CNH Industrial 2016 third quarter revenues of $5.7 billion, with net income of $39 million and net industrial debt of $2.7 billion at quarter-end

LONDON, Oct. 31, 2016 /PRNewswire/ --

Financial results presented under U.S. GAAP⁽¹⁾ 

• Adjusted net income⁽²⁾⁽³⁾ was $68 million in the third quarter of 2016, with adjusted diluted EPS⁽²⁾ of $0.05
• Operating profit⁽²⁾ of Industrial Activities was $248 million in the third quarter of 2016, with operating margin of 4.5%; year-over-year operating profit and margin improvements were achieved in Agricultural Equipment, Powertrain and Commercial Vehicles
• In the quarter the Company repurchased $450 million in principal amount of 7.875% Notes due 2017, and issued $600 million in principal amount of 4.50% Notes due 2023
• CNH Industrial announced today its agreement to acquire the agricultural grass and soil implement business of Kongskilde Industries to expand its offering in tillage, seeding and hay & forage segments
• Full year guidance reaffirmed

CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $5,749 million for the third quarter of 2016, down 1.7% compared to the third quarter of 2015. Net sales of Industrial Activities were $5,461 million for the third quarter of 2016, down 1.6% compared to the third quarter of 2015. Reported net income was $39 million in the third quarter, and includes a charge of $38 million ($24 million net of tax impact) related to the repurchase of a portion of the Case New Holland Industrial Inc. 7.875% Notes due 2017. Adjusted net income was $68 million for the quarter, up 79% compared to the third quarter of 2015.

Operating profit of Industrial Activities was $248 million for the third quarter of 2016, in line with the third quarter of 2015, with an operating margin of 4.5%. "Our third quarter results were consistent with our expectations," said Richard Tobin, Chief Executive Officer of CNH Industrial. "Despite the challenging demand environment in our agricultural equipment business we have been able to increase our comparable profit margin for the quarter in the segment as a result of proactive cost control measures, and improved equipment demand in Latin America. Our commercial vehicles business continues to gain market share in Europe as our new vehicle product launches continue to gain traction in the market."

The effective tax rate was 55.2% for the third quarter of 2016. Excluding the impact of the exceptional non-tax deductible charge of $551 million incurred in the first half of 2016 following finalization of the European Commission settlement, and the impact of the inability to record deferred tax assets on losses in certain jurisdictions, the effective tax rate year-to-date was 34%, in line with the Company's long-term effective tax rate objective of between 34% to 36%.

Net industrial debt⁽¹⁾ was $2.7 billion at September 30, 2016, a $0.5 billion increase compared to June 30, 2016 primarily attributable to non-inventory related timing differences in the production cycle and their impact on net working capital. Total debt of $26.3 billion at September 30, 2016, was in line with June 30, 2016 and December 31, 2015. As of September 30, 2016, available liquidity⁽¹⁾ was $8.9 billion, up $0.1 billion compared to June 30, 2016 and down $0.4 billion compared to December 31, 2015.

During the quarter, the Company issued $600 million in aggregate principal amount of 4.50% Notes due 2023. In addition, the Company repurchased $450 million of the outstanding 7.875% Notes due 2017 issued by its subsidiary Case New Holland Industrial Inc. The $38 million one-off charge related to the repurchase will be more than offset by interest cost savings achieved through the remaining term of the 2017 Notes.

"We have had some very positive developments in the quarter," said Richard Tobin. "We demonstrated our commitment to technological advancement and Precision Farming with our autonomous tractor concept vehicle at Farm Progress in August. Today we have announced our agreement to acquire the tillage, seeding and hay and forage segments of Kongskilde Industries. Furthermore, we announced a new exclusive alliance with Hyundai Heavy Industries in the mini-excavator segment which will become operational in the first quarter of 2017, and CNH Industrial was confirmed Industry Leader for the sixth consecutive year by the Dow Jones Sustainability Indices. We are effectively managing our businesses through some challenging market conditions by reducing our structural costs, retaining our leading market share positions and positioning ourselves to take full advantage of opportunities as they arise in the cycle."

