Published: 2022-05-09 00:00:00 ET

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CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in, and under the laws of, the Netherlands. CNH Industrial has its corporate seat in Amsterdam, the Netherlands, and its principal office in London, England, United Kingdom. The Company was formed on September 29, 2013 as a result of the business combination transaction between Fiat Industrial S.p.A. (“Fiat Industrial”) and its majority owned subsidiary CNH Global N.V. (“CNH Global”). Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial” and the “Company” refer to CNH Industrial and its subsidiaries.

The condensed consolidated financial statements of CNH Industrial N.V. and its consolidated subsidiaries have been voluntarily prepared by the Company without audit. Although prepared on a voluntary basis, the condensed consolidated financial statements included in the report comply in all material respects with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) governing interim financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting only of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. These interim financial statements should be read in conjunction with the financial statements and the notes thereto appearing in the Company’s annual report on Form 20-F for the year ended December 31, 2021. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related accompanying notes and disclosures. The COVID-19 pandemic has resulted in uncertainties in the Company's business, which may cause actual results to differ materially from the estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with goodwill, indefinite life intangibles, definite life intangibles, long-lived impairment tests, determination of discount rates and other assumptions for pension and other post-retirement benefit expense and income taxes. Changes in estimates are recorded in results of operations in the period during which the events or circumstances giving rise to such changes occur.

Certain financial information in this report has been presented by geographic area. Beginning January 1, 2022, our geographical regions are: (1) North America; (2) Europe, Middle East and Africa; (3) South America and (4) Asia Pacific. Prior amounts have been conformed to these regions. The geographic designations have the following meanings:

•North America: United States, Canada, and Mexico;

•Europe, Middle East, and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine, Balkans, Russia, Turkey, the African continent, and the Middle East;

•South America: Central and South America, and the Caribbean Islands; and

•Asia Pacific: Continental Asia (including the Indian subcontinent) and Oceania

Discontinued Operations

Until December 31, 2021, CNH Industrial N.V. owned and controlled the Commercial and Specialty Vehicles business, the Powertrain business, and the related Financial Services business (together the “Iveco Group Business” or the “On-Highway Business”), as well as the Agriculture business, the Construction business, and the related Financial Services business (collectively, the “Off-Highway Business”). Effective January 1, 2022, the Iveco Group Business was separated from CNH Industrial N.V. by way of a demerger under Dutch law to Iveco Group N.V. (the Demerger) and Iveco Group became a public listed company independent from CNH Industrial with its common shares trading on Euronext Milan, a regulated market organized and managed by Borsa Italiana S.p.A. The On-Highway Business' financial results for the periods prior to the demerger have been reflected in our Condensed Consolidated Statement of Operations, retrospectively, as discontinued operations. Additionally, the related assets and liabilities associated with the On-Highway Business are classified as discontinued operations within Assets Held for Distribution and Liabilities Held for Distribution in the prior year of the Condensed Consolidated Balance Sheet. Pursuant to the terms of the deeds of demerger entered into between CNH Industrial N.V. and Iveco Group N.V. on January 1, 2022, assets related to the On-Highway Business were transferred to, and liabilities related to the On-Highway Business were retained or assumed by, Iveco Group N.V.

In order to present the financial effects of a Discontinued Operation, revenues and expenses arising from intercompany transactions were eliminated. Eliminations from transactions between Continuing and Discontinued Operations are allocated in full to Discontinued Operations. However, no profit or loss is recognized for intercompany transactions within the Condensed Consolidated Statement of Operations. The amounts of income statement items included in Discontinued Operations is detailed in the following sections.

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Intercompany transactions between Continuing and Discontinued Operations have been eliminated in the consolidated statement of financial position. The net balance between Assets held for distribution and Liabilities held for distribution represents the net equity of the Discontinued Operations. This amount corresponds to the reduction in the total equity of CNH Industrial due to the Demerger that occurred on January 1, 2022.

All cash flows from Discontinued Operations are reported in the appropriate items for operating activities, investing activities and financing activities in the Statement of Cash Flows. The cash flows represent those arising from transactions with third parties.

The following table presents the assets and liabilities of the Iveco Group Business classified as Assets Held for Distribution and Liabilities Held for Distribution:

						December 31, 2021
ASSETS HELD FOR DISTRIBUTION
Cash and cash equivalents						$	961
Restricted cash						55
Trade receivables, net						165
Financing receivables, net						3,284
Inventories, net						3,005
Property, plant and equipment, net						3,221
Investments in unconsolidated subsidiaries and affiliates						613
Equipment under operating leases						66
Goodwill, net						80
Other intangible assets, net						141
Deferred tax assets						1,059
Other assets						896
Total Assets Held for Distribution						$	13,546
LIABILITIES HELD FOR DISTRIBUTION
Debt						2,343
Trade payables						3,366
Deferred tax liabilities						14
Pension, postretirement and other postemployment benefits						560
Other liabilities						5,609
Total Liabilities Held for Distribution						$	11,892

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Details of Statement of Operations line items included in Discontinued Operations, after the eliminations, for the quarter ended March 31, 2021 are as follows:

						Three Months Ended March 31,
						2021
Revenues
Net sales						$	3,570
Finance, interest and other income						49
Total Revenues						$	3,619
Costs and Expenses
Cost of goods sold						3,058
Selling, general and administrative expenses						221
Research and development expenses						131
Restructuring expenses						1
Interest expense						29
Other, net						75
Total Costs and Expenses						$	3,515
Income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates						104
Income tax (expense) benefit						(41)
Equity in income of unconsolidated subsidiaries and affiliates						(1)
Net Income (loss) from discontinued operations						$	62

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Cash flows from Discontinued Operations from the quarter ended March 31, 2021 are as follows:

						Three Months Ended March 31,
						2021
Operating activities:
Net income (loss) of discontinued operations						$	62
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense, net of depreciation and amortization of assets under operating leases and assets sold under buy-back commitments						78
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments						75
Loss on repurchase of notes						—
Undistributed income of unconsolidated subsidiaries						1
Other non-cash items						48
Changes in operating assets and liabilities:
Provisions						57
Deferred income taxes						22
Trade and financing receivables related to sales, net						215
Inventories, net						(380)
Trade payables						(22)
Other assets and liabilities						(25)
Cash flow from operating activities of discontinued operation						$	131
Investing activities:
Additions to retail receivables						(4)
Collections of retail receivables						9
Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments						—
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments						(34)
Expenditures for assets under operating leases and assets sold under buy-back commitments						(169)
Other						325
Cash flow from investing activities of discontinued operation						$	127
Financing activities:
Proceeds from long-term debt						731
Payments of long-term debt						(986)
Net decrease in other financial liabilities						(104)
Dividends paid						—
Cash flow from financing activities of discontinued operation						$	(359)

Business Combinations

On November 30, 2021, CNH Industrial acquired Raven Industries, Inc. ("Raven"). Raven included three business divisions: Applied Technology, Engineered Films and Aerostar. The acquisition of Raven has been accounted for as a business combination using the acquisition method of accounting. At December 31, 2021, CNH Industrial recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date including $1.3 billion and $0.5 billion in preliminary goodwill and intangible assets, respectively. The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2022 and no measurement period adjustments have been recorded in the three months ended March 31, 2022. Applied Technology results for the three months ended March 31, 2022 are included in the Company's Agriculture segment. The Engineered Films and Aerostar business divisions continue to be identified as held for sale as of March 31, 2022.

