primarily included
in "Retail and other notes and finance leases" in the accompanying Consolidated
Balance Sheets. Amortization of the related purchase accounting adjustments
resulted in a decrease to income of approximately $8 million and $13 million for
the years ended December 31, 2001 and 2000, respectively, and $6 million for the
period November 12, 1999 through December 31, 1999, and is included in "Finance
income earned on retail and other notes and finance leases" in the accompanying
Consolidated Statements of Income. The remaining purchase accounting adjustments
as of December 31, 2001 total $6 million and will be primarily recognized as a
decrease to "Finance income earned on retail and other notes and finance leases"
in the accompanying Consolidated Statements of Income over the next 16 months.
Recognition of income on loans is generally suspended when management
determines that collection of future income is not probable or when an account
becomes 120 days delinquent. Income accrual is resumed if the receivable becomes
contractually current and collection doubts are removed. Previously suspended
income is recognized at that time. The dollar amount of the Company's managed
retail portfolio for which accruals have been suspended was $252 million and
$190 million at December 31, 2001 and 2000, respectively.
Case Credit primarily offers retail and other notes with fixed interest
rates, but also offers notes with interest rates that float with the prime rate,
plus an applicable margin. At December 31, 2001 and 2000, $297 million and $352
million, respectively, of the managed portfolio have interest rates that are
variable.
Allowance for Credit Losses
The Company's wholesale and retail note receivables have significant
concentration of credit risk in the agricultural and construction equipment
industry and are subject to potential credit losses. As the vast majority of the
Company's receivables are retail financings, which consist of large groups of
homogeneous contracts, the allowance for credit losses is generally established
during the period in which receivables are acquired and maintained at a level
deemed appropriate by management based on historical and other factors that
affect collectibility. Such factors include the historical trends of
repossessions, credit losses and recoveries; the careful monitoring of portfolio
credit quality; and current and projected economic and market conditions.
Non-retail receivables are evaluated based on these same criteria and an
allowance for credit losses is established for the difference between the
investment in the receivable and the anticipated proceeds from disposition of
the receivable's collateral when these factors indicate that collection is not
probable. The evaluation of these factors involves complex, subjective
judgments. See Note 4, "Receivables" in the Notes to Financial Statements.
Investments in Operating Leases
Case Credit purchases equipment from dealers that is leased to retail
customers under operating leases. The Company has significant investments in the
residual values of its leasing portfolios. The residual values represent an
estimate of the values of the assets at the end of the lease contracts and are
initially recorded based on historical evidence of equipment values adjusted for
known, current market conditions. Realization of the residual values is
dependent on the Company's future ability to market the vehicles under then
prevailing market conditions, which include the strength of the agricultural and
construction equipment industries and the volume of used equipment available in
the market. Management reviews residual values periodically to determine that
recorded amounts are appropriate and the operating lease assets have not been
impaired. If a decline in estimated residual values is not expected to be
recoverable, the investment in the equipment is adjusted for the difference
between the carrying value of the equipment and the present value of the
equipment's expected future cash flows including the estimated residual value.
Case guarantees a portion of the residual values on some of Case Credit's
operating leases. On these leases, if the guaranteed residual value is not
realized, Case Credit will receive a payment from Case for a portion of the
realized loss. Income from operating leases is recognized over the term of the
lease. Each item of equipment under operating lease is depreciated on a
straight-line basis over a period of time consistent with the lease term.
Expenditures for maintenance and repairs are the responsibility of the lessee.
See Note 6, "Equipment on Operating Leases" in the Notes to Financial
Statements.
Goodwill
Goodwill represents the excess of the purchase price allocated to Case
Credit plus the liabilities assumed over the fair value of the tangible and
identifiable intangible assets purchased. Goodwill was amortized on a
straight-line basis over 20 years through December 31, 2001. Case Credit
continually evaluates whether events and circumstances
27
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
have occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, Case Credit uses an estimate of the undiscounted cash flows
over the remaining life of the goodwill in measuring whether the goodwill is
recoverable. Effective with the adoption of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," goodwill will no
longer be amortized. For detailed discussion of the effects of purchase
accounting on other balance sheet categories, see "New Accounting
Pronouncements" for a description of the impact this pronouncement will have on
this accounting policy.
Securitization Accounting
The Company sells receivables, through the use of consolidated special
purpose entities, to limited purpose business trusts, and other privately
structured facilities, which then issue asset-backed securities to private or
public investors. These transactions are recorded as sales and the assets of the
trusts and other facilities are not consolidated in the Company's financial
statements in accordance with the provisions of Statement of Financial
Accounting Standards No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities-A Replacement of FASB
Statement 125" ("SFAS 140") and other applicable accounting principles generally
accepted in the United States. In conjunction with these sales, the Company
retains certain interests in the sold receivables including interest-only
strips, cash reserve accounts, subordinated tranches of the public securities
issued ("ABS certificates"), and rights to service the sold receivables.
Gains or losses on sales of the receivables depend in part on the previous
carrying amount of the financial assets involved in the transfer, allocated
between the assets sold and the retained interests based on their relative fair
values at the date of transfer. The Company estimates fair values based on the
present value of their future expected cash flows using key assumptions. The key
assumptions used in the present value calculations are credit loss, prepayment
and interest rates. These assumptions represent management's best estimates of
these rates based on historical information adjusted for current market
conditions.
The Company also monitors the fair value of its retained interests
outstanding each period by discounting their expected future cash flows based on
similar assumptions. The fair value is compared to the carrying value of the
retained interest and any excess of carrying value over fair value results in an
adjustment to the asset with a corresponding offset to earnings when they are
deemed to be other than temporary.
The Company services all securitized receivables and is entitled to receive
a 1.00% annual servicing fee as compensation for these services. The Company has
determined that this servicing fee exceeds the fair value of the services
provided and records a servicing asset as part of each transaction.
ABS certificates are classified as held to maturity securities and are
initially recorded at their allocated carrying values on the accompanying
Consolidated Balance Sheets. ABS certificates have stated interest rates between
4.30% and 7.32%. Interest income related to these and other retained interests
is included in "Securitization and servicing fee income" in the accompanying
Consolidated Statements of Income. All other retained interests are also
initially recorded at their allocated carrying values as "Due from trusts" on
the accompanying Consolidated Balance Sheets.
See Note 4 "Receivables" in the Notes to Financial Statements.
Assets Held For Sale and Impaired Loans
Estimated losses arising from the repossession of equipment supporting
impaired retail receivables and operating leases are recognized upon
repossession. Repossessed assets are recorded at the lower of historical cost or
estimated fair value and are reclassified to "Assets held for sale" with the
related adjustments charged to the allowance for credit losses. Any final
adjustment to the loss estimated at the time of repossession is recognized upon
the final sale of the equipment.
Non-retail finance receivables are reduced to the lower of historical cost
or the estimated fair value of collateral when determined to be impaired. A loan
is considered impaired when it is determined that the Company will be unable to
collect all amounts due according to the original terms of the loan agreement.
The Company's policy is to recognize interest income related to impaired loans
on a cash basis.
Cash and Cash Equivalents
28
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Cash equivalents are comprised of all highly liquid investments with an
original maturity of three months or less.
Deposits Withheld from Dealers
These deposits represent amounts withheld from dealers relating to retail
sales financed using retail and other notes and finance leases. Any subsequent
losses on retail and other notes or finance leases that were acquired with
limited recourse are charged against the amounts withheld from the dealer. To
the extent that a loss on a retail or other note or finance lease exceeds the
dealers' reserves, the amount is charged against the Company's allowance for
credit losses. Annually, the balance of each dealer's withholding account, in
excess of minimum levels, is remitted to the dealer.
Derivatives
The Company uses derivative financial instruments to manage its interest
rate exposures. Case Credit does not hold or issue such instruments for trading
purposes. Effective January 1, 2001, the Company accounts for its derivatives on
the Consolidated Balance Sheet as assets or liabilities, at fair value in
accordance with Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended. These
instruments are primarily accounted for as hedges of anticipated transactions or
recognized assets and liabilities and unrealized fair value gains and losses are
not recognized in earnings as of the balance sheet date to the extent that hedge
is effective. The effective portion of unrealized gains and losses are
recognized in interest expense in the period which the hedged transaction
affects earnings. Hedge accounting requires that the Company assess
effectiveness between changes in fair value of derivatives designated as hedges
compared to changes in fair value of the underlying hedged assets or liabilities
for each reporting period. The effectiveness tests involve estimation of the
fair values of future transactions as well as an evaluation of the probability
of occurrence of such transactions. For further information regarding the
Company's use of derivative financial instruments, please see Note 11,
"Financial Instruments."
