CNH Industrial N.V. [CNHI] Filings

10-Q 1 cnhi-20230930.htm 10-Q cnhi-20230930

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, 2023


☐						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: 001-36085

CNH INDUSTRIAL N.V.

(Exact name of registrant as specified in its charter)

Netherlands

98-1125413

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Cranes Farm Road, Basildon, Essex, SS14 3AD, United Kingdom

(Address of principal executive offices)

Registrant’s telephone number including area code: +44 207 925 1964

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, par value €0.01

CNHI

New York Stock Exchange 1

3.850% Notes due 2027

CNHI27

New York Stock Exchange

1 In addition to the New York Stock Exchange, CNHI common shares are listed on Euronext Milan, the regulated market of Borsa Italiana, in Italy.

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. þ Yes o 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). þ Yes o 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	☐	Smaller reporting company	☐
		Emerging growth 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 Exchange Act). ☐ Yes þ No

At September 30, 2023, 1,330,483,676 common shares, par value €0.01 per share, of the registrant were outstanding.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION
Item 1	Financial statements	1
Item 2	Management's discussion and analysis of financial condition and results of operations	32
Item 3	Quantitative and qualitative disclosures about market risk	53
Item 4	Controls and procedures	53

PART II – OTHER INFORMATION
Item 1	Legal proceedings	54
Item 1A	Risk factors	54
Item 2	Unregistered sales of equity securities and use of proceeds	55
Item 3	Default upon senior securities	55
Item 4	Mine safety disclosures	55
Item 5	Other information	55
Item 6	Exhibits	56

Note:

CNH Industrial N.V. qualifies as a Foreign Private Issuer, as determined by Rule 3b-4 under the Securities Exchange Act of 1934 (the "Exchange Act") and is exempt from filing quarterly reports on Form 10-Q by virtue of Rules 13a-13 and 15d-13 under the Exchange Act. CNH Industrial N.V. has voluntarily elected to file this quarterly financial report using Form 10-Q.

As a Foreign Private Issuer, CNH Industrial N.V. is also exempt from the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and its officers, directors, and principal shareholders are not subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

PART I - FINANCIAL INFORMATION

CNH INDUSTRIAL N.V.

CONSOLIDATED BALANCE SHEETS

As of September 30, 2023 and December 31, 2022

(Unaudited)


(in millions of dollars)	September 30, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	2,979	$	4,376
Restricted cash	706		753
Trade receivables, net	199		172
Financing receivables, net	22,240		19,260
Receivables from Iveco Group N.V.	229		298
Inventories, net	6,447		4,811
Property, plant and equipment, net	1,681		1,532
Investments in unconsolidated subsidiaries and affiliates	477		385
Equipment under operating leases	1,454		1,502
Goodwill, net	3,490		3,322
Other intangible assets, net	1,237		1,129
Deferred tax assets	704		433
Derivative assets	163		189
Other assets	1,035		1,219
Total Assets	$	43,041	$	39,381
Liabilities and Equity
Debt	$	24,958	$	22,962
Payables to Iveco Group N.V.	76		156
Trade payables	3,574		3,702
Deferred tax liabilities	26		85
Pension, postretirement and other postemployment benefits	421		449
Derivative liabilities	246		204
Other liabilities	5,625		4,847
Total Liabilities	34,926		32,405
Redeemable noncontrolling interest	58		49
Common shares, €0.01, par value; outstanding 1,330,483,676 common shares and 371,000,610 loyalty program special voting shares at 9/30/2023; and outstanding 1,344,240,971 common shares and 371,072,953 loyalty program special voting shares at 12/31/2022	25		25
Treasury stock, at cost; 33,916,520 common shares at 9/30/2023 and 20,159,225 common shares at 12/31/2022	(437)		(230)
Additional paid in capital	1,563		1,504
Retained earnings	9,134		7,906
Accumulated other comprehensive income (loss)	(2,300)		(2,278)
Noncontrolling interests	72		—
Total Equity	8,057		6,927
Total Liabilities and Equity	$	43,041	$	39,381