Segment Results

Agricultural Equipment's net sales decreased 3.0% for the third quarter of 2016 compared to the third quarter of 2015 (down 3.4% on a constant currency basis), as a result of unfavorable industry volume and product mix in the row crop sector in NAFTA and unfavorable industry volume in the small grain sector in EMEA. Net sales of specialty tractors in EMEA remain strong. Net sales increased in LATAM due to market improvements in Brazil and Argentina, and slightly decreased in APAC due to lower market demand in China, while Australia continues to improve.

Operating profit was $155 million for the third quarter of 2016 ($137 million in the third quarter of 2015). The increase was primarily due to net price realization and lower material costs, partially offset by unfavorable volume, including fixed cost absorption, and unfavorable product mix in NAFTA and EMEA. Operating margin increased 1.0 p.p. to 6.6%.

Construction Equipment's net sales increased 0.7% for the third quarter of 2016 compared to the third quarter of 2015 (up 0.5% on a constant currency basis), driven by favorable volume in APAC, partially offset by lower sales in NAFTA.

Operating profit was $1 million in the third quarter of 2016 compared to $37 million in the third quarter of 2015, as a result of unfavorable market mix and product mix and negative price realization primarily in NAFTA, partially mitigated by cost containment actions.

Commercial Vehicles' net sales decreased 3.4% for the third quarter of 2016 compared to the third quarter of 2015 (down 3.7% on a constant currency basis), primarily as a result of lower volume in all ranges in LATAM mainly due to continuing deterioration of market conditions in Brazil and the Euro V pre-buy impact in the Argentinian market in the second half of 2015. Net sales were flat in EMEA as a volume increase in trucks was offset by decreases in buses and specialty vehicles.

Operating profit was $64 million for the third quarter of 2016 ($60 million in the third quarter of 2015), with an operating margin of 3.0% (up 0.3 p.p. compared to the third quarter of 2015). The increase was due to positive pricing and manufacturing efficiencies in EMEA trucks and buses, partially offset by lower volume in the specialty vehicle business. In LATAM, market conditions remained challenging primarily in Brazil. In APAC, operating profit improved mainly as a result of positive pricing.

Powertrain's net sales increased 6.3% in the third quarter of 2016 compared to the third quarter of 2015 (up 5.9% on a constant currency basis) due to higher volumes primarily in on-road engine applications. Sales to external customers accounted for 48% of total net sales (44% in the third quarter of 2015).

Operating profit was $52 million for the third quarter of 2016, a $17 million increase compared to the third quarter of 2015 primarily due to favorable volume and industrial efficiencies. Operating margin increased 1.7 p.p. to 6.1%, the highest third quarter margin ever reported in the segment's history, confirming the positive contribution of a well-balanced portfolio of engine applications.

Financial Services' revenues totaled $386 million in the third quarter of 2016, a 1.0% decrease compared to the third quarter of 2015 (down 2.9% on a constant currency basis), due to a lower average portfolio and reduced interest spreads, partially offset by the positive impact of currency translation. In the third quarter of 2016, retail loan originations (including unconsolidated joint ventures) were $2.2 billion, flat compared to the third quarter of 2015. The managed portfolio (including unconsolidated joint ventures) of $24.8 billion as of September 30, 2016 (of which retail was 65% and wholesale 35%) was up $0.3 billion compared to September 30, 2015 (down $0.2 billion on a constant currency basis).

Net income was $77 million for the third quarter of 2016, a decrease of $17 million compared to the third quarter of 2015, primarily due to the lower average portfolio and the reduction in interest spreads.

2016 Outlook

CNH Industrial is confirming its 2016 guidance as follows:

• Net sales of Industrial Activities between $23 billion and $24 billion, with an operating margin of Industrial Activities between 5.2% and 5.8%;
• Net industrial debt at the end of 2016 between $2.0 billion and $2.3 billion (or $1.5 billion and $1.8 billion excluding the European Commission settlement of $0.5 billion).