On December 30, 2021, CNH Industrial completed its previously announced purchase of 90% capital stock of Sampierana S.p.A. ("Sampierana"). At December 31, 2021, CNH Industrial had recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date including approximately $51 million in preliminary goodwill. The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2022 and no measurement period adjustments have been

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Adopted in 2022

None

Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by Reference Rate Reform if certain criteria are met. ASU 2020-04 can be adopted beginning as of March 12, 2020 through December 31, 2022 and may be applied as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company has not adopted ASU 2020-04 as of March 31, 2022. ASU 2020-04 is not expected to have a significant impact on the Company's consolidated financial statements.

Revenue Contract Assets and Liabilities Acquired in a Business Combination

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) as applied by the acquiree to determine what to record for the acquired revenue contract assets and liabilities instead of at fair value on the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the timing of adoption and its impact to our consolidated financial statements.

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. Entities can elect to adopt the guidance on TDRs using either a prospective or modified retrospective transition. The amendments related to disclosures should be adopted prospectively. The Company is currently evaluating the impact of adoption to our consolidated financial statements.

There are other new accounting pronouncements issued by the FASB that we will adopt. We do not believe any of these accounting pronouncements will have a material impact on our consolidated financial statements.

The following table summarizes revenues for the three months ended March 31, 2022 and 2021:

			Three Months Ended March 31,
			2022						2021
			(in millions)
Agriculture			$	3,377					$	3,038
Construction			803						656
Eliminations and Other			—						—
Total Industrial Activities			$	4,180					$	3,694
Financial Services			466						397
Eliminations and Other			(1)						5
Total Revenues			$	4,645					$	4,096

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A reconciliation of basic and diluted earnings per share is as follows (in millions, except per share amounts):

			Three Months Ended March 31,
			2022						2021
Net income attributable to CNH Industrial			$	333					$	408
Net income (loss) attributable to CNH Industrial from continuing operations			$	333					$	360
Net income (loss) attributable to CNH Industrial from discontinued operations			$	—					$	48
Basic earnings (loss) per share attributable to common shareholders:
Weighted average common shares outstanding—basic (in millions)			1,356						1,354
Continuing operations			$	0.24					$	0.27
Discontinued operations			$	—					$	0.03
Basic earnings per share attributable to CNH Industrial N.V.			$	0.24					$	0.30
Diluted earnings (loss) per share attributable to common shareholders
Weighted average common shares outstanding—basic (in millions)			1,356						1,354
Stock compensation plans (1) (in millions)			6						5
Weighted average common shares outstanding—diluted (in millions)			1,362						1,359
Continuing operations			$	0.24					$	0.27
Discontinued operations			$	—					$	0.03
Diluted earnings per share attributable to CNH Industrial N.V.			$	0.24					$	0.30

The following table summarizes the components of net periodic benefit cost of CNH Industrial’s defined benefit pension plans and postretirement health and life insurance plans for the three months ended March 31, 2022 and 2021:

			Pension												Healthcare												Other
			Three Months Ended March 31,												Three Months Ended March 31,												Three Months Ended March 31,
			2022						2021						2022						2021						2022						2021
			(in millions)
Service cost			$	3					$	3					$	1					$	1					$	2					$	2
Interest cost			7						5						1						1						—						—
Expected return on assets			(12)						(13)						(1)						(2)						—						—
Amortization of:
Prior service credit			—						—						(31)						(34)						—						—
Actuarial loss			5						6						—						1						—						—
Net periodic benefit cost			$	3					$	1					$	(30)					$	(33)					$	2					$	2

On February 20, 2018, CNH Industrial announced that the United States Supreme Court ruled in its favor in Reese vs. CNH Industrial N.V. and CNH Industrial America LLC. The decision allowed CNH Industrial to terminate or modify various retiree healthcare benefits previously provided to certain UAW Union represented Company retirees. On April 16, 2018, CNH Industrial announced its determination to modify the benefits provided to the applicable retirees (“Benefit Modification”) to make them consistent with the benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW. The Benefit Modification resulted in a reduction of the plan liability by $527 million. This amount will be amortized from Other Comprehensive Income

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("OCI") to the income statement over approximately 4.5 years, which represents the average service period to attain eligibility conditions for active participants. For the three months ended March 31, 2022 and 2021, $30 million and $30 million of amortization (“Benefit Modification Amortization”) was recorded as a pre-tax gain in Other, net, respectively.

In 2021, CNH Industrial communicated plan changes for the US retiree medical plan. The plan changes resulted in a reduction of the plan liability by $100 million. This amount will be amortized from OCI to the income statement over approximately 4 years, which represents the average service period to attain eligibility conditions for active participants. For the three months ended March 31, 2022, $6 million of amortization was recorded as a pre-tax gain in Other, Net.

The effective tax rates for the three months ended March 31, 2022 and 2021 were 33.5% and 25.6%, respectively. The higher 2022 effective tax rate was primarily driven by increases in pre-tax losses for which deferred tax benefits were not recognized and the derecognition of certain deferred tax assets, both of which related to Russia. In addition, during 2022, the Company had larger discrete tax charges associated with unrecognized tax benefits.

As in all financial reporting periods, the Company assessed the realizability of its deferred tax assets, which relate to multiple tax jurisdictions in all regions of the world. During the three-month period ended March 31, 2022, the Company changed its assessment regarding the recognition of its Russian deferred tax assets as of the beginning of the period. In addition, the Company was unable to recognize deferred tax assets associated with the current year pre-tax losses in that jurisdiction. These two items combined increased the Company’s current period effective tax rate by 5.1%.

The Company operates in many jurisdictions around the world and is routinely subject to income tax audits. As various ongoing audits are concluded, or as the applicable statutes of limitations expire, it is possible the Company’s amount of unrecognized tax benefits could change during the next twelve months. Those changes, however, are not expected to have a material impact on the Company’s results of operations, balance sheet, or cash flows.

The operating segments through which the Company manages its operations are based on the internal reporting used by the Company’s Chief Operating Decision Maker (“CODM”) to assess performance and make decisions about resource allocation. The segments are organized based on products and services provided by the Company.

CNH Industrial has the following three operating segments:

Agriculture designs, manufactures and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors (Quadtrac®), combines, cotton pickers, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements and material handling equipment. Agricultural equipment is sold under the New Holland Agriculture and Case IH brands, as well as the STEYR, Kongskilde and Överum brands in Europe and the Miller brand, primarily in North America and Australia.

Construction 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. Construction equipment is sold under the CASE Construction Equipment, New Holland Construction and Eurocomach brands.