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, "Accounting for
Derivative Instruments and Hedging Activities," which has been amended by SFAS
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS 133, an amendment of SFAS 133" and SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an amendment of SFAS 133." SFAS 133 is effective for fiscal years beginning
after June 15, 2000 and will be applied to: (a) derivative instruments; and (b)
certain derivative instruments embedded in hybrid contracts that were issued,
acquired or substantively modified after December 31, 1998. SFAS 133 requires
that every derivative instrument be recorded on the balance sheet as an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met.
The Company adopted SFAS 133 on January 1, 2001. SFAS 133 requires that as
of the date of initial adoption, the difference between the fair market value of
derivative instruments recorded on the balance sheet and the previous carrying
amount of those derivatives be reported in net income or other comprehensive
income, as appropriate, as the cumulative effect of a change in accounting
principle in accordance with Accounting Principles Board Opinion 20, "Accounting
Changes." To the extent that these amounts are recorded in other comprehensive
income, they will be reversed into earnings in the period in which the hedged
transaction occurs. Adoption of this accounting standard resulted in cumulative
net of tax reductions in other comprehensive income of approximately $5 million
as of January 1, 2001 and had no material impact on net income. The adoption
also resulted in an increase to assets and liabilities recorded on the balance
sheet of approximately $4 million and $9 million, respectively.
29
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
In September 2000, FASB issued SFAS 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - A Replacement
of FASB Statement 125". SFAS 140 is effective for transfers occurring after
March 31, 2001 and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The Company adopted
the disclosure provisions related to the securitization of financial assets on
December 31, 2000. All remaining provisions were adopted in the second quarter
of 2001. This adoption did not have a material impact on the Company.
In January 2001, the Emerging Issues Task Force issued EITF Issue No.
99-20, "Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets". According to this
pronouncement, the Company must recognize cash flows in excess of the initial
investment's carrying value as interest income using the effective yield method.
Beneficial interests must be measured at fair value with other than temporary
impairments being recorded in income. The Company adopted this pronouncement on
April 1, 2001 and adoption of this pronouncement did not have a significant
impact on the financial position or result of operations of the Company.
In June 2001, FASB issued SFAS 141, "Business Combinations". SFAS 141 is
effective for all business combinations initiated subsequent to June 30, 2001
and for all business combinations accounted for under the purchase method for
which the acquisition date is July 1, 2001 or thereafter. SFAS 141 requires all
business combinations to be accounted for using the purchase method and requires
that intangible assets be identified separately from goodwill in the allocation
of the purchase price in a business combination if they constitute either a
legal or contractual right or if they are separable from other assets acquired.
Consequently, this statement will only impact future business combinations the
Company initiates.
In June 2001, FASB issued SFAS 142, "Goodwill and Other Intangible Assets".
SFAS 142 requires that, effective January 1, 2002, existing goodwill and
intangible assets with indefinite lives are no longer subject to amortization
over their estimated useful lives, but rather are subject to at least an annual
assessment for impairment by applying a fair value based test. The impairment
test for intangible assets with indefinite lives must be performed, and its
results recorded, in the first quarter of 2002. As part of the impairment test
for goodwill, the Company will compare the estimated fair value of each
reporting unit with allocated goodwill to the carrying amount of the reporting
units' assets and liabilities, including goodwill. If the fair value exceeds its
carrying amount, no goodwill impairment charge is taken. If the fair value is
less than the carrying amount, the second step of the test must be performed in
which the fair value is allocated to the reporting units' assets and liabilities
other than goodwill. If this allocation results in excess fair value, this value
is compared to recorded goodwill and an impairment loss is recorded as a change
in accounting principle. The first step of this test must be completed by June
30, 2002 and the second step must be completed by December 31, 2002. The result
of this test must be recorded in the first quarter of 2002 regardless of the
date the test was performed. After the initial adoption, annual impairment
losses will be reported as operating expenses. The Company is currently
assessing the potential impact of applying the impairment tests in this
statement to its existing goodwill, and expects that, prior to the application
of such tests, adoption of the statement will reduce goodwill amortization
expense by $7 million annually.
In July 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations, which requires obligations associated with the
retirement of long-lived assets to be recorded as increases in costs of the
related asset. Finally, in 2001 the FASB issued Statement No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. This Statement retains the
previous cash flow test for impairment and broadens the presentation of
discontinued operations. These Statements are not expected to have a material
effect on the Company's financial position or net income.
In December 2001, the American Institute of Certified Public Accountants
issued Statement of Position 01-06 "Accounting by Certain Entities (including
entities with trade receivables) that Lend to or Finance the Activities of
Others". This statement establishes consistent accounting and reporting
guidelines for all entities involved in these activities. The Company will adopt
this statement on January 1, 2002 and does not expect it to have a significant
impact on its financial position or results of operations.
30
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3: Merger
On November 12, 1999, New Holland N.V. acquired Case for $4.6 billion in
cash, including related costs and expenses. Of the total purchase price, $674
million was allocated to Case Credit. Effective with the closing of the merger,
New Holland N.V. changed its name to CNH.
This merger was accounted for as a purchase and, accordingly, the purchase
price was allocated to the assets and liabilities of Case Credit based upon
their respective estimated fair values, including identifiable intangibles, with
the remainder allocated to goodwill. The purchase price allocation resulted in
goodwill of approximately $129 million, which was being amortized on a straight-
line basis over 20 years through December 31, 2001. The historical shareholder's
equity of the Company was eliminated in the Company's Consolidated Balance
Sheets. The fair value adjustments to the historical balance sheet and the
resulting goodwill were as follows (in millions):
Purchase Price Allocation
- ----------------------------------------------------------------------
Net assets at historical cost, including liabilities assumed of $3,345 $ 520
Fair value adjustments:
Accounts and notes receivable 33
Equipment on operating leases (34)
Discount on medium-term note 27
Deferred income taxes (16)
Other 15
Goodwill 129
-----
Total purchase price allocated $674
=====
In conjunction with the merger, CNH Capital's management assessed and
formulated a plan to integrate the operations of the Case and New Holland
finance businesses at the time that the original purchase price allocation was
made in 1999. The only adjustment to the original fair value allocation occurred
in October 2000 when the Company finalized the plans made in conjunction with
the merger and recorded approximately $1 million of restructuring liabilities
related to the Case Credit business, resulting in additional goodwill. As of
December 31, 2001, there was no restructuring reserve balance remaining.
Case Credit has prepared the following unaudited pro forma income
statements to illustrate the estimated effects of the acquisition of Case by New
Holland as if this transaction had occurred as of the beginning of 1999. The pro
forma data reflects the impact of the fair market value adjustments to the Case
Credit assets and liabilities acquired. These adjustments are being amortized
over the periods estimated to be benefited and primarily include reduced
depreciation of equipment on operating leases, the amortization of the fair
value adjustments for acquired receivables, discount on notes payable and
goodwill. The pro forma data does not include the impact of the $1 million of
additional goodwill recorded during 2000.
Year Ended
December 31, 1999
(unaudited)
(in millions)
-----------------
Revenues:
Finance income earned on retail and other notes and finance leases $150
Interest income from Case Corporation 40
Net gain on retail notes sold 53
Securitization and servicing fee income 49
Lease income on operating leases 102
Other income 23
----
Total revenues 417
Expenses:
Interest expense 197
On payables to affiliates 1
----
Interest expense 198
Operating expenses:
Fees charged by Case Corporation 33
Administrative and operating expenses 19
31
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Provision for credit losses 29
Goodwill amortization 6
Depreciation of equipment on operating leases 62
Other 3
----
Total operating expenses 152
----
Total expenses 350
----
Income before taxes 67
Income tax provision 26
----
Net income $ 41
====
Case Credit has presented this unaudited pro forma financial data for
illustrative purposes only. This pro forma data is not necessarily indicative of
(i) the results of operations that would have occurred had the transaction been
effective as of the beginning of each of the years presented, or (ii) the
results of operations that Case Credit will attain in the future. In addition,
the pro forma financial data does not reflect any synergies or cost savings that
may occur as a result of the merger.
During 2000, Case Credit acquired Case Wholesale Receivable Inc. ("CWRI")
from Case at net book value of $175 million. CWRI's purpose is to acquire
selected wholesale receivables from Case. The acquisition was done to be
consistent with New Holland Credit Company's (the financial services business of
New Holland) practice of consolidating U.S. wholesale receivables within the
financial services company. Additionally, the financial services support for
Case's Latin America equipment sales was shifted to New Holland Credit Company's
operations in that region of the world.
Note 4: Receivables
Wholesale notes and accounts arise primarily from the sale of goods to
dealers and distributors by Case. Under the standard terms of the wholesale
receivable agreements, these receivables typically have interest-free periods of
up to twelve months and stated original maturities of up to twenty-four months,
with repayment accelerated upon the sale of the underlying equipment by the
dealer. After the expiration of any interest-free period, interest is charged to
dealers on outstanding balances until the Company receives payment. The
interest-free periods are determined based on the type of equipment sold and the
time of year of the sale. Interest rates are set based on market factors and
based on the prime rate or LIBOR. The company evaluates and assesses dealers on
an ongoing basis as to their credit worthiness. Case is obligated to repurchase
goods sold to a dealer upon cancellation or termination of the dealer's contract
for such causes as change in ownership, closeout of the business or default.
