CNH Industrial SEC Filings

6-K
CNH INDUSTRIAL N.V. filed this Form 6-K on 11/06/2017
Entire Document
 
cnhi-cover_6.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2017

Commission File No. 001-36085

 

CNH INDUSTRIAL N.V.

(Translation of registrant’s name into English)

 

25 St. James’s Street

London, SW1A 1HA

United Kingdom

Tel. No.: +44 1268 533000

(Address of Principal Executive Offices)

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F      Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  

 

 

 

 


CNH INDUSTRIAL N.V.

Form 6-K for the month of November 2017.

This report on Form 6-K contains the following exhibits:

 

Exhibit 99.1

 

CNH Industrial N.V. Quarterly Report for the three and nine months ended September 30, 2017 (prepared in accordance with U.S. GAAP)

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

Exhibit 99.1 to this Report on Form 6-K is hereby incorporated by reference into CNH Industrial N.V.’s registration statement on Form F-3ASR (File No. 333-206891) and CNH Industrial N.V.’s registration statements on Form S-8 (File Nos. 333-191477 and 333-196574).  

 

 

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CNH Industrial N.V.

 

 

By:

/s/ Michael P. Going

Name:

Michael P. Going

Title:

Corporate Secretary

November 6, 2017

 

 

 


Index of Exhibits

 

Exhibit

Number

 

Description of Exhibit

Exhibit 99.1

 

CNH Industrial N.V. Quarterly Report for the three and nine months ended September 30, 2017 (prepared in accordance with U.S. GAAP)

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

cnhi-6k_20170930.htm

Exhibit 99.1

 

 

CNH INDUSTRIAL N.V.

QUARTERLY REPORT FOR THE THREE AND NINE MONTHS

ENDED September 30, 2017

 

 


TABLE OF CONTENTS

INDEX

 

 

Page

PART I – FINANCIAL INFORMATION

Condensed consolidated balance sheets as of September 30, 2017 (unaudited) and December 31, 2016

1

Condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 (unaudited)

2

Condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 (unaudited)

3

Condensed consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (unaudited)

4

Condensed consolidated statements of changes in equity for the nine months ended September 30, 2017 and 2016 (unaudited)

5

Notes to condensed consolidated financial statements (unaudited)

6

Management’s discussion and analysis of financial condition and results of operations

33

Quantitative and qualitative disclosures about market risk

50

 

 

PART II – OTHER INFORMATION

 

Legal proceedings

51

Risk factors

51

Unregistered sales of equity securities and use of proceeds

51

Default upon senior securities

51

Mine safety disclosures

51

Other information

51

 

 

 


PART I – FINANCIAL INFORMATION

 

 

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2017 and December 31, 2016

 

 

September 30, 2017

 

 

December 31, 2016

 

(in millions)

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,100

 

 

$

5,017

 

Restricted cash

 

 

681

 

 

 

837

 

Trade receivables, net

 

 

557

 

 

 

623

 

Financing receivables, net

 

 

19,182

 

 

 

18,662

 

Inventories, net

 

 

7,283

 

 

 

5,609

 

Property, plant and equipment, net

 

 

6,918

 

 

 

6,397

 

Investments in unconsolidated subsidiaries and affiliates

 

 

560

 

 

 

487

 

Equipment under operating leases

 

 

1,874

 

 

 

1,907

 

Goodwill

 

 

2,472

 

 

 

2,449

 

Other intangible assets, net

 

 

772

 

 

 

787

 

Deferred tax assets

 

 

1,014

 

 

 

937

 

Derivative assets

 

 

89

 

 

 

95

 

Other assets

 

 

2,027

 

 

 

1,740

 

Total Assets

 

$

47,529

 

 

$

45,547

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Debt

 

$

25,518

 

 

$

25,276

 

Trade payables

 

 

5,867

 

 

 

5,185

 

Deferred tax liabilities

 

 

98

 

 

 

84

 

Pension, postretirement and other postemployment benefits

 

 

2,345

 