About CNH Industrial

CNH Industrial N.V. (NYSE: CNHI /MI: CNHI) is a global leader in the capital goods sector with established industrial experience, a wide range of products and a worldwide presence. Each of the individual brands belonging to the Company is a major international force in its specific industrial sector: Case IH, New Holland Agriculture and Steyr for tractors and agricultural machinery; Case and New Holland Construction for earth moving equipment; Iveco for commercial vehicles; Iveco Bus and Heuliez Bus for buses and coaches; Iveco Astra for quarry and construction vehicles; Magirus for firefighting vehicles; Iveco Defence Vehicles for defence and civil protection; and FPT Industrial for engines and transmissions. More information can be found on the corporate website: www.cnhindustrial.com

Additional Information

Today, at 2:00 p.m. CET / 1:00 p.m. GMT / 9:00 a.m. EDT, management will hold a conference call to present 2016 third quarter and first nine months results to financial analysts and institutional investors. The call can be followed live online at: http://bit.ly/2deoEuE and a recording will be available later on the Company's website (www.cnhindustrial.com). A presentation will be made available on the CNH Industrial website prior to the call.

Non-GAAP Financial Information

CNH Industrial monitors its operations through the use of several non-GAAP financial measures. CNH Industrial's management believes that these non-GAAP financial measures provide useful and relevant information regarding its results and allow management and investors to assess CNH Industrial's operating trends, financial performance and financial position. Management uses these non-GAAP measures to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions as they provide additional transparency with respect to our core operations. These non-GAAP financial measures have no standardized meaning presented in U.S. GAAP or EU-IFRS and are unlikely to be comparable to other similarly titled measures used by other companies due to potential differences between the companies in calculations. As a result, the use of these non-GAAP measures has limitations and should not be considered as substitutes for measures of financial performance and financial position prepared in accordance with U.S. GAAP and/or EU-IFRS.

CNH Industrial non-GAAP financial measures are defined as follows:

• Operating Profit under U.S. GAAP: Operating Profit of Industrial Activities is defined as net sales less cost of goods sold, selling, general and administrative expenses, and research and development expenses. Operating Profit of Financial Services is defined as revenues less selling, general and administrative expense, interest expenses and certain other operating expenses.
• Trading Profit under EU-IFRS: Trading Profit is derived from financial information prepared in accordance with EU-IFRS and is defined as income before restructuring, gains/(losses) on disposal of investments and other unusual items, interest expense of Industrial Activities, income taxes, equity in income (loss) of unconsolidated subsidiaries and affiliates, non-controlling interests.
• Operating Profit under EU-IFRS: Operating Profit under EU-IFRS is computed starting from Trading Profit under EU-IFRS plus/minus restructuring costs, other income (expenses) that are unusual in the ordinary course of business (such as gains and losses on the disposal of investments and other unusual items arising from infrequent external events or market conditions).
• Adjusted Net Income (Loss): is defined as net income (loss), less restructuring charges and exceptional items, after tax. In particular, exceptional items are specifically disclosed items that management believes are not reflective of on-going operational activities.
• Adjusted Diluted EPS: is computed by dividing Adjusted Net Income (loss) attributable to CNH Industrial N.V. by a weighted-average number of common shares outstanding during the period that takes into consideration potential common shares outstanding deriving from the CNH Industrial share-based payment awards, when inclusion is not anti-dilutive.
• Net Debt and Net Debt of Industrial Activities (or Net Industrial Debt): CNH Industrial provides the reconciliation of Net Debt to Total Debt, which is the most directly comparable measure included in the consolidated balance sheets. Due to different sources of cash flows used for the repayment of the debt between Industrial Activities and Financial Services (by cash from operations for Industrial Activities and by collection of financing receivables for Financial Services), management separately evaluates the cash flow performance of Industrial Activities using Net Debt of Industrial Activities.
• Available Liquidity: is defined as cash and cash equivalents plus restricted cash and undrawn committed facilities.
• Change excl. FX or Constant Currency: CNH Industrial discusses the fluctuations in revenues and certain non-GAAP financial measures on a constant currency basis by applying the prior year exchange rates to current year's values expressed in local currency in order to eliminate the impact of foreign exchange rate fluctuations.

