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CNH Reports Record Second Quarter Net Income of $347 Million, Up 52%, Highest Quarterly Results in CNH History BURR RIDGE, IL--(MARKET WIRE)--Jul 23, 2008 -- CNH Global NV (NYSE:CNH - News):
-- Robust agricultural industry sales and market share gains drove net
sales of equipment to $5.3 billion, up 29%
-- Pricing actions offset higher input costs, primarily steel
-- Agricultural Equipment Gross Margin improved
-- Construction Equipment revenues up almost 50% in Latin America and
Rest-of-World more than offsetting soft markets in North America and
Western Europe
-- Revenue growth and cost discipline contributed to record Equipment
Operations Operating Margin of 11.1%
-- Financial Services net income up 21%
-- Full year 2008 financial outlook tightened, with expected range of
diluted EPS before restructuring, after tax, forecasted to be $3.40 to
$3.60Robust sales growth in the agricultural equipment business combined with favorable product sales mix were the primary drivers of CNH's diluted earnings per share growth of 52% for the second quarter of 2008 compared to the second quarter of 2007. Continued strong agriculture equipment industry growth and new product introductions, coupled with an emphasis on quality and disciplined supply chain management, lay the groundwork for solid future top line and earnings growth.
Second Quarter & First Half Highlights
(Unaudited, in millions, except per share data)
Quarter Ended Six Months Ended
----------------- Percent ----------------- Percent
6/30/08 6/30/07 Change 6/30/08 6/30/07 Change
-------- -------- ------ -------- -------- ------
Net Sales of
Equipment $ 5,279 $ 4,096 28.9 % $ 9,378 $ 7,337 27.8 %
Equipment Operations
Operating Profit $ 585 $ 441 32.7 % $ 849 $ 660 28.6 %
Financial Services
Net Income $ 70 $ 58 20.7 % $ 122 $ 123 (0.8)%
Consolidated Net
Income $ 347 $ 228 52.2 % $ 459 $ 323 42.1 %
Restructuring (After
Tax) $ 4 $ 19 (78.9)% $ 18 $ 29 (37.9)%
Net Income Before
Restructuring, After
Tax $ 351 $ 247 42.1 % $ 477 $ 352 35.5 %
Diluted Earnings Per
Share (EPS) $ 1.46 $ 0.96 52.1 % $ 1.93 $ 1.36 41.9 %
Diluted EPS Before
Restructuring, After
Tax $ 1.48 $ 1.04 42.3 % $ 2.01 $ 1.48 35.8 %
"We are pleased to report strong double digit growth in sales, operating profit and net income for the second quarter, making this our tenth consecutive quarter of year over year improvement," said Harold Boyanovsky, CNH President and Chief Executive Officer. "Our Agricultural Equipment business continues to strengthen in all regions while our Construction Equipment business grew sales, driven by growth in Latin America and Rest-of-World which more than offset declining market conditions in North America and Western Europe. Given the continued robust market growth in Latin America, we announced the reopening of our Sorocaba, Brazil production facility that will increase our capacity in combine harvesters and construction equipment. Pricing and operational actions implemented in earlier quarters, part of a continuous program to improve margins and maximize profits on our growing volumes, are showing positive results in offsetting rising material cost pressures and production capacity constraints. Based on our first half performance, we are tightening our full year 2008 guidance to $3.40 to $3.60 diluted EPS, before restructuring, after tax." Mr. Boyanovsky continued: "Our Gross Margin improved as a result of actions taken by the company which reduced the cost of industrial supply bottlenecks by approximately $18 million in the quarter. We anticipate further substantial reductions during the balance of the year." Second Quarter and Six Months 2008 Operating Review - Equipment Operations Strong worldwide agricultural equipment industry retail unit sales growth in the second quarter and first half of this year combined with improved market share drove net sales of Agricultural Equipment up 38% for the quarter and first half of 2008. Industry sales of high horsepower tractors and combines, particularly in North America, increased more than the overall market, contributing to a more robust product mix of agricultural equipment sales. Worldwide construction equipment industry retail unit sales remained at near-record levels with continuing increases in Latin American and Rest-of-World markets despite Western Europe's decline from its record level and a continued weak market in North America. Industry sales of heavy construction equipment were robust in most markets, leading to a more favorable product sales mix.
Net Sales of Equipment Quarter Ended Six Months Ended
(Unaudited, US$ in --------------- Percent --------------- Percent
millions, except percents) 6/30/08 6/30/07 Change 6/30/08 6/30/07 Change
------- ------- ------ ------- ------- ------
Agricultural Equipment $ 3,838 $ 2,789 37.6% $ 6,764 $ 4,906 37.9%
Construction Equipment $ 1,441 $ 1,307 10.3% $ 2,614 $ 2,431 7.5%
------- ------- ------- -------
Total Net Sales of
Equipment $ 5,279 $ 4,096 28.9% $ 9,378 $ 7,337 27.8%In addition to CNH's agricultural equipment unit sales growth and improvements in product mix, price actions taken earlier in the year, continued introduction of new products and the positive effects of variations in exchange rate changes (7%) helped drive the robust sales growth. Sales grew 10% for CNH's worldwide Construction Equipment business in the second quarter as positive variations in currency (10%), strength in Latin American and Rest-of-World markets and pricing offset soft markets in North America and Western Europe. Equipment Operations Gross Profit and Margin Agricultural Equipment sales growth, mix improvements and pricing actions drove a 28% increase in CNH's Gross Profit in the second quarter compared with 2007 and offset weakness in Construction Equipment due to unfavorable absorption as production rates in Europe were reduced in response to a softer market, thus enabling the company to maintain a Gross Margin consistent with 2007.
Equipment Operations
(Unaudited, US$ in Quarter Ended Six Months Ended
millions, except -------------- ----------------
percents) 6/30/08 6/30/07 Change 6/30/08 6/30/07 Change
------- ----- --------- ------- ------- ---------
Gross Profit $ 1,064 $ 831 28.0% $ 1,764 $ 1,432 23.2%
Gross Margin 20.2% 20.3% (0.1)pts 18.8% 19.5% (0.7)ptsEquipment Operations Operating Profit and Margin Equipment Operations Operating Profit grew 33% in the second quarter compared with 2007, driven by the significant improvements in Agricultural Equipment Gross Profit.