Financial Services provides and administers retail financing to customers for the purchase or lease of new and used agricultural and construction equipment sold by CNH Industrial brand dealers. In addition, Financial Services provides wholesale financing to CNH Industrial brand dealers. Wholesale financing consists primarily of floor plan financing and allows the dealers to purchase and maintain a representative inventory of products. Financial Services also provides trade receivables factoring services to CNH Industrial companies. The European operations of CNH Industrial Financial Services are supported by Iveco's Financial Services segment. CNH Industrial provides financial services to Iveco Group companies in the South America, Asia Pacific and North America regions.

The activities carried out by the two industrial segments Agriculture and Construction, as well as corporate functions, are collectively referred to as "Industrial Activities".

Revenues for each reported segment are those directly generated by or attributable to the segment as a result of its business activities and include revenues from transactions with third parties as well as those deriving from transactions with other segments, recognized at normal market prices. Segment expenses represent expenses deriving from each segment’s business activities both with third parties and other operating segments or which may otherwise be directly attributable to it. Expenses deriving from business activities with other segments are recognized at normal market prices.

With reference to Industrial Activities' segments, the CODM assesses segment performance and makes decisions about resource allocation based upon Adjusted EBIT. The Company believes Adjusted EBIT more fully reflects Industrial Activities segments' inherent profitability. Adjusted EBIT of Industrial Activities is defined as net income (loss) before: Income taxes, Financial Services'

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results, Industrial Activities’ interest expenses (net), foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. In particular, non-recurring items are specifically disclosed items that management considers to be rare or discrete events that are infrequent in nature and not reflective of on-going operational activities.

With reference to Financial Services, the CODM assesses the performance of the segment and makes decisions about resource allocation on the basis of net income prepared in accordance with U.S. GAAP.

The following table includes the reconciliation of Adjusted EBIT for Industrial Activities to net income, the most comparable U.S. GAAP financial measure, for the three months ended March 31, 2022 and 2021.

						Three Months Ended March 31,
						2022						2021
						(in millions)
Agriculture						$	426					$	399
Construction						32						25
Unallocated items, eliminations and other						(29)						(31)
Total Adjusted EBIT of Industrial Activities						$	429					$	393
Financial Services Net Income						82						78
Financial Services Income Taxes						36						26
Interest expense of Industrial Activities, net of interest income and eliminations						(35)						(40)
Foreign exchange gains (losses), net of Industrial Activities						(13)						(11)
Finance and non-service component of Pension and other post-employment benefit cost of Industrial Activities(1)						38						34
Restructuring expense of Industrial Activities						(2)						(1)
Other discrete items of Industrial Activities(2)						(40)						—
Income (loss) before taxes						$	495					$	479
Income tax (expense) benefit						(159)						(116)
Net income (loss) of discontinued operations						$	—					$	62
Net income (loss)						$	336					$	425

(1) In the three months ended March 31, 2022, this item includes the pre-tax gain of $30 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 modification of a healthcare plan in the U.S. and a pre-tax gain of $6 million as a result of the amortization over 4 years of the $101 million positive impact from 2021 modifications of a healthcare plan in the U.S. In the three months ended March 31, 2021, this item includes the pre-tax gain of $30 million as a result of the 2018 modification.

Financing Receivables, net

A summary of financing receivables as of March 31, 2022 and December 31, 2021 is as follows:

			March 31, 2022						December 31, 2021
			(in millions)
Retail			$	10,427					$	9,955
Wholesale			5,621						5,373
Other			35						48
Total			$	16,083					$	15,376

The Company assesses and monitors the credit quality of its financing receivables based on whether a receivable is classified as Performing or Non-Performing. Financing receivables are considered past due if the required principal and interest payments have not yet been received as of the date such payments were due. Delinquency is reported on financing receivables greater than 30 days past

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due. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. These receivables are generally 90 days past due. Finance income for non-performing receivables is recognized on a cash basis. Accrued interest is charged-off to interest income. Interest income charged-off was not material for the three months ended March 31, 2022. Interest accrual is resumed if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at that time. As the terms for retail financing receivables are greater than one year, the performing/non-performing information is presented by year of origination for North America, South America and Asia Pacific.

The aging of financing receivables as of March 31, 2022 and December 31, 2021 is as follows (in millions):

			March 31, 2022
			31-60 Days Past Due						61-90 Days Past Due						Total Past Due						Current						Total Performing						Non- Performing						Total
Retail
North America
2021																											$	794					$	—					$	794
2020																											2,949						—						2,949
2019																											1,489						—						1,489
2018																											772						—						772
2017																											445						—						445
Prior to 2017																											224						—						224
Total			$	12					$	—					$	12					$	6,661					$	6,673					$	—					$	6,673
South America
2021																											$	234					$	—					$	234
2020																											981						—						981
2019																											578						—						578
2018																											325						—						325
2017																											206						—						206
Prior to 2017																											201						—						201
Total			$	15					$	—					$	15					$	2,510					$	2,525					$	—					$	2,525
Asia Pacific
2021																											$	137					$	—					$	137
2020																											506						1						507
2019																											310						1						311
2018																											139						1						140
2017																											72						1						73
Prior to 2017																											25						—						25
Total			$	12					$	11					$	23					$	1,166					$	1,189					$	4					$	1,193
Europe, Middle East, Africa			$	—					$	—					$	—					$	36					$	36					$	—					$	36
Total Retail			$	39					$	11					$	50					$	10,373					$	10,423					$	4					$	10,427
Wholesale
North America			$	—					$	—					$	—					$	2,423					$	2,423					$	3					$	2,426
South America			—						—						—						902						902						—						902
Asia Pacific			4						7						11						440						451						—						451
Europe, Middle East, Africa			3						—						3						1,839						1,842						—						1,842
Total Wholesale			$	7					$	7					$	14					$	5,604					$	5,618					$	3					$	5,621

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Allowance for credit losses (activity) for the three months ended March 31, 2022 is as follows (in millions):

			Three Months Ended March 31, 2022
			Retail						Wholesale
Opening Balance			$	220					$	65
Provision			12						7
Charge-offs, net of recoveries			(1)						—
Foreign currency translation and other			13						2
Ending Balance			$	244					$	74

At March 31, 2022, the allowance for credit losses included an increase in reserves of $15 million for domestic Russian receivables. The Company continues to monitor the situation in Eastern Europe and will update the macroeconomic factors and qualitative factors in future periods, as warranted. The provision for credit losses is included in selling, general, and administrative expenses.

At both March 31, 2021 and December 31, 2021, the allowance for credit losses was reduced by a release of reserves primarily due to the improved outlook for the agricultural industry and a reduced expected impact on credit conditions from the COVID-19 pandemic.