See accompanying notes to the consolidated financial statements

CNH INDUSTRIAL N.V.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions of dollars and shares, except per share amounts)	2023		2022		2023		2022
Revenues
Net sales	$	5,332	$	5,396	$	16,062	$	15,189
Finance, interest and other income	654		485		1,833		1,419
Total Revenues	5,986		5,881		17,895		16,608
Costs and Expenses
Cost of goods sold	4,059		4,156		12,133		11,819
Selling, general and administrative expenses	462		422		1,385		1,224
Research and development expenses	266		213		766		609
Restructuring expenses	5		11		8		19
Interest expense	346		190		941		490
Other, net	186		159		536		490
Total Costs and Expenses	5,324		5,151		15,769		14,651
Income of Consolidated Group before Income Taxes	662		730		2,126		1,957
Income tax (expense) benefit	(171)		(192)		(536)		(579)
Equity in income of unconsolidated subsidiaries and affiliates	79		21		176		69
Net income (loss)	570		559		1,766		1,447
Net income (loss) attributable to noncontrolling interests	3		3		11		10
Net income (loss) attributable to CNH Industrial N.V.	$	567	$	556	$	1,755	$	1,437

Earnings per share attributable to common shareholders
Basic	$	0.43	$	0.41	$	1.31	$	1.06
Diluted	$	0.42	$	0.41	$	1.30	$	1.06
Weighted average shares outstanding
Basic	1,332		1,350		1,337		1,354
Diluted	1,351		1,355		1,355		1,359

Cash dividends declared per common share	$	—	$	—	$	0.396	$	0.302

See accompanying notes to the consolidated financial statements

CNH INDUSTRIAL N.V.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions of dollars)	2023		2022		2023		2022
Net income (loss)	$	570	$	559	$	1,766	$	1,447
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on cash flow hedges	(33)		(10)		(59)		(89)
Changes in retirement plans’ funded status	(3)		(14)		(11)		(64)
Foreign currency translation	(14)		96		70		427
Share of other comprehensive income (loss) of entities using the equity method	(8)		(13)		(23)		(42)
Other comprehensive income (loss), net of tax	(58)		59		(23)		232
Comprehensive income (loss)	512		618		1,743		1,679
Less: Comprehensive income (loss) attributable to noncontrolling interests	(1)		3		10		9
Comprehensive income (loss) attributable to CNH Industrial N.V.	$	513	$	615	$	1,733	$	1,670

See accompanying notes to the consolidated financial statements

CNH INDUSTRIAL N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2023 and 2022

(Unaudited)


	Nine Months Ended September 30,
(in millions of dollars)	2023		2022
Cash Flows from Operating Activities
Net Income (loss)	$	1,766	$	1,447
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization expense excluding depreciation and amortization of assets under operating leases	276		252
Depreciation and amortization expense of assets under operating leases	140		155
(Gain) loss on disposal of assets, net	21		22
Undistributed (income) loss of unconsolidated subsidiaries	(125)		(36)
Other non-cash items, net	136		130
Changes in operating assets and liabilities:
Provisions	618		(21)
Deferred income taxes	(319)		83
Trade and financing receivables related to sales, net	(1,602)		(1,279)
Inventories, net	(1,443)		(1,121)
Trade payables	(101)		(120)
Other assets and liabilities	25		(398)
Net cash provided (used) by operating activities	(608)		(886)
Cash Flows from Investing Activities
Additions to retail receivables	(5,689)		(4,179)
Collections of retail receivables	4,308		3,342
Proceeds from the sale of assets, excluding assets under operating leases	1		25
Expenditures for property, plant and equipment and intangible assets, excluding assets under operating leases	(401)		(245)
Expenditures for assets under operating leases	(384)		(368)
Other	123		(165)
Net cash provided (used) by investing activities	(2,042)		(1,590)
Cash Flows from Financing Activities
Proceeds from long-term debt	7,510		7,727
Payments of long-term debt	(6,478)		(6,733)
Net increase in other financial liabilities	930		340
Dividends paid	(531)		(416)
Purchase of treasury stock and other	(224)		(116)
Net cash provided (used) by financing activities	1,207		802
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(1)		(357)
Net increase (decrease) in cash, cash equivalents and restricted cash	(1,444)		(2,031)
Cash, cash equivalents and restricted cash, beginning of year	5,129		5,845
Cash, cash equivalents and restricted cash, end of period	$	3,685	$	3,814

See accompanying notes to the consolidated financial statements

CNH INDUSTRIAL N.V.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Nine Months Ended September 30, 2023

(Unaudited)