Equipment Operations
Operating Profit and Margin
(Unaudited, US$ in Quarter Ended Six Months Ended
millions, except ------------ ------------
percents) 6/30/08 6/30/07 Change 6/30/08 6/30/07 Change
----- ----- --------- ----- ----- ---------
Agricultural Equipment $ 491 $ 327 50.2 % $ 726 $ 460 57.8 %
Construction Equipment $ 94 $ 114 (17.5)% $ 123 $ 200 (38.5)%
----- ----- ----- -----
Total Operating Profit $ 585 $ 441 32.7 % $ 849 $ 660 28.6 %
Agricultural Equipment 12.8% 11.7% 1.1 pts 10.7% 9.4% 1.3 pts
Construction Equipment 6.5% 8.7% (2.2)pts 4.7% 8.2% (3.5)pts
Total Operating Margin 11.1% 10.8% 0.3 pts 9.1% 9.0% 0.1 ptsAgricultural Equipment Operating Margin reached a record 12.8% in the second quarter, as a result of Gross Margin improvements and selling, general and administrative (SG&A) and research and development (R&D) costs declining as a percent of net sales. Construction Equipment Operating Margin declined to 6.5% primarily as positive price recovery was not sufficient to offset volume declines and unfavorable manufacturing costs associated with an imbalance in the distribution of demand combined with higher SG&A as a percent of sales. Second Quarter 2008 Brand Activities Case Construction Equipment launched 16 Tier 3 engine re-powered models in North America, 15 in Europe, 10 in the Rest-of-World and 7 in Latin America during the second quarter. The equipment ranged from crawler excavators to wheel loaders and tractor loader backhoes. Customer Assistance call centers were inaugurated for France, Germany and Spain, and a training center opened in Shanghai, China, to provide certified training programs for up to 400 mechanics in 2008. New Holland Construction Equipment launched products upgraded with new functionality including 10 in Europe, 7 in the Americas and 6 in the Rest-of-World. Among the new products were the E385B and E485B demolition series excavators with Tier 3 engines and new hydraulics. The demolition segment continues to expand in response to customer requirements for efficient machines that can excel in this specific segment but are flexible enough to be used for standard excavator applications. Case IH launched, in North America, the Farmall 65C & 75C, 64 and 76-horsepower Tier 3 compliant compact utility tractors for a wide variety of applications from livestock operations to municipalities. Its Puma 165-210 models, in the 135 to 180 horsepower range, can now be ordered autoguidance-ready with Case IH Advanced Farming Systems (AFS) for precision-farming applications. In Europe, Case IH launched the Quantum 65C & 75C utility tractors suitable for grassland, dairy, livestock arable, poultry and vegetable farms. The Magnum 335 was launched in Australia, representing the highest powered drawbar machine, ideal for Australia's cotton, cereal and broad-acre farms where maximum power is needed. New Holland Agricultural Equipment launched the 523-horsepower CR9080 Twin Rotor Combine®, in North America, a product which has industry-leading horsepower and maximizes productivity with the largest threshing capacity, cleaning area and cab on the market. It also launched the TV6070 Bidirectional(TM) tractor, which offers high visibility and features a new 6.7L engine with an efficient eight-range transmission. In Europe, the brand launched three T4000F specialty tractors developed to work in orchards. Equipped with four-cylinder engines, they are designed to work in confined spaces. Meanwhile, T5000, TT50 and TL5000 tractors were shipped to Turkey, Angola and Australia.
Second Quarter and Six Months 2008 Operating Review - Financial Services
Financial Services Highlights
(Unaudited, US$ in Quarter Ended Six Months Ended
millions, except ----------------- Percent ----------------- Percent
percents) 6/30/08 6/30/07 Change 6/30/08 6/30/07 Change
-------- -------- ------- -------- -------- ------
Net Income $ 70 $ 58 20.7% $ 122 $ 123 (0.8)%
On-Book Asset
Portfolio $ 12,378 $ 7,160 72.9% $ 12,378 $ 7,160 72.9 %
Managed Asset
Portfolio $ 20,647 $ 17,727 16.5% $ 20,647 $ 17,727 16.5 %CNH Financial Services' Second Quarter Net Income grew by 21% in the quarter as income from higher levels of on-book receivables more than offset a $14.7 million reduction in Retail ABS transaction gains from the year-ago quarter. Ongoing improvement in Agricultural Equipment portfolios offset an unfavorable delinquency trend in Construction Equipment. First half Net Income declined by 1% from the prior year, as increased income from higher levels of on-book receivables did not offset a $40.3 million reduction in Retail ABS gains.
Equipment Operations Cash Flow and Net (Cash) / Debt
Cash Flow and Net Debt Quarter Ended Six Months Ended
---------------- ----------------
(Unaudited, US$ in millions) 6/30/08 6/30/07 6/30/08 6/30/07
------- ------- ------- -------
Net Income $ 347 $ 228 $ 459 $ 323
Depreciation & Amortization 72 72 133 143
Changes in Working Capital* 68 12 (369) 76
Other*** 332 271 422 371
------- ------- ------- -------
Cash Generated by Operating Activities 819 583 645 913
Net Cash from Investing Activities** (108) (49) (187) (122)
All Other, Including FX Impact for the
Period (88) 3 (115) 3
------- ------- ------- -------
(Increase) / Decrease in Net Debt
(Cash) $ 623 $ 537 $ 343 $ 794
======= ======= ======= =======
Net Debt (Cash) $ (829) $ (531) $ (829) $ (531)
======= ======= ======= =======
* Net change in receivables, inventories and payables including
inter-segment receivables and payables, net of FX impact for the
period.
** Excluding Net (Deposits In) Withdrawals from Fiat Cash Pools, as they
are a part of Net Debt (Cash).
