EDGAR 10-K Filing

Company CIK: 1552493
Filing Year: 2024
Filename: 1552493_10-K_2024_0001558370-24-003365.json

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ITEM 1. BUSINESS
Item 1. Business
Overview
CNH Industrial Capital LLC (together with its consolidated subsidiaries, “CNH Capital,” the “Company” or “we”) is an indirect wholly-owned subsidiary of CNH Industrial N.V. (“CNHI” and together with its consolidated subsidiaries, “CNH”) and is headquartered in Racine, Wisconsin. As a captive finance company, our primary business is to underwrite and manage financing products for end-use customers and dealers of CNH Industrial America LLC (“CNH America”) and CNH Industrial Canada Ltd. (“CNH Canada”) (collectively, “CNH North America”) and provide other related financial products and services to support the sale of agricultural and construction equipment sold by CNH North America. We also provide financing products related to new and used equipment manufactured by entities other than CNH North America, as well as financing for the purchase of parts, service, rentals, implements and attachments from CNH North America dealers which may or may not be manufactured or provided by CNH North America. We are often able to offer financing to customers at advantageous interest rates or other terms (such as longer contract terms, longer warranty terms or parts and service incentives), due to our participation in subsidized financing programs sponsored by CNH North America, which reimburses us for some or all of the cost of such terms. The primary operating subsidiaries of CNH Industrial Capital LLC include CNH Industrial Capital America LLC (“CNH Capital America”), New Holland Credit Company, LLC (“New Holland Credit”) and CNH Industrial Capital Canada Ltd. (“CNH Capital Canada”). CNH Capital America is the primary financing and business entity of CNH Capital for the United States that enters into financing arrangements with end-use customers and dealers, and CNH Capital Canada performs the same functions in Canada, while New Holland Credit acts as the servicer for financing products originated by CNH Capital America.
CNH is the company initially formed by a business combination transaction, completed September 29, 2013, between Fiat Industrial S.p.A. and CNH Global N.V. (“CNH Global”), the former indirect parents of CNH Capital. As a result of this transaction, CNH Industrial Capital LLC and its primary operating subsidiaries, including CNH Capital America, New Holland Credit and CNH Capital Canada, are indirect wholly-owned subsidiaries of CNHI (with all of the equity interests in CNH Industrial Capital LLC owned by CNHI through intermediate companies, through which CNHI exercises indirect control over CNH Industrial Capital LLC). CNHI is incorporated in and under the laws of The Netherlands. CNHI has its corporate seat in Amsterdam, The Netherlands, and its principal office in Basildon, Essex, England.
CNH Capital provides and administers financing to end-use customers for the purchase or lease of new and used equipment and components sold through CNH North America’s dealer network, as well as revolving charge account financing and other financial services. CNH Capital also provides wholesale financing to CNH North America dealers and distributors, all of which are independently owned and operated. As a holding company, CNH Industrial Capital LLC generally does not conduct operations of its own but relies on its subsidiaries for the generation and distribution of profits.
CNH Capital’s revenue is primarily generated through the income of its portfolio and the income generated through marketing programs with CNH North America. The size of the portfolio is in part related to the level of equipment sales by CNH North America. The portfolio profitability is linked to the difference between lending and borrowing rates, the credit quality of the customers and the value of collateral. For the years ended December 31, 2023 and 2022, we derived 40% and 34%, respectively, of our revenue from CNH North America and other CNH subsidiaries.
Our customers obtain our financing products for commercial purposes and, in many cases, have had a previous borrowing relationship with CNH Capital. Retail notes and finance leases are secured by the purchased equipment, which generally has a longer useful life than the term of the receivable. Wholesale financings are likewise secured by the equipment purchased by the dealer.
CNH Capital funds its operations and lending activity through a combination of term receivables securitizations, secured and unsecured facilities, a repurchase agreement, commercial paper, unsecured bonds, affiliate borrowings and retained earnings. CNH Capital’s current funding strategy is to maintain sufficient liquidity and flexible access to a wide variety of financial instruments and funding options.
As part of its overall funding strategy, CNH Capital participates in the asset-backed securitization (“ABS”) markets. CNH Capital periodically transfers retail notes and wholesale receivables originated from end-use customers and dealers to special purpose entities, in exchange for cash proceeds from asset-backed securities issued by these special purpose entities. Investors in these asset-backed securities in turn receive payments on their securities based on the cash flows from the transferred receivables. CNH Capital continues to service the transferred receivables and maintains a cash reserve account, which provides security to investors in the event that cash collections from the receivables are not sufficient to permit principal and interest payments to the holders of the securities. These special purpose entities and the investors in the asset-backed securities have no recourse, beyond the applicable cash reserve account, for failure of any end-use customers or dealers to make payments on the transferred receivables when due.
In addition to portfolio quality and funding costs, CNH Capital’s long-term profitability is also dependent on service levels and operational effectiveness. CNH Capital performs billing and collection services, customer support, repossession and remarketing functions, reporting and data management operations and marketing activities.
As of December 31, 2023, CNH Capital had total assets of $16.0 billion and total stockholder’s equity of $1.6 billion. For the year ended December 31, 2023, CNH Capital had total revenues of $1.1 billion and net income of $215.1 million. As of December 31, 2023, CNH Capital had third-party debt of $13.4 billion, approximately 64% of which represented secured debt as of such date.
Relationship with CNH
CNH organizes its operations into three operating segments: Agriculture, Construction and Financial Services. Collectively, these three segments design, produce, market, sell and finance agricultural and construction equipment. CNH has industrial and financial services companies located in 32 countries and a commercial presence in approximately 164 countries around the world.
CNH’s Agricultural segment designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements, and material handling equipment. CNH is also a leading provider of technology dedicated to Precision Agriculture. Agricultural equipment is sold in North America under the New Holland Agriculture and Case IH brands. Regionally-focused brands include: STEYR for tractors; Flexi-Coil specializing in tillage and seeding systems; and Miller manufacturing application equipment. The Raven brand supports Precision Agriculture, digital technology and the development of autonomous systems. Hemisphere, acquired in 2023, provides high-performance satellite positioning technology for the agriculture and construction industries.
CNH’s Construction segment designs, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders and compact track loaders along with a wide variety of attachments. Construction equipment is sold in North America under the CASE Construction Equipment and New Holland Construction brands.
As of December 31, 2023 and 2022, CNH had total assets of $46.4 billion and $39.4 billion, respectively, and total equity of $8.2 billion and $6.9 billion, respectively.
For the years ended December 31, 2023 and 2022, CNH had total revenues of $24.7 billion and $23.6 billion, respectively, and net income attributable to CNH Industrial N.V. of $2.4 billion and $2.0 billion, respectively. For the year ended December 31, 2023, CNH’s net sales of agricultural equipment and net sales of construction equipment generated in North America (United States, Canada and Mexico) were $7.2 billion and $2.3 billion, respectively, representing increases of 6% and 31% from the same period in 2022, respectively.
CNH Capital is a key financing source for CNH North America’s end-use customers and dealers. The Company offers financing to customers with advantageous terms that are subsidized by CNH North America, including low-rate, interest-free or interest-only periods and other sales incentive programs.
Although our primary focus is to finance CNH North America equipment, we also provide financing products related to new and used agricultural and construction equipment manufactured by entities other than CNH North America, as well as financing for the purchase of parts, service, rentals, implements and attachments from CNH North America dealers which may or may not be manufactured or provided by CNH North America. We are still, however, dependent on CNH North America for substantially all of our business, with revenues related to financing provided to CNH North America dealers and retail customers purchasing and/or leasing from CNH North America and its dealers accounting for over 90% of our total revenues for the year ended December 31, 2023, and with loan portfolios attributable to such financing accounting for over 90% of our total receivables as of December 31, 2023.
The size of our lending portfolio is related in part to the level of equipment sales by CNH North America, which is driven by the strength of the agricultural and construction markets. The credit quality of our portfolio reflects the underwriting standards of CNH Capital, which are developed internally and independent of the sales volume goals of CNH North America.
We borrow from our affiliates as one of the funding sources for our operations and lending activity. As of December 31, 2023 and 2022, we had outstanding affiliate borrowings of $132.5 million and $341.5 million, respectively, representing 1.0% and 3.2% of our total indebtedness, respectively.
CNH North America also provides us with other types of operational and administrative support, such as payroll and other human resource services. For the years ended December 31, 2023 and 2022, we incurred fees charged by our affiliates of $53.8 million and $50.9 million, respectively, representing 21% and 20%, respectively, of our total administrative and operating expenses.
Effective as of September 29, 2013, in connection with the business combination transaction of CNH Global with and into CNHI, CNHI assumed all of CNH Global’s obligations under a support agreement, pursuant to which CNHI has agreed to, among other things, (a) make cash capital contributions to us, to the extent necessary to cause our ratio of net earnings available for fixed charges to fixed charges to be not less than 1.05 for each fiscal quarter (with such ratio determined, on a consolidated basis and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), for such fiscal quarter and the immediately preceding three fiscal quarters taken as a whole), (b) generally maintain an ownership of at least 51% of the voting equity interests in us and (c) cause us to have, as of the end of any fiscal quarter, a consolidated tangible net worth of at least $50 million. The support agreement is not intended to be and is not a guarantee by CNHI of our indebtedness or other obligations. The obligations of CNHI to us pursuant to this support agreement are to us only and do not run to, and are not enforceable directly by, any creditor of ours, including holders of our notes or the trustee under the indenture governing our notes. The support agreement may be modified, amended or terminated, at CNHI’s election, upon thirty days’ prior written notice to us and the rating agencies, if (a) the modification, amendment or termination would not result in a downgrade of our rated indebtedness; (b) the modification, amendment or notice of termination provides that the support agreement will continue in effect with respect to our rated indebtedness then outstanding; or (c) we have no long-term rated indebtedness outstanding.
Products and Services
CNH Capital’s financing products and services fall into the following main categories:
Retail (65.4% of gross receivables as of December 31, 2023): Retail financing products primarily include retail notes, finance leases and operating leases to end-use customers and revolving charge account financing for customers to purchase parts, service, rentals, implements and attachments from CNH North America dealers. The terms of retail notes, finance leases and operating leases generally range from two to seven years, and interest rates vary depending on prevailing market interest rates and certain incentive programs offered by CNH North America. Revolving charge accounts are generally accompanied by higher interest rates than our other retail financing products, generally require minimum monthly payments and do not have pre-determined maturity dates.
CNH Capital utilizes a proprietary credit scoring model as part of the credit approval and review process. CNH Capital also provides servicing and collection operations generally performed through its subsidiary, New Holland Credit, for the retail financing products.
