Company Quick10K Filing
CNH Industrial Capital
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 0 $-0
10-Q 2019-11-12 Quarter: 2019-09-30
10-Q 2019-08-02 Quarter: 2019-06-30
10-Q 2019-05-10 Quarter: 2019-03-31
10-K 2019-03-01 Annual: 2018-12-31
10-Q 2018-11-13 Quarter: 2018-09-30
10-Q 2018-08-03 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-K 2018-03-02 Annual: 2017-12-31
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-06-30
10-Q 2017-05-05 Quarter: 2017-03-31
10-K 2017-03-03 Annual: 2016-12-31
10-Q 2016-11-07 Quarter: 2016-09-30
10-Q 2016-08-03 Quarter: 2016-06-30
10-Q 2016-05-10 Quarter: 2016-03-31
10-K 2016-03-04 Annual: 2015-12-31
10-Q 2015-11-02 Quarter: 2015-09-30
10-Q 2015-08-03 Quarter: 2015-06-30
10-Q 2015-05-07 Quarter: 2015-03-31
10-K 2015-03-05 Annual: 2014-12-31
10-Q 2014-11-06 Quarter: 2014-09-30
10-Q 2014-08-04 Quarter: 2014-06-30
10-Q 2014-05-08 Quarter: 2014-03-31
10-K 2014-03-28 Annual: 2013-12-31
10-Q 2013-11-06 Quarter: 2013-09-30
10-Q 2013-08-05 Quarter: 2013-06-30
10-K 2013-03-04 Annual: 2012-12-31
10-Q 2012-11-16 Quarter: 2012-09-30
8-K 2018-08-14 Off-BS Arrangement, Other Events, Exhibits
8-K 2018-08-09 Other Events, Exhibits
8-K 2018-08-09 Other Events, Exhibits
8-K 2018-04-27 Officers
CNHC 2019-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1: Basis of Presentation
Note 2: New Accounting Pronouncements
Note 3: Accumulated Other Comprehensive Income
Note 4: Receivables
Note 5: Equipment on Operating Leases
Note 6: Credit Facilities and Debt
Note 7: Income Taxes
Note 8: Financial Instruments
Note 9: Geographical Information
Note 10: Related-Party Transactions
Note 11: Commitments and Contingencies
Note 12: Supplemental Condensed Consolidating Financial Information
Note 13: Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 cnhc-20190930ex311f5f002.htm
EX-31.2 cnhc-20190930ex312dd2f4d.htm
EX-32.1 cnhc-20190930ex321b448d4.htm

CNH Industrial Capital Earnings 2019-09-30

CNHC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
BWMG 2 2 2 0 -1 -1 -0 14% 0.1 -79%
WLUC 0 0 0 0 -1 -1 -0 0.0
ASIM 0 0 0 0 -0 -0 -0 0.7 -144%
LVYN 0 0 0 0 -0 -0 -0 0.0
CPA18 2,262 1,385 206 0 127 242 1,036 0% 4.3 6%
HRGG 122 98 0 0 0 2 15 0% 8.5 0%
ASFT 0 0 0 0 -0 -0 0 0% -1.5 -12,811%
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
FULO 2 2 0 0 0 0 -0 -1.5 18%
HICT 0 0 -0 -0 -0 0.2 1,298,000%

10-Q 1 cnhc-20190930x10q.htm 10-Q cnhc_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission File Number: 000-55510

CNH INDUSTRIAL CAPITAL LLC

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

 

39-1937630
(I.R.S. Employer
Identification Number)

5729 Washington Avenue
Racine, Wisconsin
(Address of principal
executive offices)

(262) 636-6011
(Registrant’s telephone number,
including area code)

53406
(Zip code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒    

Emerging growth company ☐

Smaller reporting company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes  ☒ No

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

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

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

PAGE

PART I. FINANCIAL INFORMATION 

Item 1. 