Allowance for credit losses activity for the three months ended March 31, 2021 and for the year ended December 31, 2021 is as follows (in millions):

			Three Months Ended March 31, 2021
			Retail						Wholesale
Opening Balance			$	231					$	62
Provision			5						4
Charge-offs, net of recoveries			(3)						—
Foreign currency translation and other			(13)						3
Ending Balance			$	220					$	69

			Twelve Months Ended December 31, 2021
			Retail						Wholesale
Opening Balance			231						62
Provision			22						6
Charge-offs, net of recoveries			(22)						1
Foreign currency translation and other			(11)						(4)
Ending Balance			$	220					$	65

Troubled Debt Restructurings

A restructuring of a receivable constitutes a troubled debt restructuring (“TDR”) when a lender grants a concession it would not otherwise consider to a borrower that is experiencing financial difficulties. As a collateral-based lender, the Company typically will repossess collateral in lieu of restructuring receivables. As such, for retail receivables, concessions are typically provided based on bankruptcy court proceedings. For wholesale receivables, concessions granted may include extended contract maturities, inclusion of interest-only periods, modification of a contractual interest rate to a below market interest rate and waiving of interest and principal.

TDRs are reviewed along with other receivables as part of management’s ongoing evaluation of the adequacy of the allowance for credit losses. The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of the collateral. In determining collateral value, the Company estimates the current fair market value of the equipment collateral and considers credit enhancements such as additional collateral and third-party guarantees.

Before removing a receivable from TDR classification, a review of the borrower is conducted. If concerns persist about the future ability of the borrower to meet its obligations based on a credit review, the TDR classification is not removed from the receivable.

As of March 31, 2022, the Company had 149 retail and finance lease contracts classified as TDRs in North America where a court has determined the concession. The pre-modification value of these contracts was $4 million and the post-modification value was

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$3 million. Additionally, the Company had 335 accounts with a balance of $22 million in North America undergoing bankruptcy proceedings where a concession has not yet been determined. As of March 31, 2021, the Company had 218 retail and finance lease contracts classified as TDRs in North America where a court has determined the concession. The pre-modification value was $6 million and the post-modification value was $6 million. Additionally, the Company had 356 accounts with a balance of $24 million in North America undergoing bankruptcy proceedings where a concession has not yet been determined. As the outcome of the bankruptcy cases is determined by the court based on available assets, subsequent re-defaults are unusual and were not material for retail and finance lease contracts that were modified in a TDR during the previous twelve months ended March 31, 2022 and 2021.

As of March 31, 2022 and 2021, the Company’s wholesale TDR were immaterial.

Transfers of Financial Assets

The Company transfers a number of its financial receivables to securitization programs or factoring transactions.

A securitization transaction entails the sale of a portfolio of receivables to a securitization vehicle. This special purpose entity (“SPE”) finances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the cash flow generated by the portfolio). SPEs utilized in the securitization programs differ from other entities included in the Company’s condensed consolidated financial statements because the assets they hold are legally isolated from the Company's assets. For bankruptcy analysis purposes, the Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of the SPEs’ investors. The Company’s interests in the SPEs’ receivables are subordinate to the interests of third party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay the Company’s creditors until all obligations of the SPE have been fulfilled or the receivables are removed from the SPE.

Certain securitization trusts are also VIEs and consequently, the VIEs are consolidated since the Company has both the power to direct the activities that most significantly impact the VIEs' economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.

No recourse provisions exist that allow holders of the asset-backed securities issued by the trusts to put those securities back to the Company although the Company provides customary representations and warranties that could give rise to an obligation to repurchase from the trusts any receivables for which there is a breach of the representations and warranties. Moreover, the Company does not guarantee any securities issued by the trusts. The trusts have a limited life and generally terminate upon final distribution of amounts owed to investors or upon exercise of a cleanup-call option by the Company in its role as servicer.

Furthermore, factoring transactions may be either with recourse or without recourse; certain without recourse transfers include deferred payment clauses (for example, when the payment by the factor of a minor part of the purchase price is dependent on the total amount collected from the receivables), requiring first loss cover, meaning that the transferor takes priority participation in the losses, or requires a significant exposure to the cash flows arising from the transferred receivables to be retained. These types of transactions do not qualify for the derecognition of the assets since the risks and rewards connected with collection are not substantially transferred, and, accordingly, the Company continues to recognize the receivables transferred by this means in its balance sheet and a financial liability of the same amount under asset-backed financing.

At March 31, 2022 and December 31, 2021, the carrying amount of such restricted assets included in financing receivables above are the following (in millions):

			Restricted Receivables
			March 31, 2022						December 31, 2021
Retail note and finance lease receivables			$	6,436					$	6,878
Wholesale receivables			3,730						3,443
Total			$	10,166					$	10,321

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Inventories as of March 31, 2022 and December 31, 2021 consist of the following:

			March 31, 2022						December 31, 2021
			(in millions)
Raw materials			$	1,751					$	1,517
Work-in-process			1,158						570
Finished goods			2,518						2,129
Total inventories			$	5,427					$	4,216

Lessee

The Company has mainly operating lease contracts for buildings, plant and machinery, vehicles, IT equipment and machinery.

Leases with a term of 12 months or less are not recorded in the balance sheet. For these leases the Company recognized, on a straight-line basis over the lease term, lease expense of $1 million and $1 million in the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022 and 2021, the Company incurred operating lease expenses of $16 million and $17 million, respectively.

At March 31, 2022, the Company has recorded approximately $191 million of right-of-use assets and $192 million of related lease liability included in Other Assets and Other Liabilities, respectively. At March 31, 2022, the weighted average remaining lease term (calculated on the basis of the remaining lease term and the lease liability balance for each lease) and the weighted average discount rate for operating leases were 5.7 years and 3.5%, respectively.

During the three months ended March 31, 2022 and 2021 leased assets obtained in exchange for operating lease obligations were $11 million and $9 million, respectively. The operating cash outflow for amounts included in the measurement of operating lease obligations was $16 million and $18 million as of March 31, 2022 and 2021, respectively.

Lessor

The Company, primarily through its Financial Services segment, leases equipment and vehicles to retail customers under operating leases. Our leases typically have terms of 3 to 5 years with options available for the lessee to purchase the equipment at the lease term date. Revenue for non-lease components is accounted for separately.

A summary of investments in unconsolidated subsidiaries and affiliates as of March 31, 2022 and December 31, 2021 is as follows:

			March 31, 2022						December 31, 2021
			(in millions)
Equity method			$	267					$	286
Cost method			50						47
Total			$	317					$	333

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Changes in the carrying amount of goodwill for the three months ended March 31, 2022 are as follows:

			Agriculture						Construction						Financial Services						Total
			(in millions)
Balance at January 1, 2022			$	3,020					$	49					$	141					$	3,210
Foreign currency translation and other			6						(1)						1						6
Balance at March 31, 2022			$	3,026					$	48					$	142					$	3,216

Goodwill and other indefinite-lived intangible assets are tested for impairment annually or more frequently if a triggering event occurs that would indicate it is more likely than not that the fair value of a reporting unit is less than book value. CNH Industrial performed its most recent annual impairment review as of December 31, 2021 and concluded that there was no impairment to goodwill for any of the reporting entities.

The acquisitions of Raven and Sampierana during the fourth quarter of 2021 led to an increase in goodwill for Agriculture and Construction of $1.3 billion and $51 million, respectively. Goodwill related to the acquisitions was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2022. Thus, goodwill associated with the acquisitions is subject to adjustment during the measurement period.

