2014 FOURTH QUARTER AND FULL YEAR RESULTS

CNH Industrial closed 2014 with revenues of $32.6 billion, net income of $708 million and net income before restructuring and other exceptional items of $940 million. 

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Financial results under U.S. GAAP(*) (**)

• Revenues totaled $8.4 billion for the fourth quarter and $32.6 billion for the full year 2014 ($9.3 billion and $33.8 billion for the same periods in 2013). Net sales of Industrial Activities were $8.0 billion for the quarter and $31.2 billion for the year ($9.0 billion and $32.7 billion for the same periods in 2013), down 5.9% and 2.8%, respectively, on a constant currency basis. 

• Operating profit of Industrial Activities was $376 million for the quarter ($389 million in Q4 2013), with an operating margin at 4.7% (up 0.4 p.p.). For the full year operating profit of Industrial Activities was $1,988 million ($2,095 million in 2013). Operating margin stood at 6.4%, flat year over year. 

• Net income was $87 million (or $0.06 per share) for the quarter and $708 million (or $0.52 per share) for the full year. Net income before restructuring and other exceptional items was $167 million (or $0.12 per share) for the quarter and $940 million (or $0.69 per share) for the full year, up $50 million compared to Q4 2013 and down $7 million for the full year. 

• Net industrial debt was $2.7 billion at December 31, 2014 ($3.9 billion at September 30, 2014 and $2.2 billion at December 31, 2013). Available liquidity totaled $8.9 billion ($8.7 billion at December 31, 2013). 

• The Board of Directors is recommending for 2014 a dividend of €0.20 per common share, totaling approximately $307 million (€271 million). 

• For 2015 CNH Industrial expects net sales of Industrial Activities at approximately $28 billion, with operating margin of Industrial Activities between 6.1% and 6.4%. Net industrial debt expected between $2.2 billion and $2.4 billion.

(*) Beginning with the filing with the U.S. Securities and Exchange Commission (“SEC”) of its annual report on Form 20-F for the fiscal year ended December 31, 2013, prepared in accordance with U.S. GAAP, CNH Industrial reports quarterly and annual financial results both under U.S. GAAP for SEC reporting purposes and under IFRS for European listing purposes and Dutch law requirements. Financial statements under both sets of accounting principles use the U.S. dollar as the reporting currency. In addition, as disclosed in the Form 20-F, CNH Industrial has expanded its reportable segments from three (Agricultural and Construction Equipment inclusive of its financial services activities, Trucks and Commercial Vehicles inclusive of its financial services activities, and Powertrain) to five (Agricultural Equipment, Construction Equipment, Commercial Vehicles, Powertrain and Financial Services). The following tables and comments on the financial results of the Company and by segments are prepared in accordance with U.S. GAAP. Financial results under IFRS are shown in specific tables at the end of this press release. Prior period results under IFRS, prepared in Euro, have been consistently recast into U.S. dollars. A summary outlining the Company’s transition to U.S. GAAP and the U.S. dollar as the reporting currency is available on the Company’s website, www.cnhindustrial.com. (**) Refer to the Non-GAAP Financial Information section of this press release for information regarding Non-GAAP financial measures.

CNH Industrial N.V. (NYSE:CNHI / MI:CNHI) today announced consolidated revenues of $32,555 million for 2014, down 3.8% compared to 2013 (down 2.1% on a constant currency basis). Net sales of Industrial Activities were $31,198 million in 2014, down 4.5% from 2013 (down 2.8% on a constant currency basis). Net sales increases in Construction Equipment and Powertrain were offset by a decline in Agricultural Equipment, mainly due to unfavorable volume and product mix, particularly in LATAM and NAFTA, and in Commercial Vehicles in LATAM, as well as by the negative impact of currency translation, primarily relating to the Brazilian real. 

Operating profit of Industrial Activities was $1,988 million in 2014, a 5.1% decrease compared to 2013 (down 3.6% on a constant currency basis), with an operating margin for the year at 6.4%, in line with 2013. Operating profit improved in Construction Equipment and Powertrain and declined in Agricultural Equipment and Commercial Vehicles. Construction Equipment benefitted from favorable volume and mix in all regions, positive price realization, and cost efficiencies. For Powertrain, the improvement was due to the increased activity with third parties, and continued industrial cost efficiencies. For Commercial Vehicles, positive performance in EMEA and APAC and significant reductions in selling, general and administrative (“SG&A”) expenses were offset by the negative effects of challenging trading conditions in LATAM, due to a significant decline in market demand. In Agricultural Equipment, lower volume and negative product mix were partially offset by positive net price realization, industrial efficiencies and structural cost reductions in SG&A and research and development (“R&D”) expenses. Foreign exchange translation impacts were not material to the operating profit of Industrial Activities. 