(in millions of dollars)	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
Balance December 31, 2022	$	25	$	(230)	$	1,504	$	7,906	$	(2,278)	$	—	$	6,927	$	49
Net income (loss)	—		—		—		482		—		—		482		4
Other comprehensive income (loss), net of tax	—		—		—		—		(38)		1		(37)		—
Dividends paid	—		—		—		—		—		—		—		(1)
Acquisition of treasury stock	—		(71)		—		—		—		—		(71)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		—		—		—		—		—		—		—
Share-based compensation expense	—		—		24		—		—		—		24		—
Other changes	—		—		—		—		—		74		74		—
Balance March 31, 2023	25		(301)		1,528		8,388		(2,316)		75		7,399		52
Net income (loss)	—		—		—		706		—		—		706		4
Other comprehensive income (loss), net of tax	—		—		—		—		70		2		72		—
Dividends paid	—		—		—		(527)		—		—		(527)		(1)
Acquisition of treasury stock	—		(98)		—		—		—		—		(98)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		17		(17)		—		—		—		—		—
Share-based compensation expense	—		—		25		—		—		—		25		—
Other changes	—		—		—		—		—		(2)		(2)		—
Balance June 30, 2023	25		(382)		1,536		8,567		(2,246)		75		7,575		55
Net income (loss)	—		—		—		567		—		(2)		565		5
Other comprehensive income (loss), net of tax	—		—		—		—		(54)		(4)		(58)		—
Dividends paid	—		—		—		—		—		—		—		(2)
Acquisition of treasury stock	—		(55)		—		—		—		—		(55)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		—		—		—		—		—		—		—
Share-based compensation expense	—		—		28		—		—		—		28		—
Other changes	—		—		(1)		—		—		3		2		—
Balance September 30, 2023	$	25	$	(437)	$	1,563	$	9,134	$	(2,300)	$	72	$	8,057	$	58

See accompanying notes to the consolidated financial statements

CNH INDUSTRIAL N.V.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Nine Months Ended September 30, 2022

(Unaudited)


(in millions of dollars)	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
Balance December 31, 2021, as previously reported	$	25	$	(84)	$	4,464	$	4,818	$	(2,445)	$	30	$	6,808	$	45
Demerger of Iveco Group	—		—		(3,044)		1,464		(52)		(22)		(1,654)		—
Balance January 1, 2022	25		(84)		1,420		6,282		(2,497)		8		5,154		45
Net income (loss)	—		—		—		333		—		—		333		3
Other comprehensive income (loss), net of tax	—		—		—		—		130		—		130		—
Dividends paid	—		—		—		—		—		—		—		(1)
Acquisition of treasury stock	—		(21)		—		—		—		—		(21)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		—		—		—		—		—		—		—
Share-based compensation expense	—		—		18		—		—		—		18		—
Other changes	—		—		(4)		—		—		(1)		(5)		—
Balance March 31, 2022	25		(105)		1,434		6,615		(2,367)		7		5,609		47
Net income (loss)	—		—		—		548		—		—		548		4
Other comprehensive income (loss), net of tax	—		—		—		—		44		(1)		43		—
Dividends paid	—		—		—		(412)		—		—		(412)		(2)
Acquisition of treasury stock	—		(19)		—		—		—		—		(19)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		3		(3)		—		—		—		—		—
Share-based compensation expense	—		—		21		—		—		—		21		—
Other changes	—		—		4		—		—		—		4		—
Balance June 30, 2022	25		(121)		1,456		6,751		(2,323)		6		5,794		49
Net income (loss)	—		—		—		556		—		(2)		554		5
Other comprehensive income (loss), net of tax	—		—		—		—		59		—		59		—
Dividends paid	—		—		—		—		—		—		—		(1)
Acquisition of treasury stock	—		(76)		—		—		—		—		(76)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		4		(4)		—		—		—		—		—
Share-based compensation expense	—		—		23		—		—		—		23		—
Other changes	—		—		4		—		—		(1)		3		(1)
Balance September 30, 2022	$	25	$	(193)	$	1,479	$	7,307	$	(2,264)	$	3	$	6,357	$	52

See accompanying notes to the consolidated financial statements.

CNH INDUSTRIAL N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in and under the laws of the Netherlands. CNH Industrial has its corporate seat in Amsterdam, the Netherlands, and its principal office in Basildon, England, United Kingdom. Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial”, "CNH" and the “Company” refer to CNH Industrial and its consolidated subsidiaries.

