CNH Industrial N.V. [CNHI] Filings

10-Q 1 cnhi-20220930.htm 10-Q cnhi-20220930

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, 2022


☐						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

Not Applicable

(State or other jurisdiction of incorporation or organization)

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

25 St. James’s Street, London, SW1A 1HA, United Kingdom

(Address of principal executive offices)

Registrant’s telephone number including area code: +44 2079 251964

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

4.50% Notes due 2023

CNHI23

New York Stock Exchange

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 the 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 October 31, 2022, there were 1,344,479,873 common shares, par value €0.01 per share, and 371,073,335 special voting shares, par value €0.01 per share outstanding.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION
Item 1	Financial s tatements	1
Item 2	Management's d iscussion and a nalysis of f inancial c ondition and r esults of o perations	37
Item 3	Quantitative and qualitative disclosures about market risk	59
Item 4	Controls and p rocedures	59

PART II – OTHER INFORMATION
Item 1	Legal proceedings	60
Item 1A	Risk factors	60
Item 2	Unregistered sales of equity securities and use of proceeds	61
Item 3	Default upon senior securities	61
Item 4	Mine safety disclosures	61
Item 5	Other information	61
Item 6	Exhibits	62

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.

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2022 and December 31, 2021

(Unaudited)


	September 30, 2022		December 31, 2021
	(in millions)
ASSETS
Cash and cash equivalents	$	3,154	$	5,044
Restricted cash	660		801
Trade receivables, net	200		192
Financing receivables, net	16,901		15,376
Receivables from Iveco Group N.V.	224		—
Inventories, net	5,362		4,216
Property, plant and equipment, net	1,405		1,475
Investments in unconsolidated subsidiaries and affiliates	327		333
Equipment under operating leases	1,539		1,738
Goodwill, net	3,233		3,210
Other intangible assets, net	1,158		1,207
Deferred tax assets	351		421
Derivative assets	280		182
Other assets	1,050		1,675
Assets held for distribution	—		13,546
Total Assets	$	35,844	$	49,416
LIABILITIES AND EQUITY
Debt	20,922		20,897
Payables to Iveco Group N.V.	95		502
Trade payables	3,312		3,530
Deferred tax liabilities	134		125
Pension, postretirement and other postemployment benefits	522		675
Derivative liabilities	412		181
Other liabilities	4,038		4,761
Liabilities held for distribution	—		11,892
Total Liabilities	$	29,435	$	42,563
Redeemable noncontrolling interest	52		45
Common shares, €0.01, par value; outstanding 1,347,028,843 common shares and 371,073,335 loyalty program special voting shares at 9/30/2022; and outstanding 1,356,077,000 common shares and 371,218,250 loyalty program special voting shares at 12/31/2021	25		25
Treasury stock, at cost; 17,371,353 common shares at 9/30/2022 and 8,323,196 common shares at 12/31/2021	(193)		(84)
Additional paid in capital	1,479		4,464
Retained earnings	7,307		4,818
Accumulated other comprehensive loss	(2,264)		(2,445)
Noncontrolling interests	3		30
Total Equity	$	6,357	$	6,808
Total Liabilities and Equity	$	35,844	$	49,416

See accompanying notes to the condensed consolidated financial statements

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three And Nine Months Ended September 30, 2022 and 2021

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Revenues
Net sales	$	5,396	$	4,336	$	15,189	$	12,808
Finance, interest and other income	485		410		1,419		1,208
Total Revenues	$	5,881	$	4,746	$	16,608	$	14,016
Costs and Expenses
Cost of goods sold	4,156		3,452		11,819		10,064
Selling, general and administrative expenses	422		349		1,224		1,023
Research and development expenses	213		157		609		453
Restructuring expenses	11		15		19		21
Interest expense	190		127		490		417
Other, net	159		124		490		422
Total Costs and Expenses	$	5,151	$	4,224	$	14,651	$	12,400
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries and affiliates	730		522		1,957		1,616
Income tax (expense) benefit	(192)		(79)		(579)		(347)
Equity in income of unconsolidated subsidiaries and affiliates	21		17		69		68
Net income (loss) from continuing operations	559		460		1,447		1,337
Net income (loss) from discontinued operations	—		(131)		—		116
Net income	$	559	$	329	$	1,447	$	1,453
Net income attributable to noncontrolling interests	3		6		10		32
Net income (loss) attributable to CNH Industrial N.V.	$	556	$	323	$	1,437	$	1,421