Financial Statements

1

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

           1

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

           2

 

Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)

3

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)

           5

 

Consolidated Statements of Changes in Stockholder’s Equity for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)

           6

 

Condensed Notes to Consolidated Financial Statements (Unaudited)

8

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

*

Item 4. 

Controls and Procedures

44

PART II. OTHER INFORMATION 

Item 1. 

Legal Proceedings

44

Item 1A. 

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

*

Item 3.

Defaults Upon Senior Securities

*

Item 4. 

Mine Safety Disclosures

45

Item 5. 

Other Information

45

Item 6. 

Exhibits

45

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

 

 

PART I. FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

 

2019

    

2018

 

2019

    

2018

REVENUES

  

 

 

 

 

 

  

 

 

 

 

 

Interest income on retail notes and finance leases

 

$

54,110

 

$

52,649

 

$

166,690

 

$

151,480

Interest income on wholesale notes

 

 

17,385

 

 

17,211

 

 

51,120

 

 

49,036

Interest and other income from affiliates

 

 

84,315

 

 

76,142

 

 

257,560

 

 

263,549

Rental income on operating leases

 

 

60,534

 

 

60,027

 

 

181,667

 

 

181,100

Other income

 

 

8,012

 

 

5,252

 

 

18,500

 

 

18,628

Total revenues

  

 

224,356

 

 

211,281

  

 

675,537

 

 

663,793

EXPENSES

  

 

 

 

 

 

  

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense to third parties

 

 

82,411

 

 

79,991

 

 

252,616

 

 

232,847

Interest expense to affiliates

 

 

6,368

 

 

1,566

 

 

9,791

 

 

5,942

Total interest expense

  

 

88,779

 

 

81,557

  

 

262,407

 

 

238,789

Administrative and operating expenses:

  

 

 

 

 

 

  

 

 

 

 

 

Fees charged by affiliates

 

 

11,568

 

 

11,777

 

 

35,523

 

 

35,036

Provision for credit losses

 

 

7,917

 

 

8,286

 

 

27,983

 

 

24,396

Depreciation of equipment on operating leases

 

 

56,070

 

 

54,920

 

 

172,670

 

 

173,174

Other expenses

 

 

10,536

 

 

8,349

 

 

26,795

 

 

32,033

Total administrative and operating expenses

  

 

86,091

 

 

83,332

  

 

262,971

 

 

264,639

Total expenses

  

 

174,870

 

 

164,889

  

 

525,378

 

 

503,428

INCOME BEFORE TAXES

  

 

49,486

 

 

46,392

  

 

150,159

 

 

160,365

Income tax provision

 

 

12,965

 

 

5,111

 

 

36,643

 

 

31,653

NET INCOME

  

$

36,521

 

$

41,281

  

$

113,516

 

$

128,712

 

 

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

1

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

 

2019

    

2018

 

2019

    

2018

NET INCOME

 

$

36,521

 

$

41,281

 

$

113,516

 

$

128,712

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(5,720)

 

 

11,493

 

 

12,214

 

 

(23,475)

Pension liability adjustment

 

 

98

 

 

81

 

 

275

 

 

276

Change in derivative financial instruments

 

 

438

 

 

725

 

 

(2,573)

 

 

719

Total other comprehensive income (loss)

 

 

(5,184)

 

 

12,299

 

 

9,916

 

 

(22,480)

COMPREHENSIVE INCOME

 

$

31,337

 

$

53,580

 

$

123,432

 

$

106,232

 

 

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

2

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

    

September 30, 

    

December 31, 

 

 

2019

 

2018

ASSETS

 

 

 

    

 

 

Cash and cash equivalents

 

$

117,397

 

$

160,328

Restricted cash and cash equivalents

 

 

529,850

 

 

639,543

Receivables, less allowance for credit losses of $72,330 and $74,412, respectively

 

 

9,927,388

 

 

9,950,926

Affiliated accounts and notes receivable

 

 

24,070

 

 

43,389

Equipment on operating leases, net

 

 

1,741,913

 

 