As of March 31, 2022 and December 31, 2021, the Company’s other intangible assets and related accumulated amortization consisted of the following:

									March 31, 2022																		December 31, 2021
			Weighted Avg. Life						Gross						Accumulated Amortization						Net						Gross						Accumulated Amortization						Net
									(in millions)
Other intangible assets subject to    amortization:
Dealer networks			15						$	291					$	234					$	57					$	290					$	231					$	59
Patents, concessions, licenses and other			5-25						1,957						1,107						850						1,973						1,097						876
									2,248						1,341						907						2,263						1,328						935
Other intangible assets not subject to    amortization:
Trademarks									272						—						272						272						—						272
Total Other intangible assets									$	2,520					$	1,341					$	1,179					$	2,535					$	1,328					$	1,207

During the fourth quarter of 2021, the Company recorded $0.5 billion in intangible assets based on the preliminary valuation for the Raven Industries, Inc. and Sampierana S.p.A. acquisitions. The valuation of assets acquired and liabilities assumed has not yet been finalized as of March 31, 2022. Thus, the intangible assets associated with the acquisitions are subject to adjustment during the measurement period.

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A summary of Other liabilities as of March 31, 2022 and December 31, 2021 is as follows:

			March 31, 2022						December 31, 2021
			(in millions)
Warranty and campaign programs			$	501					$	526
Marketing and sales incentive programs			1,252						1,325
Tax payables			632						671
Accrued expenses and deferred income			511						559
Accrued employee benefits			431						544
Lease liabilities			192						196
Legal reserves and other provisions			219						187
Contract reserve			10						12
Contract liabilities			22						20
Restructuring reserve			27						29
Other			792						692
Total			$	4,589					$	4,761

Warranty and Campaign Programs

CNH Industrial pays for basic warranty and other service action costs. A summary of recorded activity for the three months ended March 31, 2022 and 2021 for the basic warranty and accruals for campaign programs are as follows:

			Three Months Ended March 31,
			2022						2021
			(in millions)
Balance at beginning of period			$	526					$	507
Current year additions			68						83
Claims paid			(95)						(84)
Currency translation adjustment and other			2						(7)
Balance at end of period			$	501					$	499

Restructuring Expense

As a global company with a diverse business portfolio, CNH Industrial in the ordinary course of business is exposed to numerous legal risks, including, without limitation, dealer and supplier litigation, intellectual property right disputes, product warranty and defective product claims, product performance, asbestos, personal injury, emissions and/or fuel economy regulatory and contractual issues, competition law and other investigations and environmental claims. The most significant of these matters are described below.

The outcome of any current or future proceedings, claims, or investigations cannot be predicted with certainty. Adverse decisions in one or more of these proceedings, claims or investigations could require the Company to pay substantial damages or fines or undertake service actions, recall campaigns or other costly actions. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect CNH Industrial’s financial position and results. When it is probable that such a loss has been incurred and the amount can be reasonably estimated, an accrual has been made against the Company’s earnings and included in “Other liabilities” on the condensed consolidated balance sheets.

Although the ultimate outcome of legal matters pending against CNH Industrial and its subsidiaries cannot be predicted, the Company believes the reasonable possible range of losses for these unresolved legal matters in addition to the amounts accrued would not have a material effect on its condensed consolidated financial statements.

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Environmental

Pursuant to the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), which imposes strict and, under certain circumstances, joint and several liability for remediation and liability for natural resource damages, and other federal and state laws that impose similar liabilities, CNH Industrial has received inquiries for information or notices of its potential liability regarding 66 non-owned U.S. sites at which regulated materials allegedly generated by CNH Industrial were released or disposed (“Waste Sites”). Of the Waste Sites, 16 are on the National Priority List (“NPL”) promulgated pursuant to CERCLA. For 60 of the Waste Sites, the monetary amount or extent of the Company’s liability has either been resolved, it has not been named as a potentially responsible party (“PRP”), or its liability is likely de minimis.

Because estimates of remediation costs are subject to revision as more information becomes available about the extent and cost of remediation and settlement agreements can be reopened under certain circumstances, the Company’s potential liability for remediation costs associated with the 66 Waste Sites could change. Moreover, because liability under CERCLA and similar laws can be joint and several, CNH Industrial could be required to pay amounts in excess of its pro rata share of remediation costs. However, when appropriate, the financial strength of other PRPs has been considered in the determination of the Company’s potential liability. CNH Industrial believes that the costs associated with the Waste Sites will not have a material effect on the Company’s business, financial position, or results of operations.

The Company is conducting environmental investigatory or remedial activities at certain properties that are currently or were formerly owned and/or operated or that are being decommissioned. The Company believes that the outcome of these activities will not have a material adverse effect on its business, financial position, or results of operations.

The actual costs for environmental matters could differ materially from those costs currently anticipated due to the nature of historical handling and disposal of hazardous substances typical of manufacturing and related operations, the discovery of currently unknown conditions and as a result of more aggressive enforcement by regulatory authorities and changes in existing laws and regulations. As in the past, CNH Industrial plans to continue funding its costs of environmental compliance from operating cash flows.

Investigation, analysis and remediation of environmental sites is a time consuming activity. The Company expects such costs to be incurred and claims to be resolved over an extended period of time that could exceed 30 years for some sites. As of March 31, 2022 and December 31, 2021, environmental reserves of approximately $28 million and $29 million, respectively, were established to address these specific estimated potential liabilities. Such reserves are undiscounted and do not include anticipated recoveries, if any, from insurance companies. After considering these reserves, management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

Other Litigation and Investigation

Follow-up on Damages Claims: in 2011 Iveco S.p.A. (“Iveco”), which following the Demerger is now part of Iveco Group N.V., and its competitors in the European Union were subject to an investigation by the European Commission (the “Commission”) into certain business practices in the European Union (in the period 1997-2011) in relation to medium and heavy trucks. On July 19, 2016, the Commission announced a settlement with Iveco (the “Decision”). Following the Decision, the Company, Iveco and Iveco Magirus AG (“IMAG”) have been named as defendant in proceedings across Europe. The consummation of the Demerger will not result in CNH Industrial being excluded from current and future follow on proceedings originating from the Decision because under EU competition law a company cannot use corporate reorganizations to avoid liability for private damage claims. In the event one or more of these judicial proceedings would result (directly or indirectly) in a binding decision against CNH Industrial ordering it to compensate such claimants as a result of the conduct that was the subject matter of the Decision, and where Iveco and IMAG do not comply with such decisions, as a result of various intercompany arrangements, then CNH Industrial will ultimately have recourse against Iveco and IMAG for the reimbursement of the damages effectively paid to such claimants. The extent and outcome of these claims cannot be predicted at this time.