The Company provides and administers financing for retail purchases of new
and used equipment sold through Case's dealer network. The Company purchases
retail installment sales, loan and finance lease contracts from Case dealers.
The terms of retail and other notes and finance leases generally range from two
to six years, and interest rates on retail and other notes and finance leases
vary depending on prevailing market interest rates and certain incentive
programs offered by Case.
A summary of receivables is as follows (in millions):
December 31, December 31,
2001 2000
------------ ------------
Wholesale notes and accounts $ 924 $ 888
Retail and other notes 1,468 1,451
Finance leases 297 374
Due from trusts 237 280
------ ------
Gross receivables 2,926 2,993
Less--Unearned finance charges (100) (177)
Less--Allowance for credit losses (148) (84)
----- ------
Total receivables, net $2,678 $2,732
====== ======
Maturities of wholesale notes and accounts and retail and other notes and
finance leases as of December 31, 2001, are as follows (in millions):
Year ending December 31,
32
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
2002 $1,019
2003 621
2004 513
2005 278
2006 162
2007 and thereafter 96
------
Total retail and other notes and finance leases--gross $2,689
Less--Unearned finance charges (100)
------
Total retail and other notes and finance leases, net of
unearned finance charges $2,589
=====
It has been CNH's experience that substantial portions of retail
receivables are repaid before their contractual maturity dates. As a result, the
above table should not be regarded as a forecast of future cash collections.
The allowance for credit losses is established to cover probable losses for
receivables owned by the Company.
Changes in the allowance for credit losses are as follows (in millions):
Pre-acquisition
Post-acquisition basis of
basis of accounting accounting
------------------------------------------------ ---------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11
2001 2000 1999 1999
------------ ----------- -------------- ---------------
Balance, beginning of period $ 84 $ 31 $ 40 $ 29
Provision for credit losses 109 101 1 28
Reserve transfers relative to receivables
purchased 38 24 -- --
Write-offs, net of recoveries (83) (72) (10) (17)
---- ---- ---- ----
Balance, end of period $148 $ 84 $ 31 $ 40
==== ==== ==== ====
The preceding table reflects the Company's provision for credit losses, but
does not include losses charged to dealers or those incurred by the receivables
that have been securitized. Total losses incurred on the Company's serviced
portfolio were $135 million, $128 million and $58 million in 2001, 2000, and
1999, respectively. The principal balance of accounts with payments greater than
30 days delinquent was $343 million and $434 million, which represented 7.7% and
8.2%, of the Company's managed retail and other notes and finance leases at
December 31, 2001 and 2000, respectively.
Reserve transfers relative to receivables purchased in 2001 are $38 million
related to wholesale receivables acquired from Case. Reserve transfers relative
to receivables purchased in 2000 were $16 million related to wholesale and
various receivables acquired from Case and $8 million related to New Holland
receivables acquired.
Reserves for non-retail impaired loans were $49 million and $25 million as
of December 31, 2001 and 2000, respectively. The investment in impaired loans
was approximately $172 million and $137 million at December 31, 2001 and 2000,
respectively. The average investment during 2001 and 2000 was approximately $155
million and $88 million, respectively. Income recognized on impaired loans
during 2001 and 2000 was insignificant.
Wholesale, retail and finance lease receivables have significant
concentrations of credit risk in the agricultural and construction business
sectors. On a geographic basis, there is not a disproportionate concentration of
credit risk in any area of the United States, Canada or Australia. Case Credit
typically retains, as collateral, a security interest in the equipment
associated with wholesale and retail notes receivable.
Wholesale Receivables Securitizations
Case Credit funds a significant portion of its United States wholesale
receivables by means of sales, on a revolving basis, pursuant to securitization
programs through a privately structured facility. This facility consisted of a
364-day, $475 million facility that is renewable annually at the sole discretion
of the purchasers. This facility was renewed for four months on June 28, 2001
for $405 million, extended another month on October 29, 2001 for $375 million,
and through a series of amendments, was further extended until March 6, 2002 for
$400 million. Effective March 6,
33
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
2002, this facility was amended as a 364-day, $450 million co-purchase facility
that is renewable annually (in March) at the sole discretion of the purchasers.
At December 31, 2001, $400 million was outstanding under the facility,
consisting of $497 million of wholesale receivables sold less the Company's
retained undivided interest of $97 million. At December 31, 2000, $400 million
was outstanding under the facility, consisting of $487 million of wholesale
receivables sold less the Company's retained undivided interest of $87 million.
The retained interests provide recourse to investors in the event of default and
are recorded at cost, which approximates fair value due to the short-term nature
of the receivables, in "Wholesale notes and accounts" in the accompanying
Consolidated Balance Sheets. The Company recognized gains on the sales of these
receivables of $8 million and $3 million in 2001 and 2000, respectively, which
were recorded in "Net gain on retail and wholesale notes sold" in the
Consolidated Statements of Income. The gains are primarily the result of the
difference between the interest received from dealers and Case, and the interest
paid to investors in the facility. Case Credit continues to service the sold
receivable portfolio. As the servicing fee received approximates the fair value
of providing these services, no servicing asset or liability has been
recognized. Servicing fees received were $7 million and $3 million in 2001 and
2000, respectively. Other cash flows between Case Credit and the facility in
2001 and 2000 included (in millions):
December 31, 2001 December 31, 2000
----------------- -----------------
Proceeds from new securitizations $ 70 $ 15
Repurchase of receivables 70 80
Proceeds from collections reinvested in the facility 1,444 470
At December 31, 2001, certain subsidiaries of Case Credit sold, with
recourse, wholesale receivables totaling $113 million. The receivables sold are
recorded in "Wholesale notes and accounts" and the proceeds received are
recorded in "Short-term debt" in the accompanying Consolidated Balance Sheets as
the transactions do not meet the criteria for derecognition in a transfer of
financial assets. No similar transactions were outstanding at December 31, 2000.
Retail Receivables Securitizations
Case Credit funded a significant portion of its North American retail
receivable originations by means of retail receivable securitizations in 2001
and 2000. Case Credit securitized retail notes with a net principal value of
$2.1 billion and $2.6 billion in 2001 and 2000, respectively. In 2001, $1.3
billion of the receivables sold were originated by Case Credit and $0.9 billion
were originated and sold to Case Credit at fair value by New Holland Credit
Company and New Holland Credit Company Canada, wholly owned subsidiaries of CNH
Global N.V. In 2000, $1.6 billion of the receivables sold were originated by
Case Credit and $1.0 billion were originated and sold to Case Credit at fair
value by New Holland Credit Company and New Holland Credit Company Canada.
These transactions are recorded as sales in accordance with the provisions
of SFAS No. 140. The Company recognized gains on the sales of these receivables
of $87 million, $61 million, and $51 million in 2001, 2000, and 1999,
respectively. To provide credit enhancements to investors, cash reserve accounts
of $45 million and $57 million were created as part of these transactions in
2001 and 2000, respectively, and total amounts held in escrow were $172 million
and $194 million at December 31, 2001 and 2000, respectively. As an additional
form of credit enhancement to investors, Case Credit provided a demand note
receivable of $19 million to fund potential shortfalls in collections related
to one of the securitizations completed in 2000. No such form of credit
enhancement to investors was provided related to the securitizations completed
in 2001.
Gains related to the recognition of servicing assets were $19 million and
$18 million for 2001 and 2000, respectively, and are included in "Net gain on
retail and wholesale notes sold" in the Consolidated Statements of Income. These
assets are being amortized over the period in which the Company earns the
related servicing fees. Amortization of servicing assets was $14 and $8 million
in 2001 and 2000, respectively. The amortization is included in "Securitization
and servicing fee income" in the Consolidated Statements of Income. The
unamortized balance of servicing assets equaled $23 million and $18 million,
which approximates fair value, at December 31, 2001 and 2000, respectively.
34
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Case stratifies its servicing assets based on geographic location and
original term. As a result, Case Credit has two categories of servicing assets
as of December 31, 2001 and 2000. One category consists of serviced assets
located in the United States with 3 to 5 year original terms, which amounted to
$20 million and $15 million as of December 31, 2001 and 2000, respectively. The
other category consists of serviced assets located in Canada with 3 to 5 year
original terms, which amounted to $3 million as of December 31, 2001 and 2000,
respectively.
Case Credit is required to remit the cash collected on the serviced
portfolio within two business days. At December 31, 2001 and 2000, $26 million
and $17 million, respectively, of unremitted cash payable is included in
"Accounts payable and other accrued liabilities" in the Consolidated Balance
Sheets.