*** Changes in Other items such as marketing programs and tax accruals.CNH's net cash position improved in the quarter by $623 million. Cash generated by operating activities, primarily from earnings and changes in working capital, were significantly higher than growth in capital investments and the increased annual dividend paid to shareholders in April, resulting in an $829 million net cash position at June 30, 2008. During the first half of 2008, CNH's net cash position improved by $343 million, as cash generated by operating activities was utilized to fund higher levels of inventory to support growing demand for agricultural products, increased capital investments to meet demand growth and improve operating efficiency, and higher dividends to shareholders. During the second quarter, CNH securitized $1.2 billion of U.S. retail notes at a net loss of $5.3 million, reflecting the current pricing of ABS transactions in general. During the first half of 2008, CNH Capital renewed approximately $2.3 billion of credit lines and conduit facilities providing the liquidity for ongoing growth of financing in support of higher demand for agricultural and construction equipment. Market Outlook We believe the global agricultural industry outlook remains excellent. High cash grain commodity prices and low levels of commodity stocks provide strong support for continued growth for higher horsepower agricultural tractors and combines throughout the world. U.S. Net Farm Cash Income is expected to be at record levels, notwithstanding weakness in milk and meat prices. CNH expects the Western European tractor market to remain strong while the combine market will grow significantly. In Eastern Europe and the CIS, we expect the markets to grow, spurred by high cash grain commodity prices and the need to update equipment. We expect Latin American markets to show continued strong growth, supported by increase in sugar cane for use in ethanol production and cash grain commodity prices. Our outlook for the global construction industry is for growth in heavy equipment industry sales to offset a decline in light equipment industry sales. We expect continuing strength in Latin American and Rest-of-World markets driven by growing economies and infrastructure spending. We expect construction demand in Western Europe to decline from recent record levels as GDP growth and construction activity levels weaken, but that demand will remain at high levels compared with recent history. Driven largely by weakness in the housing market, the North American construction outlook remains soft and we expect North American construction demand to continue its decline for the remainder of the year from already low levels. In view of these growth expectations, especially in the agriculture sector, CNH is embarking on an intensive program to strengthen its manufacturing footprint on a global scale. The primary objective of these activities is to provide additional capacity for larger horsepower tractors and combines and to remove bottlenecks. CNH Outlook Taking advantage of strong global agricultural demand and construction strength in Latin American and Rest-of-World markets, CNH expects revenues for the full year 2008 to be up approximately 25% compared to 2007. CNH expects to fully offset recent increases in input costs with previously announced pricing actions and will continue to closely monitor future developments in raw material costs. CNH expects full year Operating Margins to approximate 9% as CNH continues the improvement trend started in the second quarter. CNH is tightening its expected full year Diluted EPS, before restructuring, after taxes of $3.40 to $3.60. CNH believes it is well positioned in the rapidly growing agricultural market by its continued investment in new products, further capacity and enhanced processes while leveraging our global footprint. During the second quarter CNH announced the introduction of many new products and the planned reopening of its Sorocaba, Brazil manufacturing facility to increase capacity for both agricultural and construction equipment in the robust Latin American market. The company is also investing to enhance its processes with a significant investment in information systems worldwide to accelerate its efforts in world class manufacturing in addition to driving customer service and cost efficiency throughout CNH to position itself to capitalize on the market opportunities in 2009. CNH Global N.V. is a world leader in the agricultural and construction equipment businesses. Supported by more than 11,000 dealers in 160 countries, CNH brings together the knowledge and heritage of its Case and New Holland brand families with the strength and resources of its worldwide commercial, industrial, product support and finance organizations. CNH Global N.V., whose stock is listed at the New York Stock Exchange (NYSE:CNH - News), is a majority-owned subsidiary of Fiat S.p.A. (FIA.MI). More information about CNH and its Case and New Holland products can be found online at www.cnh.com. CNH management will hold a conference call later today to review its second quarter 2008 results. The conference call Webcast will begin at approximately 6:30 a.m. U.S. Central Time; 7:30 a.m. U.S. Eastern Time. This call can be accessed through the investor information section of the company's Web site at www.cnh.com and is being carried by CCBN. Forward-looking statements. This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release, including statements regarding our competitive strengths, business strategy, future financial position, operating results, budgets, projected costs and plans and objectives of management, are forward-looking statements. These statements may include terminology such as "may," "will," "expect," "could," "should," "intend," "estimate," "anticipate," "believe," "outlook," "continue," "remain," "on track," "goal," or similar terminology. Our outlook is predominantly based on our interpretation of what we consider key economic assumptions and involves risks and uncertainties that could cause actual results to differ. Crop production and commodity prices are strongly affected by weather and can fluctuate significantly. Housing starts and other construction activity are sensitive to the availability of credit and to interest rates and government spending. Some of the other significant factors for us include general economic and capital market conditions, the cyclical nature of our business, customer buying patterns and preferences, foreign currency exchange rate movements, our hedging practices, our customers' access to credit, actions by rating agencies concerning the ratings of our debt securities and asset backed securities, risks related to our relationship with Fiat S.p.A., political uncertainty and civil unrest or war in various areas of the world, pricing, product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory levels, the effect of changes in laws and regulations (including government subsidies and international trade regulations), the results of legal proceedings (including the ultimate outcome of the consolidated arbitration proceeding pending in London before the ICC International Court of Arbitration), technological difficulties, results of our research and development activities, changes in environmental laws, employee and labor relations, pension and health care costs, relations with and the financial strength of dealers, the cost and availability of supplies from our suppliers, raw material costs and availability, energy prices, real estate values, animal diseases, crop pests, harvest yields, government farm programs and consumer confidence, housing starts and construction activity, concerns related to modified organisms and fuel and fertilizer costs. Additionally, our achievement of the anticipated benefits of our margin improvement initiatives depends upon, among other things, industry volumes as well as our ability to effectively rationalize our operations and to execute our brand strategy. Further information concerning factors that could significantly affect expected results is included in our annual report on Form 20-F for the year ended December 31, 2007. We can give no assurance that the expectations reflected in our forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in these forward-looking statements. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the factors we disclose that could cause our actual results to differ materially from our expectations. We undertake no obligation to update or revise publicly any forward-looking statements.
CNH Global N.V.
