CNH Industrial N.V. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. The interim financial statements are unaudited. CNH Industrial reports Agriculture, Construction, and Financial Services. The Iveco Group On-Highway business was spun off effective January 1, 2022; prior-period results are presented as discontinued operations, which affects comparisons.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $5.881bn | $4.746bn | $16.608bn | $14.016bn |
| Net income from continuing operations | $559m | $460m | $1.447bn | $1.337bn |
| Net income attributable to CNH Industrial | $556m | $323m total; $457m continuing | $1.437bn | $1.421bn total; $1.330bn continuing |
| EPS attributable to CNH Industrial | $0.41 | $0.24 total; $0.34 continuing | $1.06 | $1.05 total; $0.98 continuing |
| Industrial Activities Adjusted EBIT (non-GAAP) | $670m; 12.4% margin | $420m; 9.7% margin | $1.753bn; 11.5% margin | $1.385bn; 10.8% margin |
| Cash flow from operating activities | Not provided for quarter | Not provided for quarter | $(886)m | $1.892bn consolidated |
Management reports nine-month 2021 operating cash flow from continuing operations of $1.474bn; the consolidated cash-flow statement also includes discontinued-operation cash flows. Q3 2021 net income included a $131m discontinued-operation loss, while nine-month 2021 included $116m of discontinued-operation income.
- Revenue and margins: Q3 total revenue rose 23.9% (28.9% excluding currency effects); Industrial Activities net sales rose 24.4% (29.7% excluding currency). Cost of goods sold was 77.0% of Industrial Activities net sales, versus 79.6% a year earlier. Q3 Agriculture revenue was $4.501bn and Adjusted EBIT $666m (14.8% margin); Construction revenue was $895m and Adjusted EBIT $24m (2.7% margin). Financial Services net income was $86m, down from $96m.
- Year-to-date performance: Industrial Activities net sales increased 18.6% (21.9% excluding currency). Agriculture and Construction Adjusted EBIT rose to $1.755bn and $90m, respectively. Financial Services net income was $263m versus $259m.
- Cash and liquidity: At September 30, cash and cash equivalents were $3.154bn and restricted cash $660m. Available liquidity, as defined by the company, was $8.645bn, including $4.7bn of undrawn unsecured committed facilities. Operating cash use was $886m, and Industrial Free Cash Flow, a non-GAAP measure, was negative $453m.
- Debt and balance sheet: Balance-sheet debt was $20.922bn, compared with $20.897bn at year-end 2021. The company’s net debt measure was $17.021bn, versus $15.556bn; management says the increase excluding favorable currency effects reflected negative Industrial Free Cash Flow and growth in Financial Services receivables. Inventories rose to $5.362bn from $4.216bn, and financing receivables to $16.901bn from $15.376bn.
Material changes, commentary, and risks
- Management attributed stronger Industrial Activities results chiefly to price realization, improved mix and volumes; these benefits were partly offset by higher production, raw-material, freight, SG&A and R&D costs. Construction demand weakened in several markets, particularly Asia Pacific; Agriculture demand varied by product and region.
- The nine-month effective tax rate increased to 29.6% from 21.5%. The company cited Russian deferred-tax asset write-downs and losses, unrecognized tax benefits, and a discrete tax charge related to the Raven Engineered Films sale. The Q3 effective tax rate was 26.3%, versus 15.1%.
- Operations in Russia were suspended outside the domestic market. The company recorded $71m of charges related to Russian operations during the first quarter, including asset write-downs, receivable allowances and a deferred-tax valuation allowance. Management cited continuing uncertainty from the Ukraine war, sanctions, inflation, commodity costs and supply-chain disruption.
- Other notable items included Raven Engineered Films and Aerostar divestitures and related losses, Iveco spin-off costs, and amortization gains from U.S. retiree healthcare plan changes. The company reported a $350m Raven Engineered Films sale receipt in its cash-flow discussion.
- Legal and environmental exposures include product and warranty claims, emissions-related matters, competition claims and remediation at U.S. waste sites. Management believes the reasonably possible additional loss range for unresolved legal matters would not materially affect the financial statements; outcomes remain uncertain.
- No quantified full-year guidance is provided in the filing text. Management said cash, credit facilities and expected future operating cash flows should be adequate for known cash needs, while noting results are exposed to market, supply, currency, interest-rate and geopolitical uncertainties.
- After quarter-end, CNH Industrial Capital LLC issued $400m of 5.450% notes due 2025. The company also continued a share repurchase program; Q3 purchases totaled approximately 6.4m shares.
Investor verification priorities
- Assess whether pricing and mix can continue to offset inflation, supply constraints and weaker demand in certain equipment markets.
- Track working-capital absorption, inventory growth and the drivers of negative operating cash flow and Industrial Free Cash Flow.
- Review Financial Services credit quality, receivables growth, allowance adequacy and exposure to Russia; over-30-day past-due receivables were 1.3% at quarter-end versus 1.4% a year earlier.
- Monitor debt maturities, funding costs, liquidity availability and the impact of the post-quarter $400m note issuance.
- Verify the continuing tax, divestiture, Russia-related, legal and environmental exposures, and distinguish continuing-operation comparisons from prior-year discontinued-operation results.