The consolidated financial statements of CNH Industrial N.V. and its consolidated subsidiaries have been voluntarily prepared by the Company without audit. Although prepared on a voluntary basis, the consolidated financial statements included in the report comply in all material respects with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) governing interim financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting only of normal recurring adjustments, have been reflected in these consolidated financial statements. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. These interim financial statements should be read in conjunction with the financial statements and the notes thereto appearing in the Company’s annual report on Form 10-K for the year ended December 31, 2022. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related accompanying notes and disclosures. Significant uncertainties, including rising inflation, and geopolitical events may impact the Company's business, which may cause actual results to differ materially from the estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with goodwill, indefinite life intangibles, definite life intangibles, long-lived impairment tests, determination of discount rates and other assumptions for pension and other post-retirement benefit expense and income taxes. Changes in estimates are recorded in results of operations in the period during which the events or circumstances giving rise to such changes occur.

Certain financial information in this report has been presented by geographic region. Our geographic regions are: (1) North America; (2) Europe, Middle East and Africa ("EMEA"); (3) South America and (4) Asia Pacific. The geographic designations have the following meanings:

•North America: United States, Canada and Mexico;

•Europe, Middle East and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Turkey, Uzbekistan, Pakistan, the African continent, and the Middle East;

•South America: Central and South America, and the Caribbean Islands; and

•Asia Pacific: Continental Asia (including the India subcontinent), Indonesia and Oceania.

Business Combinations

On March 13, 2023, CNH Industrial purchased Augmenta Holding SAS ("Augmenta"). The Company acquired the remaining 89.5% of Augmenta it did not own for cash consideration of approximately $79 million and a deferred payment of $10 million. At March 31, 2023, CNH Industrial recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date, including $76 million and $35 million in preliminary goodwill and intangible assets, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2023. Thus, goodwill associated with the acquisition is subject to adjustment during the measurement period. Measurement period adjustments were recorded in the second and third quarters of 2023 reducing goodwill by $14 million primarily offset by increases in intangible assets as a result of updates of certain of the valuations. Pro forma results of operations have not been presented because the effects of the Augmenta acquisition were not material to the Company’s consolidated results of operations. Additionally, Augmenta's post-acquisition results were not material.

On March 15, 2023, CNH Industrial acquired a controlling interest in Bennamann LTD ("Bennamann") (ownership interest of 50.0085%) by purchasing an additional 34.4% interest through cash consideration of approximately $51 million. At March 31, 2023, CNH Industrial recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date, including $118 million and $46 million in preliminary goodwill and intangible assets, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2023. Thus, goodwill associated with the acquisition is subject to adjustment during the measurement period.

Measurement period adjustments were made in the second and third quarters of 2023 reducing goodwill by $3 million, primarily offset by increases in intangible assets as a result of updates of certain of the valuations. Pro forma results of operations have not been presented because the effects of the Bennamann acquisition were not material to the Company’s consolidated results of operations. Additionally, Bennamann's post-acquisition results were not material.

2. NEW ACCOUNTING PRONOUNCEMENTS

Adopted in 2023

Revenue Contract Assets and Liabilities Acquired in a Business Combination

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) as applied by the acquiree to determine what to record for the acquired revenue contract assets and liabilities instead of at fair value on the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted ASU 2021-08 and applied the guidance within ASU 2021-08 on business combinations beginning January 1, 2023. The adoption did not have a material impact on our consolidated financial statements.

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on vintage disclosures to require disclosure of current period gross write-offs by year of origination. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition. The amendments related to disclosures should be adopted prospectively. The Company adopted ASU 2022-02 and applied the guidance within ASU 2022-02 to its consolidated financial statements and disclosures prospectively beginning January 1, 2023. The adoption did not have a material impact on the Company's consolidated financial statements and note disclosures.

Supplier Finance Programs Disclosures

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations ("ASU 2022-04"). ASU 2022-04 requires the buyer in a supplier finance program to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a roll forward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of roll forward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 and applied the guidance within ASU 2022-04 to its disclosures beginning January 1, 2023. As these amendments relate to disclosures only, there are no impacts to the Company’s consolidated financial statements.

Under the supply chain finance programs, administered by a third party, our suppliers are given the opportunity to sell receivables from us to participating financial institutions at their sole discretion. Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the program.

As of September 30, 2023 and December 31, 2022, $193 million and $189 million of obligations remain outstanding that we have confirmed as valid to the administrators of the supply chain finance programs. These balances are included within “Accounts payable” in our consolidated balance sheets and are reflected as cash flow from operating activities in our consolidated statements of cash flows when settled.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by Reference Rate Reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (ASU 2022-06"). ASU 2022-06 extended the sunset date of ASC Topic 848 from December 31, 2022 to December 31, 2024. The Company elected to adopt ASU 2020-04 and ASU

2022-06 in the second quarter of 2023. The Company renegotiated its contract terms on its interest rate derivatives by changing the floating interest rate swap from LIBOR to overnight SOFR. The Company elected to make the change using the optional expedients under ASC 848, which allows the change in critical terms without de-designation and results in no change to the cumulative basis adjustment reflected in earnings. The elections did not have a material impact on our consolidated financial statements for the nine months ended September 30, 2023.