Revenues and Net Sales
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
% %
2008 2007 Change 2008 2007 Change
------- ------- ----- ------- ------- -----
(in Millions)
Revenues:
Net sales
Agricultural
equipment $ 3,838 $ 2,789 38% $ 6,764 $ 4,906 38%
Construction
equipment 1,441 1,307 10% 2,614 2,431 8%
------- ------- ------- -------
Total net
sales 5,279 4,096 29% 9,378 7,337 28%
Financial services 341 262 30% 657 516 27%
Eliminations and other (69) (35) (119) (57)
------- ------- ------- -------
Total revenues $ 5,551 $ 4,323 28% $ 9,916 $ 7,796 27%
======= ======= ======= =======
Net sales:
North America $ 1,715 $ 1,475 16% $ 3,005 $ 2,766 9%
Western Europe 1,716 1,412 22% 3,100 2,461 26%
Latin America 669 415 61% 1,265 737 72%
Rest of World 1,179 794 48% 2,008 1,373 46%
------- ------- ------- -------
Total net sales $ 5,279 $ 4,096 29% $ 9,378 $ 7,337 28%
======= ======= ======= =======
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED INCOME STATEMENTS
AND SUPPLEMENTAL INFORMATION
(Unaudited)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
Three Months Three Months Three Months
Ended Ended Ended
June 30, June 30, June 30,
--------------- --------------- ---------------
2008 2007 2008 2007 2008 2007
------- ------- ------- ------- ------- -------
(in Millions, except per share data)
Revenues
Net sales $ 5,279 $ 4,096 $ 5,279 $ 4,096 $ - $ -
Finance and interest
income 272 227 48 49 341 262
------- ------- ------- ------- ------- -------
Total 5,551 4,323 5,327 4,145 341 262
------- ------- ------- ------- ------- -------
Costs and Expenses
Cost of goods sold 4,215 3,265 4,215 3,265 - -
Selling, general and
administrative 445 351 369 291 76 60
Research and development 110 99 110 99 - -
Restructuring 6 26 6 26 - -
Interest expense 203 147 90 76 163 103
Interest compensation to
Financial Services - - 60 62 - -
Other, net 61 75 48 50 20 15
------- ------- ------- ------- ------- -------
Total 5,040 3,963 4,898 3,869 259 178
------- ------- ------- ------- ------- -------
Income before income
taxes, minority interest
and equity in income
of unconsolidated
subsidiaries and
affiliates 511 360 429 276 82 84
Income tax provision 184 141 169 113 15 28
Minority interest 5 5 5 5 - -
Equity in income of
unconsolidated
subsidiaries and
affiliates:
Financial Services 3 2 70 58 3 2
Equipment Operations 22 12 22 12 - -
------- ------- ------- ------- ------- -------
Net income $ 347 $ 228 $ 347 $ 228 $ 70 $ 58
======= ======= ======= ======= ======= =======
Weighted average shares
outstanding:
Basic 237.3 236.7
======= =======
Diluted 237.7 237.5
======= =======
Basic and diluted earnings
per share ("EPS"):
Basic:
EPS before
restructuring, after
tax $ 1.48 $ 1.04
======= =======
EPS $ 1.46 $ 0.96
======= =======
Diluted:
EPS before
restructuring, after
tax $ 1.48 $ 1.04
======= =======
EPS $ 1.46 $ 0.96
======= =======
Dividends per share $ 0.50 $ 0.25
======= =======
See Notes to Condensed Consolidated Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED INCOME STATEMENTS
AND SUPPLEMENTAL INFORMATION
(Unaudited)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
Six Months Six Months Six Months
Ended Ended Ended
June 30, June 30, June 30,
--------------- --------------- ---------------
2008 2007 2008 2007 2008 2007
------- ------- ------- ------- ------- -------
(in Millions, except per share data)
Revenues
Net sales $ 9,378 $ 7,337 $ 9,378 $ 7,337 $ - $ -
Finance and interest
income 538 459 93 88 657 516
------- ------- ------- ------- ------- -------
Total 9,916 7,796 9,471 7,425 657 516
------- ------- ------- ------- ------- -------
Costs and Expenses
Cost of goods sold 7,614 5,905 7,614 5,905 - -
Selling, general and
administrative 846 696 699 583 147 113
Research and development 216 189 216 189 - -
Restructuring 24 40 24 40 - -
Interest expense 389 288 165 149 314 193
Interest compensation to
Financial Services - - 127 117 - -
Other, net 151 163 110 107 36 30
------- ------- ------- ------- ------- -------
Total 9,240 7,281 8,955 7,090 497 336
------- ------- ------- ------- ------- -------
Income before income
taxes, minority interest
and equity in income
of unconsolidated
subsidiaries and
affiliates 676 515 516 335 160 180
Income tax provision 247 205 202 144 45 61
Minority interest 10 10 10 10 - -
Equity in income of
unconsolidated
subsidiaries and
affiliates:
Financial Services 7 4 122 123 7 4
Equipment Operations 33 19 33 19 - -
------- ------- ------- ------- ------- -------
Net income $ 459 $ 323 $ 459 $ 323 $ 122 $ 123
======= ======= ======= ======= ======= =======
Weighted average shares
outstanding:
Basic 237.3 236.5
======= =======
Diluted 237.6 237.5
======= =======
Basic and diluted earnings
per share ("EPS"):
Basic:
EPS before
restructuring, after
tax $ 2.01 $ 1.49
======= =======
EPS $ 1.93 $ 1.37
======= =======
Diluted:
EPS before
restructuring, after
tax $ 2.01 $ 1.48
======= =======
EPS $ 1.93 $ 1.36
======= =======
Dividends per share $ 0.50 $ 0.25
======= =======
See Notes to Condensed Consolidated Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
AND SUPPLEMENTAL INFORMATION
(Unaudited)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
------------------- ------------------ -------------------
June 30, December June 30, December June 30, December
2008 31, 2007 2008 31, 2007 2008 31, 2007
--------- --------- -------- -------- --------- ---------
Assets
Cash and
cash
equivalents $ 1,059 $ 1,025 $ 365 $ 405 $ 694 $ 620
Deposits in
Fiat
affiliates
cash
management
pools 1,216 1,231 1,026 1,157 190 74
Accounts,
notes
receivable
and other -
net 13,456 10,593 1,654 1,544 12,118 9,310
Intersegment
notes
receivable - - 2,877 1,831 - -
Inventories 4,430 3,488 4,430 3,488 - -
Property,
plant and
equipment -
net 1,596 1,510 1,591 1,505 5 5
Equipment on
operating
leases -
net 560 511 - - 560 511
Investment
in
Financial
Services - - 2,313 2,099 - -
Investments in
unconsolidated
affiliates 538 528 429 420 109 108
Goodwill and
other
intangibles 3,133 3,142 2,963 2,973 170 169
Other assets 1,831 1,717 1,339 1,215 492 502
--------- --------- -------- -------- --------- ---------
Total Assets $ 27,819 $ 23,745 $ 18,987 $ 16,637 $ 14,338 $ 11,299
========= ========= ======== ======== ========= =========
Liabilities and
Equity
Short-term
debt $ 5,971 $ 4,269 $ 798 $ 728 $ 5,173 $ 3,541
Intersegment
short-term
debt - - - - 2,877 1,831
Accounts
payable 3,497 2,907 3,559 2,989 242 161
Long-term
debt 6,017 5,367 2,641 2,179 3,376 3,188
Accrued and
other
liabilities 5,468 4,900 5,123 4,439 357 479
--------- --------- -------- -------- --------- ---------
Total
Liabilities 20,953 17,443 12,121 10,335 12,025 9,200
Equity 6,866 6,302 6,866 6,302 2,313 2,099
--------- --------- -------- -------- --------- ---------
Total
Liabilities
and Equity $ 27,819 $ 23,745 $ 18,987 $ 16,637 $ 14,338 $ 11,299
========= ========= ======== ======== ========= =========
Total debt
less cash and
cash equivalents,
deposits in
Fiat affiliates
cash management
pools and
intersegment
notes
receivables "Net
Debt(Cash)" $ 9,713 $ 7,380 $ (829) $ (486) $ 10,542 $ 7,866
========= ========= ======== ======== ========= =========
See Notes to Condensed Consolidated Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
AND SUPPLEMENTAL INFORMATION
(Unaudited)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