Wholesale (34.6% of gross receivables as of December 31, 2023): Wholesale financing consists primarily of dealer floorplan financing, which gives dealers the ability to maintain a representative inventory of products. In addition, CNH Capital provides financing to dealers for used equipment taken in trade, equipment utilized in dealer owned rental yards, parts inventory, working capital and other financing needs. Currently, credit is extended to approximately 770 CNH North America dealers (with each being a separate legal entity) with approximately 1,750 locations in North America.
The dealer financing agreements provide CNH Capital with a first priority security interest in the equipment and parts financed and possibly other collateral. A majority of dealers also provide a personal or corporate guarantee (from an affiliate of the dealer). The amount of credit extended is primarily based upon the dealer’s expected annual sales, effective net worth, utilization of existing credit lines and inventory turnover. CNH Capital evaluates and assesses dealers on an ongoing basis as to their credit worthiness and conducts audits of dealer equipment inventories on a regular basis. The amounts of credit made available to dealers are reviewed on a regular basis, which is usually annually, and such amounts are adjusted when deemed appropriate by CNH Capital.
CNH Capital finances other products, including insurance and equipment protection products underwritten through a third-party insurer.
Competition
CNH Capital’s financing products and services are intended to be competitive with those available from third parties. CNH North America sponsors certain marketing programs that allow us to offer financing to customers at competitive or advantageous interest rates or other terms (such as longer contract terms, longer warranty terms or parts and service incentives). Under these programs, including our low-rate financing programs or interest waiver programs, we are compensated by CNH North America for some or all of the cost of such terms. This support from CNH North America provides a material competitive advantage in offering financing to customers of CNH North America’s products.
We compete primarily with banks, equipment finance and leasing companies, and other financial institutions. Typically, this competition is based upon financial products and services offered, customer service, financial terms and interest rates charged. In addition, some of our competitors may be eligible to participate in government programs providing access to capital at more favorable rates, which may create a competitive disadvantage for CNH Capital. CNH Capital believes that its strong, long-term relationship with its dealers and end-use customers and the ease-of-use of our products provides a competitive edge over other third-party financing options. In addition, the marketing programs offered by CNH North America have a positive influence on the proportion of CNH North America’s equipment sales financed by CNH Capital.
Employees
The ability to attract, retain, and further develop qualified employees is crucial to the success of CNH Capital’s business and its ability to create value over the long-term. As of December 31, 2023, the Company had 369 employees, none of which were represented by unions.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
CNH Capital is an indirect wholly-owned subsidiary of CNHI. The results of operations of the Company are primarily affected by its relationships with CNH North America.
The following risks should be considered in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on page 18, including the risks and uncertainties described in the Cautionary Note on Forward-Looking Statements and notes to the consolidated financial statements. The following is a cautionary discussion of risks, uncertainties and assumptions that we believe are material to our business. These risks may affect our operating results and, individually or in the aggregate, could cause our actual results to differ materially from past and projected future results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You should, however, consult any subsequent disclosures we make from time to time in materials filed with the United States Securities and Exchange Commission (“SEC”).
Risks Related to Our Indebtedness and Liquidity
Credit rating changes could affect our access to funding and our cost of funds, which could in turn adversely affect our financial condition and results of operations.
Our ability to access the capital markets or other forms of financing and our funding costs are highly dependent on, among other things, our credit ratings and those of CNHI and our ABS transactions. Rating agencies may review and revise their ratings from time to time, and any downgrade or other negative action with respect to our credit ratings by one or more rating agencies may increase our funding costs, potentially limit our access to sources of financing and have a material adverse effect on our financial condition and results of operations. A lack of funding could result in our inability to meet customer demand for equipment financing, while increased funding costs could lead to deteriorating margins, decreased profits and could result in higher customer interest rates and lower customer demand, which in turn may adversely affect our financial condition and results of operations.
We have significant outstanding indebtedness, which may limit our ability to obtain additional funding and may limit our financial and operating flexibility.
As of December 31, 2023, we had an aggregate of $13.5 billion of consolidated indebtedness and our equity was $1.6 billion. The extent of our indebtedness could have important consequences on our operations and financial results, including:
● we may not be able to secure additional funds for working capital, capital expenditures, debt service requirements or general corporate purposes;
● we may need to use a portion of our projected future cash flow from operations to pay principal and interest on our indebtedness, which may reduce the amount of funds available to us for other purposes;
● we may be more financially leveraged than some of our competitors, which could put us at a competitive disadvantage;
● we may not be able to invest in the development or introduction of new products or new business opportunities;
● our future cash may be exposed to the risk of rate volatility;
● we may not be able to adjust rapidly to changing market conditions, which may make us more vulnerable to a downturn in general economic conditions; and
● we may not be able to access the capital markets on favorable terms, which may adversely affect our ability to provide competitive retail and wholesale financing programs.
Further, due to the cessation of the London Interbank Offered Rate (“LIBOR”), the Company has entered into financial transactions such as credit agreements and certain derivative transactions that use the relevant new benchmark rates. These new benchmark rates are calculated differently from LIBOR and have inherent differences, which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rates. The full effects of the transition to these new benchmark rates remain uncertain.
Restrictive covenants in our debt agreements could limit our financial and operating flexibility.
The agreements governing our outstanding debt securities and other credit agreements to which we are a party from time to time contain, or may contain, covenants that restrict our ability and/or that of our subsidiaries to, among other things:
● incur additional indebtedness;
● make certain investments;
● enter into certain types of transactions with affiliates;
● sell or acquire certain assets or merge with or into other companies;
● use assets as security in other transactions; and/or
● enter into sale and leaseback transactions.
These restrictive covenants could limit our financial and operating flexibility. For example:
● limits on incurring additional debt and using assets as security in other transactions could materially limit our future business prospects by restricting us from financing as many customers as we otherwise would, particularly if our traditional funding sources (including principally the ABS markets) were not available;
● limits on investments could result in a return on assets lower than that of our competitors; and
● limits on the sale of assets or merger with or into other companies could deny us a future business opportunity despite the benefits that could be realized from such a transaction.
In addition, we are required to maintain a certain coverage level for leverage; our leverage ratio, defined as the ratio of total net debt to equity, is required not to exceed 9.00:1.
Although we do not believe any of these covenants materially restrict our operations currently, a breach of one or more of the covenants could result in adverse consequences that could negatively impact our businesses, results of operations and financial condition. These consequences may include the acceleration of amounts outstanding under certain of our credit facilities, triggering an obligation to redeem certain debt securities, termination of existing unused commitments by our lenders, refusal by our lenders to extend further credit under one or more of the facilities or to enter into new facilities or the lowering or modification of CNHI’s or our credit ratings. We cannot assure you that we will continue to comply with each restrictive covenant at all times, particularly if we were to encounter challenging and volatile market conditions. For further information, see Note 8: Credit Facilities and Debt to the consolidated financial statements for the year ended December 31, 2023.
Risks Related to Our Business, Strategy and Operations
Reduced demand for agricultural and construction equipment would reduce the opportunities for us to finance equipment.
Our business is largely dependent upon the demand for CNH North America’s products and its customers’ willingness to enter into financing or leasing arrangements to acquire or use those products. A significant and prolonged decrease in demand for CNH North America’s products could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our primary business is to provide retail and wholesale financing for the purchase or lease of CNH North America products. The demand for CNH North America’s products and our financing products and services is influenced by a number of factors such as:
● the general economic conditions and outlook, such as market volatility and changing interest rates;
● the price of agricultural commodities and the ability to competitively export agricultural commodities;
● the cost of farm inputs, including the value of land, fertilizers, fuel, labor and other inputs;
● the profitability of agricultural enterprises, farmers’ income and their capitalization;
● the demand for food products;
● the availability of stocks and yields from previous harvests;
● agricultural policies, including aid and subsidies to agricultural enterprises provided by governments and/or supranational organizations, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates;
● change in trade agreements or trade terms, negotiation of new trade agreements and the imposition of new tariffs against certain countries or covering certain products or raw materials;
● change in or uncertainty surrounding global trade policies;
● droughts, floods and other unfavorable climatic conditions, especially during the spring, a particularly important period for generating CNH North America’s sales orders;
● public infrastructure spending;
● new residential and non-residential construction;
● capital spending in oil and gas and, to a lesser extent, in mining;
● changes in global market conditions, including interest rates.
In the equipment industry, changes in demand can occur suddenly, resulting in imbalances in inventories, product capacity, and prices for new and used equipment. If fewer pieces of equipment are sold, CNH Capital will be presented with fewer opportunities to finance equipment.
We are subject to interest rate risks, and changes in interest rates could reduce demand for CNH North America equipment, adversely affect our interest margins, and limit access to capital markets while increasing borrowing costs.
Changing interest rates could have a dampening effect on overall economic activity as well as on the financial health of our customers, either of which could negatively affect customer demand for CNH North America’s products and our services as well as customers’ ability to repay their financing obligations to us. In addition, credit market dislocations could have an impact on funding costs, making it more difficult for us to offer customers competitive financing. While we aim to limit the exposure of our net financial assets to changes in prevailing interest rates, interest rate volatility could have an adverse effect on our net interest rate margin, i.e., the difference between the yield we earn on assets and the interest rates we pay. Actions by credit rating agencies, such as downgrades or negative changes to ratings outlooks, can affect the availability and cost of funding for the Company and can increase the Company’s cost of capital and hurt its competitive position.
Change in support from CNH North America could reduce our ability to offer competitively priced financing, which may have a material adverse effect on our business, financial condition, results of operations and cash flows.
CNH North America subsidizes certain of our promotional financing programs that allow us to offer lower rate financing to customers and other advantageous financing terms (such as longer repayment and warranty periods, and special parts and service incentives). This support from CNH North America provides us with a material competitive advantage in offering financing for the purchase or lease of CNH North America’s products. Any elimination or reduction of these subsidies could negatively impact our ability to offer competitive financing options to customers, reduce customer demand for our financing products and services, and have a material adverse effect on our business, financial condition, results of operations and cash flows. For the years ended December 31, 2023, 2022 and 2021, we recognized revenues from CNH North America for marketing programs of $427.2 million, $266.5 million and $296.5 million, respectively, representing 40%, 34% and 38% of our total revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
CNH North America also provides us with other types of operational and administrative support, such as payroll and other human resource services. For the years ended December 31, 2023, 2022 and 2021, we incurred fees charged by our affiliates of $53.8 million, $50.9 million and $47.4 million, respectively, representing 21%, 20% and 16%, respectively, of our total administrative and operating expenses.
An increase in customer credit risk may result in higher delinquencies and defaults, and deterioration in collateral valuation may reduce our collateral recoveries, which could increase losses on our receivables and operating leases and adversely affect our financial condition and results of operations.