Weighted average assumptions utilized in measuring the initial fair value
of retained interests for securitizations completed during 2001 and 2000 were as
follows:
U.S. Canada
---- ------
2001 2000 2001 2000
---- ---- ---- ----
Constant prepayment rate 17.00% 17.00% 20.00% 20.00%
Annual credit loss rate 0.87% 0.66% 1.00% 0.56%
Discount rate 3.75% 6.91% 3.87% 6.18%
Weighted average maturity in months 22 23 21 19
The significant assumptions used in estimating the fair values of
retained interests from sold receivables which remain outstanding, and the
sensitivity of the current fair value to immediate 10% and 20% adverse changes
at December 31, 2001 and 2000 are as follows (in millions unless stated
otherwise):
United States
Impact on Fair Value
2001 2000
--------------------------------- ----------------------------------
December 31, December 31,
2001 10% 20% 2000 10% 20%
Assumption Change Change Assumption Change Change
---------- ------ ------- ---------- ------ -------
Constant prepayment rate 17.00% 0.4 0.9 17.00% 0.4 1.0
Annual credit loss rate 1.48% 6.4 12.6 0.60% 2.7 5.3
Discount rate 3.12% 0.0 0.1 6.89% 0.8 1.7
Weighted average remaining maturity 17 months 18 months
Receivables Securitized in
--------------------------------
1998 1999 2000 2001
---- ---- ---- ----
Actual and expected static pool losses as of December 31, 2001 2.71% 3.31% 2.43% 1.32%
Actual and expected static pool losses as of December 31, 2000 2.09% 1.61% 1.11%
Canada
Impact on Fair Value
2001 2000
--------------------------------- --------------------------------
December 31, December 31,
2001 10% 20% 2000 10% 20%
Assumption Change Change Assumption Change Change
----------- ------ ------ ---------- ------ ------
Constant prepayment rate 20.00% 0.2 0.3 20.00% 0.2 0.6
Annual credit loss rate 1.10% 0.8 1.5 0.55% 0.3 0.6
Discount rate 3.97% 0.0 0.0 6.15% 0.1 0.2
Weighted average remaining maturity 16 months 17 months
Receivables Securitized in
-------------------------------
35
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
1998 1999 2000 2001
---- ---- ---- ----
Actual and expected static pool losses as of December 31, 2001 1.48% 2.50% 1.03% 1.65%
Actual and expected static pool losses as of December 31, 2000 .93% 1.10% .82%
Static pool losses are calculated by summing the actual and projected
future credit losses and dividing them by the original balance of each pool of
assets securitized. Weighted average remaining maturity represents the weighted
average number of months that the current collateral balance is expected to
remain outstanding.
The changes shown above are hypothetical. They are computed based on
variations of individual assumptions without considering the interrelationship
between these assumptions. As a change in one assumption may affect the other
assumptions, the magnitude of the impact on fair value of actual changes may be
greater or less than those illustrated above.
Based on its periodic evaluation of the retained interests in receivables
sold, Case Credit reduced the value of its retained interests by $76 million and
$25 million in 2001 and 2000, respectively, with the offsetting amount charged
to "Other than temporary impairment of ABS retained interests" in the
accompanying Consolidated Statements of Income. The primary cause of this
reduction was the continued elevation in the credit losses recognized related to
sold notes in excess of historically experienced levels and the corresponding
increase in the assumption used to estimate future credit losses.
Case Credit's cash flows related to securitization activities for 2001 and
2000 can be summarized as follows (in millions):
December 31, 2001 December 31, 2000
----------------- -----------------
Proceeds from new retail securitizations $2,070 $2,560
Servicing fees received (1) 22 28
Cash received on other retained interests 43 41
Cash paid upon close of deal (2) 96 123
(1) Does not reflect servicing fees earned in Canada as the Company is paid for
these services if there are residual funds available when the Trusts are
liquidated.
(2) Includes cash paid to repurchase receivables, net of returns of investments
in retained interests.
Case Credit's portfolio of managed receivables, including receivables owned
and receivables serviced for others, has decreased from $7.0 billion at
December 31, 2000, to $6.5 billion at December 31, 2001. Case Credit's managed
portfolio at December 31, 2001, included $2.9 billion of serviced receivables
(net of unearned finance charges), including retail and other notes amounting to
$2.5 billion (net of unearned finance charges) that were securitized and $400
million of wholesale notes and accounts that were outstanding under the
previously described revolving securitization facility in North America. At
December 31, 2000, Case Credit's managed portfolio included $3.5 billion of
serviced receivables (net of unearned finance charges), including retail and
other notes amounting to $3.1 billion (net of unearned finance charges) that
were securitized and $400 million of wholesale notes and accounts that were
outstanding under the previously described revolving securitization facility in
North America.
At December 31, 2001, approximately $581 million of retail notes receivable
have been pledged as collateral under the Company's asset-backed commercial
paper facility. At December 31, 2000, approximately $232 million of retail notes
receivable had been pledged as collateral under the Company's asset-backed
commercial paper facility.
Note 5: Property, Plant and Equipment
Property, plant and equipment are stated at cost. Property, plant and
equipment consist of leasehold improvements and furniture and fixtures,
including computer equipment and software. Depreciation is provided on a
straight-line basis over the estimated useful lives of the respective assets.
Useful lives range from 5 to 14 years for leasehold improvements, and 3 to 10
years for furniture and fixtures. Expenditures for maintenance and repairs are
charged to expense as incurred.
Note 6: Equipment on Operating Leases
A summary of equipment on operating leases, is as follows (in millions):
36
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 2001 December 31, 2000
----------------- -----------------
Equipment on operating leases $569 $624
Accumulated depreciation (96) (79)
---- ----
Net equipment on operating leases $473 $545
==== ====
Lease payments owed to Case Credit for equipment under non-cancelable
operating leases as of December 31, 2001, are as follows (in millions):
2002 $ 84
2003 59
2004 26
2005 12
2006 2
2007 and thereafter --
Depreciation expense totaled $65 million, $69 million and $71 million for
the years ended December 31, 2001, 2000 and 1999, respectively. Payments
received from Case Corporation for residual guarantees were $18 million for the
year ended December 31, 2001 and not significant for the year ended December 30,
2000. Residual losses realized, net of payments received from Case, are $12
million and $4 million for the years ended December 31, 2001 and 2000,
respectively. These losses were reflected as reductions in the investment in
equipment on operating leases in prior periods when the residual values were
determined to have been impaired.
Purchase accounting adjustments due to the merger resulted in a $34 million
net decrease in "Equipment on operating leases, at cost" in the accompanying
Consolidated Balance Sheets. Amortization of the related purchase accounting
adjustments resulted in a reduction of depreciation expense of approximately $1
million for the period November 12, 1999 through December 31, 1999, $8 million
for the year ended December 31, 2000, and $9 million for the year ended December
31, 2001, which is included in "Depreciation of equipment on operating leases"
in the accompanying Consolidated Statements of Income. There were no purchase
accounting adjustments remaining as of December 31, 2001.
Note 7: Other Assets
The components of other assets as of December 31, 2001 and 2000 are as
follows (in millions):
December 31, 2001 December 31, 2000
----------------- -----------------
Certificates of deposit $ 91 $135
Tax receivable 86 35
Derivative assets 21 --
Investment in joint venture 19 16
Other current assets 4 --
---- ----
Total other assets $221 $186
==== ====
Certificates of deposits support retail receivables related to purchases of
agricultural equipment by Brazilian customers from Case Corporation. These U.S.
dollar indexed certificates are reflected at historical cost on the balance
sheet and have original maturities that range between three months and four
years and bear interest rates between 8.75% and 10.00%. Case guarantees the
receivables underlying the certificates of deposit.
The Case Credit Europe S.A.S. joint venture is accounted for under the
equity method of accounting. Income is included in "Other income" in the
accompanying Consolidated Statements of Income.
Note 8: Short-Term Debt
The Company has various lines of credit and liquidity facilities that
include borrowings under both committed credit facilities and uncommitted lines
of credit and similar arrangements.
A summary of short-term debt is set forth in the following table (in
millions):
37
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 2001 December 31, 2000
----------------- -----------------
Credit agreements (a) $ 128 $ 113
Commercial paper -- 76
Asset-backed commercial paper liquidity facility 449 200
Current portion long-term debt 140 910
------ -------
Total short-term debt $ 717 $ 1,299
====== =======
(a) The credit agreements include borrowings under both committed credit
facilities and uncommitted lines of credit and similar arrangements.
As of December 31, 2001, Case Credit and certain subsidiaries sold
wholesale accounts receivable with recourse, which are included in the Credit
agreements line in the table above. Case Credit and Case Credit Ltd had $80
million and $14 million of borrowings that bear interest equal to 2.33% and
2.87%, respectively, and will mature in the first quarter of 2002. Case Credit
Australia Pty. Ltd had $19 million of borrowings that bear interest equal to
4.63% and will mature in the second quarter of 2002.