 

 

2,276

 

Derivative liabilities

 

 

84

 

 

 

249

 

Other liabilities

 

 

9,136

 

 

 

8,005

 

Total Liabilities

 

$

43,048

 

 

$

41,075

 

Redeemable noncontrolling interest

 

 

25

 

 

 

21

 

Common shares, €0.01, par value; outstanding 1,363,676,503 common shares and 396,237,285 special voting shares at 09/30/2017; and outstanding 1,361,630,903 common shares and 412,268,203 special voting shares at 12/31/2016

 

 

25

 

 

 

25

 

Treasury stock, at cost; 723,693 common shares at 9/30/2017 and 1,278,708 common shares at 12/31/2016

 

 

(8

)

 

 

(9

)

Additional paid in capital

 

 

4,416

 

 

 

4,408

 

Retained earnings

 

 

1,967

 

 

 

1,787

 

Accumulated other comprehensive loss

 

 

(1,952

)

 

 

(1,767

)

Noncontrolling interests

 

 

8

 

 

 

7

 

Total Equity

 

$

4,456

 

 

$

4,451

 

Total Liabilities and Equity

 

$

47,529

 

 

$

45,547

 

 

 

 

 

See accompanying notes to the condensed consolidated financial statements

 

 

1


CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

(in millions)

(in millions)

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

6,331

 

 

$

5,461

 

 

$

18,370

 

 

$

16,987

 

 

Finance and interest income

 

 

299

 

 

 

288

 

 

 

889

 

 

 

887

 

 

Total Revenues

 

$

6,630

 

 

$

5,749

 

 

$

19,259

 

 

$

17,874

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

$

5,242

 

 

$

4,524

 

 

$

15,166

 

 

$

14,014

 

 

Selling, general and administrative expenses

 

 

559

 

 

 

546

 

 

 

1,676

 

 

 

1,687

 

 

Research and development expenses

 

 

243

 

 

 

211

 

 

 

662

 

 

 

619

 

 

Restructuring expenses

 

 

53

 

 

 

6

 

 

 

77

 

 

 

31

 

 

Interest expense

 

 

259

 

 

 

273

 

 

 

712

 

 

 

743

 

 

Other, net

 

 

174

 

 

 

131

 

 

 

454

 

 

 

951

 

 

Total Costs and Expenses

 

$

6,530

 

 

$

5,691

 

 

$

18,747

 

 

$

18,045

 

 

Income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates

 

 

100

 

 

 

58

 

 

 

512

 

 

 

(171

)

 

Income tax (expense)

 

 

(64

)

 

 

(32

)

 

 

(225

)

 

 

(179

)

 

Equity in income of unconsolidated subsidiaries and affiliates

 

 

21

 

 

 

13

 

 

 

66

 

 

 

5

 

 

Net income (loss)

 

 

57

 

 

 

39

 

 

 

353

 

 

 

(345

)

 

Net income attributable to noncontrolling interests

 

 

4

 

 

 

-

 

 

 

12

 

 

 

2

 

 

Net income (loss) attributable to CNH Industrial N.V.

 

$

53

 

 

$

39

 

 

$

341

 

 

$

(347

)

 

Earnings (loss) per share attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

0.03

 

 

$

0.25

 

 

$

(0.25

)

 

Diluted

 

$

0.04

 

 

$

0.03

 

 

$

0.25

 

 

$

(0.25

)

 

Cash dividends declared per common share

 

$

-

 

 

$

-

 

 

$

0.118

 

 

$

0.148

 

 

 

 

 

 

 

 

 

See accompanying notes to the condensed consolidated financial statements


 

2


CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

 

(in millions)

(in millions)

Net income (loss)

 

$

57

 

 

$

39

 

 

$

353

 

 

$

(345

)

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized income (loss) on cash flow hedges

 

 

16

 

 

 

(8

)

 

 

81

 

 

 

(27

)

 

Changes in retirement plans’ funded status

 

 

15

 

 

 

13

 

 