Fundamental to any organization that extends credit is the credit risk associated with its customers. The creditworthiness of each customer, the rates of delinquency and default, repossessions and net losses are impacted by many factors, including:
● relevant industry and general economic conditions (in particular, those conditions most directly affecting the agricultural and construction industries);
● the availability of capital;
● the terms and conditions applicable to extensions of credit;
● interest rates;
● the experience and skills of the customer’s management team;
● commodity prices;
● political events, including government mandated moratoria on payments;
● the weather; and
● the value of the collateral securing the extension of credit.
Deterioration in the quality of our financial assets, an increase in delinquencies or defaults, or a reduction in collateral recovery rates could have an adverse impact on our financial performance. These risks become more acute in an economic slowdown or recession due to decreased demand for (or availability of) credit, declining asset values, changes in government subsidies, reductions in collateral to receivable balance ratios, and an increase in delinquencies, defaults, insolvencies, foreclosures and losses. In such circumstances, our receivable servicing and litigation costs may also increase. In addition, governments may pass laws, or implement regulations, that modify rights and obligations under existing agreements, or which prohibit or limit the exercise of contractual rights.
When a customer defaults on a receivable and we repossess collateral securing the repayment of the receivable, our ability to recover or mitigate losses by selling the collateral is subject to the current market value of such collateral. Those values are affected by levels of new and used inventory of agricultural and construction equipment on the market. They are also dependent upon the strength or weakness of market demand for new and used agricultural and construction equipment, which is affected by the strength of the general economy. In addition, repossessed collateral may be in poor condition, reducing its value. Finally, relative pricing of used equipment, compared with new equipment, can affect levels of market demand and the resale of repossessed equipment. All of the foregoing could increase losses on receivables and operating leases, adversely affecting our financial condition and results of operations.
Changes in interest rates, exchange rates and market liquidity could have a material adverse effect on our earnings and cash flows.
Because a significant number of our receivables are generated at fixed interest rates, our financial performance may be impacted by fluctuations in interest rates. Although we seek to match fund the majority of our assets, with approximately 61% of our receivables and approximately 68% of our funding at a fixed rate, respectively, as of December 31, 2023, changes in market interest rates may influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and/or cash flow.
We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which we earn revenues. In addition, the reporting currency for the consolidated financial statements is the U.S. dollar. Certain of our assets, liabilities, expenses and revenues are denominated in other currencies. Those assets, liabilities, expenses and revenues are translated into U.S. dollars at the applicable exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those other currencies affect the value of those items reflected in the consolidated financial statements, even if their value remains unchanged in the original currency. Changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our financial condition and results of operations.
We also rely on the capital markets and a variety of funding programs to provide liquidity for our operations, including committed asset-backed and unsecured facilities and the issuance of secured and unsecured debt. Significant changes in market liquidity conditions could affect our access to funding and the associated funding costs and reduce our earnings and cash flow.
Although we seek to manage interest rate, exchange rate and market liquidity risks with a variety of techniques, including a match funding program, the selective use of derivatives and a diversified funding program, there can be no assurance that we will be able to do so successfully, and our financial condition and results of operations could be adversely affected. In addition, by utilizing these techniques, we potentially forego the benefits that may result from favorable fluctuations in interest rates and exchange rates.
Our models could fail to properly anticipate and manage risk.
We use models to forecast future losses, revenues and expenses, for capital planning purposes, and to manage a variety of financial and operational risks. These models are subject to inherent limitations due to imperfect assumptions, uncertainty regarding outcomes, and unaccounted for and emerging risks. The models we employ may not be sufficiently predictive of future results due to limited historical patterns, unanticipated market changes and customer behavior. They may be negatively impacted by human error and may not be effective if we fail to review them for flaws, test them for predictive accuracy and recalibrate them from time to time as appropriate. Notwithstanding the steps we take to develop and maintain predictive models, our models could fail to properly anticipate and help us manage risk and could result in operational and financial harm to us.
Changes in government monetary or fiscal policies may negatively impact our results.
Governments have implemented measures designed to slow inflationary pressure (e.g., higher interest rates, reduced financial asset purchases). Changing interest rates could have a dampening effect on the overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect demand for our products and our customers’ ability to repay obligations to us. Central banks and other policy arms of many countries may take actions to vary the amount of liquidity and credit available in an economy. The impact from a change in liquidity and credit policies could negatively affect the customers and markets we serve, which could adversely impact our business, financial condition and results of operations. Government initiatives that are intended to stimulate or reduce demand for products sold by CNH North America, such as changes in tax treatment or purchase incentives for new equipment, can significantly influence the timing and level of our revenues. The terms, size and duration of such government actions are unpredictable and outside of our control. Any adverse change in government policy relating to those initiatives could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to obtain funding, in particular through the ABS market and committed asset-backed facilities, at competitive rates, our ability to conduct our financing business may be severely impaired and our financial condition, results of operations and cash flows may be materially and adversely affected.
We have traditionally relied upon the ABS market and committed asset-backed facilities as a primary source of funding and liquidity. Access to funding at competitive rates is essential to our business. An inability to access the ABS market or a significant reduction in liquidity in the secondary market for ABS transactions could adversely affect our ability to sell receivables on a favorable or timely basis. Such conditions could have an adverse impact on our access to funding, financial condition and results of operations.
If we breach our representations and warranties in connection with our ABS transactions, we may be required to repurchase non-conforming receivables from the securitization vehicles, which could have an adverse effect on our financial condition, results of operations and cash flows.
In connection with our ABS transactions, we make customary representations and warranties regarding the assets being securitized, as disclosed in the relevant offering documents. While no recourse provisions exist that allow holders of asset-backed securities issued by our ABS trusts to require us to repurchase those securities, a breach of these representations and warranties could give rise to an obligation to repurchase non-conforming receivables from the trusts. Any obligation to make future repurchases could have an adverse effect on our financial condition, results of operations and cash flows.
Certain of our operations are subject to supervision and regulation by governmental authorities and changes in applicable laws or regulations may adversely impact our ability to engage in related business activities or increase the cost of our operations, thus adversely affecting our business, financial condition and results of operations.
Our operations are subject to extensive, complex and frequently changing rules, regulations and legal interpretations from various governmental authorities, which among other things:
● regulate credit granting and servicing activities, including establishing licensing requirements;
● require periodic reporting of financing and servicing activity to regulators;
● establish maximum interest rates, finance and other charges;
● regulate customers’ insurance coverage;
● require disclosures to, and the collection of certain information from, customers;
● set collection, foreclosure, repossession and claims handling procedures and other trade practices;
● prohibit discrimination in the extension of credit and administration of receivables; and
● regulate the use, handling and reporting of information related to applicants and customers.
As applicable laws are amended or construed differently, new laws are adopted to expand the scope of regulation imposed upon us, or existing laws prohibit interest rates we charge from rising to a level commensurate with risk and market conditions, such events could adversely affect our business and our financial condition and results of operations.
New regulations or changes in financial services regulations could adversely impact us.
Our operations are highly regulated by governmental authorities which can impose significant additional costs and/or restrictions on our business. For example, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), including its regulations, as well as other efforts at regulatory reform in financial services, may substantially affect our origination, servicing and securitization programs as well as limit the ability of our customers to enter into hedging transactions or finance purchases of CNH North America equipment. The Dodd-Frank Act includes extensive provisions regulating these securities and related capital market activities by the SEC and increased the regulation of the ABS markets through, among other things, a mandated risk retention requirement for securitizers and a direction to regulate credit rating agencies. Future regulations may affect our ability to engage in these capital market activities or increase the effective cost of such transactions, which could adversely affect our financial condition, results of operations and cash flows.
Our operations are subject to risks associated with our use of third-party service providers.
We rely on third-party service providers for a variety of services and systems that we use in connection with our core origination and servicing operations. Our reliance exposes us to risks, as those third parties could fail to perform financially, contractually or otherwise in accordance with our expectations. Such failure could result in events that have a material adverse impact on our business, such as disruption or interruption of operational activities and poor performance negatively affecting our customer and dealer relationships, as well as potential liability to our customers and dealers for legal and regulatory violations committed by those third parties while providing services to us or on our behalf.
Our business may be affected by climate change, unfavorable weather conditions or other calamities.
Poor, severe or unusual weather conditions caused by climate change or other factors, particularly during the planting and early growing season, can significantly affect the purchasing decisions of CNH North America’s agricultural equipment customers. The timing and quantity of rainfall are two of the most important factors in agricultural production. Insufficient levels of rain prevent farmers from planting crops or may cause growing crops to die, resulting in lower yields. Excessive rain or flooding can also prevent planting or harvesting from occurring at optimal times and may cause crop loss through increased disease or mold growth. Temperature affects the rate of growth, crop maturity, crop quality and yield.
Temperatures outside normal ranges can cause crop failure or decreased yields and may also affect disease incidence. Natural disasters such as floods, hurricanes, storms, droughts, diseases and pests can have a negative impact on agricultural production. The resulting negative impact on farm income can strongly affect demand for CNH North America’s agricultural equipment in any given period.
In addition, natural disasters, pandemic illness, acts of terrorism or violence, acts of war, equipment failures, power outages, disruptions to our information technology systems and networks or other unexpected events could result in physical damage to and complete or partial closure of one or more of CNH’s manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of parts or component products, and disruption and delay in the transport of CNH North America’s products to dealers and customers. If such events occur, our financial results might be negatively impacted. Our existing insurance and risk management arrangements may not protect against all costs that may arise from such events.
Furthermore, the potentially long-term physical impacts of climate change on CNH North America’s facilities, suppliers and customers, and therefore on its operations, are highly uncertain and will be driven by the circumstances developing in various geographical regions. These may include long-term changes in temperature and water availability. These potential physical effects may adversely impact the demand for CNH North America’s products and the cost, production, sales and financial performance of its operations and as a result could adversely affect our financial condition, results of operations and cash flows.
Regulators in the U.S. have also focused efforts on requiring and promoting enhanced disclosure related to sustainability. We may face liabilities in connection with our efforts to comply with these disclosure requirements as well as expectations by our stakeholders of enhanced disclosures regarding our climate change initiatives.
Global economic conditions impact our business.
Our results of operations and financial position are and will continue to be influenced by macroeconomic factors, including changes in the level of consumer and business confidence, changes in interest rates, the availability of credit, inflation and deflation, energy prices, and the cost of commodities or other raw materials. Such macroeconomic factors vary from time to time and their effect on our results of operations and financial position cannot be specifically and singularly assessed and/or isolated.
Changes in demand for food and alternative energy sources could impact our revenues.
Changing worldwide demand for farm outputs to meet the world’s growing food and alternative energy demands, driven by a growing world population and government policies, including those related to climate change, are likely to result in fluctuating agricultural commodity prices, which affect sales of agricultural equipment. While higher commodity prices will benefit our crop producing agricultural equipment customers, higher commodity prices also result in greater feed costs for livestock and poultry producers, which in turn may result in lower levels of equipment purchased by these customers. Lower commodity prices directly affect farm income, which could negatively affect sales of agricultural equipment. Moreover, changing alternative energy demands may cause farmers to change the types or quantities of the crops they grow, with corresponding changes in equipment demands. Finally, changes in governmental policies regulating bio-fuel utilization could affect demand for CNH North America equipment and result in higher research and development costs related to equipment fuel standards.