The weighted-average interest rates on total short-term debt outstanding at
December 31, 2001 and 2000 were 3.18% and 6.33%, respectively. At December 31,
2001, the unused portion of the committed credit facilities was $284 million.
The unused portion of the asset-backed commercial paper facility was $941
million. At December 31, 2000, the unused portion of the combined committed
credit facilities and the commercial paper program was $712 million. The unused
portion of the asset- backed commercial paper facility was $1 billion.
At the option of the Company, borrowings under the revolving credit
facilities bear interest at: (1) LIBOR, plus an applicable margin; (2) EURIBOR
plus an applicable margin. Borrowings may be obtained in U.S. dollars and
certain other foreign currencies. Borrowings under the Asset-Backed Commercial
Paper Facility bear interest at prevailing commercial paper rates at the date of
the borrowing. The revolving credit facilities impose restrictions on certain
indebtedness, liens on Company assets and ownership of certain subsidiaries.
Case Credit is in compliance with all restrictive covenants as of December 31,
2001.
The credit facilities generally provide for facility fees on the total
commitment, whether used or unused, and also provide for annual agency fees to
the administrative agents for the facilities.
On June 8, 2001, Case Credit Australia Pty. Ltd. negotiated a 1-year A$400
million Australian Asset-Backed Retail Commercial Paper Conduit Transaction
($204 million in U.S. dollars), which is renewable on an annual basis.
$213 million of retail notes receivable were sold with recourse and $190 million
of proceeds were received, which are reflected as short-term debt for financial
statement purposes as of December 31, 2001. The borrowings bear interest equal
to 4.63%, and will mature in June 2008.
On December 15, 2000, the Company negotiated a one-year, $1.2 billion
asset-backed commercial paper facility, which replaced the $750 million
commercial paper liquidity facility renewed in August 1999. As of December 31,
2001, $329 million of notes were sold with recourse and $259 million of proceeds
were received, which are reflected in short-term debt. These borrowings bear
interest equal to 2.0% and will mature in January 2003.
On July 27, 2000, the Company, together with Fiat S.p.A., CNH Global N.V.,
Fiat Finance and Trade Ltd. S.A., New Holland Credit Company LLC and Case
Corporation, as co-borrowers, entered into a $2.0 billion five-year Credit
Agreement with Chase Manhattan International Limited, as Facility Agent and Euro
Swing-line Agent, The Chase Manhattan Bank, as US Swing-line Agent, and ABN Amro
Bank N.V., Banca Intesa S.p.A. and Chase Manhattan plc, as Arrangers, on behalf
of additional banks. This new Credit Agreement replaces the Case Credit
Corporation $1.2 billion Revolving Credit and Guarantee Agreement dated
August 23, 1996 with Chase Manhattan Bank, as administrative agent. Case
Credit's borrowing availability under this facility is limited by the borrowings
of the co-borrowers and the commitment of $0.2 billion of the availability
solely to Fiat. Total availability to the co-borrowers, excluding the component
committed to Fiat was $1.8 billion as of December 31, 2001 and 2000.
The Company's ability to originate new receivables and operating results
are dependent on its access to the capital markets at a reasonable cost of
capital. The Company's access is dependent on its stand-alone credit rating as
well as that of its direct and indirect parents, Case, CNH and Fiat. Adverse
ratings actions can materially impact the Company's access to funding. In April
2001, Standard & Poor's downgraded the long-term corporate credit ratings of
CNH, Case and Case Credit and related entities to BB from BBB- and also lowered
the short-term debt ratings of such entities to B, with a negative outlook. At
the same time, Moody's downgraded Fiat's long-term debt rating from A3 to Baa2
as well as lowered its long-term and short-term debt ratings of Case and Case
Credit to Ba2 and NP from Baa3 and P-3, respectively, also with a negative
outlook. In addition, in June 2001, Standard & Poor's downgraded Fiat's
short-term rating from A-2 to A-3. The impact of these ratings downgrades on
Case Credit's short-term funding was to preclude access to the commercial paper
market through the Company's programs. In view of these rating agency actions,
Case Credit has decided to access the asset-backed commercial paper markets in
various countries in which the Company operates as a core source of funding for
its operations.
In February 2002, Moody's announced that it was reviewing the long-term
debt rating of Ba2 for Case and Case Credit, as well as Fiat's Baa2 long-term
and P-2 short term debt ratings for possible downgrade. Further ratings
downgrades of either the Company's, its parents' or Fiat's debt could adversely
affect their ability to access the capital markets or borrow funds at similar
rates. An aggregate of approximately $200 million of Case Credit's off balance
sheet financing and indebtedness is subject to ratings triggers which will
require the Company, in the event of a ratings downgrade of Fiat's debt to
certain levels, to terminate the sale of receivables into the facility. Since
the beginning of 2002, CNH has been able to restructure one other facility
and link the ratings trigger to an increase in the level of the collateral,
instead of the termination of the facility. CNH intends to restructure the
remaining agreements; however, CNH cannot ensure its efforts will be successful.
38
Note 9: Long-Term Debt
A summary of long-term debt is set forth in the following table (in millions):
December 31, 2001 December 31, 2000
----------------- -----------------
Case Credit Corporation
Notes, payable in 2001, interest rate of 6.125% $ -- $ 100
Notes, payable in 2003, interest rate of 6.125% 191 200
Notes, payable in 2007, interest rate of 6.75% 144 150
Fixed-rate, medium-term notes, maturities through 140 604
2002, weighted-average interest rate of 6.15% and 6.01%
Floating-rate, medium-term notes, maturities through
2001, weighted-average interest rate of 6.09% -- 125
Case Credit Australia Pty Ltd
Fixed-rate, medium-term notes, maturities through
2001, interest rate of 5.75% -- 70
Floating-rate, medium-term notes, maturities through
2001, weighted-average interest rate of 7.13% -- 70
Case Credit Ltd. (Canada)
Fixed-rate, medium-term notes, maturities through
2001, weighted-average interest rate of 6.30% -- 133
------ ------
Gross long-term debt 475 1,452
------ ------
Less unamortized discount (8) (15)
Less current maturities of long-term debt (140) (910)
------ ------
Net long-term debt $ 327 $ 527
====== ======
A summary of the minimum annual repayments of long-term debt as of December 31,
2001, is as follows (in millions):
2002 $ 140
2003 191
2004 --
2005 --
2006 --
2007 and thereafter 144
------
Total $ 475
======
Purchase accounting related adjustments due to the merger totaled $27
million, which is included in "Long-term debt" in the accompanying Consolidated
Balance Sheets. Amortization of the related purchase accounting adjustments
resulted in expense of approximately $6 million and $11 million for the years
ended December 31, 2001 and 2000, and $2 million for the period November 12,
1999 through December 31, 1999, which is included in "Interest expense" in the
accompanying Consolidated Statements of Income. The remaining purchase
accounting adjustments as of December 31, 2001 total $8 million, which will be
recognized as an increase to "Interest expense to third parties" in the
accompanying Consolidated Statements of Income over the next 70 months.
During 2001, Case Credit issued no additional debt and retired $900 million
of long-term debt in accordance with scheduled maturities. During 2000, Case
Credit retired an aggregate of $534 million of long-term debt. Also
39
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
during 2000, Case Credit Australia Pty. Ltd., issued A$75 million of its
medium-term notes pursuant to a medium-term note program. These notes have
maturities that range from twenty- four to thirty-six months and bear interest
based on BBSW (7.12% as of December 31, 2000), for the floating-rate notes. The
net proceeds from this issuance were used to fund Case Credit Australia Pty.
Ltd's growth initiatives and for other corporate purposes.
Note 10: Income Taxes
The income and expenses of Case Credit and its domestic subsidiaries are
included in the consolidated income tax return of Case. The Company's Canadian
subsidiaries file separate income tax returns. In addition, Case Credit's
Australian subsidiaries are permitted income tax relief with Case's Australian
subsidiaries. Provisions for income taxes for all periods are made as if Case
Credit filed a separate income tax return. Any liability or benefit incurred by
Case resulting from the inclusion of Case Credit in its income tax returns was
reimbursed to or paid by Case Credit or the appropriate subsidiary.
At December 31, 2001 and 2000, the Company has current taxes receivable of
$3 million and $6 million, respectively, which are included in "Affiliated
accounts and notes receivable" in the accompanying Consolidated Balance Sheets.