Not Yet Adopted

Leases between entities under common control

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"). ASU 2023-01 requires that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset. Additionally, the leasehold improvements are subject to the impairment guidance in Topic 360: Property, Plant and Equipment. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact, if any, of adoption to our consolidated financial statements.

Disclosure improvements

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification (“ASC”). These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not anticipate that the ASU will have a significant effect on its financial statements and related disclosures.

3. REVENUE

The following table summarizes revenues for the three and nine months ended September 30, 2023 and 2022 (in millions of dollars):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Agriculture	$	4,384	$	4,501	$	13,201	$	12,600
Construction	948		895		2,861		2,589
Total Industrial Activities	5,332		5,396		16,062		15,189
Financial Services	653		482		1,805		1,419
Eliminations and other	1		3		28		—
Total Revenues	$	5,986	$	5,881	$	17,895	$	16,608

The following table disaggregates revenues by major source for the three and nine months ended September 30, 2023 and 2022 (in millions of dollars):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues from:
Sales of goods	$	5,322	$	5,388	$	16,031	$	15,166
Rendering of services and other revenues	10		8		31		23
Revenues from sales of goods and services	5,332		5,396		16,062		15,189
Finance and interest income	491		303		1,342		815
Rents and other income on operating lease	163		182		491		604
Finance, interest and other income	654		485		1,833		1,419
Total Revenues	$	5,986	$	5,881	$	17,895	$	16,608

4. VARIABLE INTEREST ENTITIES

The Company consolidates various securitization trusts and facilities that have been determined to be variable interest entities (“VIEs”) and of which the Company is a primary beneficiary. The Company has both the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. For further information regarding VIEs, please see “Note 9: Receivables.”

The following table presents certain assets and liabilities of consolidated VIEs, which are included in the consolidated balance sheets included in this report. The assets in the table below include only those assets that can be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of the consolidated VIEs for which creditors do not have recourse to the general credit of the Company (in millions of dollars).


	September 30, 2023		December 31, 2022
Restricted cash	$	556	$	595
Financing receivables	9,344		8,808
Total Assets	$	9,900	$	9,403
Debt	$	8,930	$	8,485
Total Liabilities	$	8,930	$	8,485

5. EARNINGS PER SHARE

The Company’s basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock units and performance stock units are considered dilutive securities.

A reconciliation of basic and diluted earnings per share is as follows (in millions of dollars and shares, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Basic EPS attributable to common shareholders
Net income (loss) attributable to CNH Industrial	$	567	$	556	$	1,755	$	1,437
Weighted average common shares outstanding—basic	1,332		1,350		1,337		1,354
Basic EPS attributable to CNH Industrial N.V.	$	0.43	$	0.41	$	1.31	$	1.06
Diluted EPS attributable to common shareholders
Weighted average common shares outstanding—basic	1,332		1,350		1,337		1,354
Stock compensation plans (1)	19		5		18		5
Weighted average common shares outstanding—diluted	1,351		1,355		1,355		1,359
Diluted EPS attributable to CNH Industrial N.V.	$	0.42	$	0.41	$	1.30	$	1.06

(1) For the three and nine months ended September 30, 2023, no shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact. For the three and nine months ended September 30, 2022, 4.7 million and 2.0 million shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact.

6. EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT BENEFITS

The following table summarizes the components of net periodic benefit cost of CNH Industrial’s defined benefit pension plans and postretirement health and life insurance plans for the three and nine months ended September 30, 2023 and 2022 (in millions of dollars):


	Pension				Healthcare				Other
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
	2023		2022		2023		2022		2023		2022
Service cost	$	3	$	2	$	1	$	1	$	2	$	1
Interest cost	14		6		3		2		1		1
Expected return on assets	(12)		(11)		(2)		(1)		—		—
Amortization of:
Prior service credit	—		—		(9)		(31)		—		—
Actuarial loss (gain)	4		4		—		1		(1)		—
Net periodic benefit cost	$	9	$	1	$	(7)	$	(28)	$	2	$	2