Competitive activity or failure by us to respond to actions by our competitors could adversely affect our results of operations, in particular due to a cost of funds disparity between us and some of our competitors.
We operate in a highly competitive environment, with financing for owners or operators of CNH North America equipment available through a variety of sources, such as banks, finance companies and other financial institutions, including government sponsored entities. Some of our competitors enjoy certain regulatory, government support or credit rating advantages over CNH Capital today, which may, among other things, enable them to access capital on more favorable terms. Such cost of funds disparities between us and some of our competitors, or regulatory, government support or credit rating changes that enhance the competitive position of our competitors, could result in our inability to effectively compete.
The success of our business also depends on our ability to identify emerging industry changes and develop and market new products and services that meet the evolving needs of existing and potential customers. Increasing competition may adversely affect our business if we are unable to match the products and services of our competitors. If we are unable to effectively compete, our business, financial condition and results of operations will suffer.
Our ability to execute our strategy depends upon our ability to attract, develop and retain qualified personnel.
Our ability to compete successfully, to manage our business effectively, to expand our business and to execute our strategic direction depends, in part, on our ability to attract, motivate and retain qualified personnel in key functions and markets, with the requisite education, skills, background, talents and industry experience. Failure to attract and retain qualified personnel, whether as a result of an insufficient number of qualified applicants, or the inability to integrate and retain qualified personnel, could impair our ability to execute our business strategy and meet our business objectives. These may be affected by the loss of employees, particularly when departures involve larger numbers of employees. Higher rates of employee separations may adversely affect us through decreased employee morale, the loss of knowledge of departing employees, and the devotion of resources to recruiting and onboarding new employees.
A decrease in the value of the equipment that we lease or higher than expected return volumes of our leased equipment could adversely affect our results.
We estimate the expected residual values of leased equipment at the inception of the lease, which is the estimated future value of leased equipment at the time of the expiration of the lease term. The residual values are reviewed quarterly. Changes in residual value assumptions would affect the amount of depreciation expense and the net amount of equipment on operating leases. If estimated future values significantly decline due to economic factors, obsolescence, the overall industry volume of lease returns, or other adverse circumstances, we may not realize such residual values, which could reduce our earnings.
Actual proceeds realized by us upon the sale of returned leased equipment at lease termination may be lower than the amount projected. Among the factors that can affect the value of returned lease equipment are the volume of equipment returned (primarily affected by contractual lease-end values relative to prevailing market values and marketing programs for new equipment), any significant trends in the used equipment market and any new product trends. Each of these factors, alone or in combination, has the potential to adversely affect our profitability if actual results were to differ significantly from our estimates.
As of December 31, 2023, our total operating lease residual values were $1.0 billion.
Our results of operations may be adversely impacted by various types of claims, lawsuits, and other contingent obligations.
We are involved in various lawsuits and other legal proceedings that arise in the ordinary course of our business. The industries in which we and CNH North America operate are also periodically reviewed or investigated by regulators, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims. The ultimate outcome of these legal matters pending against us is uncertain, and although such legal matters are not expected individually to have a material adverse effect on our financial position or profitability, such legal matters could, in the aggregate, in the event of unfavorable resolutions thereof, have a material adverse effect on our results of operations and financial condition. Furthermore, we could in the future become subject to judgments or enter into settlements of lawsuits and claims that could have a material adverse effect on our results of operations in any particular period. In addition, while we maintain insurance coverage with respect to certain risks, we may not be able to obtain such insurance on acceptable terms in the future, if at all, and any such insurance may not provide adequate coverage against claims under such policies.
Our affiliates may cease to provide us with financing support.
During previous capital markets crises, which had a material adverse effect on the ABS markets, we relied more heavily upon financing provided by CNH and its predecessors. In the event of a severe downturn in the ABS markets, we would need to look to alternative funding sources, including CNH, though CNH would have no obligation to provide such financing (other than the obligations assumed by CNHI under the support agreement, dated November 4, 2011). To the extent CNH does not provide such financing to us when needed, we could suffer from a lack of funding and/or incur increased funding costs if funding is obtained through less favorable sources.
Our participation in cash management pools exposes us to CNH credit risk, which, in the event of a bankruptcy or insolvency of certain CNH entities, could render us unable to recover our deposits, materially and adversely affecting our financial condition and results of operations.
We participate in a group-wide cash management system with other companies within CNH, including CNH America and CNH Canada. Our positive cash deposits with CNH, if any, are either invested by CNH treasury subsidiaries in highly rated, highly liquid money market instruments or bank deposits, or may be applied by CNH treasury subsidiaries to meet the financial needs of other CNH entities and vice versa. While we believe participation in such CNH treasury subsidiaries’ cash management pools provides us with financial benefits, it exposes us to CNH credit risk.
In the event of a bankruptcy or insolvency of CNHI (or any other CNH entity, including CNH America and CNH Canada, in the jurisdictions with set off agreements) or in the event of a bankruptcy or insolvency of the CNH entity in whose name the deposit is pooled, we may be unable to secure the return of such funds to the extent they belong to us, and we may be viewed as a creditor of such CNH entity with respect to such deposits. It is possible that our claims as a creditor could be subordinated to the rights of third-party creditors in certain situations. If we are not able to recover our deposits, our financial condition and results of operations may be materially and adversely impacted.
A cybersecurity breach could interfere with our operations, compromise confidential information, negatively impact our corporate reputation and expose us to liability.
We rely upon information technology systems and networks, some of which are managed by third parties, in connection with a variety of our business activities. These systems include invoicing and collection of payments from CNH North America’s dealers and from our customers. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information and the proprietary information of our customers and CNH North America’s dealers, as well as personally identifiable information of those dealers, customers and our employees, in data centers and on information technology networks. Operating these information technology systems and networks in a secure manner, and processing and maintaining this data in a secure manner, are critical to our business operations and strategy. Increased information technology security threats (e.g. worms, viruses, malware, phishing attacks, ransomware, and other malicious threats) and more sophisticated computer crime, including through the use of artificial intelligence and machine learning, pose a significant risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Cybersecurity attacks could also include attacks targeting customer data.
While we actively manage information technology security risks within our control through security measures, business continuity plans and employee training around phishing and other cyber risks, our information technology networks and infrastructure have been and may be vulnerable to intrusion, attacks or disruptions or shutdowns due to attacks by cyber criminals, employee, supplier or dealer error or malfeasance.
A failure or breach in security, whether of our systems and networks or those of third parties on which we rely, could expose us and our customers and dealers to risks of misuse of information or systems, the compromising of confidential information, loss of financial resources, manipulation and destruction of data and operations disruptions, which in turn could adversely affect our reputation, competitive position, businesses and results of operations. Security breaches could also result in litigation, regulatory action, unauthorized release of confidential or otherwise protected information and corruption of data, as well as remediation costs and higher operational and other costs of implementing further data protection measures. In addition, as security threats continue to evolve, we may need to invest additional resources to protect the security of our systems and data. The amount or scope of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack.
Changes in privacy laws could disrupt our business.
The regulatory framework for privacy and data security issues is rapidly evolving and is likely to remain uncertain for the foreseeable future. We collect personal information and other data as part of our business operations. This data is subject to a variety of U.S. and foreign laws and regulations. New privacy laws will continue to come into effect around the world. We may be required to incur significant costs to comply with these and other privacy and data security laws, rules and regulations. Any inability to adequately address privacy and security concerns or comply with applicable privacy and data security laws, rules and regulations could have an adverse effect on our business prospects, results of operations and/or financial position.
We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations and investors may lose confidence in the accuracy and completeness of our financial reports.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As of September 30, 2023, as previously reported, we identified a material weakness in our internal control over financial reporting, which persisted as of December 31, 2023. The material weakness relates to the design and implementation of information technology (“IT”), general controls in the areas of user access limits and segregation of duties related to our enterprise resource planning (“ERP”) application.
In addition, as of December 31, 2023, we determined that we have an additional material weakness in our internal control over financial reporting. This material weakness relates to the design and implementation of general controls over classification in our Statement of Cash Flows of changes in certain intercompany and operating lease receivables from our investing activities, and of bond discounts and debt issuance costs from our debt financing activities.
These material weaknesses have not resulted in the need to revise any of our previously published financial results. We are in the process of taking steps intended to remediate the material weaknesses.
With respect to the IT-related material weakness, our efforts have included enhancing our IT general controls framework that addresses risks associated with user access and security, application change management and IT operations. We are implementing enhanced compensating controls and providing focused training for control owners to help sustain effective control operations and comprehensive remediation efforts relating to segregation of duties to strengthen user access controls and security.
With respect to the material weakness relating to the classification of items within our Statement of Cash Flows, our management plans to enhance the Company’s controls and review activity to assess and validate the classification of items in the operating, investing or financing sections within our Statement of Cash Flows. The Company’s remediation plan is expected to include the following actions: (i) reviewing and enhancing the Company’s organizational structure including technical training and supervision of individuals responsible for the preparation and review of the Statement of Cash Flows; and (ii) engaging with third-party resources to assist with the enhancement and formalization of roles and review responsibilities related to the technical review process for the Statement of Cash Flows.
While we believe these efforts have improved, and will continue to improve, our internal controls and address the underlying causes of the material weaknesses, the material weaknesses will not be remediated until our remediation plans have been fully implemented and we have concluded that the improvements added to our current control environment are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.
If we fail to effectively remediate the material weaknesses in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may be unable to accurately or timely report our financial condition or results of operations. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports and we may face restricted access to the capital markets.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our principal executive offices are located at 5729 Washington Avenue, Racine, WI 53406. We maintain the following offices:
Primary
Location
Function
Tenant
Ownership Status
Burlington, ON
Office
CNH Capital Canada
Leased
New Holland, PA
Office
New Holland Credit Company
Leased from New Holland North America, Inc.
Racine, WI
Office
CNH Capital
Leased from CNH America

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
CNH Capital is party to various litigation matters and claims arising from its operations. Management believes that the outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on CNH Capital’s financial condition or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
All of CNH Industrial Capital LLC’s limited liability company interests are owned by CNH America, which is indirectly wholly-owned by CNHI. There is currently no established trading market for CNH Industrial Capital LLC’s limited liability company interests. CNH Industrial Capital LLC received capital contributions of $75 million from CNH America in 2023. CNH Industrial Capital LLC paid cash dividends of $135 million and $250 million to CNH America in 2022 and 2021, respectively.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the Company’s financial condition and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements.