1,724,217

Equipment held for sale

 

 

216,347

 

 

209,991

Goodwill

 

 

109,123

 

 

108,399

Other intangible assets, net

 

 

11,124

 

 

10,182

Other assets

 

 

82,003

 

 

84,937

TOTAL

 

$

12,759,215

 

$

12,931,912

LIABILITIES AND STOCKHOLDER’S EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Short-term debt (including current maturities of long-term debt)

 

$

3,865,460

 

$

4,324,292

Accounts payable and other accrued liabilities

 

 

732,269

 

 

715,778

Affiliated debt

 

 

483,124

 

 

276,271

Long-term debt

 

 

6,363,764

 

 

6,259,839

Total liabilities

 

 

11,444,617

 

 

11,576,180

Commitments and contingent liabilities (Note 11)

 

 

 

 

 

 

Stockholder’s equity:

 

 

 

 

 

 

Member’s capital

 

 

 —

 

 

 —

Paid-in capital

 

 

844,077

 

 

843,643

Accumulated other comprehensive loss

 

 

(137,680)

 

 

(146,999)

Retained earnings

 

 

608,201

 

 

659,088

Total stockholder’s equity

 

 

1,314,598

 

 

1,355,732

TOTAL

 

$

12,759,215

 

$

12,931,912

 

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

3

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018

(Dollars in thousands)

(Unaudited)

 

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

 

 

 

 

 

 

 

 

 

 

 

September 30, 

    

December 31, 

 

 

2019

 

2018

Restricted cash and cash equivalents

 

$

529,850

 

$

639,543

Receivables, less allowance for credit losses of $49,028 and $54,124, respectively

 

 

6,871,451

 

 

6,687,828

TOTAL

 

$

7,401,301

 

$

7,327,371

 

 

 

 

 

 

 

Short-term debt (including current maturities of long-term debt)

 

$

3,326,333

 

$

3,241,347

Long-term debt

 

 

3,398,728

 

 

3,442,286

TOTAL

 

$

6,725,061

 

$

6,683,633

 

 

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

4

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

CASH FLOWS FROM OPERATING ACTIVITIES

  

 

 

 

 

 

Net income

 

$

113,516

 

$

128,712

Adjustments to reconcile net income to net cash from (used in) operating activities:

 

 

 

 

 

 

Depreciation on property and equipment and equipment on operating leases

 

 

172,671

 

 

173,180

Amortization of intangibles

 

 

1,375

 

 

1,602

Provision for credit losses

 

 

27,983

 

 

24,396

Deferred income tax expense (benefit)

 

 

44,055

 

 

(10,368)

Changes in components of working capital:

 

 

 

 

 

 

Change in affiliated accounts and notes receivables

 

 

19,643

 

 

(24,322)

Change in other assets and equipment held for sale

 

 

(3,570)

 

 

(23,698)

Change in accounts payable and other accrued liabilities

 

 

(34,061)

 

 

(20,334)

Net cash from (used in) operating activities

  

 

341,612

 

 

249,168

CASH FLOWS FROM INVESTING ACTIVITIES

  

 

 

 

 

 

Cost of receivables acquired

 

 

(8,149,836)

 

 

(8,185,725)

Collections of receivables

 

 

8,200,468

 

 

8,594,883

Purchase of equipment on operating leases

 

 

(514,369)

 

 

(431,457)

Proceeds from disposal of equipment on operating leases

 

 

337,284

 

 

324,304

Change in property, equipment and software, net

 

 

(2,317)

 

 

(4,143)

Net cash from (used in) investing activities

  

 

(128,770)

 

 

297,862

CASH FLOWS FROM FINANCING ACTIVITIES

  

 

 

 

 

 

Proceeds from issuance of affiliated debt

 

 

1,370,930

 

 

674,596

Payment of affiliated debt

 

 

(1,164,078)

 

 

(1,040,598)

Proceeds from issuance of long-term debt

 

 

1,945,345

 

 

2,574,196

Payment of long-term debt

 

