CNH Industrial NV

Previous wording

In combination with the downturn in our industry cycle, lower commodity prices, changes in government policies, higher interest rates and repercussions from geopolitical events, the global economy continues to experience events affecting our suppliers, customers and business operations. These events have contributed to an inflationary environment which has affected, and may continue to affect, the price and availability of certain products and services necessary for the Company's operations, how we plan production for the end-customer demand, and how we invest in future innovations.

Current wording

In combination with the downturn in our industry cycle, lower commodity prices, changes in government policies, higher interest rates and repercussions from geopolitical events, the global economy continues to experience events affecting our suppliers, customers and business operations. As a consequence of the industry downturn, the Company expects production volumes to decline for the rest of 2024 due to lower demand. Given these conditions, we expect manufacturing inefficiencies and lower fixed cost absorption.

Previous wording

We recorded revenues of $4,818 million for the three months ended March 31, 2024, a decline of 9.8% (down 10.4% on a constant currency basis) compared to the three months ended March 31, 2023. Net sales were $4,131 million in the three months ended March 31, 2024, a decrease of 13.5% (down 14.0% on a constant currency basis) compared to the three months ended March 31, 2023. This decline is mainly due to lower industry demand. Price realization continued to be favorable for Agriculture and essentially flat for Construction.

Current wording

We recorded revenues of $5,488 million for the three months ended June 30, 2024, a decline of 16.4% (down 15.6% on a constant currency basis) compared to the three months ended June 30, 2023. Net sales were $4,803 million in the three months ended June 30, 2024, a decrease of 19.3% (down 18.6% on a constant currency basis) compared to the three months ended June 30, 2023. This decline was mainly due to lower shipment volumes on decreased industry demand and dealer inventory requirements. Price realization continued to be modestly favorable for Agriculture and essentially flat for Construction.

Previous wording

Selling, general and administrative expenses were $411 million for the three months ended March 31, 2024 (8.5% of total revenues), down $27 million compared to the three months ended March 31, 2023 (8.2% of total revenues). Total expenses were lower primarily due to a decrease in labor costs, driven by the Company's restructuring program, partially offset by higher credit risk provisions in the Financial Services segment.

Current wording

Selling, general and administrative expenses were $461 million for the three months ended June 30, 2024 (8.4% of total revenues), down $24 million compared to the three months ended June 30, 2023 (7.4% of total revenues). Total expenses were lower primarily due to a decrease in labor costs, driven by the Company's restructuring program, partially offset by higher credit risk provisions in the Financial Services segment.

Previous wording

Restructuring expenses were $31 million and $1 million for the three months ended March 31, 2024 and 2023, respectively. The Company’s restructuring program announced in November 2023 targets both labor and non-labor SG&A expenses. The Company has incurred a total of $78 million from launch to March 31, 2024 under this program and expects to incur aggregated restructuring charges of up to $200 million in 2023 and 2024.

Current wording

Restructuring expenses were $51 million and $2 million for the three months ended June 30, 2024 and 2023, respectively. The Company’s restructuring program announced in November 2023 targets both labor and non-labor SG&A expenses. The Company has incurred a total of $114 million from launch to June 30, 2024 under this program.

Previous wording

Interest expense was $394 million for the three months ended March 31, 2024 compared to $272 million for the three months ended March 31, 2023. The increase in interest expense is primarily due to both higher rates and outstanding debt in our Financial Services segment. The interest expense attributable to Industrial Activities for the three months ended March 31, 2024, net of interest income and eliminations, was $32 million, compared to $4 million in the three months ended March 31, 2023.

Current wording

Interest expense was $418 million for the three months ended June 30, 2024 compared to $323 million for the three months ended June 30, 2023. The increase in interest expense is primarily due to both higher rates and outstanding debt in our Financial Services segment. The interest expense attributable to Industrial Activities for the three months ended June 30, 2024, net of interest income and eliminations, was $46 million, compared to $22 million in the three months ended June 30, 2023.

