Exhibit 99.1

Interim Report

for the period ended September 30, 2019

Third Quarter 2019

CONTENTS

BOARD OF DIRECTORS AND AUDITOR	2
INTERIM REPORT ON OPERATIONS	3
GENERAL	3
RESULTS OF OPERATIONS	5
CONDENSED STATEMENT OF FINANCIAL POSITION BY ACTIVITY	24
LIQUIDITY AND CAPITAL RESOURCES	25
2019 U.S. GAAP OUTLOOK	29
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2019	30
Condensed Consolidated Income Statement	31
Condensed Consolidated Statement of Comprehensive Income	32
Condensed Consolidated Statement of Financial Position	33
Condensed Consolidated Statement of Cash Flows	35
Condensed Consolidated Statement of Changes in Equity	36
Notes	37

Also available at www.cnhindustrial.com

CNH Industrial N.V.

Corporate Seat: Amsterdam, the Netherlands

Principal Office: 25 St. James’s Street, London, SW1A 1HA, United Kingdom

Share Capital: €17,608,744.72 (as of September 30, 2019)

Amsterdam Chamber of Commerce: reg. no. 56532474

Contents 1

BOARD OF DIRECTORSAND

AUDITOR

BOARD OF DIRECTORS Chairperson Suzanne Heywood Chief Executive Officer Hubertus Mühlhäuser Directors^(a) Léo W. Houle^(2)(3)(*) John Lanaway^(1)(**) Alessandro Nasi^(2)(3)(b) Silke C. Scheiber^(1)(**) Lorenzo Simonelli^(1)(**)(b) Jacqueline A. Tammenoms Bakker^{(2)(3)(**)(c)} Jacques Theurillat^(1)(**) INDEPENDENT AUDITOR Ernst & Young Accountants LLP

(1)    Member of the Audit Committee

(2)    Member of the Governance and Sustainability Committee

(3)    Member of the Compensation Committee

(*) Independent Director and Senior Non-Executive Director

(**) Independent Director

(a)Ms. Mina Gerowin, Mr. Peter Kalantzis and Mr. Guido Tabellini members of the Board until April 12, 2019.

Mr. Alessandro Nasi and Mr. Lorenzo Simonelli members of the Board since April 12, 2019.

(b)     Member of the relevant Committee/s since April 12, 2019.

(c)     Member of the Compensation Committee since April 12, 2019.

Disclaimer

All statements other than statements of historical fact contained in this filing, including statements regarding our competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, earnings (or loss) per share, capital expenditures, dividends, capital structure or other financial items; costs; and plans and objectives of management regarding operations and products, 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”, “design”, “target”, “objective”, “goal”, “forecast”, “projection”, “prospects”, “plan”, or similar terminology. Forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize or other assumptions underlying any of the forward-looking statements prove to be incorrect, the actual results or developments may differ materially from any future results or developments expressed or implied by the forward-looking statements.

Factors, risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others: the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related products; general economic conditions in each of our markets; changes in government policies regarding banking, monetary and fiscal policy; legislation, particularly relating to capital goods-related issues such as agriculture, the environment, debt relief and subsidy program policies, trade and commerce and infrastructure development; government policies on international trade and investment, including sanctions, import quotas, capital controls and tariffs; actions of competitors in the various industries in which we compete; development and use of new technologies and technological difficulties; the interpretation of, or adoption of new, compliance requirements with respect to engine emissions, safety or other aspects of our products; production difficulties, including capacity and supply constraints and excess inventory levels; labor relations; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; a decline in the price of used vehicles; the resolution of pending litigation and investigations on a wide range of topics, including dealer and supplier litigation, follow-on private litigation in various jurisdictions after the settlement of the EU antitrust investigation announced on July 19, 2016, intellectual property rights disputes, product warranty and defective product claims, and emissions and/or fuel economy regulatory and contractual issues; the Company’s pension plans and other post-employment obligations; political and civil unrest; volatility and deterioration of capital and financial markets, including possible effects of “Brexit”, terror attacks in Europe and elsewhere; our ability to achieve the targets set out in the Strategic Business Plan announced on September 3, 2019 at our Capital Markets Day event; our ability to successfully implement the planned spin-off of the Company's On-Highway business; and other similar risks and uncertainties and our success in managing the risks involved in the foregoing. Further information concerning factors, risks, and uncertainties that could materially affect CNH Industrial’s financial results is included in CNH Industrial N.V.’s EU Annual Report at December 31, 2018, prepared in accordance with EU-IFRS and in its annual report on Form 20-F for the year ended December 31, 2018, prepared in accordance with U.S. GAAP. Investors should refer to and consider the incorporated information on risks, factors, and uncertainties in addition to the information presented here.

Forward-looking statements are based upon assumptions relating to the factors described in this filing, which are sometimes based upon estimates and data received from third parties. Such estimates and data are often revised. Our actual results could differ materially from those anticipated in such forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update or revise publicly our forward-looking statements.

Further information concerning CNH Industrial and its businesses, including factors that potentially could materially affect CNH Industrial’s financial results, is included in CNH Industrial’s reports and filings with the U.S. Securities and Exchange Commission (“SEC”), the Autoriteit Financiële Markten (“AFM”) and Commissione Nazionale per le Società e la Borsa (“CONSOB”).

All future written and oral forward-looking statements by CNH Industrial or persons acting on the behalf of CNH Industrial are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.

Board of Directors and Auditor 2

INTERIM REPORT ON OPERATIONS

(Unaudited)

GENERAL

CNH Industrial N.V. (the “Company” and collectively with its subsidiaries, “CNH Industrial” or the “CNH Industrial Group” or the “Group”) is incorporated in, and under the laws of, the Netherlands and has its corporate seat in Amsterdam, the Netherlands, and its principal office in London, England, United Kingdom. The Company was formed by the business combination transaction, completed on September 29, 2013, 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 “we”, “us” and “our” refer to CNH Industrial N.V. together with its subsidiaries.