Six Months Six Months Six Months
Ended Ended Ended
June 30, June 30, June 30,
---------------- ---------------- ----------------
2008 2007 2008 2007 2008 2007
------- ------- ------- ------- ------- -------
Operating
Activities:
Net income $ 459 $ 323 $ 459 $ 323 $ 122 $ 123
Adjustments to
reconcile net
income to net
cash from
operating
activities:
Depreciation
and
amortization 186 177 133 143 53 34
Intersegment
activity - - (90) (30) 90 30
Changes in
operating
assets and
liabilities (1,036) (590) 237 492 (1,273) (1,082)
Other, net 54 54 (94) (15) 26 6
------- ------- ------- ------- ------- -------
Net cash from
operating
activities (337) (36) 645 913 (982) (889)
------- ------- ------- ------- ------- -------
Investing
Activities:
Expenditures for
property, plant
and equipment (154) (90) (154) (90) - -
Expenditures for
equipment on
operating leases (148) (161) - - (148) (161)
Net (additions)
collections from
retail
receivables and
related
securitizations (1,115) (668) - - (1,115) (668)
Net (deposits in)
withdrawals from
Fiat affiliates
cash management
pools 76 (770) 176 (747) (100) (23)
Other, net (29) (11) (33) (32) (3) 21
------- ------- ------- ------- ------- -------
Net cash from
investing
activities (1,370) (1,700) (11) (869) (1,366) (831)
------- ------- ------- ------- ------- -------
Financing
Activities:
Intersegment
activity - - (1,045) 17 1,045 (17)
Net increase
(decrease) in
indebtedness 1,790 1,613 471 (31) 1,319 1,644
Dividends paid (118) (59) (118) (59) - (60)
Other, net 3 - 3 - 7 -
------- ------- ------- ------- ------- -------
Net cash from
financing
activities 1,675 1,554 (689) (73) 2,371 1,567
------- ------- ------- ------- ------- -------
Other, net 66 39 15 18 51 21
------- ------- ------- ------- ------- -------
Increase (decrease)
in cash and cash
equivalents 34 (143) (40) (11) 74 (132)
Cash and cash
equivalents,
beginning of period 1,025 1,774 405 703 620 471
------- ------- ------- ------- ------- -------
Cash and cash
equivalents, end of
period $ 1,059 $ 1,031 $ 365 $ 692 $ 694 $ 339
======= ======= ======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements.CNH GLOBAL N.V. Notes to Unaudited Condensed Consolidated Financial Statements 1. Principles of Consolidation and Basis of Presentation - The accompanying unaudited condensed consolidated financial statements and supplemental information reflect all adjustments consisting only of normal, recurring adjustments except where noted, that are, in the opinion of management, necessary for a fair presentation of the consolidated results of CNH Global N.V., a Netherlands corporation, and its consolidated subsidiaries ("CNH" or the "Company") in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"); however, because of their condensed nature, they do not include all of the information and note disclosures required by U.S. GAAP or the rules of the Securities and Exchange Commission ("SEC") for complete annual or interim period financial statements. These financial statements should therefore be read in conjunction with the audited, consolidated financial statements and notes thereto for the year ended December 31, 2007 included in the Company's Annual Report on Form 20-F filed with the SEC on March 5, 2008. CNH is controlled by Fiat Netherlands Holding N.V., a wholly owned subsidiary of Fiat S.p.A. ("Fiat"). As of June 30, 2008, Fiat owned approximately 89% of CNH's outstanding common shares. The condensed consolidated financial statements include the accounts of CNH's majority-owned and controlled subsidiaries and reflect the interests of the minority owners of the subsidiaries that are not fully owned for the periods presented, as applicable. The operations and key financial measures and financial analyses differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, management believes that certain supplemental disclosures are important in understanding the consolidated operations and financial results of CNH. The supplemental financial information captioned "Equipment Operations" includes the results of operations of CNH's agricultural and construction equipment operations, with the Company's financial services businesses reflected on the equity method of accounting. The supplemental financial information captioned "Financial Services" reflects the combination of CNH's financial services businesses. 2. Recent Accounting Developments - As of the beginning of 2008, CNH adopted Statement of Financial Accounting Standards ("SFAS") No. 157 "Fair Values Measurements" ("SFAS No. 157") and No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"), except as SFAS No. 157 applies to nonfinancial assets and nonfinancial liabilities. In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, which defines fair value, establishes a framework for the measurement of fair value, and enhances disclosures about fair value measurements. The Statement does not require any new fair value measures but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. In February 2008, the FASB issued FSP No. FAS 157-2, which delayed the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially deferred the effective date of Statement 157 to fiscal years beginning after November 15, 2008. The partial adoption of SFAS No. 157 on January 1, 2008, did not have a material impact to CNH's financial position and results of operations. In February 2007, the FASB issued SFAS No. 159, which permits an entity to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The fair value option established by SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in income at each subsequent reporting date. This standard also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The adoption of SFAS No. 159 on January 1, 2008, did not have an impact to CNH's financial position and results of operations, as the Company did not elect the fair value option for eligible items. 3. Stock-Based Compensation Plans - Stock-based compensation consists of stock options and performance-based shares that have been granted under the CNH Outside Directors' Compensation Plan and the CNH Equity Incentive Plan ("CNH EIP"). For the six months ended June 30, 2008 and 2007, pre-tax stock-based compensation costs were $13.9 million and $9.9 million, respectively. For the three months ended June 30, 2008 and 2007, pre-tax stock-based compensation costs were $6.4 million and $5.1 million, respectively. In June 2008, CNH granted approximately 1.2 million performance-based stock options (at targeted performance levels) under the CNH EIP. This grant may result in an estimated expense over the vesting period of approximately $13 million. One-third of the options will vest if specified fiscal 2008 targets are achieved when 2008 results are approved by the Board of Directors in the first quarter of 2009 (the "Determination Date"). The remaining options will vest equally on the first and second anniversary of the Determination Date. The actual number of options that vest may exceed 1.2 million if CNH's 2008 performance exceeds targets; however, if minimum target levels are not achieved, the options will not vest. This grant has a contractual life of five years from the Determination date. The grant date fair value of $12.78 was determined using the Black-Scholes pricing model. The assumptions used in the Black-Scholes model were: Risk-free interest rate 3.02% Expected volatility 40.65% Expected life 3.63 years Dividend yield 0.94% The risk-free interest rate is based on the current U.S. Treasury rate for a bond of approximately the expected life of the options. The expected volatility is based on the historical activity of CNH's common shares over a period equal to the expected life of the options. The expected life is based on the average of the vesting period of each vesting tranche and the original contract term of 68 months. The expected dividend yield is based on the annual dividends which have been paid on CNH's common shares over the past several years. 