Previous wording

Income tax expense for the three months ended March 31, 2024 was $77 million compared to $173 million for the three months ended March 31, 2023. The effective tax rate for the three months ended March 31, 2024 and 2023 was 19.2% and 27.6%, respectively. The effective tax rate for the three months ended March 31, 2024 was lower than the effective tax rate for the three months ended March 31, 2023 due to discrete items that reduced the rate in 2024 compared to discrete items that increased the rate in 2023.

Current wording

Income tax expense for the three months ended June 30, 2024 was $95 million compared to $192 million for the three months ended June 30, 2023. The effective tax rate for the three months ended June 30, 2024 and 2023 was 20.9% and 22.9%, respectively. The effective tax rate for the three months ended June 30, 2024 was lower than the effective tax rate for the three months ended June 30, 2023 due to discrete items that reduced the rate in 2024, including the impact of highly-inflationary accounting and tax-related inflation adjustments in Argentina. The 2023 effective tax rate was reduced by the tax impact related to the sale of CNH Industrial Russia.

Previous wording

Net sales of Industrial Activities were $4,131 million during the three months ended March 31, 2024, a decrease of 13.5% compared to the three months ended March 31, 2023 (down 14.0% on a constant currency basis). This decline is mainly due to lower volume across regions, driven by lower industry demand. Price realization continued to be favorable for Agriculture and essentially flat for Construction.

Current wording

Net sales of Industrial Activities were $4,803 million during the three months ended June 30, 2024, a decrease of 19.3% compared to the three months ended June 30, 2023 (down 18.6% on a constant currency basis). This decline is mainly due to lower shipment volumes on decreased industry demand and dealer inventory requirements. Price realization continued to be modestly favorable for Agriculture and essentially flat for Construction.

Previous wording

Adjusted EBIT of Industrial Activities was $405 million during the three months ended March 31, 2024, compared to an adjusted EBIT of $555 million during the three months ended March 31, 2023. The decline was primarily due to lower volume in the Agricultural segment on lower industry demand, partially offset by improved product costs and a continued reduction in SG&A expenses.

Current wording

Adjusted EBIT of Industrial Activities was $536 million during the three months ended June 30, 2024, compared to an adjusted EBIT of $822 million during the three months ended June 30, 2023. The decline was primarily due to lower volume in the Agricultural segment on lower industry demand, partially offset by improved purchasing and manufacturing costs, along with a continued reduction in SG&A expenses.

Previous wording

Adjusted EBIT was $421 million in the three months ended March 31, 2024, compared to $570 million in the three months ended March 31, 2023. The decrease was driven by lower volumes, partially offset by improved purchasing and manufacturing costs, and a continued reduction in SG&A expenses. R&D investments accounted for 6.0% of sales (5.3% in Q1 2023). Income from unconsolidated subsidiaries increased $42 million year-over-year. Adjusted EBIT margin was 12.5%.

Current wording

Adjusted EBIT was $536 million in the three months ended June 30, 2024, compared to $821 million in the three months ended June 30, 2023. The decrease was driven by the lower industry volumes, partially offset by improved purchasing and manufacturing costs, along with a continued reduction in SG&A expenses. R&D investments accounted for 5.5% of sales (4.9% in Q2 2023). Income from unconsolidated subsidiaries increased $15 million year-over-year. Adjusted EBIT margin was 13.7% (16.8% in Q2 2023).

Previous wording

Construction's net sales totaled $758 million in the three months ended March 31, 2024, a decline of 10.7% compared to the three months ended March 31, 2023 (down 11.3% on a constant currency basis), due to lower volume across all regions driven mainly by lower market demand.

Current wording

Construction's net sales totaled $890 million in the three months ended June 30, 2024, a decline of 16.4% compared to the three months ended June 30, 2023 (down 15.7% on a constant currency basis), due to lower volumes across all regions driven mainly by lower market demand.

Previous wording

Revenues of Financial Services were $685 million in the three months ended March 31, 2024, up 24.8% compared to the three months ended March 31, 2023 (up 23.4% on a constant currency basis), due to favorable volumes and yields across all regions, partially offset by lower used equipment sales due to decreased operating lease maturities.