Restructuring expenses totaled $184 million for the year, as part of the Company’s Efficiency Program announced in July 2014. Agricultural Equipment recorded $43 million primarily due to the closure of a joint venture in China and cost reduction activities as a result of negative demand conditions. Commercial Vehicles recorded $102 million mainly due to actions to reduce SG&A expenses and business support costs as a result of the transition to CNH Industrial’s regional structure, and costs related to the completion of manufacturing product specialization programs. Construction Equipment recorded $39 million mainly due to the realignment of the dealer networks in EMEA as a result of the re-positioning of the Case and New Holland brand offerings , and the announced closure of the Company’s Calhoun, Georgia, USA facility. For 2013, restructuring expenses were $71 million, mainly related to Commercial Vehicles primarily related to manufacturing product specialization programs. 

Interest expense, net totaled $613 million in 2014, $65 million higher than 2013, primarily due to an increase in average net industrial debt during the year, partially offset by more favorable interest rates primarily related to the new notes issued during the year. 

Other, net was a charge of $313 million for 2014 (charge of $284 million for 2013). The increase of $29 million was mainly due to higher foreign exchange losses, which included a $71 million pre-tax charge for the remeasurement of Venezuelan assets denominated in Bolivars.

Income taxes totaled $467 million for 2014, representing an effective tax rate of 42.9% (2013 effective tax rate of 48.8%), in line with the Company’s expectations for the year, and well above the expected long term target. 

Equity in income of unconsolidated subsidiaries and affiliates totaled $86 million for the year ($125 million for 2013); the decrease was mainly due to lower results from APAC joint ventures as a result of more difficult trading conditions.

Net income of Financial Services was $364 million for 2014, compared to $342 million for 2013, as a result of a larger comparable portfolio and one-time items in the previous year. 

Consolidated net income was $708 million for 2014 ($828 million for 2013). Net income attributable to CNH Industrial N.V. was $710 million ($677 million for 2013), or $0.52 per share ($0.54 per share for 2013). Net income before restructuring and other exceptional items (a non-GAAP measure) was $940 million for 2014 ($947 million for 2013), or $0.69 per share ($0.63 per share for 2013). 

Net industrial debt of $2.7 billion at December 31, 2014 was $0.5 billion higher than at December 31, 2013. Cash generation in the operations before changes in working capital contributed for $1.3 billion. Changes in working capital negatively impacted by $1.0 billion, mainly due to lower payables as a result of the relevant production curtailments in Agricultural Equipment in the fourth quarter, and of Commercial Vehicles in EMEA returning to normalized levels of production as compared to prior year’s Euro V pre-buy activity, as well as in LATAM operations. Capital expenditure activity totaled $1.0 billion and dividend payments were $0.4 billion. Currency translation differences on euro-denominated debt positively affected net industrial debt by $0.6 billion. 

Available liquidity at December 31, 2014 was $8.9 billion, inclusive of $2.7 billion in undrawn committed facilities ($2.2 billion at December 31, 2013), compared to $8.7 billion at December 31, 2013. During the year, a €1.75 billion five-year committed revolving credit facility was signed, replacing an existing three-year €2 billion facility due to mature in February 2016.  

Fourth Quarter 

The Company reported consolidated revenues of $8,365 million for the fourth quarter of 2014, down 10.0% compared to Q4 2013 (down 4.9% on a constant currency basis). Net sales of Industrial Activities were $8,018 million in Q4 2014, down 10.9% from Q4 2013 (down 5.9% on a constant currency basis), largely as a result of the difficult demand conditions in Agricultural Equipment. 

Operating profit of Industrial Activities totaled $376 million for the fourth quarter ($389 million in the comparable period), with an operating margin of 4.7% (4.3% in Q4 2013). Construction Equipment operating performance improved as a result of lower SG&A and R&D expenses, and positive volume and mix. Agricultural Equipment operating profit was negatively affected by unfavorable volume and mix, including negative industrial absorption primarily related to production curtailments to realign inventory to market demand, partially offset by favorable pricing and cost efficiencies. Commercial Vehicles operating performance was stable compared to Q4 2013 as improved EMEA operations were able to offset challenging trading conditions in LATAM and negative foreign exchange currency impacts. Powertrain operating performance was stable, with industrial efficiencies offsetting reduced volumes with captive customers. 

Restructuring expenses totaled $86 million in the quarter, mainly due to actions to reduce SG&A expenses and business support costs, as well as costs related to the completion of manufacturing product specialization programs for Commercial Vehicles, and to cost reduction activities as a result of negative demand conditions within Agricultural Equipment. For Q4 2013, restructuring expenses were $39 million, mainly related to Commercial Vehicles.

Interest expense, net totaled $164 million for the quarter, compared to $166 million for Q4 2013, with more favorable interest rates offset by an increase in average net industrial debt. 

Net income of Financial Services was $98 million for the quarter, compared to $122 million for Q4 2013, as the positive impact of the higher average portfolio and lower provisions for credit losses was more than offset by higher income taxes. 

Consolidated net income was $87 million for the quarter ($54 million for Q4 2013). Net income attributable to CNH Industrial N.V. was $83 million for the quarter ($60 million for Q4 2013), or $0.06 per share ($0.04 per share for Q4 2013). Net income before restructuring and other exceptional items (a non-GAAP measure) was $167 million for the quarter ($117 million for Q4 2013).