The sources of (loss) income before taxes were as follows (in millions):
Post-acquisition Pre-acquisition
basis of accounting basis of accounting
----------------------------------------------------- -------------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11
2001 2000 1999 1999
---- ---- ---- ----
U.S. sources $ (24) $ 2 $ 10 $ 72
Foreign sources (19) (21) (4) 18
----- ----- ---- ----
(Loss) income before taxes $ (43) $ (19) $ 6 $ 90
==== ==== ==== ====
The (benefit) provision for income taxes is as follows (in millions):
Post-acquisition Pre-acquisition
basis of accounting basis of accounting
----------------------------------------------------- -------------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11
2001 2000 1999 1999
---- ---- ---- ----
Current:
United States $ 25 $ 4 $ 1 $ 15
Foreign (6) (4) -- 8
State 3 (4) -- --
---- ---- ---- ----
Total current 22 (4) 1 23
==== ==== ==== ====
Deferred:
United States (33) (4) 2 8
Foreign (2) (3) -- --
State (5) -- -- 1
---- ---- ---- ----
Total deferred (40) (7) 2 9
---- ---- ---- ----
Total tax (benefit) provision $(18) $(11) $ 3 $ 32
==== ==== ==== ====
Following is a reconciliation of income taxes computed at the U.S. Federal
income tax rate to the tax provision reflected in the accompanying Consolidated
Statements of Income (in millions):
Post-acquisition Pre-acquisition
basis of accounting basis of accounting
----------------------------------------------------- -------------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11
2001 2000 1999 1999
---- ---- ---- ----
Tax (benefit) provision at U.S. Federal
income tax rate $(15) $ (7) $ 2 $ 32
State taxes, net of Federal benefit (5) (6) -- --
Goodwill amortization 2 2 -- --
Other -- -- 1 --
---- ---- ---- ----
Total tax provision $(18) $(11) $ 3 $ 32
==== ==== ==== ====
40
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Case Credit has not recorded valuation allowances against deferred tax
assets as management believes it is more likely than not that such assets will
be realizable. Deferred tax assets and deferred tax liability are included in
"Other assets" and "Accounts payable and other accrued liabilities",
respectively, in the accompanying Consolidated Balance Sheets.
The components of the net deferred tax assets (liabilities) are as follows
(in millions):
December 31, 2001 December 31, 2000
----------------- -----------------
Deferred tax assets (liabilities):
Allowance for credit losses $ 78 $ 24
Deferred gains on sales of receivables (25) (28)
Accrued expenses 2 4
Leasing adjustments 1 1
Depreciation (71) (64)
Purchasing accounting adjustment (10) (5)
Other (11) (8)
---- ----
Net deferred tax liabilities $(36) $(76)
==== ====
Note 11: Financial Instruments
Fair Market Value of Financial Instruments
The estimated fair market values of financial instruments that do not
approximate the carrying values in the financial statements are as follows (in
millions):
December 31, 2001 December 31, 2000
---------------------- ----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
Notes receivable $ 2,678 $ 2,660 $ 2,732 $ 2,712
Long-term debt 467 441 1,437 1,306
The fair market value of "Notes receivable" was based on discounting the
estimated future payments of fixed-rate receivables at prevailing market rates.
The fair value of the interest only strip component of the "Due from trusts"
included in total receivables in the accompanying Consolidated Balance Sheets
was based on loss, prepayment and interest rate assumptions approximating those
currently experienced by the Company. The carrying amounts of floating-rate
receivables, ABS certificates, and certificates of deposit approximate their
fair market value. The fair value of long-term debt was based on quoted market
prices and the carrying amount of short-term debt approximates its fair value.
As derivatives are recorded at fair market value on the balance sheet, the
carrying amount and fair market value are equivalent.
Derivatives
Case Credit utilizes derivative instruments to mitigate its exposure to
interest rate risk. The Company does not issue such instruments for trading
purposes. These instruments include interest rate swaps, forward starting swaps
and back-to-back interest rate caps. Interest rate swaps that have been
designated in cash flow hedging relationships are being used by the Company to
mitigate the risk of rising interest rates related to the anticipated issuance
of short-term LIBOR based debt in future periods. Gains and losses on these
instruments, to the extent that the hedge relationship has been effective, are
deferred in other comprehensive loss and recognized in "Interest expense to
third parties" in the accompanying Consolidated Statements of Income over the
period in which the Company recognizes interest expense on the related debt. Any
ineffectiveness in the hedging relationships was insignificant during 2001. 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 48 months, and the Company expects approximately $7 million net
of tax losses deferred in other comprehensive income to be recognized in
earnings over the 12 months ended December 31, 2002.
41
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Interest rate swaps that have been designated in fair value hedge
relationships are being used by the Company to mitigate the risk of reductions
in the fair value of existing fixed rate medium-term notes due to decreases in
LIBOR based interest rates. Gains and losses on these instruments are reflected
in "Interest expense to third parties" in the accompanying Consolidated
Statements of Income in the period in which they occur and an offsetting gain or
loss is also reflected in "Interest expense to third parties" based on changes
in the fair value of the debt instrument being hedged due to changes in LIBOR
based interest rates. There was no ineffectiveness as a result of fair value
hedge relationships in 2001.
Case Credit enters into forward starting interest rate swaps as hedges of
the anticipated issuance of fixed rate securities to outside investors in ABS
transactions. The purpose of this instrument is to protect fixed rate debt
issuances from fluctuations in the LIBOR yield of U.S. dollar swap rates that
form the basis of pricing the ABS transaction. The changes in the fair market
value of these instruments are highly correlated to changes in the fair value of
the anticipated cash flows from the securities to be issued. Gains and losses
are deferred in other comprehensive loss and recognized in "Net gain on retail
and wholesale notes sold" in the accompanying Consolidated Statements of Income
at the time of the ABS issuance. Ineffectiveness of these hedge relationships
was insignificant in 2001.
Case Credit also utilizes both back-to-back interest rate swaps and
back-to-back interest rate caps that are not designated in hedge relationships.
These instruments are used to mitigate interest rate risk related to the
Company's asset-backed commercial paper facility and various limited purpose
business trusts associated with the Company's retail note asset-backed
securitization programs in North America. These facilities and trusts require
Case Credit to enter into interest rate swaps and caps. To ensure that these
transactions do not result in the Company being exposed to this risk, Case
Credit enters into an offsetting interest rate swap or cap with substantially
similar terms. Net gains and losses on these instruments were insignificant for
2001.
Note 12: Related Party Transactions / Affiliated Debt
Case Credit receives compensation from Case for retail lease contracts that
were created under certain low-rate financing programs and interest waiver
programs offered by Case. The amount of such compensation not yet paid by Case
as of December 31, 2001 and 2000, was $6 million and $8 million, respectively,
and is included in "Affiliated accounts and notes receivables" in the
accompanying Consolidated Balance Sheets.
Operating expenses include charges from Case for administrative expenses
related to employees who perform specific functions for Case Credit. Such
charges amounted to $33 million and $31 million for the years ended December 31,
2001 and 2000, respectively, $2 million for the period November 12 to December
31, 1999, and $31 million for the period January 1 to November 11, 1999 and is
included in "Administrative and operating expenses" in the accompanying
Consolidated Statements of Income. Management believes that these charges
reasonably reflect the actual costs of services provided.
As of December 31, 2001, New Holland Credit Company has various loans
totaling $443 million to Case Credit. These loans bear interest based on one-
month LIBOR (2.45% - 2.55% as of December 31, 2001), and mature in the first
quarter of 2002. As part of asset-backed securitizations (see Note 2, "Summary
of Significant Accounting Policies"), Case Credit purchased $900 million of
receivables from New Holland Credit Company at fair market value during 2001.
As of December 31, 2001, CNH has various loans totaling $1,163 million to
Case Credit. These loans bear interest based on one-month LIBOR (2.49% - 4.75%
as of December 31, 2001), and mature in the first quarter of 2002.
As of December 31, 2001, Case Canada Corporation has various loans totaling
$217 million to Case Credit Ltd. These loans bear interest based on one-month
LIBOR (3.12% as of December 31, 2001), and mature in the first quarter of 2002.
42
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 2001, Fiat has various loans totaling $76 million to
Case Credit Ltd. These loans bear interest based on one-month Banker's
Acceptance (2.76% - 3.82% as of December 31, 2001), and mature in the first
quarter of 2002.
As of December 31, 2001, Fiat has various loans totaling $47 million to
Case Credit. These loans bear interest based on three-month LIBOR (2.85% as of
December 31, 2001), and mature in 2003.
As of December 31, 2001, Fiat has various loans totaling $31 million to
Case Credit Australia. These loans bear interest based on Japanese LIBOR (.57%
as of December 31, 2001), and mature in the first quarter of 2002.
As of December 31, 2001, Case Canada Investments Ltd. has various loans
totaling $13 million to Case Credit Ltd. These loans bear interest based on
Prime + .75% (7.44% as of December 31, 2001), and mature in the first quarter
of 2002.
Note 13: 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
Case Credit's financial position or results of operations.
Commitments
Commitments under capital and operating leases are not significant to the
financial statements. Total rental expense for operating leases was minimal for
the years ended December 31, 2001 and 2000 and for the periods November 12 to
December 31, 1999, and January 1 to November 11, 1999.