Overview
Organization
We offer a range of financial products and services to the customers and dealers of CNH North America. Retail financing products primarily include retail notes, finance leases, operating leases and revolving charge account financing to end-use customers. Wholesale financing consists primarily of dealer floorplan financing as well as financing to dealers for used equipment taken in trade, equipment utilized in dealer-owned rental yards, parts inventory, working capital and other financing needs.
Trends and Economic Conditions
In combination with the economic recovery factors and repercussions from geopolitical events, the global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets. These disruptions 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 CNH North America’s operations. For example, CNH North America experienced supply chain disruptions and inflationary pressures in 2022 and, while these trends improved in 2023, CNH North America continues to experience some disruptions. The reduction in supply chain disruptions contributed to improved efficiencies in its manufacturing operations, but purchasing costs remain elevated.
In addition, CNH North America continues to monitor global economic conditions and the impact of macroeconomic pressures, including repercussions from rising interest rates, fluctuating currency exchange rates, inflation and recession fears, on its business, customers and suppliers.
Our business is closely tied to the agricultural and construction equipment industries because we offer financing products for such equipment. For the year ended December 31, 2023, CNH’s net sales of agricultural equipment and net sales of construction equipment generated in North America were $7.2 billion and $2.3 billion, respectively, representing increases of 6% and 31% from the same period in 2022, respectively.
In general, our receivable mix between agricultural and construction equipment financing directionally reflects the mix of equipment sales by CNH North America. As such, changes in the agricultural industry or with respect to our agricultural equipment customers may affect the majority of our portfolio.
As a finance company, we are subject to interest rate risks. Changing interest rates can reduce demand for CNH North America equipment, adversely affect our interest margins while increasing our borrowing costs. Most of our retail customer receivables (which, as used herein, “retail customer receivables” refers primarily to retail notes and finance leases) are fixed rate, while our revolving charge accounts and wholesale receivables are a combination of fixed and floating rate. We manage interest rate risks via a match funding program and the selective use of derivatives.
Net income was $215.1 million for the year ended December 31, 2023, compared to $219.1 million for the year ended December 31, 2022. The decrease in net income was primarily due to increased borrowing costs, higher provisions for credit losses, lower gains on used equipment sales due to decreased operating lease maturities and increased labor costs, partially offset by a higher average portfolio. The receivables balance greater than 30 days past due as a percentage of gross receivables was 0.8%, 1.0% and 0.5% at December 31, 2023, 2022 and 2021, respectively.
Macroeconomic issues for us include the uncertainty of governmental actions with respect to monetary, fiscal and legislative policies, the global economic recovery, changes in demand and pricing for used equipment, capital market disruptions, trade agreements, and financial regulatory reform. Significant volatility in the price of certain commodities could also impact CNH North America’s and our results.
Results of Operations
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Revenues
Revenues for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
$ Change
% Change
Interest income on retail notes and finance leases
$
288,067
$
216,528
$
71,539
33.0
%
Rental income on operating leases
237,178
248,335
(11,157)
(4.5)
Interest income on revolving charge accounts
39,568
-
39,568
-
Interest income on wholesale notes
66,015
28,659
37,356
130.3
Interest and other income from affiliates
434,257
268,267
165,990
61.9
Other income
7,568
30,046
(22,478)
(74.8)
Total revenues
$
1,072,653
$
791,835
$
280,818
35.5
%
Total revenues were $1,072.7 million for the year ended December 31, 2023 compared to $791.8 million for the year ended December 31, 2022. A higher average portfolio coupled with a higher average yield for the total portfolio drove the year-over-year increase in total revenues. The average yield for the managed portfolio was 7.9% for the year ended December 31, 2023, compared to 6.7% for the year ended December 31, 2022.
Interest income on retail notes and finance leases for the year ended December 31, 2023 was $288.1 million, representing an increase of $71.5 million from the year ended December 31, 2022. The increase was due to the favorable impacts of $57.2 million from higher interest rates and $14.3 million from higher average earning assets.
Rental income on operating leases for the year ended December 31, 2023 was $237.2 million, representing a decrease of $11.2 million from the year ended December 31, 2022. The decrease was due to the unfavorable impact of $25.5 million from lower average earning assets, offset by a $14.3 million favorable impact from higher interest rates.
Revolving charge accounts income was $39.6 million for the year ended December 31, 2023.
Interest income on wholesale notes for the year ended December 31, 2023 was $66.0 million, representing an increase of $37.4 million from the year ended December 31, 2022. The increase was due to the favorable impacts of $23.6 million from higher interest rates and $13.8 million from higher average earning assets.
Interest and other income from affiliates for the year ended December 31, 2023 was $434.3 million, representing an increase of $166.0 million from the year ended December 31, 2022. Compensation from CNH North America for retail low-rate financing programs and interest waiver programs offered to customers was $140.2 million and $123.9 million for the years ended December 31, 2023 and 2022, respectively. The increase was primarily due to the mix in pricing programs. For select operating leases, compensation from CNH North America for the difference between market rental rates and the amounts paid by customers was $40.8 million and $47.2 million for the years ended December 31, 2023 and 2022, respectively. The decrease was primarily due to lower average earning assets. For revolving charge accounts, compensation from CNH North America for low-rate financing programs and interest waiver programs offered to customers was $4.1 million for the year ended December 31, 2023. For the year ended December 31, 2023, compensation from CNH North America for wholesale marketing programs was $242.1 million compared to $95.1 million for the prior year. The increase was primarily due to higher originations combined with higher base rates.
Other income for the year ended December 31, 2023 was $7.6 million, representing a decrease of $22.5 million from the year ended December 31, 2022, which is largely attributable to the Company no longer receiving third-party commission income related to a private-label revolving charge account product.
Expenses
Expenses for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
$ Change
% Change
Total interest expense
$
534,239
$
241,807
$
292,432
120.9
%
Fees charged by affiliates
53,804
50,858
2,946
5.8
Provision for credit losses
11,579
11,241
3.0
Depreciation of equipment on operating leases
178,969
201,582
(22,613)
(11.2)
Other expenses, net
17,034
(3,655)
20,689
(566.0)
Total expenses
$
795,625
$
501,833
$
293,792
58.5
%
Total interest expense was $534.2 million for the year ended December 31, 2023 compared to $241.8 million for the year ended December 31, 2022. The increase was due to the unfavorable impacts of $245.1 million from higher average interest rates and $47.3 million from higher average total debt. The average debt cost was 4.5% for the year ended December 31, 2023 compared to 2.4% for the year ended December 31, 2022.
The provision for credit losses was $11.6 million for the year ended December 31, 2023 was relatively flat compared to $11.2 million for the year ended December 31, 2022.
Depreciation of equipment on operating leases decreased by $22.6 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to a lower average operating lease portfolio.
Other expenses, net increased by $20.7 million for the year ended December 31, 2023 compared to the prior year, primarily due to lower gains on used equipment sales as a result of decreased operating lease maturities.
The effective tax rate for the year ended December 31, 2023 was 22.4%, compared to 24.4% for the year ended December 31, 2022.
Receivables and Equipment on Operating Leases Originated and Held
Receivables and equipment on operating lease originations for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
$ Change
% Change
Retail customer
$
4,330,215
$
3,733,700
$
596,515
16.0
%
Revolving charge accounts
1,010,687
219,644
791,043
360.1
Wholesale
13,885,020
11,086,435
2,798,585
25.2
Equipment on operating leases
521,144
517,623
3,521
0.7
Total originations
$
19,747,066
$
15,557,402
$
4,189,664
26.9
%
The increases in originations for retail customer receivables and equipment on operating leases were primarily due to better penetration rates. Wholesale originations increased due to higher shipment volumes of CNH North America equipment. During the fourth quarter of 2022, we began offering revolving charge account financing.
Receivables and equipment on operating leases held as of December 31, 2023 and 2022 were as follows (dollars in thousands):
$ Change
% Change
Retail customer
$
8,204,470
$
7,275,284
$
929,186
12.8
%
Revolving charge accounts
205,872
207,744
(1,872)
(0.9)
Wholesale
5,160,120
3,383,804
1,776,316
52.5
Equipment on operating leases
1,378,384
1,472,973
(94,589)
(6.4)
Total receivables and equipment on operating leases
$
14,948,846
$
12,339,805
$
2,609,041
21.1
%
The total balance of retail customer receivables greater than 30 days past due as a percentage of retail customer receivables was 1.2% at both December 31, 2023 and 2022. The total wholesale receivables balance greater than 30 days past due as a percentage of the wholesale receivables was not significant at December 31, 2023 or 2022. The total revolving charge account receivables balance greater than 30 days past due as a percentage of the revolving charge account receivables was 5.0% and 12.0% at December 31, 2023 and 2022, respectively.
Total retail customer receivables on nonaccrual status were $60.9 million and $53.5 million at December 31, 2023 and 2022, respectively. As of December 31, 2023, total revolving charge account receivables on nonaccrual status were immaterial and there were no revolving charge account receivables on nonaccrual status as of December 31, 2022. As of December 31, 2023 and 2022, there were no wholesale receivables on nonaccrual status.
Total receivable charge-offs and recoveries, by product, for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
Charge-offs:
Retail customer
$
17,624
$
8,202
Revolving charge accounts
6,512
Wholesale
-
4,631
Total charge-offs
24,136
12,882
Recoveries:
Retail customer
(1,785)
(2,262)
Revolving charge accounts
(221)
-
Wholesale
(26)
(526)
Total recoveries
(2,032)
(2,788)
Charge-offs, net of recoveries:
Retail customer
15,839
5,940
Revolving charge accounts
6,291
Wholesale
(26)
4,105
Total charge-offs, net of recoveries
$
22,104
$
10,094
Our allowance for credit losses on all receivables financed totaled $114.7 million at December 31, 2023 and $125.0 million at December 31, 2022.
The allowance is subject to a quarterly evaluation based on many quantitative and qualitative factors, including historical loss experience by product category, portfolio duration, delinquency trends, forward-looking macroeconomic factors (in particular, those conditions directly affecting the profitability and financial strength of our customers), and collateral value. No single factor determines the adequacy of the allowance. Different assumptions or changes in forward-looking economic assumptions would result in changes to the allowance for credit losses and the provision for credit losses. These qualitative factors are subjective and require a degree of management judgment.
We believe our allowance is sufficient to provide for losses in our receivable portfolio as of December 31, 2023.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Comparisons for the year ended December 31, 2022 to the year ended December 31, 2021 are discussed in Item 7 of the Company’s 2022 annual report filed with the SEC on February 28, 2023.
Liquidity and Capital Resources
The following discussion of liquidity and capital resources principally focuses on our statements of cash flows, balance sheets and capitalization. CNH Capital’s current funding strategy is to maintain sufficient liquidity and flexible access to a wide variety of financial instruments and funding options.
In the past, securitization has been one of our most economical sources of funding and, therefore, the majority of our originated receivables are securitized, with the cash generated from such receivables utilized to repay the related debt or purchase new receivables.
