Company Quick10K Filing
Quick10K
CNH Industrial Capital
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
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
GDRZF Gold Reserve 174
FSNT Fuse Enterprises 91
OPVS Nanoflex Power 35
LFER Life On Earth 6
BZYR Burzynski Research Institute 5
REXX Rex Energy 3
SIRE Southwest Iowa Renewable Energy 0
GNLN Greenlane Holdings 0
ISRB Inspired Builders 0
NBIO Nascent Biotech 0
CNHC 2019-06-30
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-20190630ex311282eac.htm
EX-31.2 cnhc-20190630ex3123211a9.htm
EX-32.1 cnhc-20190630ex3217501ff.htm

CNH Industrial Capital Earnings 2019-06-30

CNHC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cnhc-20190630x10q.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 June 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 June 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 Six Months Ended June 30, 2019 and 2018 (Unaudited)

           1

 

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

           2

 

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

3

 

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

           5

 

Consolidated Statements of Changes in Stockholder’s Equity for the Six Months Ended June 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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

June 30, 

 

June 30, 

 

 

2019

    

2018

 

2019

    

2018

REVENUES

  

 

 

 

 

 

  

 

 

 

 

 

Interest income on retail notes and finance leases

 

$

57,112

 

$

50,201

 

$

112,580

 

$

98,831

Interest income on wholesale notes

 

 

16,993

 

 

16,256

 

 

33,735

 

 

31,825

Interest and other income from affiliates

 

 

88,992

 

 

92,392

 

 

173,245

 

 

187,407

Rental income on operating leases

 

 

60,492

 

 

59,957

 

 

121,133

 

 

121,073

Other income

 

 

5,523

 

 

7,335

 

 

10,488

 

 

13,376

Total revenues

  

 

229,112

 

 

226,141

  

 

451,181

 

 

452,512

EXPENSES

  

 

 

 

 

 

  

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense to third parties

 

 

84,989

 

 

76,020

 

 

170,205

 

 

152,856

Interest expense to affiliates

 

 

258

 

 

2,784

 

 

3,423

 

 

4,376

Total interest expense

  

 

85,247

 

 

78,804

  

 

173,628

 

 

157,232

Administrative and operating expenses:

  

 

 

 

 

 

  

 

 

 

 

 

Fees charged by affiliates

 

 

11,574

 

 

11,304

 

 

23,955

 

 

23,259

Provision for credit losses

 

 

13,097

 

 

4,295

 

 

20,066

 

 

16,110

Depreciation of equipment on operating leases

 

 

55,680

 

 

56,569

 

 

116,600

 

 

118,254

Other expenses

 

 

13,832

 

 

13,119

 

 

16,259

 

 

23,684

Total administrative and operating expenses

  

 

94,183

 

 

85,287

  

 

176,880

 

 

181,307

Total expenses

  

 

179,430

 

 

164,091

  

 

350,508

 

 

338,539

INCOME BEFORE TAXES

  

 

49,682

 

 

62,050

  

 

100,673

 

 

113,973

Income tax provision

 

 

11,898

 

 

14,422

 

 

23,678

 

 

26,542

NET INCOME

  

$

37,784

 

$

47,628

  

$

76,995

 

$

87,431

 

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

1

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

June 30, 

 

June 30, 

 

 

2019

    

2018

 

2019

    

2018

NET INCOME

 

$

37,784

 

$

47,628

 

$

76,995

 

$

87,431

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

9,244

 

 

(16,968)

 

 

17,934

 

 

(34,968)

Pension liability adjustment

 

 

89

 

 

89

 

 

177

 

 

195

Change in derivative financial instruments

 

 

(1,061)

 

 

(84)

 

 

(3,011)

 

 

(6)

Total other comprehensive income (loss)

 

 

8,272

 

 

(16,963)

 

 

15,100

 

 

(34,779)

COMPREHENSIVE INCOME

 

$

46,056

 

$

30,665

 

$

92,095

 

$

52,652

 

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

2

CNH INDUSTRIAL CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

 

2019

 

2018

ASSETS

 

 

 

    

 

 

Cash and cash equivalents

 

$

97,644

 

$

160,328

Restricted cash and cash equivalents

 

 

488,562

 

 

639,543

Receivables, less allowance for credit losses of $77,610 and $74,412, respectively

 

 

10,189,998

 

 

9,950,926

Affiliated accounts and notes receivable

 

 