 

45

 

 

 

39

 

 

Foreign currency translation

 

 

(96

)

 

 

(9

)

 

 

(362

)

 

 

161

 

 

Share of other comprehensive income (loss) of entities using the equity method

 

 

14

 

 

 

(4

)

 

 

49

 

 

 

3

 

 

Other comprehensive income (loss), net of tax

 

 

(51

)

 

 

(8

)

 

 

(187

)

 

 

176

 

 

Comprehensive income (loss)

 

 

6

 

 

 

31

 

 

 

166

 

 

 

(169

)

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

3

 

 

 

(1

)

 

 

10

 

 

 

4

 

 

Comprehensive income (loss) attributable to CNH Industrial N.V.

 

$

3

 

 

$

32

 

 

$

156

 

 

$

(173

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements


 

3


CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2017 and 2016

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

(in millions)

 

Operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

353

 

 

$

(345

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense, net of assets under operating leases and assets sold under buy-back commitments

 

 

540

 

 

 

537

 

Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments

 

 

430

 

 

 

406

 

Loss from disposal of assets

 

 

23

 

 

 

2

 

Loss on repurchase/early redemption of notes

 

 

56

 

 

 

38

 

Undistributed income (loss) of unconsolidated subsidiaries

 

 

(22

)

 

 

52

 

Other non-cash items

 

 

130

 

 

 

172

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Provisions

 

 

163

 

 

 

500

 

Deferred income taxes

 

 

(80

)

 

 

14

 

Trade and financing receivables related to sales, net

 

 

28

 

 

 

367

 

Inventories, net

 

 

(1,222

)

 

 

(754

)

Trade payables

 

 

232

 

 

 

(173

)

Other assets and liabilities

 

 

(26

)

 

 

304

 

Net cash provided by operating activities

 

$

605

 

 

$

1,120

 

Investing activities:

 

 

 

 

 

 

 

 

Additions to retail receivables

 

 

(2,857

)

 

 

(2,747

)

Collections of retail receivables

 

 

3,104

 

 

 

3,287

 

Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments

 

 

11

 

 

 

8

 

Proceeds from the sale of assets previously under operating leases and assets sold under buy-back commitments

 

 

594

 

 

 

429

 

Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments

 

 

(278

)

 

 

(290

)

Expenditures for assets under operating leases and assets sold under buy-back commitments

 

 

(1,196

)

 

 

(1,091

)

Other

 

 

82

 

 

 

(42

)

Net cash used in investing activities

 

$

(540

)

 

$

(446

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

11,096

 

 

 

8,778

 

Payments of long-term debt

 

 

(11,994

)

 

 

(9,146

)

Net decrease in other financial liabilities

 

 

(187

)

 

 

(451

)

Dividends paid

 

 

(166

)

 

 

(205

)

Other

 

 

(16

)

 

 

(58

)

Net cash used in financing activities

 

$

(1,267

)

 

$

(1,082

)

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

285

 

 

 

157

 

Decrease in cash and cash equivalents

 

 

(917

)

 

 

(251

)

Cash and cash equivalents, beginning of year

 

 

5,017

 

 

 

5,384

 

Cash and cash equivalents, end of period

 

$

4,100

 

 

$

5,133

 

See accompanying notes to the condensed consolidated financial statements


 

4


CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Nine Months Ended September 30, 2017 and 2016

(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, 2016

 

$

25

 

 

$

 

 

$

4,399

 

 

$

2,241

 

 

$

(1,863

)

 

$

41

 

 

$

4,843

 

 

$

18

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(347

)

 

 

 

 

 

(5

)

 

 

(352

)

 

 

7

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

174

 

 

 

2

 

 

 

176

 

 

 

 

Dividend paid

 

 

 

 

 

 

 

 

 

 

 

(201

)

 

 

 

 

 

(1

)

 

 

(202

)

 

 

(3

)

Acquisition of treasury stock

 

 

 

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

Common shares issued from treasury stock and capital increase for share-based compensation