Current wording

Revenues of Financial Services were $687 million in the three months ended June 30, 2024, up 13.9% compared to the three months ended June 30, 2023 (up 15.7% on a constant currency basis), due to favorable volumes in all regions except EMEA and higher yields, primarily in North America, partially offset by lower used equipment sales due to decreased operating lease maturities.

Previous wording

At March 31, 2024, the receivables balance greater than 30 days past due as a percentage of receivables was 1.7% (1.4% as of March 31, 2023).

Current wording

At June 30, 2024, the receivables balance greater than 30 days past due as a percentage of receivables was 2.5% (1.8% as of June 30, 2023), with most of the growth in South America from the seasonal concentration of yearly payments owed by agricultural customers compounded by regional economic and environmental factors..

Previous wording

(1) In the three months ended March 31, 2024 and 2023, this item includes the pre-tax gain of $6 million and $6 million, respectively, as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.

Current wording

(1) In the three months ended June 30, 2024 and 2023, this item includes the pre-tax gain of $6 million as a result of the amortization over the 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.

Previous wording

Cost of goods sold was $3,195 million for the three months ended March 31, 2024 compared with $3,611 million for the three months ended March 31, 2023. As a percentage of net sales of Industrial Activities, cost of goods sold was 77.3% in the three months ended March 31, 2024 (75.6% for the three months ended March 31, 2023), which was impacted by lower production volumes, partially offset by favorable price realization and production cost efficiencies.

Current wording

Cost of goods sold was $6,897 million for the six months ended June 30, 2024 compared with $8,074 million for the six months ended June 30, 2023. As a percentage of net sales of Industrial Activities, cost of goods sold was 77.2% in the six months ended June 30, 2024 (75.2% for the six months ended June 30, 2023), which was impacted by lower production volumesand unfavorable mix, partially offset by favorable price realization and production cost efficiencies.

Previous wording

Other, net expenses were $163 million for the three months ended March 31, 2023 and included a pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over four years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $13 million in relation to the fair value remeasurement of previously held investments in Augmenta and Bennamann; partially offset by a loss on the sale of our Russia Financial Services business of $6 million and foreign exchange losses of $6 million.

Current wording

Other, net expenses were $350 million for the six months ended June 30, 2023 and includes a loss of $23 million on the sale of CNH Industrial Russia and CNH Capital Russia, offset by a pre-tax gain of $12 million ($9 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $13 million in relation to the fair value remeasurement of previously held investments in Augmenta and Bennamann.

Previous wording

Net income was $402 million for the three months ended March 31, 2024, compared to net income of $486 million for the three months ended March 31, 2023. Net income for the three months ended March 31, 2024 included restructuring expense of $31 million, and $6 million ($5 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.

Current wording

Net income was $840 million for the six months ended June 30, 2024, compared to net income of $1,196 million for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024 included restructuring expense of $82 million, a loss of$15 million on the sale of certain non-core product lines, and $12 million ($9 million after-tax) as a result of the amortization over 4 years of the $101 million positive impact from the 2021 U.S. healthcare plan modification.

Previous wording

Net income was $486 million for the three months ended March 31, 2023 and included pre-tax gain of $6 million ($5 million after-tax) as a result of the amortization over four years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $13 million in relation to the fair value remeasurement of previously held investments in Augmenta and Bennamann, partially offset by a loss on the sale of our Russia Financial Services business of $6 million and restructuring expenses of $1 million.

Current wording

Net income was $1,196 million for the six months ended June 30, 2023. Net income for the six months ended June 30, 2023 included a loss of $17 million related to the sale of CNH Industrial Russia, a loss of $6 million related to CNH Capital Russia, and restructuring expenses of $3 million, partially offset by a pre-tax gain of $12 million ($9 million after-tax) as a result of the amortization over four years of the $101 million positive impact from the 2021 U.S. healthcare plan modification and a gain of $13 million in relation to the fair value remeasurement of previously held investments in Augmenta and Bennamann.