12,666

 

 

43,389

Equipment on operating leases, net

 

 

1,724,634

 

 

1,724,217

Equipment held for sale

 

 

236,349

 

 

209,991

Goodwill

 

 

109,443

 

 

108,399

Other intangible assets, net

 

 

11,123

 

 

10,182

Other assets

 

 

78,431

 

 

84,937

TOTAL

 

$

12,948,850

 

$

12,931,912

LIABILITIES AND STOCKHOLDER’S EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

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

 

$

4,197,425

 

$

4,324,292

Accounts payable and other accrued liabilities

 

 

781,330

 

 

715,778

Affiliated debt

 

 

346,482

 

 

276,271

Long-term debt

 

 

6,300,528

 

 

6,259,839

Total liabilities

 

 

11,625,765

 

 

11,576,180

Commitments and contingent liabilities (Note 10)

 

 

 

 

 

 

Stockholder’s equity:

 

 

 

 

 

 

Member’s capital

 

 

 —

 

 

 —

Paid-in capital

 

 

843,901

 

 

843,643

Accumulated other comprehensive loss

 

 

(132,496)

 

 

(146,999)

Retained earnings

 

 

611,680

 

 

659,088

Total stockholder’s equity

 

 

1,323,085

 

 

1,355,732

TOTAL

 

$

12,948,850

 

$

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 JUNE 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.

 

 

 

 

 

 

 

 

 

 

 

June 30, 

    

December 31, 

 

 

2019

 

2018

Restricted cash and cash equivalents

 

$

488,562

 

$

639,543

Receivables, less allowance for credit losses of $51,447 and $54,124, respectively

 

 

6,735,185

 

 

6,687,828

TOTAL

 

$

7,223,747

 

$

7,327,371

 

 

 

 

 

 

 

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

 

$

3,258,797

 

$

3,241,347

Long-term debt

 

 

3,337,045

 

 

3,442,286

TOTAL

 

$

6,595,842

 

$

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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

CASH FLOWS FROM OPERATING ACTIVITIES

  

 

 

 

 

 

Net income

 

$

76,995

 

$

87,431

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

 

 

 

 

 

 

Depreciation on property and equipment and equipment on operating leases

 

 

116,601

 

 

118,259

Amortization of intangibles

 

 

974

 

 

1,072

Provision for credit losses

 

 

20,066

 

 

16,110

Deferred income tax (benefit) expense

 

 

28,910

 

 

(27,944)

Changes in components of working capital:

 

 

 

 

 

 

Change in affiliated accounts and notes receivables

 

 

30,737

 

 

(464,469)

Change in other assets and equipment held for sale

 

 

8,599

 

 

(10,011)

Change in accounts payable and other accrued liabilities

 

 

21,943

 

 

(23,089)

Net cash from (used in) operating activities

  

 

304,825

 

 

(302,641)

CASH FLOWS FROM INVESTING ACTIVITIES

  

 

 

 

 

 

Cost of receivables acquired

 

 

(5,539,579)

 

 

(5,411,526)

Collections of receivables

 

 

5,366,432

 

 

5,740,541

Purchase of equipment on operating leases

 

 

(347,175)

 

 

(241,788)

Proceeds from disposal of equipment on operating leases

 

 

220,817

 

 

222,126

Change in property, equipment and software, net

 

 

(1,916)

 

 

(2,816)

Net cash from (used in) investing activities

  

 

(301,421)

 

 

306,537

CASH FLOWS FROM FINANCING ACTIVITIES

  

 

 

 

 

 

Proceeds from issuance of affiliated debt

 

 

653,140

 

 

670,886

Payment of affiliated debt

 

 

(583,222)

 

 

(506,385)

Proceeds from issuance of long-term debt

 

 

1,945,345

 

 

1,264,266

Payment of long-term debt

 

 

(1,958,759)

 

 

(2,110,344)

Change in short-term borrowings, net

 

 

(148,573)

 

 

489,271

Dividends paid to CNH Industrial America LLC

 

 

(125,000)

 

 

(40,000)

Net cash from (used in) financing activities

  

 

(217,069)

 

 

(232,306)

DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

  

 

(213,665)

 

 

(228,410)

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

  

 

 

 

 

 

Beginning of period

 

 

799,871

 

 

875,558

End of period

  

$

586,206

 

$

647,148

CASH PAID DURING THE PERIOD FOR INTEREST

  

$

170,758

 

$

161,573

CASH PAID (RECEIVED) DURING THE PERIOD FOR TAXES

  

$

(37,895)

 

$

33,037

 

 

 

 

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 SIX MONTHS ENDED JUNE 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

 

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 SIX MONTHS ENDED JUNE 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

 

 

 

 

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 currently evaluating data requirements and methodologies to assess the effect of the new guidance on its consolidated financial statements.