 

(2,475,771)

 

 

(3,091,688)

Change in short-term borrowings, net

 

 

123,108

 

 

138,997

Dividends paid to CNH Industrial America LLC

 

 

(165,000)

 

 

(60,000)

Net cash from (used in) financing activities

  

 

(365,466)

 

 

(804,497)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

  

 

(152,624)

 

 

(257,467)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

  

 

 

 

 

 

Beginning of period

 

 

799,871

 

 

875,558

End of period

  

$

647,247

 

$

618,091

CASH PAID DURING THE PERIOD FOR INTEREST

  

$

243,398

 

$

221,751

CASH PAID (RECEIVED) DURING THE PERIOD FOR TAXES

  

$

(40,936)

 

$

50,761

 

 

 

 

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

5

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Member’s

 

Paid-in

 

Comprehensive

 

Retained

 

 

 

 

 

Capital

 

Capital

 

Income (Loss)

 

Earnings

 

Total

BALANCE - January 1, 2019

  

$

 —

 

$

843,643

 

$

(146,999)

 

$

659,088

 

$

1,355,732

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

39,211

 

 

39,211

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

8,690

 

 

 —

 

 

8,690

Stock compensation

 

 

 —

 

 

164

 

 

 —

 

 

 —

 

 

164

Reclassification of certain tax effects

 

 

 —

 

 

 —

 

 

(597)

 

 

597

 

 

 —

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

88

 

 

 —

 

 

88

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

(1,950)

 

 

 —

 

 

(1,950)

BALANCE - March 31, 2019

 

$

 —

 

$

843,807

 

$

(140,768)

 

$

698,896

 

$

1,401,935

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

37,784

 

 

37,784

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(125,000)

 

 

(125,000)

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

9,244

 

 

 —

 

 

9,244

Stock compensation

 

 

 —

 

 

94

 

 

 —

 

 

 —

 

 

94

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

89

 

 

 —

 

 

89

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

(1,061)

 

 

 —

 

 

(1,061)

BALANCE - June 30, 2019

 

$

 —

 

$

843,901

 

$

(132,496)

 

$

611,680

 

$

1,323,085

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

36,521

 

 

36,521

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(40,000)

 

 

(40,000)

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

(5,720)

 

 

 —

 

 

(5,720)

Stock compensation

 

 

 —

 

 

176

 

 

 —

 

 

 —

 

 

176

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

98

 

 

 —

 

 

98

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

438

 

 

 —

 

 

438

BALANCE - September 30, 2019

 

$

 —

 

$

844,077

 

$

(137,680)

 

$

608,201

 

$

1,314,598

 

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

6

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

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

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Accumulated

    

 

 

    

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Member’s

 

Paid-in

 

Comprehensive

 

Retained

 

 

 

 

 

Capital

 

Capital

 

Income (Loss)

 

Earnings

 

Total

BALANCE - January 1, 2018

  

$

 —

 

$

843,559

 

$

(100,163)

 

$

632,243

 

$

1,375,639

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

39,803

 

 

39,803

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(20,000)

 

 

(20,000)

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

(18,000)

 

 

 —

 

 

(18,000)

Stock compensation

 

 

 —

 

 

167

 

 

 —

 

 

 —

 

 

167

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

106

 

 

 —

 

 

106

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

78

 

 

 —

 

 

78

BALANCE - March 31, 2018

 

$

 —

 

$

843,726

 

$

(117,979)

 

$

652,046

 

$

1,377,793

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

47,628

 

 

47,628

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(20,000)

 

 

(20,000)

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

(16,968)

 

 

 —

 

 

(16,968)

Stock compensation

 

 

 —

 

 

96

 

 

 —

 

 

 —

 

 

96

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

89

 

 

 —

 

 

89

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

(84)

 

 

 —

 

 

(84)

BALANCE - June 30, 2018

 

$

 —

 

$

843,822

 

$

(134,942)

 

$

679,674

 