	Pension				Healthcare				Other
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022
Service cost	$	7	$	8	$	2	$	3	$	4	$	4
Interest cost	41		20		7		5		3		1
Expected return on assets	(34)		(35)		(3)		(4)		—		—
Amortization of:
Prior service credit	—		—		(27)		(94)		—		—
Actuarial loss (gain)	13		14		—		2		(1)		—
Net periodic benefit cost	$	27	$	7	$	(21)	$	(88)	$	6	$	5

On February 20, 2018, CNH Industrial announced that the United States Supreme Court ruled in its favor in Reese vs. CNH Industrial N.V. and CNH Industrial America LLC. The decision allowed CNH Industrial to terminate or modify various retiree healthcare benefits previously provided to certain UAW Union represented Company retirees. On April 16, 2018, CNH Industrial announced its determination to modify the benefits provided to the applicable retirees (“Benefit Modification”) to make them consistent with the benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW. The Benefit Modification resulted in a reduction of the plan liability of $527 million. This amount was amortized from Other Comprehensive Income ("OCI") to the income statement over approximately 4.5 years, which represents the average service period to attain eligibility conditions for active participants. The amount was completely amortized as of December 31, 2022. For the three and nine months ended September 30, 2022, $30 million and $90 million of amortization (“Benefit Modification Amortization”) was recorded as a pre-tax gain in Other, net, respectively.

In 2021, CNH Industrial communicated plan changes for the U.S. retiree medical plan. The plan changes resulted in a reduction of the plan liability of $100 million. This amount will be amortized from OCI to the income statement over approximately 4 years, which represents the average service period to attain eligibility conditions for active participants. For the three and nine months ended September 30, 2023 and 2022, $6 million and $18 million of amortization was recorded as a pre-tax gain in Other, net, respectively.

7. INCOME TAXES

The effective tax rate for the three months ended September 30, 2023 and 2022 was 25.8% and 26.3%, respectively. The 2023 effective tax rate for the three months ended September 30, 2023 was lower than the effective tax rate for the three months ended September 30, 2022 due to a lower share of consolidated earnings in higher taxing jurisdictions compared to the prior year.

The effective tax rate for the nine months ended September 30, 2023 and 2022 was 25.2% and 29.6%, respectively. The 2023 effective tax rate was reduced by the tax benefits related to the sale of CNH Industrial Russia, although these benefits were partially offset by discrete tax expenses associated with prior periods. The 2022 effective tax rate was increased by pre-tax losses for which deferred tax assets were not recognized, the de-recognition of certain deferred tax assets, increased charges for unrecognized tax benefits, and a discrete tax charge resulting from the sale of Raven’s Engineered Films division.

As in all financial reporting periods, the Company assessed the realizability of its deferred tax assets, which relate to multiple tax jurisdictions in all regions of the world. During the nine-month period ended September 30, 2023, there were no changes in our assessment of deferred tax asset positions that impacted the Company’s tax rate for the period. During the nine-month period ended September 30, 2022, the Company changed its assessment regarding the recognition of its Russian deferred tax assets and applied a full valuation allowance as of the beginning of the period.

The Company operates in many jurisdictions around the world and is routinely subject to income tax audits. As various ongoing audits are concluded, or as the applicable statutes of limitations expire, it is possible the Company’s amount of unrecognized tax benefits could change during the next twelve months. We do not expect changes to our assessment to have a material impact on the Company's results of operations, balance sheet, or cash flows.

8. SEGMENT INFORMATION

The operating segments through which the Company manages its operations are based on the internal reporting used by the Company’s Chief Operating Decision Maker (“CODM”) to assess performance and make decisions about resource allocation. The segments are organized based on products and services provided by the Company. CNH Industrial has the following three operating segments:

Agriculture designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements and material handling equipment. Agricultural equipment is sold under the New Holland Agriculture and Case IH brands. Regionally focused brands include: STEYR, for agricultural tractors; Flexi-Coil specializing in tillage and seeding systems; Miller manufacturing application equipment; and Kongskilde providing tillage, seeding and hay & forage implements. The Raven brand supports digital agriculture, precision technology and the development of autonomous systems.

Construction designs, manufactures and distributes a full line of construction equipment, including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders and compact track loaders. Construction equipment is sold under the CASE Construction Equipment, New Holland Construction and Eurocomach brands.