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

Other changes

 

 

 

 

 

 

 

 

6

 

 

 

2

 

 

 

 

 

 

(29

)

 

 

(21

)

 

 

 

Balance, September 30, 2016

 

$

25

 

 

$

(9

)

 

$

4,435

 

 

$

1,695

 

 

$

(1,689

)

 

$

8

 

 

$

4,465

 

 

$

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2017

 

$

25

 

 

$

(9

)

 

$

4,408

 

 

$

1,787

 

 

$

(1,767

)

 

$

7

 

 

$

4,451

 

 

$

21

 

Net income

 

 

 

 

 

 

 

 

 

 

 

341

 

 

 

 

 

 

4

 

 

 

345

 

 

 

8

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(185

)

 

 

(2

)

 

 

(187

)

 

 

 

Dividend paid

 

 

 

 

 

 

 

 

 

 

 

(161

)

 

 

 

 

 

(1

)

 

 

(162

)

 

 

(4

)

Acquisition of treasury stock

 

 

 

 

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29

)

 

 

 

Common shares issued from treasury stock and capital increase for share-based compensation

 

 

 

 

 

30

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

Other changes

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

Balance, September 30, 2017

 

$

25

 

 

$

(8

)

 

$

4,416

 

 

$

1,967

 

 

$

(1,952

)

 

$

8

 

 

$

4,456

 

 

$

25

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements

 

5


 

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, and has its principal office in London, United Kingdom. The Company was formed as a result of the business combination transaction between Fiat Industrial S.p.A. (“Fiat Industrial”) and 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 consolidated 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 U.S. (“U.S. GAAP”) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. 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, 2016. 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. Actual results could differ materially from those estimates.

In February 2017, the Company completed the acquisition of the grass and soil implement business of Kongskilde Industries, the impact of which was not material to the September 30, 2017 financial statements.

Certain financial information in this report has been presented by geographic area. Our geographic regions are: (1) NAFTA; (2) EMEA; (3) LATAM; and (4) APAC. The geographic designations have the following meanings:

 

NAFTA—United States, Canada and Mexico;

 

EMEA— member countries of the European Union, member countries of the European Free Trade Association (“EFTA”), Ukraine, Balkans, African continent and the Middle East (excluding Turkey);

 

LATAM—Central and South America, and the Caribbean Islands; and

 

APAC—Continental Asia (including Turkey and Russia), Oceania and member countries of the Commonwealth of Independent States (excluding Ukraine).

2. NEW ACCOUNTING PRONOUNCEMENTS

Adopted in 2017

Share-based Compensation

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows, and forfeitures. The Company adopted ASU 2016-09 on a prospective basis as of January 1, 2017, which did not have a material impact on its consolidated financial statements.

Inventory

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”). This standard amends the subsequent measurement of inventory for all methods other than last-in, first-out (LIFO) or the retail inventory method to measure at the lower of cost and net realizable value (estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation) instead of the lower of cost and market. The Company adopted ASU 2015-11 on a prospective basis as of January 1, 2017, which did not have a material impact on its consolidated financial statements.

 

6


Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company elected to early adopt ASU 2017-04 on a prospective basis as of January 1, 2017, which did not have a material impact on its consolidated financial statements.

Not Yet Adopted

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance under current U.S. GAAP. The new standard requires an entity to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration that the entity expects to receive. This new revenue recognition model defines a five-step process to achieve this objective. The new standard also requires additional disclosures to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts with customers. In August 2015, the FASB amended the effective date to be the first quarter of fiscal year 2018 with early adoption permitted in 2017. The FASB subsequently issued several amendments in 2016 clarifying various aspects of ASU 2014-09, including revenue transactions that involve a third party, goods or services that are immaterial in the context of the contract, licensing arrangements, certain transition practical expedients, disclosure of performance obligation and provisions for losses on construction-type and production-type contracts. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the consolidated statement of changes in equity.

The Company currently plans to adopt the new standard effective January 1, 2018 using the full retrospective approach.