Basic earnings (loss) per share attributable to common shareholders
Continuing operations	$	0.41	$	0.34	$	1.06	$	0.98
Discontinuing operations	$	—	$	(0.10)	$	—	$	0.07
Basic earnings per share attributable to CNH Industrial N.V.	$	0.41	$	0.24	$	1.06	$	1.05
Diluted earnings (loss) per share attributable to common shareholders
Continuing operations	$	0.41	$	0.34	$	1.06	$	0.98
Discontinuing operations	$	—	$	(0.10)	$	—	$	0.06
Diluted earnings per share attributable to CNH Industrial N.V.	$	0.41	$	0.24	$	1.06	$	1.04
Average shares outstanding (in millions)
Basic	1,350		1,354		1,354		1,354
Diluted	1,355		1,361		1,359		1,360

Cash dividends declared per common share	$	—	$	—	$	0.302	$	0.132

See accompanying notes to the condensed consolidated financial statements

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

For the Three And Nine Months Ended September 30, 2022 and 2021

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net income	$	559	$	329	$	1,447	$	1,453
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on cash flow hedges	(10)		40		(89)		(33)
Changes in retirement plans’ funded status	(14)		13		(64)		(21)
Foreign currency translation	96		(34)		427		172
Share of other comprehensive income (loss) of entities using the equity method	(13)		(46)		(42)		(67)
Other comprehensive income (loss), net of tax	59		(27)		232		51
Comprehensive income	618		302		1,679		1,504
Less: Comprehensive income attributable to noncontrolling interests	3		7		9		35
Comprehensive income (loss) attributable to CNH Industrial N.V.	$	615	$	295	$	1,670	$	1,469

See accompanying notes to the condensed consolidated financial statements

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2022 and 2021

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
	(in millions)
Operating activities:
Net income	$	1,447	$	1,453
Less: Net income (loss) from discontinued operations	—		116
Net income (loss) of continuing operations	1,447		1,337
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense, net of depreciation and amortization of assets under operating leases	252		219
Depreciation and amortization expense of assets under operating leases	155		182
(Gain) loss on disposal of assets	22		—
Loss on repurchase of notes	—		8
Undistributed loss of unconsolidated subsidiaries	(36)		(7)
Other non-cash items	130		74
Changes in operating assets and liabilities:
Provisions	(21)		57
Deferred income taxes	83		(7)
Trade and financing receivables related to sales, net	(1,279)		3
Inventories, net	(1,121)		(838)
Trade payables	(120)		334
Other assets and liabilities	(398)		112
Cash flow from operating activities discontinued operation	—		418
Net cash provided by (used in) operating activities	$	(886)	$	1,892
Investing activities:
Additions to retail receivables	(4,179)		(3,680)
Collections of retail receivables	3,342		3,297
Proceeds from the sale of assets, net of assets under operating leases	25		15
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases	(245)		(197)
Expenditures for assets under operating leases	(368)		(352)
Other	(165)		(803)
Cash flow from investing activities discontinued operation	—		134
Net cash used in investing activities	$	(1,590)	$	(1,586)
Financing activities:
Proceeds from long-term debt	7,727		6,392
Payments of long-term debt	(6,733)		(7,128)
Net increase (decrease) in other financial liabilities	340		(322)
Dividends paid	(416)		(184)
Other	(116)		—
Cash flow from financing activities discontinued operation	—		(450)
Net cash provided by (used in) financing activities	$	802	$	(1,692)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash	(357)		(329)
Increase (decrease) in cash and cash equivalents and restricted cash	(2,031)		(1,715)
Cash and cash equivalents and restricted cash, beginning of year	5,845		9,629
Cash and cash equivalents and restricted cash, end of period	$	3,814	$	7,914
Cash and cash equivalents and restricted cash, end of period (discontinued operation)	—		720
Cash and cash equivalents and restricted cash, end of period (continuing operations)	$	3,814	$	7,194

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three And Nine Months Ended September 30, 2022

(Unaudited)


	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
	(in millions)
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	—		—		—		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	—		—		—		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	—		—		—		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

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three And Nine Months Ended September 30, 2021

(Unaudited)