Financial Services offers retail note and lease financing to end-use customers for the purchase of new and used agricultural and construction equipment and components sold through CNH Industrial brands' dealer network, as well as revolving charge account financing and other financial services. Financial Services also provides wholesale financing to CNH Industrial brand dealers and distributors. Further, Financial Services provides trade receivables factoring services to CNH Industrial companies. The European operations of CNH Industrial Financial Services are supported by the Iveco Group's Financial Services segment. CNH Industrial Financial Services provides financial services to Iveco Group companies in the North America, South America and Asia Pacific regions.

The activities carried out by Agriculture and Construction, as well as corporate functions, are collectively referred to as "Industrial Activities".

Revenues for each reported segment are those directly generated by or attributable to the segment as a result of its business activities and include revenues from transactions with third parties as well as those deriving from transactions with other segments, recognized at normal market prices. Segment expenses represent expenses deriving from each segment’s business activities both with third parties and other operating segments or which may otherwise be directly attributable to it. Expenses deriving from business activities with other segments are recognized at normal market prices.

With reference to Industrial Activities' segments, the CODM assesses segment performance and makes decisions about resource allocation based upon Adjusted EBIT. The Company believes Adjusted EBIT more fully reflects Industrial Activities segments' inherent profitability. Adjusted EBIT of Industrial Activities is defined as net income (loss) before: Income taxes, Financial Services' results, Industrial Activities’ interest expenses (net), foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. In particular, non-recurring items are specifically disclosed items that management considers to be rare or discrete events that are infrequent in nature and not reflective of ongoing operational activities.

With reference to Financial Services, the CODM assesses the performance of the segment and makes decisions about resource allocation on the basis of net income prepared in accordance with U.S. GAAP.

The following table includes the reconciliation of Adjusted EBIT for Industrial Activities to net income, the most comparable U.S. GAAP financial measure, for the three and nine months ended September 30, 2023 and 2022 (in millions of dollars):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Agriculture	$	672	$	666	$	2,063	$	1,755
Construction	60		24		176		90
Unallocated items, eliminations and other	(75)		(20)		(205)		(92)
Total Adjusted EBIT of Industrial Activities	657		670		2,034		1,753
Financial Services Net income (loss)	86		86		258		263
Financial Services Income Taxes	34		32		89		106
Interest expense of Industrial Activities, net of interest income and eliminations	(10)		(27)		(36)		(97)
Foreign exchange gains (losses), net of Industrial Activities	(21)		(14)		(27)		(14)
Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1)	—		35		2		112
Restructuring expense of Industrial Activities	(5)		(11)		(8)		(19)
Other discrete items(2)	—		(20)		(10)		(78)
Income (loss) before taxes	741		751		2,302		2,026
Income tax (expense) benefit	(171)		(192)		(536)		(579)
Net income (loss)	$	570	$	559	$	1,766	$	1,447

(1) In the three and nine months ended September 30, 2023 and 2022, this item includes the pre-tax gain of $6 million and $18 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 modifications of a healthcare plan in the U.S. In the three and nine months ended September 30, 2022, this item includes the pre-tax gain of $30 million and $90 million as a result of the 2018 modification of a healthcare plan in the U.S.

(2) In the three months ended September 30, 2023 this item did not include any discrete items, while the three months ended September 30, 2022 included $14 million of costs related to the Raven segments held for sale and $7 million of spin off costs related to the Iveco Group business. The nine months ended September 30, 2023 included a loss of $23 million on the sale of CNH Industrial Russia and CNH Capital Russia businesses, partially offset by a gain of $13 million for the fair value remeasurement of Augmenta and Bennamann. The nine months ended September 30, 2022 included $43 million of asset write-downs related to the Industrial Activities of our Russian Operations, $22 million of costs related to the Raven segments held for sale, and $13 million of spin off costs related to the Iveco Group business.

9. RECEIVABLES

Financing Receivables, net

A summary of financing receivables as of September 30, 2023 and December 31, 2022 is as follows (in millions of dollars):


	September 30, 2023		December 31, 2022
Retail	$	12,826	$	11,446
Wholesale	9,379		7,785
Other	35		29
Total	$	22,240	$	19,260

CNH Industrial provides and administers retail note and lease financing to end-use customers for the purchase of new and used equipment and components sold through its dealer network, as well as revolving charge account financing. The terms of retail notes and finance leases generally range from two to six years, and interest rates vary depending on the prevailing market interest rates and certain incentive programs offered on behalf of and sustained by Industrial Activities. Revolving charge accounts are generally accompanied by higher interest rates than the Company's other retail financing products, require minimum monthly payments and do not have pre-determined maturity dates.