4. Accounts and Notes Receivable - In CNH's receivable securitization programs, certain retail and wholesale finance receivables are sold and not included in the Company's consolidated balance sheets. The amounts outstanding under these retail programs were $4.4 billion and $4.6 billion at June 30, 2008 and December 31, 2007, respectively. In addition, as of June 30, 2008 and December 31, 2007, $1.4 billion and $2.3 billion, respectively, of wholesale receivables remained outstanding under these programs. During the second quarter 2008, CNH securitized $1.2 billion of U.S. retail notes at a net loss of $5.3 million. 5. Inventories - Inventories as of June 30, 2008 and December 31, 2007 consist of the following:
June 30, December 31,
2008 2007
------------- -------------
(in millions)
Raw materials $ 1,064 $ 890
Work-in-process 428 333
Finished goods and parts 2,938 2,265
------------- -------------
Total Inventories $ 4,430 $ 3,488
============= =============6. Goodwill and Other Intangibles - The following table sets forth changes in goodwill and other intangibles for the three months ended June 30, 2008:
Foreign
Balance at Currency
December 31, Translation Balance at
2007 Amortization and Other June 30, 2008
------------- ------------- ------------- -------------
(in millions)
Goodwill $ 2,382 $ - $ (5) $ 2,377
Other Intangibles 760 (29) 25 756
------------- ------------- ------------- -------------
Total
Goodwill and
Other
Intangibles $ 3,142 $ (29) $ 20 $ 3,133
============= ============= ============= =============As of June 30, 2008 and December 31, 2007, the Company's other intangible assets and related accumulated amortization consisted of the following:
June 30, 2008 December 31, 2007
-------------------------- --------------------------
Weighted Accumulated Accumulated
Average Amorti- Amorti-
Life Gross zation Net Gross zation Net
-------- -------- -------- -------- -------- --------
(in millions)
Other intangible
assets subject
to amortization:
Engineering
drawings 20 $ 385 $ 195 $ 190 $ 391 $ 186 $ 205
Dealer network 25 216 74 142 216 70 146
Software 5 345 227 118 318 207 111
Other 10-30 62 28 34 49 23 26
-------- -------- -------- -------- -------- --------
1,008 524 484 974 486 488
Other intangible
assets not
subject to
amortization:
Trademarks 272 - 272 272 - 272
-------- -------- -------- -------- -------- --------
Total other
intangibles $ 1,280 $ 524 $ 756 $ 1,246 $ 486 $ 760
======== ======== ======== ======== ======== ========CNH recorded amortization expense of approximately $29 million for the six months ended June 30, 2008 and $69 million for the year ended December 31, 2007. 7. Debt - The following table sets forth total debt and total debt less cash and cash equivalents, deposits in Fiat affiliates cash management pools and intersegment notes receivable ("Net Debt (Cash)") as of June 30, 2008 and December 31, 2007:
Equipment Financial
Consolidated Operations Services
----------------- ------------------ -----------------
June 30, December June 30, December June 30, December
2008 31, 2007 2008 31, 2007 2008 31, 2007
-------- -------- -------- -------- -------- --------
(in millions)
Short-term debt:
With Fiat
affiliates $ 4,170 $ 2,562 $ 640 $ 263 $ 3,530 $ 2,299
Other 1,801 1,707 158 465 1,643 1,242
Intersegment - - - - 2,877 1,831
-------- -------- -------- -------- -------- --------
Total short-term
debt 5,971 4,269 798 728 8,050 5,372
-------- -------- -------- -------- -------- --------
Long-term debt:
With Fiat
affiliates 1,959 1,668 942 800 1,017 868
Other 4,058 3,699 1,699 1,379 2,359 2,320
Intersegment - - - - - -
-------- -------- -------- -------- -------- --------
Total long-term
debt 6,017 5,367 2,641 2,179 3,376 3,188
-------- -------- -------- -------- -------- --------
Total debt:
With Fiat
affiliates 6,129 4,230 1,582 1,063 4,547 3,167
Other 5,859 5,406 1,857 1,844 4,002 3,562
Intersegment - - - - 2,877 1,831
-------- -------- -------- -------- -------- --------
Total debt 11,988 9,636 3,439 2,907 11,426 8,560
-------- -------- -------- -------- -------- --------
Less:
Cash and cash
equivalents 1,059 1,025 365 405 694 620
Deposits in Fiat
affiliates cash
management pools 1,216 1,231 1,026 1,157 190 74
Intersegment
notes receivable - - 2,877 1,831 - -
-------- -------- -------- -------- -------- --------
Net debt (cash) $ 9,713 $ 7,380 $ (829) $ (486) $ 10,542 $ 7,866
======== ======== ======== ======== ======== ========At June 30, 2008, CNH had approximately $3.2 billion available under $10.8 billion total lines of credit and asset-backed facilities. CNH participates in Fiat affiliates cash management pools with other Fiat affiliates. Amounts deposited with Fiat affiliates as part of the Fiat cash management system are repayable to CNH upon one business day's notice. To the extent that Fiat affiliates are unable to return any such amounts upon one business day's notice, and in the event of a bankruptcy or insolvency of Fiat, CNH may be unable to secure the return of such funds, and CNH may be viewed as a creditor of such Fiat entity with respect to such funds. There is no assurance that the future operations of the Fiat cash management system may not adversely impact CNH's ability to recover its funds to the extent one or more of the above described events were to occur. 8. Income Taxes - For the six months ended June 30, 2008 and 2007, effective income tax rates were 36.5% and 39.8%, respectively. For the three months ended June 30, 2008 and 2007, effective income tax rates were 36.0% and 39.2%, respectively. For 2008 and 2007, tax rates differ from the Netherlands statutory rate of 25.5% due primarily to higher tax rates in certain jurisdictions, tax credits and incentives, provisioning of unrecognized tax benefits, utilization of tax losses in certain jurisdictions where no tax benefit was previously recognized, impact of tax losses in certain jurisdictions where no immediate tax benefit is recognized, and enacted changes in tax rates. The Company is engaged in competent authority proceedings at June 30, 2008. The Company anticipates reaching a settlement with competent authority within the next twelve months that may result in a tax deficiency assessment for which there should be correlative relief under competent authority. The potential tax deficiency assessment could have a net effect on cash flows in the range of $40 million to $45 million. The Company has provided for the unrecognized tax benefits and related competent authority recovery under FIN 48. The Company does not believe that the resolution of the competent authority proceedings will have a material adverse effect on the results of operation. 