The Company is finalizing the process for the adoption of this standard. Based upon the implementation efforts to date, the Company identified specific services provided to retail customers for which it has determined a partially different timing of recognition of revenues and margin. The impact of this change in accounting treatment on the net equity at January 1, 2016 (date of first time retrospective adoption of the new standard) is not expected to be material. Furthermore, the impacts in prospective years will depend on changes in volumes and characteristics of these contracts year-over-year. However, these changes are not expected to have significant impacts on future earnings. Furthermore, as part of its implementation project, the Company is in the process of reviewing the appropriate classification of certain costs and is determining if they have to be classified as a reduction to Net Sales. Such reclassifications are not expected to have an impact on net income (loss). The Company is also in the process of reviewing the sale of operating lease equipment by its Financial Services segment. Under ASC 605, the Company reports the net gain (loss) on the sale of such equipment in its income statement. Under ASC 606, the Company anticipates it will record the proceeds in revenue and the cost within cost of goods sold. This will have no impact to net income (loss). No further significant differences have been identified to date.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which amends ASC 825-10, Financial Instruments - Overall. This ASU changes the treatment for available-for-sale equity investments by recognizing unrealized fair value changes directly in net income, and no longer in other comprehensive income. The ASU is effective January 1, 2018, with the cumulative-effect adjustment from initially applying the new standard recognized in the consolidated statement of financial position as of January 1, 2018. The impact of the adjustments on the Company’s net income, financial position, and cash flows is expected to be immaterial.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which establishes ASC 326, Financial Instruments - Credit Losses. 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. The ASU is effective for annual period beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes ASC 840, Leases. The ASU’s most prominent change is the requirement for lessees to recognize leased assets and liabilities classified as operating leases under previous GAAP. The ASU does not significantly change the lessee’s recognition, measurement and presentation of

 

7


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 will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. It is effective for annual reporting periods beginning after December 15, 2018 including interim periods within those fiscal years, but early adoption is permitted. The ASU requires a modified retrospective transition approach and provides certain optional transition relief. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Statement of Cash Flows

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”) that changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Compensation – Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Derivatives and Hedging

In August 2017, the FASB issued ASU 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. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within these years. Early adoption is permitted in any interim period or fiscal year before the effective date. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

3. VENEZUELAN AND ARGENTINIAN CURRENCY REGULATIONS AND RE-MEASUREMENTS

The functional currency of CNH Industrial’s Venezuelan subsidiary is the U.S. dollar. At the end of each period, CNH Industrial re-measures the net monetary assets of its Venezuelan subsidiary from the bolivar fuerte (“Bs.F.” or “bolivars”) to the U.S. dollar at the rate it believes is legally available to the Company.

In January 2014, the Venezuelan government enacted changes affecting the country’s currency exchange and other controls and established a new foreign currency administration, the National Center for Foreign Commerce (“CENCOEX”). CENCOEX assumed control of the sale and purchase of foreign currency in Venezuela and established the official exchange rate. Additionally, the government expanded the types of transactions that may be subject to the weekly auction mechanism under SICAD I. Also in 2014, the Venezuelan government announced that another floating rate exchange system (SICAD II) would be initiated. In February 2015, the Venezuelan government announced that the two previously used currency conversion mechanisms (SICAD I and SICAD II) had been merged into a single mechanism called SICAD and introduced a new open market exchange rate system, SIMADI. The changes created a three-tiered system.