	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
	(in millions)
Balance, January 1, 2021	$	25	$	(109)	$	4,388	$	3,279	$	(2,676)	$	82	$	4,989	$	40
Net income	—		—		—		408		—		15		423		2
Other comprehensive income (loss), net of tax	—		—		—		—		38		2		40		—
Dividends paid	—		—		—		—		—		—		—		(1)
Common shares issued from treasury stock and capital increase for share-based compensation	—		4		(4)		—		—		—		—		—
Share-based compensation expense	—		—		15		—		—		—		15		—
Other changes	—		—		(2)		—		—		—		(2)		—
Balance, March 31, 2021	$	25	$	(105)	$	4,397	$	3,687	$	(2,638)	$	99	$	5,465	$	41
Net income	—		—		—		690		—		5		695		4
Other comprehensive income (loss), net of tax	—		—		—		—		38		—		38		—
Dividends paid	—		—		—		(180)		—		(1)		(181)		(1)
Share-based compensation expense	—		—		15		—		—		—		15		—
Other changes	—		—		(1)		—		—		(1)		(2)		—
Balance, June 30, 2021	$	25	$	(105)	$	4,411	$	4,197	$	(2,600)	$	102	$	6,030	$	44
Net income (loss)	—		—		—		323		—		2		325		4
Other comprehensive income (loss), net of tax	—		—		—		—		(28)		1		(27)		—
Dividends paid	—		—		—		—		—		(90)		(90)		(1)
Share-based compensation expense	—		—		16		—		—		—		16		—
Other changes	—		—		—		(6)		—		(3)		(9)		—
Balance, September 30, 2021	$	25	$	(105)	$	4,427	$	4,514	$	(2,628)	$	12	$	6,245	$	47

See accompanying notes to the condensed consolidated financial statements

CNH INDUSTRIAL N.V.

NOTES TO CONDENSED 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 London, England, United Kingdom. The Company was formed on September 29, 2013 as a result of the business combination transaction between Fiat Industrial S.p.A. (“Fiat Industrial”) and its majority owned subsidiary CNH Global N.V. (“CNH Global”). Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial” and the “Company” refer to CNH Industrial and its subsidiaries.

The condensed 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 condensed 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 condensed 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 20-F for the year ended December 31, 2021. 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, geopolitical instability and the war in the Ukraine 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 area. Beginning January 1, 2022, our geographical regions are: (1) North America; (2) Europe, Middle East and Africa; (3) South America and (4) Asia Pacific. Prior amounts have been conformed to these regions. 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, Balkans, Russia, Turkey, the African continent, and the Middle East;

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

•Asia Pacific: Continental Asia (including the Indian subcontinent) and Oceania

Discontinued Operations

Until December 31, 2021, CNH Industrial N.V. owned and controlled the Commercial and Specialty Vehicles business, the Powertrain business, and the related Financial Services business (together the “Iveco Group Business” or the “On-Highway Business”), as well as the Agriculture business, the Construction business, and the related Financial Services business (collectively, the “Off-Highway Business”). Effective January 1, 2022, the Iveco Group Business was separated from CNH Industrial N.V. by way of a demerger under Dutch law (the "Demerger") to Iveco Group N.V. (the "Iveco Group"), and the Iveco Group became a public listed company independent from CNH Industrial with its common shares trading on the Euronext Milan, a regulated market organized and managed by Borsa Italiana S.p.A. In connection with the Demerger, shares of Iveco Group N.V. were distributed to shareholders in CNH Industrial N.V. on a pro rata basis. The On-Highway Business' financial results for the periods prior to the Demerger have been reflected in our Condensed Consolidated Statement of Operations, retrospectively, as discontinued operations. Additionally, the related assets and liabilities associated with the On-Highway Business are classified as discontinued operations within Assets Held for Distribution and Liabilities Held for Distribution in the prior year of the Condensed Consolidated Balance Sheet. Pursuant to the terms of the deeds of demerger entered into between CNH Industrial N.V. and Iveco Group N.V. on January 1, 2022, assets related to the On-Highway Business were transferred to, and liabilities related to the On-Highway Business were retained or assumed by, Iveco Group N.V.

In order to present the financial effects of a Discontinued Operation, revenues and expenses arising from intercompany transactions were eliminated. Eliminations from transactions between Continuing and Discontinued Operations are allocated in full to Discontinued Operations. However, no profit or loss is recognized for intercompany transactions within the Condensed Consolidated Statement of Operations. The amounts of income statement items included in Discontinued Operations is detailed in the following sections.

Intercompany transactions between Continuing and Discontinued Operations have been eliminated in the consolidated statement of financial position. The net balance between Assets held for distribution and Liabilities held for distribution represents the net equity of the Discontinued Operations. This amount corresponds to the reduction in the total equity of CNH Industrial due to the Demerger that occurred on January 1, 2022.

All cash flows from Discontinued Operations are reported in the appropriate items for operating activities, investing activities and financing activities in the Statement of Cash Flows. The cash flows represent those arising from transactions with third parties.

The following table presents the assets and liabilities of the Iveco Group Business classified as Assets Held for Distribution and Liabilities Held for Distribution:


		December 31, 2021
	(in millions)
ASSETS HELD FOR DISTRIBUTION
Cash and cash equivalents		$	961
Restricted cash		55
Trade receivables, net		165
Financing receivables, net		3,284
Inventories, net		3,005
Property, plant and equipment, net