FPT Emissions Investigation: on July 22, 2020, a number of FPT’s offices in Europe were visited by investigators in the context of a request for assistance by the public prosecutors of Frankfurt am Main, Germany and Turin, Italy in relation to alleged noncompliance of two engine models produced by FPT Industrial S.p.A., which is now part of Iveco Group N.V., installed in certain Ducato (a vehicle distributed by Stellantis N.V.) and Iveco Daily vehicles. In certain instances CNH Industrial and other third parties have also received various requests for compensation by German and Austrian customers on various contractual and tort grounds, including requests for damages resulting from the termination of the purchase contracts, or in the form of requests for an alleged lower residual value of their vehicles as a consequence of the alleged non-compliance with other approval regulations regarding emissions. In certain instances, other customers have brought judicial claims on the same legal and factual bases. Although (i) at the date hereof, the Company has been informed by the Iveco Group that it has no evidence of any wrongdoing and (ii) CNHI had no role in the design and sale of such engine models and vehicles, the Company cannot predict at this time the extent and outcome of these requests and directly or indirectly related legal proceedings, including customer claims or potential class actions alleging emissions non-compliance.

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Guarantees

CNH Industrial provided guarantees on the debt or commitments of third parties and performance guarantees on non-consolidated affiliates as of March 31, 2022 and December 31, 2021 totaling of $13 million and $15 million, respectively.

The Company may elect to measure financial instruments and certain other items at fair value. This fair value option would be applied on an instrument-by-instrument basis with changes in fair value reported in earnings. The election can be made at the acquisition of an eligible financial asset, financial liability or firm commitment or, when certain specified reconsideration events occur. The fair value election may not be revoked once made. The Company has not elected the fair value measurement option for eligible items.

Fair-Value Hierarchy

The hierarchy of valuation techniques for financial instruments is based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the use of observable market data when available.

Determination of Fair Value

When available, the Company uses quoted market prices to determine fair value and classifies such items in Level 1. In some cases where a market price is not available, the Company will use observable market-based inputs to calculate fair value, in which case the items are classified in Level 2.

If quoted or observable market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters such as interest rates, currency rates, or yield curves. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, and the key inputs to those models as well as any significant assumptions.

Derivatives

CNH Industrial utilizes derivative instruments to mitigate its exposure to interest rate and foreign currency exposures. Derivatives used as hedges are effective at reducing the risk associated with the exposure being hedged and are designated as a hedge at the inception of the derivative contract. CNH Industrial does not hold or enter into derivative or other financial instruments for speculative purposes. The credit and market risk related to derivatives is reduced through diversification among various counterparties, utilizing mandatory termination clauses and/or collateral support agreements. Derivative instruments are generally classified as Level 2 in the fair value hierarchy. The cash flows underlying all derivative contracts were recorded in operating activities in the condensed consolidated statements of cash flows.

Foreign Exchange Derivatives

CNH Industrial has entered into foreign exchange forward contracts and swaps in order to manage and preserve the economic value of cash flows in a currency different from the functional currency of the relevant legal entity. CNH Industrial conducts its business on a global basis in a wide variety of foreign currencies and hedges foreign currency exposures arising from various receivables, liabilities, and expected inventory purchases and sales. Derivative instruments utilized to hedge the foreign currency risk associated with anticipated inventory purchases and sales in foreign currencies are designated as cash flow hedges. Gains and losses on these instruments are deferred in accumulated other comprehensive income (loss) and recognized in earnings when the related transaction occurs. If a derivative instrument is terminated because the hedge relationship is no longer effective or because the hedged item is a

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forecasted transaction that is no longer determined to be probable, the cumulative amount recorded in accumulated other comprehensive income (loss) is recognized immediately in earnings. Such amounts were insignificant in all periods presented.

CNH Industrial also uses forwards and swaps to hedge certain assets and liabilities denominated in foreign currencies. Such derivatives are considered economic hedges and not designated as hedging instruments. The changes in the fair values of these instruments are recognized directly in income in “Other, net” and are expected to offset the foreign exchange gains or losses on the exposures being managed.

All of CNH Industrial’s foreign exchange derivatives are considered Level 2 as the fair value is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s foreign exchange derivatives was $6.4 billion and $8.2 billion at March 31, 2022 and December 31, 2021, respectively.

Interest Rate Derivatives

CNH Industrial has entered into interest rate derivatives (swaps and caps) in order to manage interest rate exposures arising in the normal course of business. Interest rate derivatives that have been designated as cash flow hedges are being used by the Company to mitigate the risk of rising interest rates related to existing debt and anticipated issuance of fixed-rate debt in future periods. Gains and losses on these instruments are deferred in accumulated other comprehensive income (loss) and recognized in interest expense over the period in which CNH Industrial recognizes interest expense on the related debt.

Interest rate derivatives that have been designated as fair value hedge relationships have been used by CNH Industrial to mitigate the volatility in the fair value of existing fixed rate bonds and medium-term notes due to changes in floating interest rate benchmarks. Gains and losses on these instruments are recorded in “Interest expense” in the period in which they occur and an offsetting gain or loss is also reflected in “Interest expense” based on changes in the fair value of the debt instrument being hedged due to changes in floating interest rate benchmarks.

CNH Industrial also enters into offsetting interest rate derivatives with substantially similar terms that are not designated as hedging instruments to mitigate interest rate risk related to CNH Industrial’s committed asset-backed facilities. Unrealized and realized gains and losses resulting from fair value changes in these instruments are recognized directly in income. Net gains and losses on these instruments were insignificant for the three months ended March 31, 2022 and 2021.

All of CNH Industrial’s interest rate derivatives outstanding as of March 31, 2022 and December 31, 2021 are considered Level 2. The fair market value of these derivatives is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s interest rate derivatives was approximately $6.7 billion and $6.4 billion at March 31, 2022 and December 31, 2021, respectively.

As a result of the reform and replacement of specific benchmark interest rates, uncertainty remains regarding the timing and exact nature of those changes. At March 31, 2022, the notional amount of hedging instruments that could be affected by the reform of benchmark interest rates is $1.2 billion.

With regard to hedge accounting, the Company continues to monitor significant developments in order to assess the potential future impacts of the COVID-19 pandemic on the hedging relationships in place and to update its estimates concerning whether forecasted transactions can still be considered probable of occurring.

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Financial Statement Impact of CNH Industrial Derivatives

The following table summarizes the gross impact of changes in the fair value of derivatives designated as cash flow hedges recognized in accumulated other comprehensive income (loss) and net income (loss) during the three months ended March 31, 2022 and 2021 (in millions):

												Recognized in Net Income
For the Three Months Ended March 31,						Gain (Loss) Recognized in Accumulated Other Comprehensive Income						Classification of Gain (Loss)						Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
2022
Foreign exchange contracts						$	(150)
												Net sales						1
												Cost of goods sold						(17)
												Other, net						(10)
Interest rate contracts						37						Interest expense						8
Total						$	(113)											$	(18)
2021
Foreign exchange contracts						$	(26)
												Net sales						(2)
												Cost of goods sold						25
												Other, net						(7)
Interest rate contracts						20						Interest expense						(2)
Total						$	(6)											$	14

The following table summarizes the activity in accumulated other comprehensive income related to the derivatives held by the Company during the three months ended March 31, 2022 and 2021:

In Millions						Before-Tax Amount						Income Tax						After-Tax Amount
Accumulated derivative net losses as of December 31, 2021						$	(3)					$	(14)					$	(17)
Impact of demerger						19						—						19
Net changes in fair value of derivatives						(113)						2						(111)
Net losses reclassified from accumulated other comprehensive income into income						18						(2)						16
Accumulated derivative net losses as of March 31, 2022						$	(79)					$	(14)					$	(93)

In Millions						Before-Tax Amount						Income Tax						After-Tax Amount
Accumulated derivative net losses as of December 31, 2020						$	(5)					$	(1)					$	(6)
Net changes in fair value of derivatives						(6)						(1)						(7)
Net losses reclassified from accumulated other comprehensive income into income						(14)						1						(13)
Accumulated derivative net losses as of March 31, 2021						$	(25)					$	(1)					$	(26)

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The following tables summarize the impact that changes in the fair value of fair value hedges and derivatives not designated as hedging instruments had on earnings (in millions):

												For the Three Months Ended March 31,
						Classification of Gain						2022						2021
Fair Value Hedges
Interest rate derivatives						Interest expense						$	(55)					$	(21)
Not Designated as Hedges
Foreign exchange contracts						Other, Net						$	(47)					$	(4)

The fair values of CNH Industrial’s derivatives as of March 31, 2022 and December 31, 2021 in the condensed consolidated balance sheets are recorded as follows:

March 31, 2022

December 31, 2021

in millions of dollars

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments under Subtopic 815-20

Interest rate contracts

Derivative assets

75

Derivative assets

65

Foreign currency contracts

Derivative assets

15

Derivative assets

77

Total derivative assets designated as hedging instruments

90

142

Interest rate contracts

Derivative liabilities

72

Derivative liabilities

28

Foreign currency contracts

Derivative liabilities

169

Derivative liabilities

101

Total derivative liabilities designated as hedging instruments

241

129

Derivatives not designated as hedging instruments under Subtopic 815-20

Interest rate contracts

Derivative assets

48

Derivative assets

11

Foreign currency contracts

Derivative assets

78

Derivative assets

29

Total derivative assets not designated as hedging instruments

126

40

Interest rate contracts

Derivative liabilities

48

Derivative liabilities

12

Foreign currency contracts

Derivative liabilities

92

Derivative liabilities

40

Total derivative liabilities not designated as hedging instruments

140

52

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Items Measured at Fair Value on a Recurring Basis

The following tables present for each of the fair-value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021:

			Level 1												Level 2												Total
			March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021						March 31, 2022						December 31, 2021
			(in millions)
Assets
Foreign exchange derivatives			$	—					$	—					$	93					$	106					$	93					$	106
Interest rate derivatives			—						—						123						76						123						76
Total Assets			$	—					$	—					$	216					$	182					$	216					$	182
Liabilities
Foreign exchange derivatives			$	—					$	—					$	261					$	141					$	261					$	141
Interest rate derivatives			—						—						120						40						120						40
Total Liabilities			$	—					$	—					$	381					$	181					$	381					$	181

Items Measured at Fair Value on a Non-Recurring Basis

The Company recorded fixed asset writedowns of $17 million related to the suspension of operations in Russia during the three months ended March 31, 2022.

The following tables present the fair value for nonrecurring Level 3 measurements from impairments as of March 31, 2022 and 2021:

			Fair Value												Losses
			2022						2021						2022						2021
			(in millions)
Property, plant and equipment			$	7					$	—					$	17					$	—

The following is a description of the valuation methodologies the Company uses to non-monetary assets at fair value:

Property, plant, and equipment, net: The impairments are measured at the lower of the carrying amount, or fair value. The valuations were based on a cost approach. The inputs include replacement cost estimates adjusted for physical deterioration and economic obsolescence.

Fair Value of Other Financial Instruments

The carrying value of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable included in the condensed consolidated balance sheets approximates its fair value.

Financial Instruments Not Carried at Fair Value

The estimated fair market values of financial instruments not carried at fair value in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 are as follows:

			March 31, 2022												December 31, 2021
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
			(in millions)
Financing receivables			$	16,083					$	16,225					$	15,376					$	15,605
Debt			$	21,335					$	21,138					$	20,897					$	21,091

Financing Receivables

The fair value of financing receivables is based on the discounted values of their related cash flows at current market interest rates and they are classified as a Level 3 fair value measurement.

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Debt

All debt is classified as a Level 2 fair value measurement with the exception of bonds issued by CNH Industrial Finance Europe S.A. and bonds issued by CNH Industrial N.V. that are classified as a Level 1 fair value measurement.

The Company’s share of other comprehensive income (loss) includes net income plus other comprehensive income, which includes changes in fair value of certain derivatives designated as cash flow hedges, certain changes in pension and other retirement benefit plans, foreign currency translations gains and losses, changes in the fair value of available-for-sale securities, the Company’s share of other comprehensive income (loss) of entities accounted for using the equity method, and reclassifications for amounts included in net income (loss) less net income (loss) and other comprehensive income (loss) attributable to the noncontrolling interest. For more information on derivative instruments, see “Note 16: Financial Instruments”. For more information on pensions and retirement benefit obligations, see “Note 6: Employee Benefit Plans and Postretirement Benefits”. The Company’s other comprehensive income (loss) amounts are aggregated within accumulated other comprehensive income (loss). The tax effect for each component of other comprehensive income (loss) consisted of the following (in millions):

			Three Months Ended March 31, 2022
			Gross Amount						Income Taxes						Net Amount
Unrealized gain (loss) on cash flow hedges			$	(95)					$	—					$	(95)
Changes in retirement plans’ funded status			(34)						9						(25)
Foreign currency translation			259						—						259
Share of other comprehensive income (loss) of entities using the equity method			(9)						—						(9)
Other comprehensive income (loss)			$	121					$	9					$	130

			Three Months Ended March 31, 2021
			Gross Amount						Income Taxes						Net Amount
Unrealized gain (loss) on cash flow hedges			$	(22)					$	2					$	(20)
Changes in retirement plans’ funded status			(24)						7						(17)
Foreign currency translation			100						—						100
Share of other comprehensive income (loss) of entities using the equity method			(23)						—						(23)
Other comprehensive income (loss)			$	31					$	9					$	40

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The changes, net of tax, in each component of accumulated other comprehensive income (loss) consisted of the following (in millions):

			Unrealized Gain (Loss) on Cash Flow Hedges						Change in Retirement Plans’ Funded Status						Foreign Currency Translation						Share of Other Comprehensive Income (Loss) of Entities Using the Equity Method						Total
Balance, January 1, 2021			$	(6)					$	(653)					$	(1,884)					$	(133)					$	(2,676)
Other comprehensive income (loss), before reclassifications			(7)						13						98						(23)						81
Amounts reclassified from other comprehensive income			(13)						(30)						—						—						(43)
Other comprehensive income (loss)*			(20)						(17)						98						(23)						38
Balance, March 31, 2021			$	(26)					$	(670)					$	(1,786)					$	(156)					$	(2,638)
Balance, January 1, 2022			$	2					$	(324)					$	(1,951)					$	(224)					$	(2,497)
Other comprehensive income (loss), before reclassifications			(111)						8						259						(9)						147
Amounts reclassified from other comprehensive income			16						(33)						—						—						(17)
Other comprehensive income (loss)*			(95)						(25)						259						(9)						130
Balance, March 31, 2022			$	(93)					$	(349)					$	(1,692)					$	(233)					$	(2,367)

(*)Excluded from the table above is other comprehensive income (loss) allocated to noncontrolling interests of $0 million and $2 million for the three months ended March 31, 2022 and 2021, respectively.