Wholesale receivables arise primarily from dealer floorplan financing, and to a lesser extent, the financing of dealer operations. 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. Financial Services is compensated by Industrial Activities for providing the "interest-free" period based on market interest rates. After the expiration of any "interest-free" period, interest is charged to dealers on outstanding balances until CNH Industrial receives payment in full. The "interest-free" periods are determined based on the type of equipment sold and the time of year of the sale. The Company evaluates and assesses dealers on an ongoing basis as to their creditworthiness. CNH Industrial may be obligated to repurchase the dealer's equipment upon cancellation or termination of the dealer's contract for such causes as change in ownership, closeout of the business, or default. There were no significant losses in the three and nine months ended September 30, 2023 and 2022 relating to the termination of dealer contracts.

Transfers of Financial Assets

As part of its overall funding strategy, CNH Industrial periodically transfers certain receivables into special purpose entities (“SPE”) as part of its asset backed securitization ("ABS") programs or into factoring transactions.

SPEs utilized in the securitization programs differ from other entities included in the Company's consolidated financial statements because the assets they hold are legally isolated from the Company's assets. For bankruptcy analysis purposes, the Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs' creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of the SPEs' investors. The Company's interests in the SPEs' receivables are subordinate to the interests of third-party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay the Company's creditors until all obligations of the SPE have been fulfilled or the receivables are removed from the SPE.

Certain securitization trusts are also VIEs and consequently, the VIEs are consolidated since the Company has both the power to direct the activities that most significantly impact the VIEs' economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.

The Company may retain all or a portion of the subordinated interests in the SPEs. No recourse provisions exist that allow holders of the asset-backed securities issued by the trusts to put those securities back to the Company, although the Company provides customary representations and warranties that could give rise to an obligation to repurchase from the trusts any receivables for which there is a breach of the representations and warranties. Moreover, the Company does not guarantee any securities issued by the trusts. The trusts 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.

Factoring transactions may be either with recourse or without recourse; certain without recourse transfers include deferred payment clauses (i.e., when the payment by the factor of a minor part of the purchase price is dependent on the total amount collected from the receivables), requiring first loss cover, meaning that the transferor takes priority participation in the losses, or requires a significant exposure to the cash flows arising from the transferred receivables to be retained. These types of transactions do not qualify for the derecognition of the assets, since the risks and rewards connected with collection are not substantially transferred and, accordingly, CNH Industrial continued to recognize the receivable transferred by this means in its consolidated statement of financial position and recognizes a financial liability of the same amount under asset-backed financing.

The secured borrowings related to the transferred receivables are obligations that are payable as the receivables are collected. At September 30, 2023 and December 31, 2022, the carrying amount of such restricted assets included in financing receivables are the following (in millions of dollars):


	Restricted Receivables
	September 30, 2023		December 31, 2022
Retail note and finance lease receivables	$	7,117	$	6,766
Wholesale receivables	5,953		4,582
Total	$	13,070	$	11,348

Allowance for Credit Losses

Allowance for credit losses for the three and nine months ended September 30, 2023 is as follows (in millions of dollars):


	Three Months Ended September 30, 2023				Nine Months Ended September 30, 2023
	Retail		Wholesale		Retail		Wholesale
Opening Balance	$	280	$	60	$	270	$	64
Provision	31		(3)		67		(6)
Charge-offs	(4)		(1)		(25)		(1)
Recoveries	—		—		1		—
Foreign currency translation and other	(6)		—		(12)		(1)
Ending Balance	$	301	$	56	$	301	$	56

At September 30, 2023, the allowance for credit losses included an increase in reserves due to specific reserve needs primarily in South America, partially offset by a decrease in reserves of $15 million due to the sale of CNH Capital Russia. CNH Industrial will update the macroeconomic factors in future periods as warranted. The provision for credit losses is included in selling, general and administrative expenses.

Allowance for credit losses for the three and nine months ended September 30, 2022 is as follows (in millions of dollars):

CNH Industrial N.V. [CNHI] Filings
10-Q	[2023-11-08]
10-Q	[2023-08-02]
10-Q	[2023-05-09]
10-K	[2023-02-28]
10-Q	[2022-11-09]
20-F	[2022-03-01]
20-F	[2021-03-03]
20-F	[2020-03-03]
20-F	[2019-03-01]
20-F	[2018-03-02]
20-F	[2017-03-02]
20-F	[2016-03-04]
20-F	[2015-03-04]
20-F	[2014-04-25]