$

1,388,554

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

41,281

 

 

41,281

Dividends paid to CNH Industrial America LLC

 

 

 —

 

 

 —

 

 

 —

 

 

(20,000)

 

 

(20,000)

Foreign currency translation adjustment

 

 

 —

 

 

 —

 

 

11,493

 

 

 —

 

 

11,493

Stock compensation

 

 

 —

 

 

160

 

 

 —

 

 

 —

 

 

160

Pension liability adjustment, net of tax

 

 

 —

 

 

 —

 

 

81

 

 

 —

 

 

81

Change in derivative financial instruments, net of tax

 

 

 —

 

 

 —

 

 

725

 

 

 —

 

 

725

BALANCE - September 30, 2018

 

$

 —

 

$

843,982

 

$

(122,643)

 

$

700,955

 

$

1,422,294

 

 

 

 

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

7

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

(Unaudited)

 

 

NOTE 1: BASIS OF PRESENTATION

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

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

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

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

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

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements Adopted in 2019

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

8

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

 

 

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

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

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

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

New Accounting Pronouncements Not Yet Adopted

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

9

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

 

 

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

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

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

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

10

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

 

 

NOTE 3: ACCUMULATED OTHER COMPREHENSIVE INCOME

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

on Derivatives

    

Total

Beginning balance, gross

 

$

(128,792)

 

$

(3,836)

 

$

(1,071)

 

$

(133,699)

Tax asset

 

 

 —

 

 

919

 

 

284

 

 

1,203

Beginning balance, net of tax

 

 

(128,792)

 

 

(2,917)

 

 

(787)

 

 

(132,496)

Other comprehensive income (loss) before reclassifications

 

 

(5,720)

 

 

(97)

 

 

761

 

 

(5,056)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

227

 

 

(166)

 

 

61

Tax effects

 

 

 —

 

 

(32)

 

 

(157)

 

 

(189)

Net current-period other comprehensive income (loss)

 

 

(5,720)

 

 

98

 

 

438

 

 

(5,184)

Total

 

$

(134,512)

 

$

(2,819)

 

$

(349)

 

$

(137,680)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

on Derivatives

    

Total

Beginning balance, gross

 

$

(146,726)

 

$

(4,070)

 

$

3,025

 

$

(147,771)

Tax asset

 

 

 —

 

 

1,573

 

 

(801)

 

 

772

Beginning balance, net of tax

 

 

(146,726)

 

 

(2,497)

 

 

2,224

 

 

(146,999)

Other comprehensive income (loss) before reclassifications

 

 

12,214

 

 

(320)

 

 

(2,978)

 

 

8,916

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

684

 

 

(523)

 

 

161

Tax effects

 

 

 —

 

 

(89)

 

 

928

 

 

839

Net current-period other comprehensive income (loss)

 

 

12,214

 

 

275

 

 

(2,573)

 

 

9,916

Reclassification of stranded tax effects

 

 

 —

 

 

(597)

 

 

 —

 

 

(597)

Total

 

$

(134,512)

 

$

(2,819)

 

$

(349)

 

$

(137,680)

11

Table of Contents

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

Derivatives

    

Total

Beginning balance, gross

 

$

(133,685)

 

$

(4,693)

 

$

2,325

 

$

(136,053)

Tax asset

 

 

 —

 

 

1,726

 

 

(615)

 

 

1,111

Beginning balance, net of tax

 

 

(133,685)

 

 

(2,967)

 

 

1,710

 

 

(134,942)

Other comprehensive income (loss) before reclassifications

 

 

11,493

 

 

(58)

 

 

1,114

 

 

12,549

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

165

 

 

(128)

 

 

37

Tax effects

 

 

 —

 

 

(26)

 

 

(261)

 

 

(287)

Net current-period other comprehensive income (loss)

 

 

11,493

 

 

81

 

 

725

 

 

12,299

Total

 

$

(122,192)

 

$

(2,886)

 

$

2,435

 

$

(122,643)

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