Case Credit's private label credit card had various commitments to extend
credit, net of balances outstanding, of $2,111 million and $1,648 million for
the years ended December 31, 2001 and 2000, respectively.
Note 14: Segment and Geographical Information
The Company's reportable segments are strategic business units that are
organized around differences in geographic areas. Each segment is managed
separately as they require different knowledge of regulatory environments and
marketing strategies.
Each of Case Credit's segments provides financing for retail installment
sales contracts and leases. These financing arrangements are established in
conjunction with the purchase or lease of new and used Case farm and
construction equipment and other new and used products to end-use customers. The
North American segments also include commercial lending within the equipment
industry, multiple lines of insurance products and private-label credit cards.
The accounting policies of the segments are described in Note 2, "Summary
of Significant Accounting Policies." Case Credit evaluates segment performance
based on segment profit, defined as segment net income. Transfers between
segments are accounted for at market value.
A summary of Case Credit's reportable segment and geographical information
is set forth in the following table (in millions):
Post-acquisition Pre-acquisition
basis of accounting basis of accounting
---------------------------------------------------- -------------------
Year ended Year ended November 12 to January 1 to
December 31, December 31, December 31, November 11,
2001 2000 1999 1999
---- ---- ---- ----
43
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Revenues:
United States $ 401 $ 396 $ 44 $ 312
Canada 48 42 4 48
Australia 24 29 2 28
Other -- -- -- 1
------- ------- ------- -------
Total $ 473 $ 467 $ 50 $ 389
======= ======= ======= =======
Interest expense:
United States $ 159 $ 179 $ 22 $ 124
Canada 21 29 3 23
Australia
17 21 -- 16
------- ------- ------- -------
Total $ 197 $ 229 $ 25 $ 163
======= ======= ======= =======
Segment (loss) profit:
United States $ (10) $ 6 $ 7 $ 48
Canada (10) (7) (1) 6
Australia (5) (6) (3) 4
Other -- (1) -- --
------- ------- ------- -------
Total $ (25) $ (8) $ 3 $ 58
======= ======= ======= =======
Depreciation and amortization:
United States $ 70 $ 74 $ 13 $ 58
Canada 3 4 1 4
Australia -- -- -- --
------- ------- ------- -------
Total $ 73 $ 78 $ 14 $ 62
======= ======= ======= =======
Expenditures for additions to long-lived
assets*:
United States $ 229 $ 117 $ 8 $ 134
Canada 11 1 8 1
------- ------- ------- -------
Total $ 240 118 $ 16 $ 135
======= ======= ======= =======
Segment assets (at the end of the period):
United States $ 3,231 $ 2,923 $ 2,891 $ 2,857
Canada 433 491 549 494
Australia 363 459 536 510
Other 3 1 4 4
------- ------- ------- -------
Total $ 4,030 $ 3,874 $ 3,980 $ 3,865
======= ======= ======= =======
Long-lived assets* (at the end of the period):
United States $ 463 $ 532 $ 496 $ 507
Canada 20 23 26 26
------- ------- ------- -------
Total $ 483 $ 555 $ 522 $ 533
======= ======= ======= =======
* Includes equipment on operating lease and property, plant, and equipment
Note 15: Quarterly Financial Information (Unaudited)
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
2001
Total revenue $ 110 $ 136 $ 72 $ 155
Profit before taxes (12) 3 (19) (15)
Net (loss) income (8) 2 (12) (7)
2000
Total revenue $ 104 $ 108 $ 128 $ 127
Profit before taxes 2 3 17 (41)
Net (loss) income 1 2 11 (22)
1999
Total revenue $ 109 $ 117 $ 120 $ 93
Profit before taxes 31 34 34 (3)
Net (loss) income 20 21 22 (2)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
44
PART III
Item 10, "Directors and Executive Officers of the Registrant," Item 11,
"Executive Compensation," Item 12, "Security Ownership of Certain Beneficial
Owners and Management," and Item 13, "Certain Relationships and Related
Transactions," are not required pursuant to General Instruction I (2) of Form
10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 6-K.
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of Case Credit Corporation and Consolidated
Subsidiaries" set forth in Item 8, "Financial Statements and Supplementary
Data."
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE INCLUDED IN ITEM 14
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
Schedule I Condensed financial information of registrant
Schedule II Valuation and qualifying accounts
Schedule III Real estate and accumulated depreciation
Schedule IV Mortgage loans on real estate
Schedule V Supplemental information concerning property
casualty insurance operations
EXHIBITS
A list of the exhibits included as part of this Form 10-K is set forth in the
Index to Exhibits that immediately precedes such exhibits, which is incorporated
herein by reference.
45
REPORTS ON FORM 6-K
In a Current Report filed on 6-K dated March 30, 2001, CNH Global, N.V.
("CNH"), the indirect parent of Case Corporation, announced CNH, Kobe Steel and
Kobelco to set up global alliance in their construction equipment business. The
agreement includes substantial cross investment among the companies.
In a Current Report filed on 6-K dated April 9, 2001, CNH announced its
joint venture agreement with Shanghai Tractor and Internal Combustion Engine
Corporation.
In a Current Report filed on 6-K dated April 11, 2001, CNH announced the
death of New Holland pioneer, George C. Delp.
In a Current Report filed on 6-K dated April 16, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated April 30, 2001, CNH announced its
unaudited financial results for the quarter ended March 31, 2001.
In a Current Report filed on 6-K dated May 4, 2001, CNH announced its
shareholders approve a dividend for the year 2000.
In a Current Report filed on 6-K dated May 15, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated June 18, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated July 20, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated July 24, 2001, CNH announced its
unaudited financial results for the quarter ended June 30, 2001.
In a Current Report filed on 6-K dated August 16, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated September 14, 2001, CNH announced
its summary of North American retail unit sales activity for selected
agricultural and construction equipment and indicators of North American dealer
inventory levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated October 4, 2001, CNH announced that
weakening sales of construction equipment to impact its fourth quarter earnings.
In a Current Report filed on 6-K dated October 5, 2001, CNH announced the
ground breaking on a major addition to its Racine, Wisconsin manufacturing
facility.
46
REPORTS ON FORM 6-K (Continued)
In a Current Report filed on 6-K dated October 10, 2001, CNH announced its
participation in the Department of Commerce trade mission to Russia.
In a Current Report filed on 6-K dated October 17, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated October 25, 2001, CNH announced its
unaudited financial results for the quarter ended September 30, 2001.
In a Current Report filed on 6-K dated November 14, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated November 19, 2001, CNH announced CNH
Capital, the financial services arm of CNH, executed a $1.0 billion asset-backed
securitization by CNH Capital Receivables Inc.
In a Current Report filed on 6-K dated December 5, 2001, CNH announced its
venture with Shanghai Tractor and Internal Combustion Engine Corporation
receives government approval.
In a Current Report filed on 6-K dated December 13, 2001, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated December 21, 2001, CNH announced an
extraordinary general meeting of the Company's shareholders for the purpose of
adopting certain amendments to the articles of association of the Company,
increasing the Company's authorized share capital, and authorizing the board to
resolve on any future issuance of shares for a period of five years.
In a Current Report filed on 6-K dated January 10, 2002, CNH announced the
completion of its global alliance with Kobe Steel, Ltd., and Kobelco
Construction Machinery Co., Ltd. for the development, production and selling of
crawler excavators, including mini-excavators, on a worldwide basis.
In a Current Report filed on 6-K dated January 18, 2002, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated January 23, 2002, CNH announced its
2001 fourth quarter and full year financial results on February 7, 2002. Via a
conference call, senior management discussed the 2001 results and its 2002
outlook.
In a Current Report filed on 6-K dated February 5, 2002, CNH announced the
shareholders of the Company, in an extraordinary general meeting, had approved
adoption of certain amendments to the articles of association of the Company,
increased the Company's authorized share capital, and authorized the board to
resolve on any future issuance of shares for a period of five years.
In a Current Report filed on 6-K dated February 8, 2002, CNH announced its
unaudited financial results for the quarter and year ended December 31, 2001.
47
REPORTS ON FORM 6-K (Concluded)
In a Current Report filed on 6-K dated February 19, 2002, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer
inventory levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated March 20, 2002, CNH announced its
summary of North American retail unit sales activity for selected agricultural
and construction equipment and indicators of North American dealer inventory
levels for selected agricultural equipment for various periods.
In a Current Report filed on 6-K dated March 27, 2002, CNH announced its
shareholders approved a dividend for the year 2001.
In a Current Report filed on 6-K dated March 27, 2002, CNH announced its
plan to increase equity and reduce debt through two separate and concurrent
actions: a public offering of 50 million newly issued shares of common stock,
and the issuance of equity to majority shareholder Fiat, in exchange for debt.