Significant amounts reclassified out of each component of accumulated other comprehensive income (loss) in the three months ended March 31, 2022 and 2021 consisted of the following:

			Amounts Reclassified from Other Comprehensive Income (Loss)												Consolidated Statement of Operations Line
			Three Months Ended March 31,
			2022						2021
			(in millions)
Cash flow hedges			$	(1)					$	2					Net sales
			17						(25)						Cost of goods sold
			10						7						Other, net
			(8)						2						Interest expense
			(2)						1						Income taxes
			$	16					$	(13)
Change in retirement plans’ funded status:
Amortization of actuarial losses			$	5					$	9					*
Amortization of prior service cost			(31)						(32)						*
			(7)						(7)						Income taxes
			$	(33)					$	(30)
Total reclassifications, net of tax			$	(17)					$	(43)

(*) These amounts are included in net periodic pension and other postretirement benefit cost. See “Note 6: Employee Benefit Plans and Postretirement Benefits” for additional information.

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affiliates ("Stellantis") and Iveco Group N.V. which effective January 1, 2022 separated from CNH Industrial N.V. by way of a demerger under Dutch law and became a public listed company independent from CNH Industrial.

As of March 31, 2022, EXOR N.V. held 42.5% of CNH Industrial’s voting power and had the ability to significantly influence the decisions submitted to a vote of CNH Industrial’s shareholders, including approval of annual dividends, the election and removal of directors, mergers or other business combinations, the acquisition or disposition of assets and issuances of equity and the incurrence of indebtedness. The percentage above has been calculated as the ratio of (i) the aggregate number of common shares and special voting shares owned by EXOR N.V. to (ii) the aggregate number of outstanding common shares and special voting shares of CNH Industrial as of March 31, 2022. In addition, CNH Industrial engages in transactions with its unconsolidated subsidiaries and affiliates over which CNH Industrial has a significant influence or joint control.

The Company’s Audit Committee reviews and approves all significant related party transactions.

Transactions with EXOR N.V. and its Subsidiaries and Affiliates

EXOR N.V. is an investment holding company. As of March 31, 2022, and December 31, 2021, among other things, EXOR N.V. managed a portfolio that includes the investment in Stellantis. CNH Industrial did not enter into any significant transactions with EXOR N.V. during the three months ended March 31, 2022 and 2021.

In connection with the establishment of Fiat Industrial (now CNH Industrial) through the demerger from Fiat (which was subsequently merged into Fiat Chrysler Automobiles N.V. which is now Stellantis), the two companies entered into a Master Services Agreement (“MSA”) which sets forth the primary terms and conditions pursuant to which the service provider subsidiaries of CNH Industrial and Stellantis provide services to the service receiving subsidiaries. As structured, the applicable service provider and service receiver subsidiaries become parties to the MSA through the execution of an Opt-in letter that may contain additional terms and conditions. Pursuant to the MSA, service receivers are required to pay to service providers the actual cost of the services plus a negotiated margin. During the three months ended March 31, 2022 and 2021, Stellantis subsidiaries provided CNH Industrial with administrative services such as accounting, maintenance of plant and equipment, security, information systems and training under the terms and conditions of the MSA and the applicable Opt-in letters.

Furthermore, CNH Industrial and Stellantis engage in other minor transactions in the ordinary course of business. These transactions with Stellantis are reflected in the Company’s condensed consolidated financial statements as follows:

			Three Months Ended March 31,
			2022						2021
			(in millions)
Net sales			$	—					$	—
Cost of goods sold			$	5					$	8
Selling, general and administrative expenses			$	13					$	13

			March 31, 2022						December 31, 2021
			(in millions)
Trade receivables			$	—					$	—
Trade payables			$	18					$	20

Transactions with Iveco Group post-Demerger

CNH Industrial and Iveco Group post-Demerger entered into transactions consisting of the sale of engines from Iveco Group to CNH Industrial. Additionally, concurrent with the Demerger, the Companies entered into services contracts in relation to general administrative and specific technical matters, provided by either CNH Industrial to Iveco Group and vice versa as follows:

Master Service Agreements: CNH Industrial and Iveco Group entered into a two-year Master Services Agreement (“MSA”) whereby each Party (and its subsidiaries) may provide services to the other (and its subsidiaries). Services provided under the MSA relate mainly to lease of premises and depots and IT services.

Engine Supply Agreement: in relation to the design and supply of off-road engines from Iveco Group to CNH Industrial post-Demerger, Iveco Group and CNH Industrial entered into a ten-year Engine Supply Agreement (“ESA”) whereby Iveco Group will sell to CNH Industrial post-Demerger diesel, CNG and LNG engines and provide post-sale services.

Financial Service Agreement: in relation to certain financial services activities carried out by either CNH Industrial to Iveco Group post-Demerger or vice versa, in connection with the execution of the Demerger Deed, CNH Industrial and Iveco Group entered into a three-year Master Services Agreement (“FS MSA”), whereby each Party (and its subsidiaries) may provide services and/or financial

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services activities to the other (and its subsidiaries). Services provided under the FS MSA relate mainly to wholesale and retail financing activities to suppliers, distribution network and customers.

The transactions with Iveco Group post-Demerger are reflected in the Condensed Combined Financial Statements as follows:

			Three Months Ended March 31,
			2022						2021
			(in millions)
Net sales			$	—					$	5
Cost of goods sold			$	260					$	231

			March 31, 2022						December 31, 2021
			(in millions)
Trade receivables			$	18					$	87
Trade payables			$	194					$	181

Transactions with Unconsolidated Subsidiaries and Affiliates

CNH Industrial sells agricultural and construction equipment, and provides technical services to unconsolidated subsidiaries and affiliates such as CNH de Mexico SA de CV, Turk Traktor ve Ziraat Makineleri A.S. and New Holland HFT Japan Inc. CNH Industrial also purchases equipment from unconsolidated subsidiaries and affiliates, such as Turk Traktor ve Ziraat Makineleri A.S. These transactions primarily affected revenues, finance and interest income, cost of goods sold, trade receivables and payables and are presented as follows:

			Three Months Ended March 31,
			2022						2021
			(in millions)
Net sales			$	126					$	113
Cost of goods sold			$	121					$	107

			March 31, 2022						December 31, 2021
			(in millions)
Trade receivables			$	—					$	—
Trade payables			$	63					$	101

At March 31, 2022 and December 31, 2021, CNH Industrial had provided guarantees on commitments of its associated company for an amount of $13 million and $15 million, respectively, related to CNH Industrial Capital Europe S.a.S.

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