In March 2016, the Venezuelan government devalued its currency and reduced its existing three-tiered system to a two-tiered system by eliminating the SICAD rate. The CENCOEX rate, which was the official rate available for purchases and sales of essential items, was changed to 10 bolivars per U.S. dollar from 6.3 and is now known as DIPRO. The Venezuelan government also announced that the SIMADI rate would be replaced by the DICOM rate, which is allowed to float freely and fluctuates based on supply and demand. As a result, management determined that the DICOM rate was the most appropriate legally available rate to re-measure the net monetary assets of the Company’s Venezuelan subsidiary, except for those cases in which the Company had a legally enforceable right of obtaining U.S. dollars at a different predetermined exchange rate. At September 30, 2017 and 2016, the net monetary assets were re-measured at the DICOM rate of 3,345.00 and 658.06 bolivars per U.S. dollar, respectively, resulting in a pre- and after-tax charge of $1 million and $5 million in the line item “Other, Net” for the three and nine months ended September 30, 2017, respectively and $0 million and $11 million for the three and nine months ended September 30, 2016, respectively. CNH Industrial’s results of operations in Venezuela for the three and nine months ended September 30, 2017 and 2016 were immaterial as a percentage of both the Company’s net revenues and operating profit.

 

8


As of September 30, 2017, the Company continues to control, and therefore consolidate, its Venezuelan operations. Despite the significant macroeconomic challenges in the country, CNH Industrial intends to continue its presence in the Venezuelan market for the foreseeable future. CNH Industrial continues to monitor the Venezuelan economic situation and is actively engaged in discussions with the Venezuelan government agencies concerning its ongoing business activities. If, in the future, it concludes that it no longer maintains control over its operations in Venezuela, CNH Industrial may need to de-consolidate its operations in Venezuela, which would result in a pre- and after-tax charge of approximately $91 million.

Additionally, at the end of each period, CNH Industrial re-measures the net monetary assets of its Argentinian subsidiaries from the Argentine Peso into the U.S. dollar. During the three and nine months ended September 30, 2017 and 2016, CNH Industrial recorded a charge of $7 million and $17 million, respectively, and $7 million and $19 million, respectively, following the re-measurement of such net monetary assets.

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 condensed consolidated balance sheets included in this report. The assets in the table include only those assets that can be used to settle obligations of the 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 the Company.

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

(in millions)

 

Restricted cash

 

$

637

 

 

$

776

 

Financing receivables

 

 

10,340

 

 

 

10,263

 

Total Assets

 

$

10,977

 

 

$

11,039

 

Debt

 

$

10,278

 

 

$

10,418

 

Total Liabilities

 

$

10,278

 

 

$

10,418

 

 

 

5. EARNINGS PER SHARE

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 (loss) per share is as follows (in millions, except per share amounts):

  

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to CNH Industrial

 

$

53

 

 

$

39

 

 

$

341

 

 

$

(347

)

Weighted average common shares outstanding—basic

 

 

1,364

 

 

 

1,362

 

 

 

1,364

 

 

 

1,362

 

Basic earnings (loss) per share

 

$

0.04

 

 

$

0.03

 

 

$

0.25

 

 

$

(0.25

)

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to CNH Industrial

 

$

53

 

 

$

39

 

 

$

341

 

 

$

(347

)

Weighted average common shares outstanding—basic

 

 

1,364

 

 

 

1,362

 

 

 

1,364

 

 

 

1,362

 

Effect of dilutive securities (when dilutive):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation plans (A)

 

 

2

 

 

 

2

 

 

 

3

 

 

 

-

 

Weighted average common shares outstanding—diluted

 

 

1,366

 

 

 

1,364

 

 

 

1,367

 

 

 

1,362

 

Diluted earnings (loss) per share

 

$

0.04

 

 

$

0.03

 

 

$

0.25

 

 

$

(0.25

)

 

 

9


 

(A)

For the three and nine months ended September 30, 2017,  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, 2016, 6.5 million shares were excluded from the computation of diluted earnings per share as the impact of these shares (related to stock options) would have been anti-dilutive. For the nine months ended September 30, 2016, an additional 1.7 million shares of common stock were excluded due to the Company’s net loss position.

 

6. EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT BENEFITS

The following 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, 2017 and 2016:

 

 

Pension

 

 

Healthcare

 

 

Other

 

 

 

Three Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in millions)

 

Service cost

 

$

7

 

 

$

7

 

 

$

2

 

 

$

2

 

 

$

3

 

 

$

3

 

Interest cost

 

 

17