In addition, we have secured and unsecured facilities, a repurchase agreement, commercial paper, unsecured bonds, affiliate borrowings and cash to fund our liquidity needs.
Cash Flows
For the years ended December 31, 2023 and 2022, our cash flows were as follows (dollars in thousands):
Cash flows from (used in):
Operating activities
$
193,035
$
695,366
Investing activities
(2,761,004)
(1,926,919)
Financing activities
2,657,317
911,473
Net cash decrease
$
89,348
$
(320,080)
The decrease in net cash from operating activities for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to changes in components of working capital. The increase in net cash used for investing activities for the year ended December 31, 2023 was primarily due to increases in net expenditures of $735.4 million for receivables and $92.8 million for equipment on operating leases. Net cash used for investing activities was funded through increased external borrowings of $2,101.0 million, capital contributions from CNH America of $75.0 million and lower dividends paid of $135.0 million, partially offset by an increase in net cash paid on affiliated debt of $565.2 million.
Securitization
CNH Capital and its predecessor entities have been securitizing receivables since 1992. This market is a cost-effective financing source and allows access to a wide investor base. CNH Capital had approximately $5.0 billion of public and private asset-backed securities outstanding in the U.S. and Canada as of December 31, 2023. Our securitizations are treated as financing arrangements for accounting purposes.
Committed Asset-Backed Facilities
CNH Capital has committed asset-backed facilities with several banks or through their commercial paper conduit programs. Committed asset-backed facilities for the U.S. and Canada totaled $3.3 billion at December 31, 2023, with original borrowing maturities of up to two years. The unused availability under the facilities varies during the year, depending on origination volume and the refinancing of receivables with term securitization transactions and/or other financing. At December 31, 2023, approximately $0.4 million of funding was available for use under these facilities.
Repurchase Agreement
On September 26, 2023, the Company entered into a Global Master Repurchase Agreement which expires in September 2024. At December 31, 2023, the Company had C$299.9 million ($226.3 million) outstanding under the repurchase agreement, with an obligation to repurchase the underlying receivables in 30 days. Our repurchase agreements are treated as financing arrangements for accounting purposes.
Unsecured Facilities and Debt
Committed and uncommitted unsecured facilities with banks as of December 31, 2023, totaled $815.8 million. These credit facilities, which are eligible for renewal at various future dates, are used primarily for working capital and other general corporate purposes. As of December 31, 2023, we had $415.8 million outstanding under these credit facilities. The remaining available credit commitments are maintained primarily to provide backup liquidity for commercial paper borrowings. Our outstanding commercial paper totaled $347.9 million as of December 31, 2023.
As of December 31, 2023, our unsecured senior notes were as follows (dollars in thousands):
Issued by CNH Industrial Capital LLC (the ‘‘U.S. Senior Notes’’): (1)
4.200% notes, due 2024
$
500,000
3.950% notes, due 2025
500,000
5.450% notes, due 2025
400,000
1.875% notes, due 2026
500,000
1.450% notes, due 2026
600,000
4.550% notes, due 2028
600,000
5.500% notes, due 2029
500,000
Hedging, discounts and unamortized issuance costs
(35,937)
3,564,063
Issued by CNH Industrial Capital Canada Ltd. (the ‘‘Canadian Senior Notes’’): (2)
1.500% notes, due 2024
226,404
5.500% notes, due 2026
301,871
Discounts and unamortized issuance costs
(2,338)
525,937
Total
$
4,090,000
(1) These notes, which are senior unsecured obligations of CNH Industrial Capital LLC, are guaranteed by CNH Capital America and New Holland Credit.
(2) These notes, which are senior unsecured obligations of CNH Capital Canada, are guaranteed by CNH Industrial Capital LLC, CNH Capital America and New Holland Credit.
On April 10, 2023, CNH Industrial Capital LLC completed an offering of $600 million in aggregate principal amount of 4.550% unsecured notes due 2028, with an issue price of 98.857%.
On August 11, 2023, CNH Industrial Capital Canada Ltd. completed a private placement offering of C$400 million ($298 million) in aggregate principal amount of its 5.500% unsecured notes due 2026, with an issue price of 99.883%.
On September 13, 2023, CNH Industrial Capital LLC completed an offering of $500 million in aggregate principal amount of 5.500% unsecured notes due 2029, with an issue price of 99.399%.
Credit Ratings
Our ability to obtain funding is affected by credit ratings of our debt, which are closely related to the outlook for and the financial condition of CNHI, and the nature and availability of our support agreement with CNHI.
To access public debt capital markets, we rely on credit rating agencies to assign short-term and long-term credit ratings to our securities as an indicator of credit quality for fixed income investors. A credit rating agency may change or withdraw our ratings based on its assessment of our current and future ability to meet interest and principal repayment obligations. Each agency’s rating should be evaluated independently of any other rating. Lower credit ratings generally result in higher borrowing costs, including costs of derivative transactions, and reduced access to debt capital markets.
On November 30, 2023, Standard & Poor's ("S&P") Global Ratings raised its long-term issuer credit rating on CNH Industrial Capital LLC and CNH Capital Canada to ‘BBB+’ from ‘BBB’. S&P Global Ratings also affirmed the 'A-2' short-term issuer credit rating. Additionally, S&P Global Ratings raised the issue-level ratings on CNH Industrial Capital LLC's senior unsecured debt, to 'BBB+' from 'BBB'. The outlook is stable. Our credit ratings from both Fitch Ratings and Moody’s Investor Services remained unchanged with stable outlooks.
Our current credit ratings are as follows:
Senior
Long-Term
Short-Term
Outlook
S&P Global Ratings
BBB+
A-2
Stable
Fitch Ratings
BBB+
Stable
Moody's Investors Service
Baa2
-
Stable
Affiliate Sources
CNH Capital borrows, as needed, from CNH. This source of funding is primarily used to finance various assets and provides additional flexibility when evaluating market conditions and potential third-party financing options. We had affiliated debt of $132.5 million and $341.5 million as of December 31, 2023 and 2022, respectively.
Equity Position
Our equity position also supports our ability to access various funding sources. Our stockholder’s equity at December 31, 2023 and 2022 was $1.6 billion and $1.3 billion, respectively. During 2023, CNH Industrial Capital LLC received cash capital contributions of $75.0 million from CNH America.
Liquidity
While we expect securitization to continue to represent a material portion of our capital structure and affiliated borrowings to remain a marginal source of funding, we will continue to diversify our funding sources and expand our investor base to support our investment grade credit ratings. These diversified funding sources include committed asset-backed facilities, a repurchase agreement, unsecured notes, bank facilities and a commercial paper program.
The liquidity available for use varies due to: (a) changes in origination volumes, reflecting the financing needs of our customers, and is influenced by the timing of any refinancing of underlying receivables; and (b) the execution of our funding strategy of maintaining a sufficient level of liquidity and flexible access to a wide variety of financial instruments.
Debt
Our consolidated debt as of December 31, 2023 and 2022 is set forth in the table below (dollars in thousands):
Short-term debt (including current maturities of long-term debt)
$
5,519,792
$
4,096,426
Long-term debt
7,859,629
6,387,135
Total third-party debt
13,379,421
10,483,561
Affiliated debt
132,492
341,531
Total debt
$
13,511,913
$
10,825,092
Cash and Restricted Cash and Cash Equivalents
The following table shows cash and restricted cash and cash equivalents as of December 31, 2023 and 2022 (dollars in thousands):
Cash and cash equivalents
$
390,110
$
262,244
Restricted cash
407,817
446,335
Total cash
$
797,927
$
708,579
Restricted cash and cash equivalents are comprised of highly liquid investments with short-term original maturities. See “Liquidity and Capital Resources - Cash Flows” for a further discussion of the change in our cash position. Restricted cash is principally held by depository banks in order to comply with securitization contractual agreements, such as providing cash reserve accounts for the benefit of securitization investors.
Off-Balance Sheet Arrangements
For additional information, see “Note 13: Commitments and Contingencies” to our consolidated financial statements for the year ended December 31, 2023.
Contractual Obligations
The following table sets forth the aggregate amounts of our contractual obligations and commitments as of December 31, 2023 with definitive payment terms that will require significant cash outlays in the future (dollars in thousands).
Payments Due by Period
Less than
After
Total
1 year
1 - 3 years
4 - 5 years
5 years
Short-term and long-term debt (1)
$
13,379,421
$
5,519,792
$
5,403,251
$
1,888,677
$
567,701
Affiliated debt
132,492
132,492
-
-
-
Interest on fixed rate debt
1,416,576
370,644
646,654
371,778
27,500
Interest on floating rate debt (2)
1,155,458
254,359
486,239
408,899
5,961
Operating leases (3)
9,290
1,858
5,574
1,858
-
Total contractual obligations
$
16,093,237
$
6,279,145
$
6,541,718
$
2,671,212
$
601,162
(1)Short-term debt shown as less than one year includes current maturities of long-term debt of $2,918,273.
(2)The interest funding requirements are based on the year-end 2023 interest rates.
(3)Minimum rental commitments.
See “Liquidity and Capital Resources - Debt” for information relating to our consolidated debt as of December 31, 2023.
Guarantor Statements
CNH Capital America and New Holland Credit, which are 100%-owned subsidiaries of CNH Industrial Capital LLC, guarantee the U.S. Senior Notes (the “U.S. Notes Guarantees”). CNH Industrial Capital LLC, CNH Capital America and New Holland Credit (the “Guarantor Entities”) guarantee the Canadian Senior Notes (the “Canadian Notes Guarantees” and, together with the U.S. Notes Guarantees, the “Guarantees”). The Guarantees are full, unconditional, and joint and several.
The Guarantees are general unsecured obligations of the applicable Guarantor Entities and rank senior in right of payment to all future obligations of such Guarantor Entities that are, by their terms, expressly subordinated in right of payment to such Guarantees and pari passu in right of payment with all existing and future unsecured indebtedness of such Guarantor Entities that are not so subordinated.
The Guarantor Entities’ obligations under their applicable Guarantees are limited as necessary to prevent the Guarantees from constituting a fraudulent conveyance under applicable law. If the Guarantees were rendered voidable, they could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Guarantor Entities and, depending on the amount of the indebtedness, such Guarantor Entities’ liability on the Guarantees to which they are parties could be reduced to zero.
The Guarantees of the Guarantor Entities will be automatically released:
(1) in connection with any sale or other disposition of all of the capital stock of the applicable Guarantor Entities to a person other than, for purposes of the U.S. Notes Guarantees, CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC, or, for purposes of the Canadian Notes Guarantees, CNH Industrial N.V. or any subsidiary of CNH Industrial N.V.;
(2) in connection with the sale or other disposition of all or substantially all of the assets or properties of the applicable Guarantor Entities, including by way of merger, consolidation or otherwise, to a person other than, for purposes of the U.S. Notes Guarantees, CNH Industrial Capital LLC or any subsidiary of CNH Industrial Capital LLC or, for purposes of the Canadian Notes Guarantees, CNH Industrial N.V. or any subsidiary of CNH Industrial N.V.; or
(3) in certain other circumstances.