9. Restructuring - During the six months ended June 30, 2008 and 2007, CNH recognized expense of approximately $24 million and $40 million, respectively. For the three months ended June 30, 2008 and 2007, CNH recognized expense of approximately $6 million and $26 million, respectively. Restructuring expense for the first six months of 2008 primarily relates to severance and other costs incurred due to headcount reductions and plant closures. During the six months ended June 30, 2008 and 2007, CNH recorded cash utilization of approximately $24 million and $40 million, respectively. For the three months ended June 30, 2008 and 2007, CNH recorded cash utilization of approximately $9 million and $22 million, respectively. Cash utilization recorded in the first six months of 2008 primarily represents payments of involuntary employee severance costs and costs related to the closing of facilities. 10. Commitments and Contingencies - CNH pays for warranty costs and the cost of major programs to modify products in the customers' possession within certain pre-established time periods. A summary of recorded activity as of and for the six months ended June 30, 2008 for this commitment is as follows:
Amount
-----------
(in millions)
Balance at January 1, 2008 $ 297
Current year provision 208
Claims paid and other adjustments (155)
-----------
Balance at June 30, 2008 $ 350
===========Management makes estimates and assumptions that affect the reported amounts of deferred tax assets. The Company has recorded valuation allowances to reduce its deferred tax assets to the amount we believe more likely than not to be realized. A change in judgment of the realizability of the Company's deferred tax assets may significantly impact CNH's results of operations and financial position in the period that such a determination is made. On September 21, 2007, the Company submitted a response in a consolidated arbitration proceeding (the "Arbitration") pending in London before the ICC International Court of Arbitration. The Arbitration arose under a Services Agreement between CNH and PGN Logistics Ltd ("PGN"), pursuant to which PGN provided specified logistics services for certain of the Company's subsidiaries in Europe. The dispute arose following CNH's termination of the Services Agreement in January 2005 and involves CNH's right to terminate (based upon alleged breach of contract and illegal activities) as well as invoices under the Services Agreement that were disputed by CNH and unpaid. The Tribunal in the Arbitration issued a partial decision on liability issues, finding, among other things, that CNH was not permitted to terminate the Services Agreement and that PGN was entitled in principle to recover amounts properly owed to it at the time of termination as well as additional damages that PGN may establish it has suffered for lost profits. The hearing on damages was held on October 8-9, 2007. Prior to the damages hearing, the Company paid to PGN approximately £27.4 million ($55 million, of which $42 million was classified as restructuring) which represented payment of claims which the Tribunal held CNH was responsible for and with respect to which CNH did not have an objection as to amount. At the damages hearing PGN advanced a variety of theories purporting to substantiate damages for lost profits and other items. On February 4, 2008, the Tribunal issued its damages award. Pursuant to the award, the Tribunal, among other things, required CNH to pay certain invoices, compensate PGN for lost future profits under the Services Agreement and bear a portion of the costs incurred in connection with the dispute and the Arbitration. The Tribunal dismissed all of PGN's other claims. In March 2008, both CNH and PGN submitted applications requesting that the Tribunal correct certain errors in the damages award. On June 10, 2008, the Tribunal issued an Addendum pursuant to which it corrected the errors in the award. While CNH is assessing the financial implications of the Addendum as well as considering whether to appeal certain aspects of the latest decision, CNH estimates that the aggregate remaining amount to be paid to PGN in connection with this matter will not exceed $27 million. The Company believes its reserves are adequate to cover the ultimate amount payable. 11. Shareholders' Equity - Shareholders approved a dividend of $0.50 per common share at the Annual General Meeting on March 20, 2008. The dividend was paid on April 15, 2008 to shareholders of record at the close of business on April 4, 2008. As of June 30, 2008, CNH had 237.4 million common shares outstanding. 12. Earnings per Share -The following table reconciles the numerator and denominator of the basic and diluted earnings per share computations for the three and six months ended June 30, 2008 and 2007:
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2008 2007 2008 2007
-------- -------- -------- --------
(in Millions, except per share data)
Basic:
Net income $ 347 $ 228 $ 459 $ 323
======== ======== ======== ========
Weighted average common shares
outstanding - basic 237.3 236.7 237.3 236.5
======== ======== ======== ========
Basic earnings per share $ 1.46 $ 0.96 $ 1.93 $ 1.37
======== ======== ======== ========
Diluted:
Net income $ 347 $ 228 $ 459 $ 323
======== ======== ======== ========
Weighted average common shares
outstanding - basic 237.3 236.7 237.3 236.5
Effect of dilutive securities
(when dilutive):
Stock compensation plans 0.4 0.8 0.3 1.0
-------- -------- -------- --------
Weighted average common shares
outstanding - dilutive 237.7 237.5 237.6 237.5
======== ======== ======== ========
Diluted earnings per share $ 1.46 $ 0.96 $ 1.93 $ 1.36
======== ======== ======== ========13. Comprehensive Income (Loss) - The components of comprehensive income (loss) for the three and six months ended June 30, 2008 and 2007 are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
(in Millions)
Net income 347 228 459 323
Other comprehensive income, net of tax
Cumulative translation adjustment 85 96 203 129
Deferred gains (losses) on derivative
financial instruments (10) (37) 13 (48)
Unrealized gains (losses) on retained
interests in securitization
transactions 1 1 (1) (1)
Minimum pension liability adjustment (5) 30 (9) 29
------- ------- ------- -------
Comprehensive net income $ 418 $ 318 $ 665 $ 432
======= ======= ======= =======14. Segment Information - CNH has three reportable operating segments: Agricultural Equipment, Construction Equipment and Financial Services. A reconciliation from consolidated trading profit reported to Fiat under International Financial Reporting Standards and International Accounting Standards (collectively "IFRS") to income (loss) before taxes, minority interest and equity in income (loss) of unconsolidated subsidiaries and affiliates under U.S. GAAP for the three and six months ended June 30, 2008 and 2007 is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
(in Millions)
Trading profit reported to Fiat under
IFRS $ 618 $ 465 $ 914 $ 713
Adjustments to convert from trading
profit under IFRS to U.S. GAAP income
before income taxes, minority interest
and equity in income of unconsolidated
subsidiaries and affiliates:
Accounting for employee benefit plans (12) (21) (23) (34)