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Case Credit Corporation
By: /s/ Mario Ferla
----------------------
Mario Ferla
Senior Vice President
and Chief Financial
Officer
Date: March 29, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title
/s/ Mario Ferla Principal Executive Officer and Director
---------------
Mario Ferla
/s/ Mario Ferla Principal Financial and Accounting Officer
--------------- and Director
Mario Ferla
Date: March 29, 2002
Supplemental Information To Be Furnished With Reports Filed Pursuant to
Section 15(d) Of The Act By Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of The Act.
No annual report to security holders covering the registrant's fiscal year
ended December 31, 2001, or any proxy material has been sent to the registrant's
security holders.
49
EXHIBIT INDEX
Sequential
Exhibit Page
Number Description of Exhibit Numbers
------ ---------------------- -------
3(a) Certificate of Incorporation of Case Credit Corporation, dated January 26,
1993. (Filed as Exhibit 3(a) to the Company's Registration Statement No.
33-80775, and incorporated herein by reference.)
3(b) By-Laws of Case Credit Corporation, adopted January 26, 1993. (Filed as
Exhibit 3(b) to the Company's Registration Statement No. 33-80775, and
incorporated herein by reference.)
4(a)(1) Indenture between Case Credit Corporation, Case Corporation and The Bank
of New York, dated as of February 1, 1996. (Filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, and incorporated herein by reference.)
4(a)(2) 6 1/8% Note due 2003 of Case Credit Corporation issued pursuant to the
Indenture, dated as of February 1, 1996, between Case Credit Corporation,
Case Corporation and The Bank of New York. (Filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, and incorporated herein by reference.)
4(a)(3) Resolutions of the Board of Directors of Case Credit Corporation
authorizing the public offering of debt securities of Case Credit
Corporation in an aggregate principal amount of up to $300,000,000. (Filed
as Exhibit 4(c) to the Company's Registration Statement No. 33-80775, and
incorporated herein by reference.)
4(a)(4) Resolutions of the Board of Directors of Case Corporation authorizing
the Support Agreement and/or $300,000,000 Guarantee for Case Credit
Corporation Debt Offering. (Filed as Exhibit 4(d) to the Company's
Registration Statement No. 33-80775, and incorporated herein by reference.)
4(b)(1) Indenture between Case Credit Corporation and The Bank of New York,
dated as of October 1, 1997. (Filed as Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.)
4(b)(2) Resolutions to the Board of Directors of Case Credit Corporation
authorizing the public offering of debt securities of Case Credit
Corporation in an aggregate principal amount of up to $700,000,000. (Filed
as Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, and incorporated herein by reference.)
4(b)(3) Form of Medium-Term Note, Series A (Fixed Rate) due from 9 months to 30
years from the date of issue. (Filed as Exhibit 4.1 to the Form 8-K dated
December 19, 1997, and incorporated herein by reference.)
4(b)(4) Form of Medium-Term Note, Series A (Floating Rate) due from 9 months to
30 years from date of issue. (Filed as Exhibit 4.2 to the Form 8-K dated
December 19, 1997, and incorporated herein by reference.)
50
Sequential
Exhibit Page
Number Description of Exhibit Numbers
- ------ ---------------------- -------
4(b)(5) Action of Authorized Officers of Case Credit Corporation, dated
December 8, 1997, establishing the Medium-Term Notes, Series A. (Filed
as Exhibit 4.3 to the Form 8-K dated December 19, 1997, and
incorporated herein by reference.)
4(b)(6) Officers' Certificate and Company Order of Case Credit Corporation,
dated December 8, 1997, related to the Medium-Term Notes, Series A.
(Filed as Exhibit 4.4 to the Form 8-K dated December 19, 1997, and
incorporated herein by reference.)
4(c)(1) Resolutions of the Board of Directors of Case Credit Corporation
authorizing the public offering of debt securities of Case Credit
Corporation in an aggregate principal amount of up to $1,000,000,000.
(Filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, and incorporated herein by
reference.)
4(c)(2) Form of Medium-Term Note, Series B (Fixed Rate) due from 9 months to
30 years from the date of issue. (Filed as Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference.)
4(c)(3) Form of Medium-Term Note, Series B (Floating Rate) due from 9 months
to 30 years from the date of issue. (Filed as Exhibit 4(c) to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference.)
4(c)(4) Action of Authorized Officers of Case Credit Corporation, dated
July 27, 1998, establishing the Medium-Term Notes, Series B. (Filed as
Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by reference.)
4(c)(5) Officers' Certificate and Company Order of Case Credit Corporation,
dated July 27, 1998, related to the Medium-Term Notes, Series B.
(Filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, and incorporated herein by
reference.)
10(a) Support Agreement, dated January 10, 1996, between Case Corporation
and Case Credit Corporation. (Filed as Exhibit 10(a) to the Company's
Registration Statement No. 33- 80775, and incorporated herein by
reference.)
10(b)(1) Revolving Credit and Guarantee Agreement, dated as of August 23, 1996,
among Case Credit Corporation, certain Foreign Subsidiary Borrowers
from time to time parties thereto, the Lenders parties thereto, the
Co-Agents and Lead Managers named therein, and The Chase Manhattan
Bank, as Administrative Agent. (Filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, and incorporated herein by reference.)
10(b)(2) First Amendment, dated as of November 21, 1996, to the Revolving
Credit and Guarantee Agreement dated as of August 23, 1996, among Case
Credit Corporation, certain Foreign Subsidiary Borrowers from time to
time parties thereto, the Lenders parties thereto, the Co-Agents and
Lead Managers named therein, and The Chase
51
Sequential
Exhibit Page
Number Description of Exhibit Numbers
------- ---------------------- ----------
Manhattan Bank, as Administrative Agent. (Filed as Exhibit 10(c) to the
Company's Annual Report for the year ended December 31, 1996, and
incorporated herein by reference.)
10(b)(3) Second Amendment, dated as of August 25, 1997, to the Revolving Credit
and Guarantee Agreement, dated as of August 23, 1996, among Case Credit
Corporation, certain foreign Subsidiaries from time to time parties
thereto, the Lenders parties thereto, the Co-Agents and Lead Managers
named therein, and The Chase Manhattan Bank, as Administrative Agent.
(Filed asExhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, and incorporated herein by reference.)
10(c)(1) Revolving Credit Agreement, dated as of August 23, 1996, among Case
Credit Ltd., the Lenders parties thereto, the Canadian Imperial Bank of
Commerce, as Co-Agent, and The Bank of Nova Scotia, as Agent. (Filed as
Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, and incorporated herein by reference.)
10(c)(2) First Amendment, dated as of November 21, 1992, to the Revolving Credit
Agreement, dated as of August 23, 1996, among Case Credit Ltd., the Lenders
parties thereto, the Canadian Imperial Bank of Commerce, as Co-Agent, and
The Bank of Nova Scotia, as Administrative Agent. (Filed as Exhibit 10(e)
to the Company's Annual Report for the year ended December 31, 1996, and
incorporated herein by reference.)
10(c)(3) Second Amendment, dated as of August 25, 1997, to the Revolving Credit
Agreement, dated as of August 23, 1996, among Case Credit Ltd., the Lenders
parties thereto, Canadian Imperial Bank of Commerce, as Co-Agent, and The
Bank of Nova Scotia, as Administrative Agent. (Filed as Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997, and incorporated herein by reference.)
10(d)(1) Deed of Guarantee and Negative Pledge, dated October 17, 1997, executed
by Case Credit Corporation pursuant to which Case Credit Corporation
guarantees certain indebtedness of Case Credit Australia Pty Ltd. (Filed as
Exhibit 10(c) to the Company's Quarterly Report on Form 10-Q for the
Quarter ended September 30, 1997, and incorporated herein by reference.)
10(d)(2) Bill Facility Agreement, dated October 17, 1997, between Case Credit
Australia Pty Ltd, the lenders parties thereto, and National Australia Bank
Ltd, as Agent. (Filed as Exhibit 10(d) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, and incorporated herein
by reference.)
10(d)(3) Deed Poll, dated October 17, 1997, executed by Case Credit Australia
Pty Limited, pursuant to which Case Credit Australia Pty Ltd may from time
to time issue medium- term notes. (Filed as Exhibit 10(e) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.)
52
Sequential
Exhibit Page
Number Description of Exhibit Numbers
- ------- ---------------------- ----------
10(e)(1) Amended and Restated Transfer and Administration Agreement, dated as of
December 15, 2000, among CNH Capital Receivables Inc., as Transferor, Case
Credit Corporation, in its individual capacity and as Servicer, certain
Conduit Purchasers named therein, certain APA Banks named therein, certain
Funding Agents named therein, and The Chase Manhattan Bank, as
Administrative Agent.
12 Computation of Ratio of Earnings to Fixed Charges.
23 The consent of Arthur Andersen LLP, Independent Public Accountants.
99 Management Rep
53