The following tables present summarized financial information for the obligor groups of the U.S. Senior Notes and the Canadian Senior Notes. The obligor group consists of the issuer and guarantors for the applicable senior notes. Intercompany balances and transactions between the issuer and guarantors have been eliminated. The investments in, and equity in income from, non-guarantor subsidiaries has been excluded.
For the years ended December 31, 2023 and 2022, the summarized statement of income information for the obligor group of the U.S. Senior Notes was as follows (dollars in thousands):
Revenues
$
638,908
$
462,893
Interest expense
418,980
170,955
Administrative and operating expenses
197,393
202,652
Income tax provision (benefit)
6,042
22,424
Net income
$
16,493
$
66,862
For the U.S. Senior Notes, affiliated interest amounts recorded from and to the non-guarantor subsidiaries of CNH Industrial Capital LLC for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
Interest and other income from affiliates
$
63,762
$
37,355
Interest expense to affiliates
199,923
82,993
As of December 31, 2023 and 2022, the summarized balance sheet information for the obligor group of the U.S. Senior Notes was as follows (dollars in thousands):
Cash
$
268,448
$
235,428
Restricted cash and cash equivalents
-
-
Receivables, less allowance for credit losses of $33,308 and $36,093
3,247,283
2,198,816
Equipment on operating leases, net
924,835
1,055,313
Short-term debt, including current maturities of long-term debt
1,091,813
975,566
Accounts payable and other accrued liabilities
660,587
784,491
Long-term debt
3,398,119
2,456,038
For the U.S. Senior Notes, the obligors’ amounts due from and due to the non-guarantor subsidiaries of CNH Industrial Capital LLC as of December 31, 2023 and 2022 were as follows (dollars in thousands):
Affiliated accounts and notes receivable
$
3,223,627
$
2,689,403
Accounts payable and other accrued liabilities
3,706,424
3,254,572
For the years ended December 31, 2023 and 2022, the summarized statement of income information for the obligor group of the Canadian Senior Notes was as follows (dollars in thousands):
Revenues
$
851,475
$
629,474
Interest expense
509,590
218,534
Administrative and operating expenses
263,048
266,809
Income tax provision
17,286
36,183
Net income
$
61,551
$
107,948
For the Canadian Senior Notes, affiliated interest amounts recorded from and to the non-guarantor subsidiaries of CNH Industrial Capital LLC for the years ended December 31, 2023 and 2022 were as follows (dollars in thousands):
Interest and other income from affiliates
$
62,162
$
35,028
Interest expense to affiliates
199,923
84,494
As of December 31, 2023 and 2022, the summarized balance sheet information for the obligor group of the Canadian Senior Notes was as follows (dollars in thousands):
Cash
$
319,921
$
260,907
Restricted cash and cash equivalents
70,949
88,589
Receivables, less allowance for credit losses of $44,954 and $51,237
5,671,733
4,291,809
Equipment on operating leases, net
1,378,384
1,472,973
Short-term debt, including current maturities of long-term debt
2,393,553
1,561,788
Accounts payable and other accrued liabilities
800,693
877,678
Long-term debt
4,473,453
3,477,671
For the Canadian Senior Notes, the obligors’ amounts due from and due to the non-guarantor subsidiaries of CNH Industrial Capital LLC as of December 31, 2023 and 2022 were as follows (dollars in thousands):
Affiliated accounts and notes receivable
$
3,183,986
$
2,576,713
Accounts payable and other accrued liabilities
3,729,866
3,276,544
Other Data
As of or for the
Year Ended December 31,
(Dollars in thousands)
Gross receivables
$
13,570,462
$
10,866,832
$
9,067,252
Equipment on operating leases, net
1,378,384
1,472,973
1,707,531
Total portfolio
$
14,948,846
$
12,339,805
$
10,774,783
Delinquency (1)
0.81
%
1.02
%
0.48
%
Average gross receivables balance
$
11,953,923
$
9,728,967
$
8,970,948
Net credit loss (2)
0.18
%
0.10
%
0.14
%
Profitability:
Average receivable yields (3)
6.54
%
4.79
%
4.72
%
Average debt cost
4.48
%
2.43
%
2.00
%
Return on average portfolio (4)
1.61
%
1.94
%
2.14
%
Asset Quality:
Allowance for credit losses / gross receivables
0.85
%
1.15
%
1.28
%
(1) Delinquency is reported on gross receivables greater than 30 days past due, expressed as a percentage of the gross receivables as of the end of the respective period.
(2) Net credit losses on the receivables means charge-offs, net of recoveries, for the preceding 12 months expressed as a percentage of the respective average balance of gross receivables.
(3) Yield on retail notes, finance leases, revolving charge accounts and wholesale receivables.
(4) Net income for the period expressed as a percentage of the average portfolio.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses during the reported periods. Actual results may differ from these estimates under different assumptions and conditions. Our critical accounting policies and estimates, which require management assumptions and complex judgments, are summarized below.
Allowance for Credit Losses
The allowance for credit losses is our estimate of the lifetime expected credit losses inherent in the receivables owned by us. Retail customer receivables primarily include retail notes and finance leases to end-use customers. Revolving charge accounts represent financing for customers to purchase parts, service, rentals, implements and attachments from CNH North America dealers. Wholesale receivables include dealer floorplan financing, and to a lesser extent, the financing of dealer operations. Typically, our receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk.
Retail customer receivables that share the same risk characteristics such as, collateralization levels, geography, product type and other relevant factors are reviewed on a collective basis using measurement models and management judgment. The allowance for credit losses on retail customer receivables is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward-looking macroeconomic factors, such as GDP and Net Farm Income. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.
Wholesale receivables that share the same risk characteristics such as, collateralization levels, term, geography and other relevant factors are reviewed on a collective basis using measurement models and management judgment. The allowance for wholesale credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward-looking macroeconomic factors, such as industry sales volumes. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.
Retail customer receivables and wholesale receivables that do not have similar risk characteristics are individually reviewed based on, among other items, amounts outstanding, days past due and prior collection history. Expected credit losses are measured by considering: the probability weighted estimates of cash flows and collateral value; the time value of money; current conditions and forecasts of future economic conditions. Expected credit losses are measured as the probability weighted present value of all cash shortfalls (including the value of the collateral, if appropriate) over the expected life of each financial asset.
Charge-offs of principal amounts of retail customer receivables and wholesale receivables outstanding are deducted from the allowance at the point when it is estimated that amounts due are deemed uncollectible. When delinquency reaches 120 days, revolving charge accounts are generally deemed to be uncollectible and charged off to the allowance for credit losses.
The total allowance for credit losses at December 31, 2023 and 2022 was $114.7 million and $125.0 million, respectively. Management’s ongoing evaluation of the adequacy of the allowance for credit losses takes into consideration historical loss experience, known and inherent risks in the portfolio, adverse situations that may affect the customer’s ability to repay, estimated value of underlying collateral and current and future economic conditions.
While management believes it has exercised prudent judgment and applied reasonable assumptions, there can be no assurance that, in the future, changes in economic conditions or other factors will not cause changes in the financial condition of our customers. If the financial condition of some of our customers deteriorates, the timing and level of payments received could be impacted and, therefore, could result in an increase in losses on the current portfolio.
Equipment on Operating Lease Residual Values
We purchase equipment from our dealers and other independent third parties and lease such equipment to retail customers under operating leases. Income from these operating leases is recognized over the term of the lease. Our decision on whether or not to offer lease financing to customers is based, in part, upon estimated residual values of the leased equipment, which are estimated at the lease inception date and periodically updated. Realization of the residual values, a component in the profitability of a lease transaction, is dependent on our ability to market the equipment at lease termination under the then prevailing market conditions. Equipment model changes and updates, as well as market strength and product acceptance, are monitored and adjustments are made to residual values in accordance with the significance of any such changes. Although realization is not assured, management believes that the estimated residual values are realizable.
Total operating lease residual values at December 31, 2023 and 2022 were $1.0 billion and $1.1 billion, respectively.
Estimates used in determining end-of-lease market values for equipment on operating leases significantly impact the amount and timing of depreciation expense. If future values for this equipment were to decrease 10% from our present estimates, the total impact would be to increase our depreciation expense on equipment on operating leases by approximately $104.1 million. This amount would be charged to depreciation expense during the remaining lease terms such that the net amount of equipment on operating leases at the end of the lease terms would be equal to the revised residual values. Initial lease terms generally range from two to five years.
Cautionary Note on Forward-Looking Statements
This Annual Report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934.All statements other than statements of historical fact contained in this filing, including competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, capital expenditures, dividends, liquidity, capital structure or other financial items; costs; and plans and objectives of management regarding operations, products and services, are forward-looking statements. Forward-looking statements also include statements regarding the future performance of CNH and its subsidiaries on a stand-alone basis. 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 they occur with a degree of severity that the Company is unable to predict) or other assumptions underlying any of the forward-looking statements prove to be incorrect, including any assumptions regarding strategic plans, 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: economic conditions in each of CNH’s markets, including the significant uncertainty caused by geopolitical events; production and supply chain disruptions, including industry capacity constraints, material availability, and global logistics delays and constraints; the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related products; changes in government policies regarding banking, monetary and fiscal policy; legislation, particularly pertaining 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; volatility in international trade caused by the imposition of tariffs, sanctions, embargoes, and trade wars; actions of competitors in the various industries in which CNH North America competes; 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 CNH’s products; labor relations; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities and material price increases; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; restrictive covenants in our debt agreements; actions by rating agencies concerning the ratings on our debt and asset-backed securities and the credit rating of CNHI; price pressure on new and used equipment; security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the Company and its CNH North America dealers; security breaches with respect to CNH’s products; political and civil unrest; volatility and deterioration of capital and financial markets, including pandemics (such as the COVID-19 pandemic) and terrorist attacks; the remediation of the material weaknesses; our ability to realize the anticipated benefits from our business initiatives as part of CNHI’s strategic plan including targeted restructuring actions to optimize CNHI’s cost structure and improve the efficiency of its operations; CNHI’s failure to realize, or a delay in realizing, all of the anticipated benefits of its acquisitions, joint ventures, strategic alliances or divestitures and other similar risks and uncertainties, and our and CNHI’s success in managing the risks involved in the foregoing.
Forward-looking statements are based upon assumptions relating to the factors described in this filing, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside of our control. CNH Capital expressly disclaims any intention or obligation to provide, update or revise any forward-looking statements to reflect any change in expectations or any change in events, conditions or circumstances on which these forward-looking statements are based.