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.

NOTE 3: ACCUMULATED OTHER COMPREHENSIVE INCOME

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

on Derivatives

    

Total

Beginning balance, gross

 

$

(138,036)

 

$

(3,953)

 

$

372

 

$

(141,617)

Tax asset

 

 

 —

 

 

947

 

 

(98)

 

 

849

Beginning balance, net of tax

 

 

(138,036)

 

 

(3,006)

 

 

274

 

 

(140,768)

Other comprehensive income (loss) before reclassifications

 

 

9,244

 

 

(112)

 

 

(1,328)

 

 

7,804

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

229

 

 

(115)

 

 

114

Tax effects

 

 

 —

 

 

(28)

 

 

382

 

 

354

Net current-period other comprehensive income (loss)

 

 

9,244

 

 

89

 

 

(1,061)

 

 

8,272

Total

 

$

(128,792)

 

$

(2,917)

 

$

(787)

 

$

(132,496)

10

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 six months ended June 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

 

 

17,934

 

 

(223)

 

 

(3,739)

 

 

13,972

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

457

 

 

(357)

 

 

100

Tax effects

 

 

 —

 

 

(57)

 

 

1,085

 

 

1,028

Net current-period other comprehensive income (loss)

 

 

17,934

 

 

177

 

 

(3,011)

 

 

15,100

Reclassification of stranded tax effects

 

 

 —

 

 

(597)

 

 

 —

 

 

(597)

Total

 

$

(128,792)

 

$

(2,917)

 

$

(787)

 

$

(132,496)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

Derivatives

    

Total

Beginning balance, gross

 

$

(116,717)

 

$

(4,811)

 

$

2,439

 

$

(119,089)

Tax asset

 

 

 —

 

 

1,755

 

 

(645)

 

 

1,110

Beginning balance, net of tax

 

 

(116,717)

 

 

(3,056)

 

 

1,794

 

 

(117,979)

Other comprehensive income (loss) before reclassifications

 

 

(16,968)

 

 

(37)

 

 

(33)

 

 

(17,038)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

155

 

 

(81)

 

 

74

Tax effects

 

 

 —

 

 

(29)

 

 

30

 

 

 1

Net current-period other comprehensive income (loss)

 

 

(16,968)

 

 

89

 

 

(84)

 

 

(16,963)

Total

 

$

(133,685)

 

$

(2,967)

 

$

1,710

 

$

(134,942)

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 six months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

Unrealized

 

 

 

 

 

Translation

 

Pension

 

(Losses) Gains

 

 

 

 

    

Adjustment

    

Liability

    

Derivatives

    

Total

Beginning balance, gross

 

$

(98,717)

 

$

(4,952)

 

$

2,333

 

$

(101,336)

Tax asset

 

 

 —

 

 

1,790

 

 

(617)

 

 

1,173

Beginning balance, net of tax

 

 

(98,717)

 

 

(3,162)

 

 

1,716

 

 

(100,163)

Other comprehensive income (loss) before reclassifications

 

 

(34,968)

 

 

(72)

 

 

(83)

 

 

(35,123)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

 —

 

 

331

 

 

75

 

 

406

Tax effects

 

 

 —

 

 

(64)

 

 

 2

 

 

(62)

Net current-period other comprehensive income (loss)

 

 

(34,968)

 

 

195

 

 

(6)

 

 

(34,779)

Total

 

$

(133,685)

 

$

(2,967)

 

$

1,710

 

$

(134,942)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

    

 

 

 

June 30, 

 

June 30, 

 

 

 

    

2019

    

2018

    

2019

    

2018

    

Affected Line Item

Amortization of defined benefit pension items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(229)

 

$

(155)

 

$

(457)

 

$

(331)

 

Various line items individually insignificant

 

 

 

(229)

 

 

(155)

 

 

(457)

 

 

(331)

 

Income before taxes

 

 

 

55

 

 

38

 

 

111

 

 

82

 

Income tax benefit

 

 

$

(174)

 

$

(117)

 

$

(346)