The tables attached to this press release provide reconciliations of the non-GAAP measures used in this press release to the most directly comparable GAAP measures.

Forward-looking statements

All statements other than statements of historical fact contained in this earning release including statements regarding our competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, earnings (or loss) per share, capital expenditures, dividends, capital structure or other financial items; costs; and plans and objectives of management regarding operations and products, are forward-looking statements. These statements may include terminology such as "may", "will", "expect", "could", "should", "intend", "estimate", "anticipate", "believe", "outlook", "continue", "remain", "on track", "design", "target", "objective", "goal", "forecast", "projection", "prospects", "plan", or similar terminology. Forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize or other assumptions underlying any of the forward-looking statements prove to be incorrect, the actual results or developments may differ materially from any future results or developments expressed or implied by the forward-looking statements. Factors, risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others: the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related products; general economic conditions in each of our markets; changes in government policies regarding banking, monetary and fiscal policies; legislation, particularly relating to capital goods-related issues such as agriculture, the environment, debt relief and subsidy program policies, trade and commerce and infrastructure development; government policies on international trade and investment, including sanctions, import quotas, capital controls and tariffs; actions of competitors in the various industries in which we compete; development and use of new technologies and technological difficulties; the interpretation of, or adoption of new, compliance requirements with respect to engine emissions, safety or other aspects of our products; production difficulties, including capacity and supply constraints and excess inventory levels; labor relations; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; a decline in the price of used vehicles; the resolution of pending litigation and investigations on a wide range of topics, including dealer and supplier litigation, follow-on private litigation in various jurisdictions after the recently settled EU antitrust investigation announced on July 19, 2016, intellectual property rights disputes, product warranty and defective product claims, and emissions and/or fuel economy regulatory and contractual issues; the evolution of our contractual relations with Kobelco Construction Machinery Co., Ltd. and Sumitomo (S.H.I.) Construction Machinery Co., Ltd.; our pension plans and other post-employment obligations; political and civil unrest; volatility and deterioration of capital and financial markets, including further deterioration of the Eurozone sovereign debt crisis, possible effects of Brexit, political evolutions in Turkey, terror attacks in Europe and elsewhere, and other similar risks and uncertainties and our success in managing the risks involved in the foregoing. Further information concerning factors, risks, and uncertainties that could materially affect the Company's financial results is included in our annual report on Form 20-F for the year ended December 31, 2015, prepared in accordance with U.S. GAAP, the Company's subsequently filed reports on Form 6-K, in the Company's EU Annual Report at December 31, 2015, prepared in accordance with EU-IFRS and Semi-Annual Report for the period ended on June 30, 2016 prepared in accordance with EU-IFRS. Investors should refer to and consider the incorporated information on risks, factors, and uncertainties in addition to the information presented here.

Forward-looking statements speak only as of the date on which such statements are made. Furthermore, in light of ongoing difficult macroeconomic conditions, both globally and in the industries in which we operate, it is particularly difficult to forecast our results and any estimates or forecasts of particular periods that we provide in this earnings release are uncertain. Accordingly, investors should not place undue reliance on such forward-looking statements. We can give no assurance that the expectations reflected in our forward-looking statements will prove to be correct. Our outlook is based upon assumptions relating to the factors described in the earnings release, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Our actual results could differ materially from those anticipated in such forward-looking statements. We undertake no obligation to update or revise publicly our outlook or forward-looking statements. Further information concerning CNH Industrial and its businesses, including factors that potentially could materially affect CNH Industrial's financial results, is included in CNH Industrial's reports and filings with the U.S. Securities and Exchange Commission ("SEC"), the Autoriteit Financiële Markten ("AFM") and Commissione Nazionale per le Società e la Borsa ("CONSOB").

All future written and oral forward-looking statements by CNH Industrial or persons acting on the behalf of CNH Industrial are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.

Translation of financial statements denominated in a currency other than the U.S. dollar

The principal exchange rates used to translate into U.S. dollars the financial statements prepared in currencies other than the U.S. dollar were as follows:

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SOURCE CNH Industrial N.V.

Related Links

http://www.cnhindustrial.com