Further information concerning CNH Capital, including factors that potentially could materially affect CNH Capital’s financial results, is included in CNH Capital’s reports and filings with the SEC.
All future written and oral forward-looking statements by CNH Capital or persons acting on behalf of CNH Capital are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, primarily changes in interest rates. We monitor our exposure to these risks, and manage the underlying economic exposures on transactions using financial instruments such as forward contracts, interest rate swaps, interest rate caps and forward starting swaps. We do not hold or issue derivatives or other financial instruments for speculative purposes or to hedge translation risks. See “Note 10: Financial Instruments” in the notes to our consolidated financial statements for the year ended December 31, 2023, for a description of our risk management strategy and the methods and assumptions used to determine the fair values of financial instruments.
Interest Rate Risk
We are exposed to market risk from changes in interest rates. We monitor our exposure to this risk and manage the underlying exposure both through the matching of financial assets and liabilities and through the use of financial instruments, including swaps, caps, and forward starting swaps for the net exposure. The instruments aim to stabilize funding costs by managing the exposure created by the differing maturities and interest rate structures of our financial assets and liabilities. We do not hold or issue derivative or other financial instruments for speculative purposes.
We monitor interest rate risk to achieve a predetermined level of matching between the interest rate structure of our financial assets and liabilities. Fixed-rate financial instruments, including receivables, debt and other investments, are segregated from floating-rate instruments in evaluating the potential impact of changes in applicable interest rates. A sensitivity analysis was performed to compute the impact on fair value which would be caused by a hypothetical 10% change in the interest rates used to discount each category of financial assets and liabilities. The net impact on the fair value of the financial instruments and derivative instruments held as of December 31, 2023 and 2022, resulting from a hypothetical 10% change in interest rates, would be $6.3 million and approximately zero, respectively. For the sensitivity analysis the financial instruments are grouped according to the currency in which financial assets and liabilities are denominated and the applicable interest rate index. As a result, our interest rate risk sensitivity model may overstate the impact of interest rate fluctuations for such financial instruments, as consistently unfavorable movements of all interest rates are unlikely.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements are included in this annual report beginning on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Exchange Act of 1934. Based on this evaluation, our principal executive officer and principal financial officer concluded that due to two material weaknesses in our internal control over financial reporting (better described below and respectively relating to the design and implementation of information technology (“IT”) general controls in certain areas related to our enterprise resource planning (“ERP”) application and the classification of certain items within our Statement of Cash Flows), our disclosure controls and procedures were not effective as of December 31, 2023.
Management’s Annual Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control - Integrated Framework. Based on our assessment, and the material weaknesses noted below, we believe that, as of December 31, 2023 our internal control over financial reporting was not effective.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As of September 30, 2023, as previously reported, we identified a material weakness in our internal control over financial reporting, which persisted as of December 31, 2023. The material weakness relates to the design and implementation of IT general controls in the areas of user access limits and segregation of duties related to our ERP application.
In addition, as of December 31, 2023, we determined that we have an additional material weakness in our internal control over financial reporting. This material weakness relates to the design and implementation of general controls over classification in our Statement of Cash Flows of changes in certain intercompany and operating lease receivables from our investing activities, and of bond discounts and debt issuance costs from our debt financing activities.
These control deficiencies have not resulted in the need to revise any previously published financial results. However, the IT deficiency if not timely remediated, could impact maintaining effective segregation of duties and the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatements to one or more assertions, and IT controls and underlying data that support the effectiveness of IT system-generated data and reports). The classification deficiency in the Statement of Cash Flows, if not timely remediated, could impact the proper classification of certain amounts deriving from operating, investing or financing activities.
These control deficiencies could have resulted in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute material weaknesses.
Management’s Plan to Remediate the Material Weaknesses
Subsequent to the identification of the material weaknesses, we have been implementing measures and taking steps to address the underlying causes of the material weaknesses.
With respect to the IT-related material weakness, our efforts have included enhancing our IT general controls framework that addresses risks associated with user access and security, application change management and IT operations. We are implementing enhanced compensating controls and providing focused training for control owners to help sustain effective control operations and comprehensive remediation efforts relating to segregation of duties to strengthen user access controls and security.
With respect to the material weakness relating to the classification of items within our Statement of Cash Flows, our management plans to enhance the Company’s controls and review activity to assess and validate the classification of items in the operating, investing or financing sections within our Statement of Cash Flows. The Company’s remediation plan is expected to include the following actions: (i) reviewing and enhancing the Company’s organizational structure including technical training and supervision of individuals responsible for the preparation and review of the Statement of Cash Flows; and (ii) engaging with third-party resources to assist with the enhancement and formalization of roles and review responsibilities related to the technical review process for the Statement of Cash Flows.
While we believe these efforts have improved, and will continue to improve, our internal controls and address the underlying causes of the material weaknesses, the material weaknesses will not be remediated until our remediation plans have been fully implemented and tested and we have concluded that following the improvements to our internal controls, our current control environment is operating effectively for a sufficient period of time. In particular, the enhanced compensating controls and training will require time to test and assess. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
As described above, the Company is taking steps to remediate the material weaknesses noted above. Other than in connection with these remediation steps, there have been no changes in our internal control over financial reporting during the three months ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to the costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Omitted pursuant to General Instruction I of Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Omitted pursuant to General Instruction I of Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted pursuant to General Instruction I of Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Omitted pursuant to General Instruction I of Form 10-K.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, the “Deloitte Entities”) were appointed to serve as our independent registered public accounting firm for the year ended December 31, 2023. Ernst & Young LLP, the member firms of Ernst & Young and their respective affiliates (collectively, the “Ernst & Young Entities”) were appointed to serve as our independent registered public accounting firm for the year ended December 31, 2022.
We incurred the following fees for professional services performed by the Deloitte Entities and the Ernst & Young Entities for the years ended December 31, 2023 and 2022, respectively:
Audit fees
$
1,099,400
$
913,075
Audit-related fees
314,300
595,100
Total
$
1,413,700
$
1,508,175
“Audit Fees” are the aggregate fees billed by the Deloitte Entities in 2023 and the Ernst & Young Entities in 2023 and 2022 for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. “Audit-related fees” are fees charged by the Deloitte Entities in 2023 and the Ernst & Young Entities in 2023 and 2022 for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” This category is comprised of fees for agreed-upon procedure engagements and other attestation services subject to regulatory and funding requirements. There were no fees billed for professional services in connection with tax compliance, tax advice, tax planning or other fees not included above for the years ended December 31, 2023 and 2022.
Audit Committee’s Pre-Approval Policies and Procedures
As a wholly-owned subsidiary of CNHI, audit and non-audit services provided by our independent registered public accounting firm are subject to CNHI’s Audit Committee pre-approval policies and procedures. During the year ended December 31, 2023, all audit and non-audit services provided by our independent registered public accounting firm were pre-approved in accordance with such policies and procedures.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
1.
Financial Statements
2.
Financial Statement Schedules
See table of contents to financial statements and schedules immediately preceding the financial statements and schedules to the consolidated financial statements.
3.
Exhibits.
Exhibit
Description
3.1
Certificate of Formation of CNH Industrial Capital LLC dated December 31, 2004, as amended by the Certificate of Amendment to the Certificate of Formation of CNH Industrial Capital LLC dated February 10, 2014. (Previously filed as Exhibit 3.1 to the annual report on Form 10-K of the registrant for the year ended December 31, 2015 (File No. 333-182411) and incorporated herein by reference).
3.2
Amended and Restated Limited Liability Company Agreement of CNH Industrial Capital LLC, amended on July 7, 2011. (Previously filed as Exhibit 3.2 to the registration statement on Form S-4 of the registrant (File No. 333-182411) and incorporated herein by reference).
4.1
Indenture, dated as of September 11, 2015, by and among CNH Industrial Capital LLC, as issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Previously filed as Exhibit 4.9 to the registration statement on Form of the registrant (File No. 333-206891-03) and incorporated herein by reference).
4.2
Officers’ Certificate, dated as of August 14, 2018 (including Form of 4.200% Note due 2024 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on August 14, 2018 (File No. 000-55510) and incorporated herein by reference).
4.3
Officers’ Certificate, dated as of October 6, 2020 (including Form of 1.875% Note due 2026 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on October 6, 2020 (File No. 000-55510) and incorporated herein by reference).
4.4
Officers’ Certificate, dated as of May 24, 2021 (including Form of 1.450% Note due 2026 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on May 24, 2021 (File No. 000-55510) and incorporated herein by reference).
4.5
Officers’ Certificate, dated as of May 23, 2022 (including Form of 3.950% Note due 2025 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on May 23, 2022 (File No. 000-55510) and incorporated herein by reference).
4.6
Officers’ Certificate, dated as of October 14, 2022 (including Form of 5.450% Note due 2025 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on October 14, 2022 (File No. 000-55510) and incorporated herein by reference).
Exhibit
Description
4.7
Officers’ Certificate, dated as of April 10, 2023 (including Form of 4.550% Note due 2028 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on April 10, 2023 (File No. 000-55510) and incorporated herein by reference).
4.8
Officers’ Certificate dated as of September 13, 2023 (including Form of 5.500% Note due 2029 included therein). (Previously filed as Exhibit 4.1 to the current report on Form 8-K of the registrant on September 13, 2023 (File No. 000-55510) and incorporated herein by reference).
10.1
Support Agreement, dated as of November 4, 2011, by and between CNH Industrial Capital LLC and CNH Global N.V. (Previously filed as Exhibit 10.1 to the registration statement on Form S-4 of the registrant (File No. 333-182411) and incorporated herein by reference).
10.2
Fourth Amended and Restated Wholesale and Parts CNHi Capital Financing Agreement, dated December 31, 2017, by and between CNH Industrial America LLC and CNH Industrial Capital America LLC.
10.3
Second Amended and Restated Wholesale and Parts CNHi Capital Financing Agreement, dated December 31, 2017, by and between CNH Industrial Canada Ltd. and CNH Industrial Capital Canada Ltd.
10.4
Supplemental Support Agreement, dated as of September 27, 2013, by and among CNH Industrial Capital LLC, CNH Global N.V. and CNH Industrial N.V. (formerly known as FI CBM Holdings N.V.). (Previously filed as Exhibit 10.1 to the quarterly report on Form 10-Q of the registrant for the quarter ended September 30, 2013 (File No. 333-182411) and incorporated herein by reference).
Issuer and Guarantors of Guaranteed Securities.
23.1
Consent of Deloitte & Touche LLP.
23.2
Consent of Ernst & Young LLP.
31.1
Certifications of President Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certifications of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification required by Exchange Act Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover page Interactive Data File is formatted in Inline XBRL and included in Exhibits 101
† These certifications are deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section; nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of holders of certain long-term debt have not been filed. The registrant will furnish copies thereof to the SEC upon request.