Previous wording

Agriculture's net sales totaled $3,373 million in the three months ended March 31, 2024, a decline of 14.1% compared to the three months ended March 31, 2023 (down 14.6% on a constant currency basis) primarily due to lower industry volume across all regions and dealer inventory management, partially offset by favorable price realization.

Current wording

Agriculture's net sales totaled $7,286 million in the six months ended June 30, 2024, a decline of 17.4% compared to the six months ended June 30, 2023 (down 17.1% on a constant currency basis) primarily due to lower industry volume across all regions and dealer inventory management, partially offset by favorable price realization.

Previous wording

In North America, industry volume was down 15% year-over-year in the first quarter for tractors under 140 HP and was down 2% for tractors over 140 HP; combines were down 17%. In Europe, Middle East and Africa (EMEA), tractor and combine demand was down 15% and down 24%, respectively. South America tractor demand was down 18% and combine demand was down 40% continuing the negative trend of the second half of 2023. Asia Pacific tractor demand was down 12% while combine demand was up 16% in the region as a whole, but down 22% in Australia and New Zealand.

Current wording

For the six months ended June 30, 2024 in North America, industry volume was down 13% year-over-year for tractors under 140 HP and nil for tractors over 140 HP; combines were down 11%. In Europe, Middle East and Africa (EMEA), tractor and combine demand was down 10% and down 31%, respectively. South America tractor demand was down 14% and combine demand was down 35% continuing the negative trend of the second half of 2023. Asia Pacific tractor demand was down 5% while combine demand was up 12% in the region as a whole.

Previous wording

Global industry volume for construction equipment decreased 1% year-over-year in the first quarter for Heavy construction equipment; Light construction equipment was down 8%. Aggregated demand decreased 14% in EMEA, decreased 6% in North America, decreased 10% in South America and increased 3% in Asia Pacific.

Current wording

In the six months ended June 30, 2024 global industry volume for construction equipment decreased 3% year-over-year for Heavy construction equipment; Light construction equipment was down 6%. Aggregated demand decreased 15% in EMEA, decreased 2% in North America, increased 19% in South America and decreased 2% in Asia Pacific.

Previous wording

Net income of Financial Services was $118 million in the three months ended March 31, 2024, an increase of $40 million compared to the three months ended March 31, 2023, primarily due to favorable volumes in all regions, margin improvement in South America, and a favorable effective tax rate due to discrete items in the quarter; partially offset by increased risk costs due to higher aged delinquencies in South America.

Current wording

Net income of Financial Services was $209 million in the six months ended June 30, 2024, an increase of $37 million compared to the six months ended June 30, 2023, primarily due to favorable volumes in all regions, margin improvement in all regions except Asia Pacific, and a favorable effective tax rate due to discrete items in the current year; partially offset by increased risk costs due to higher aged delinquencies in South America, increased specific reserve needs in North America and lower used equipment sales from less operating lease maturities.

Previous wording

In the first quarter of 2024, retail loan originations, including unconsolidated joint ventures, were $2.5 billion, up $0.3 billion compared to the first quarter of 2023 (up $0.2 billion on a constant currency basis.) The managed portfolio (including unconsolidated joint ventures) was $28.7 billion as of March 31, 2024 (of which retail was 65% and wholesale was 35%), up $4.2 billion compared to March 31, 2023 (up $4.3 billion on a constant currency basis).

Current wording

In the six months ended June 30, 2024, retail loan originations, including unconsolidated joint ventures, were $5.4 billion, up $0.4 billion compared to the six months ended June 30, 2023 (up $0.4 billion on a constant currency basis). The managed portfolio, including unconsolidated joint ventures, was $28.5 billion as of June 30, 2024 (of which retail was 65% and wholesale 35%), up $2.5 billion compared to June 30, 2023 (up $3.3 billion on a constant currency basis).

Previous wording

(2) In the three months ended March 31, 2024, this item did not include any discrete items. In the three months ended March 31, 2023 this item included a $13 million gain in relation to the fair value remeasurement of Augmenta and Bennamann, partially offset by a $6 million loss on the sale of our Russia Financial Services business.