Accounting for intangible assets,
primarily product development costs (7) (11) (18) (23)
Restructuring (6) (26) (24) (40)
Net financial expense (65) (48) (137) (108)
Accounting for receivable
securitizations and other (17) 1 (36) 7
------- ------- ------- -------
Income before income taxes, minority
interest and equity in income of
unconsolidated subsidiaries and
affiliates under U.S. GAAP $ 511 $ 360 $ 676 $ 515
======= ======= ======= =======The following summarizes trading profit under IFRS by segment:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(in Millions)
Agricultural Equipment 444 283 640 380
Construction Equipment 72 88 77 152
Financial Services 102 94 197 181
-------- -------- -------- --------
Trading profit under IFRS $ 618 $ 465 $ 914 $ 713
======== ======== ======== ========15. Reconciliation of Non-GAAP Financial Measures - CNH, in its quarterly unaudited condensed financial statements, utilizes various figures that are "Non-GAAP Financial Measures" as this term is defined under Regulation G as promulgated by the SEC. In accordance with Regulation G, CNH has detailed either the computation of these measures from multiple U.S. GAAP figures or reconciled these non-GAAP financial measures to the most relevant U.S. GAAP equivalent. Some of these measures do not have standardized meanings and investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. CNH's management believes these non-GAAP measures provide useful supplementary information to investors in order that they may evaluate CNH's financial performance using the same measures used by our management. These non-GAAP financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with U.S. GAAP. An explanation and reconciliation of the measures to U.S. GAAP follows. Net Income Before Restructuring and Earnings Per Share Before Restructuring, After Tax CNH defines net income before restructuring, after tax, as U.S. GAAP net income, less U.S. GAAP restructuring charges, after tax applicable to the restructuring charges. The following table reconciles net income to net income before restructuring, after tax and the related pro-forma computation of earnings per share:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
(in Millions, except per share data)
Basic:
Net income $ 347 $ 228 $ 459 $ 323
-------- -------- -------- --------
Restructuring, after tax:
Restructuring 6 26 24 40
Tax benefit (2) (7) (6) (11)
-------- -------- -------- --------
Restructuring, after tax 4 19 18 29
-------- -------- -------- --------
Net income before restructuring,
after tax $ 351 $ 247 $ 477 $ 352
======== ======== ======== ========
Weighted average common shares
outstanding - basic 237.3 236.7 237.3 236.5
======== ======== ======== ========
Basic earnings per share before
restructuring, after tax $ 1.48 $ 1.04 $ 2.01 $ 1.49
======== ======== ======== ========
Diluted:
Net income before restructuring,
after tax $ 351 $ 247 $ 477 $ 352
======== ======== ======== ========
Weighted average common shares
outstanding - basic 237.3 236.7 237.3 236.5
Effect of dilutive securities
(when dilutive):
Stock compensation plans 0.4 0.8 0.3 1.0
-------- -------- -------- --------
Weighted average common shares
outstanding - dilutive 237.7 237.5 237.6 237.5
======== ======== ======== ========
Diluted earnings per share before
restructuring, after tax $ 1.48 $ 1.04 $ 2.01 $ 1.48
======== ======== ======== ========Equipment Operations Gross and Operating Profit CNH defines Equipment Operations gross profit as net sales of equipment less costs classified as cost of goods sold. CNH defines Equipment Operations operating profit as gross profit less costs classified as selling, general and administrative and research and development costs. The following table summarizes the computation of Equipment Operations gross and operating profit.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2008 2007 2008 2007
------- ------ ------- ------ ------- ------ ------- ------
(in Millions)
Net sales $ 5,279 100.0% $ 4,096 100.0% $ 9,378 100.0% $ 7,337 100.0%
Less:
Cost of goods
sold 4,215 79.8% 3,265 79.7% 7,614 81.2% 5,905 80.5%
------- ------- ------- -------
Equipment
Operations
gross profit 1,064 20.2% 831 20.3% 1,764 18.8% 1,432 19.5%
Less:
Selling,
general and
administrative 369 7.0% 291 7.1% 699 7.5% 583 7.9%
Research and
development 110 2.1% 99 2.4% 216 2.3% 189 2.6%
------- ------- ------- -------
Equipment
Operations
operating
profit $ 585 11.1% $ 441 10.8% $ 849 9.1% $ 660 9.0%
======= ======= ======= =======CNH defines Equipment Operations gross margin as gross profit as a percent of net sales of equipment. CNH defines Equipment Operations operating margin as operating profit as a percent of net sales of equipment. Net Debt Net Debt (Cash) is defined as total debt less cash and cash equivalents, deposits in Fiat affiliates cash management pools and intersegment notes receivable. The calculation of Net Debt (Cash) is shown below:
Equipment Operations Financial Services
-------------------- ------------------
June 30, December June 30, December
2008 31, 2007 2008 31, 2007
-------- -------- -------- --------
(in millions)
Total Debt $ 3,439 $ 2,907 $ 11,426 $ 8,560
Less:
Cash and cash equivalents 365 405 694 620
Deposits in Fiat affiliates cash
management pools 1,026 1,157 190 74
Intersegment notes receivables 2,877 1,831 - -
-------- -------- -------- --------
Net Debt (Cash) $ (829) $ (486) $ 10,542 $ 7,866
======== ======== ======== ========Working Capital Equipment Operations working capital is defined as accounts and notes receivable and other-net, excluding intersegment notes receivable, plus inventories less accounts payable. The U.S. dollar computation of working capital, as defined, is impacted by foreign exchange (FX) rate movements. To demonstrate the impact of these movements, we have computed working capital as of June 30, 2008 and March 31, 2008 using December 31, 2007 exchange rates. The calculation of Equipment Operations working capital is shown below:
June 30, March 31,
2008 at 2008 at
December December
31, 2007 31, 2007
June 30, FX March 31, FX December June 30,
2008 Rates 2008 Rates 31, 2007 2007
------- ------- ------- ------- ------- -------
(in millions)
Accounts, notes
receivable and
other - net -
Third Party $ 1,477 $ 1,403 $ 1,642 $ 1,590 $ 1,438 $ 1,478
Accounts, notes
receivable and
other - net -
Intersegment 177 177 201 205 106 39
------- ------- ------- ------- ------- -------
Accounts, notes
receivable and
other - net -
Total 1,654 1,580 1,843 1,795 1,544 1,517
------- ------- ------- ------- ------- -------
Inventories 4,430 4,236 4,251 4,105 3,488 3,038
------- ------- ------- ------- ------- -------
Accounts payable -
Third party (3,423) (3,268) (3,406) (3,269) (2,838) (2,365)
Accounts payable -
Intersegment (136) (136) (155) (151) (151) (85)
------- ------- ------- ------- ------- -------
Accounts payable -
Total (3,559) (3,404) (3,561) (3,420) (2,989) (2,450)
------- ------- ------- ------- ------- -------
Working Capital $ 2,525 $ 2,412 $ 2,533 $ 2,480 $ 2,043 $ 2,105
======= ======= ======= ======= ======= =======Contact: For more information contact:
Thomas Witom
News and Information
(630) 887-2345
Albert Trefts, Jr.
Investor Relations
(630) 887-2385
Source: CNH
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