Current wording

(2) In the six months ended June 30, 2024, this item includes a loss of $15 million on the sale of certain non-core product lines. In the six months ended June 30, 2023 this item included a gain of $13 million in relation to the fair value remeasurement of Augmenta and Bennamann, offset by a $23 million loss on the sale of CNH Industrial Russia and CNH Capital Russia.

Previous wording

At March 31, 2024, Cash and cash equivalents and Restricted cash were $3,959 million, a decrease of $1,086 million from $5,045 million at December 31, 2023, primarily due to operating activity cash absorption, the shares buyback program, receivable portfolio absorption, and investments in fixed assets, partially offset by an increase in external borrowing to support working capital requirements.

Current wording

At June 30, 2024, Cash and cash equivalents and Restricted cash were $2,647 million, a decrease of $2,398 million from $5,045 million at December 31, 2023, primarily due to operating activity cash absorption, the share buyback program, dividends paid, receivable portfolio absorption, and investments in fixed assets, partially offset by an increase in external borrowing to support working capital requirements.

Previous wording

At March 31, 2024, Cash and cash equivalents were $3,236 million ($4,322 million at December 31, 2023) and Restricted cash was $723 million ($723 million at December 31, 2023), respectively. Undrawn medium-term unsecured committed facilities were $5,036 million ($5,945 million at December 31, 2023). At March 31, 2024, the aggregate of Cash and cash equivalents, Restricted cash, undrawn medium-term unsecured committed facilities, and net financial receivables from Iveco Group which we consider to constitute our principal liquid assets (or "available liquidity"), totaled $9,155 million ($11,224 million at December 31, 2023). At March 31, 2024, this amount also included $160 million net financial receivables from Iveco Group ($234 million net financial receivables at December 31, 2023) consisting of net financial receivables mainly towards Financial Services of Iveco Group.

Current wording

At June 30, 2024, Cash and cash equivalents were $2,002 million ($4,322 million at December 31, 2023) and Restricted cash was $645 million ($723 million at December 31, 2023), respectively. Undrawn medium-term unsecured committed facilities were $4,909 million ($5,945 million at December 31, 2023). At June 30, 2024, the aggregate of Cash and cash equivalents, Restricted cash, undrawn medium-term unsecured committed facilities, and net financial receivables from Iveco Group which we consider to constitute our principal liquid assets (or "available liquidity"), totaled $7,726 million ($11,224 million at December 31, 2023). At June 30, 2024, this amount also included $170 million net financial receivables from Iveco Group ($234 million net financial receivables at December 31, 2023) consisting of net financial receivables mainly towards Financial Services of Iveco Group.

Previous wording

Cash used in operating activities in the three months ended March 31, 2024 totaled $894 million and primarily comprised the following elements:

Current wording

Cash used in operating activities in the six months ended June 30, 2024 totaled $515 million and primarily comprised the following elements:

Previous wording

▪plus $148 million in non-cash charges for depreciation and amortization ($103 million excluding equipment on operating leases);

Current wording

▪plus $299 million in non-cash charges for depreciation and amortization ($207 million excluding equipment on operating leases);

Previous wording

▪less change in provisions of $39 million;

Current wording

▪plus change in provisions of $105 million;

Previous wording

▪less change in deferred income taxes of $18 million;

Current wording

▪less change in deferred income taxes of $24 million;

Previous wording

▪less change in working capital of $1,367 million;

Current wording

▪less change in working capital of $1,793 million.

Previous wording

In the three months ended March 31, 2023, net cash used in operating activities was $701 million primarily as a result of $1,427 million change in working capital, partially offset by $486 million in net income, $132 million in non-cash charges for depreciation and amortization, along with $32 million in Other non-cash items driven by share-based payments.

Current wording

In the six months ended June 30, 2023, net cash used in operating activities was $840 million primarily as a result of $2,615 million change in working capital and $188 million change in deferred income taxes, partially offset by $1,196 million in net income, $445 million change in provisions, $270 million in non-cash charges for depreciation and amortization, along with $78 million in Other non-cash items driven by share-based payments and write downs of assets under operating leases.

Previous wording

Net cash used in investing activities was $419 million in the three months ended March 31, 2024 and was primarily due to net additions to retail receivables ($293 million), expenditures for assets under operating leases ($106 million), and expenditures for property, plant and equipment and intangible assets, excluding assets under operating lease ($96 million).

Current wording

Net cash used in investing activities was $929 million in the six months ended June 30, 2024 and was primarily due to net additions to retail receivables ($574 million), expenditures for assets under operating leases ($214 million), and expenditures for property, plant and equipment and intangible assets, excluding assets under operating lease ($206 million).

Previous wording

Net cash used in investing activities was $749 million in the three months ended March 31, 2023 and was primarily due to expenditures for assets under operating leases ($107 million), expenditures for property, plant and equipment and intangible assets, net of assets under operating lease ($90 million), additions to retail receivables ($225 million) and cash paid for acquisitions/investments of third party businesses ($137 million).

Current wording

Net cash used in investing activities was $1,247 million in the six months ended June 30, 2023 and was primarily due to additions to retail receivables ($581 million), expenditures for assets under operating leases ($237 million), expenditures for property, plant and equipment and intangible assets, net of assets under operating lease ($224 million), and cash paid for acquisitions/investments of third party businesses ($137 million).

Previous wording

Net cash provided by financing activities was $319 million in the three months ended March 31, 2024 compared to $303 million in the three months ended March 31, 2023 and was primarily due to an increase in external borrowings to support working capital requirements and an increase to our Financial Services portfolio, partially offset by the shares buyback program.

Current wording

Net cash provided by financing activities was $837 million in the six months ended June 30, 2023 and was primarily due to an increase in external borrowings to support working capital requirements and an increase to our Financial Services portfolio, partially offset by the shares buyback program and dividends paid.

Previous wording

(1) Total (Debt) of Industrial Activities includes Intersegment notes payable to Financial Services of $218 million and $301 million as of March 31, 2024 and December 31, 2023, respectively. Total (Debt) of Financial Services includes Intersegment notes payable to Industrial Activities of $416 million and $527 million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

(1) Total (Debt) of Industrial Activities includes Intersegment notes payable to Financial Services of $320 million and $301 million as of June 30, 2024 and December 31, 2023, respectively. Total (Debt) of Financial Services includes Intersegment notes payable to Industrial Activities of $352 million and $527 million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

(3) The net intersegment receivable/(payable) balance recorded by Financial Services relating to Industrial Activities was $(198) million and $(226) million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

(3) The net intersegment receivable/(payable) balance recorded by Financial Services relating to Industrial Activities was $(32) million and $(226) million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

Excluding positive exchange rate differences of $361 million, Net Debt at March 31, 2024 increased by $1,993 million compared to December 31, 2023, mainly reflecting a Free Cash Flow absorption from Industrial Activities of $1,209 million, the increase in portfolio receivables of Financial Services of $253 million, and the cash out of $581 million related to the share buyback program.

Current wording

Excluding positive exchange rate differences of $809 million, Net Debt at June 30, 2024 increased by $2,770 million compared to December 31, 2023, mainly reflecting a Free Cash Flow absorption from Industrial Activities of $1,069 million, the increase in portfolio receivables of Financial Services of $501 million, and the cash out of $1,235 million related to the share buyback program and dividends paid.

Previous wording

Available committed unsecured facilities expiring after twelve months amounted to approximately $5.0 billion at March 31, 2024 ($5.9 billion at December 31, 2023). Total committed secured facilities expiring after twelve months amounted to approximately $3.1 billion at March 31, 2024 ($3.7 billion at December 31, 2023), of which $0.2 billion was available at March 31, 2024 ($3.7 billion at December 31, 2023).

Current wording

Available committed unsecured facilities expiring after twelve months amounted to approximately $4.9 billion at June 30, 2024 ($5.9 billion at December 31, 2023). Total committed secured facilities expiring after twelve months amounted to approximately $3.1 billion at June 30, 2024 ($3.7 billion at December 31, 2023), of which $0.4 billion was available at June 30, 2024 ($3.7 billion at December 31, 2023 was utilized).