CNH Industrial reports quarterly and annual consolidated financial results in accordance with accounting standards generally accepted in the United States (“U.S. GAAP”) for U.S. Securities and Exchange Commission (“SEC”) reporting purposes, and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union (“EU-IFRS”) for European listing proposes and for Dutch law requirements. The reconciliation from EU-IFRS figures to U.S. GAAP is presented, on a voluntary basis, in the Notes to the Interim Condensed Consolidated Financial Statements.

Financial information included in this Interim Report has been prepared in accordance with EU-IFRS. This Interim Report is prepared using the U.S. dollar as the presentation currency, and with segment reporting based on the following five 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, Överum, and JF brands in Europe and the Miller brand, primarily in North America and Australia.

▪ Constructiondesigns, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, compact track loaders, and telehandlers. Construction equipment is sold under the CASE Construction Equipment and New Holland Construction brands.

▪ Commercial and Specialty Vehicles designs, manufactures and distributes a full range of light, medium, and heavy vehicles for the transportation and distribution of goods under the IVECO brand, commuter buses and touring coaches under the IVECO BUS (previously Iveco Irisbus) and Heuliez Bus brands, quarry and mining equipment under the IVECO ASTRA brand, firefighting vehicles under the Magirus brand, and vehicles for civil defense and peace-keeping missions under the Iveco Defence Vehicles brand.

▪ Powertrain designs, manufactures and distributes a range of engines, transmission systems and axles for on- and off-road applications, as well as for marine and power generation under the FPT Industrial brand.

▪ Financial Services offers a range of financial services to dealers and customers. Financial Services provides and administers retail financing to customers for the purchase or lease of new and used industrial equipment or vehicles and other equipment sold by CNH Industrial dealers. In addition, Financial Services provides wholesale financing to CNH Industrial 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.

Certain financial information in this report has been presented by geographic area. Starting from the first quarter of 2019, the composition of CNH Industrial's regions has been revised as follows: (1) North America; (2) Europe; (3) South America and (4) Rest of World. The geographic designations have the following meanings:

▪ North America (formerly NAFTA): United States, Canada and Mexico;

▪ Europe: member countries of the European Union, European Free Trade Association, Ukraine, and Balkans, formerly included in EMEA;

▪ South America (formerly LATAM): Central and South America, and the Caribbean Islands; and

▪ Rest of World: Continental Asia (including Turkey and Russia), Oceania and member countries of the Commonwealth of Independent States (excluding Ukraine), formerly included in APAC, and African continent and Middle East, formerly included in EMEA.

This Interim Report is unaudited.

Interim Report on Operations 3

Alternative performance measures (or “Non-GAAP financial measures”)

We monitor our operations through the use of several non-GAAP financial measures. We believe that these non-GAAP financial measures provide useful and relevant information regarding our operating results and enhance the readers' ability to assess CNH Industrial’s financial performance and financial position. Management uses these non-GAAP financial measures to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions as they provide additional transparency with respect to our core operations. These non-GAAP financial measures have no standardized meaning under EU-IFRS and are unlikely to be comparable to other similarly titled measures used by other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with EU-IFRS.

Our non-GAAP financial measures are defined as follows:

▪ Adjusted EBIT under EU-IFRS: is defined as profit/(loss) before taxes, financial income/(expense) of Industrial Activities, restructuring costs, 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.

▪ Adjusted EBITDA under EU-IFRS: is defined as Adjusted EBIT plus depreciation and amortization (including on assets sold under operating leases and assets sold under buy-back commitments).

▪ Adjusted EBIT under U.S. GAAP: is derived from financial information prepared in accordance with U.S. GAAP and is defined as net income (loss) before income taxes, interest expenses of Industrial Activities, net, restructuring expenses, the finance and non-service component of pension and other post-employment benefit costs, foreign exchange gains/(losses), and certain non-recurring items.

▪ Adjusted EBITDA under U.S. GAAP: is derived from financial information prepared in accordance with U.S. GAAP and is defined as Adjusted EBIT plus depreciation and amortization (including on assets sold under operating leases and assets sold under buy-back commitments).

▪ Adjusted Net Income (Loss)under U.S. GAAP: is derived from financial information prepared in accordance with U.S. GAAP and is defined as net income (loss), less restructuring charges and non-recurring items, after tax.

▪ Adjusted Diluted EPS under U.S. GAAP: is derived from financial information prepared in accordance with U.S. GAAP and is computed by dividing Adjusted Net Income (loss) attributable to CNH Industrial N.V. by a weighted-average number of common shares outstanding during the period that takes into consideration potential common shares outstanding deriving from the CNH Industrial share-based payment awards, when inclusion is not anti-dilutive. When we provide guidance for adjusted diluted EPS, we do not provide guidance on a earnings per share basis because the GAAP measure will include potentially significant items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end.

▪ Net Debt and Net Debt of Industrial Activities under EU-IFRS: Net Debt is defined as total debt plus other financial liabilities, net of cash and cash equivalents, current securities and other financial assets. We provide the reconciliation of Net Debt to Total Debt, which is the most directly comparable GAAP financial measure included in our consolidated statement of financial position. Due to different sources of cash flows used for the repayment of the debt between Industrial Activities and Financial Services (by cash from operations for Industrial Activities and by collection of financing receivables for Financial Services), management separately evaluates the cash flow performance of Industrial Activities using Net Debt of Industrial Activities.

▪ Net Debt and Net Debt of Industrial Activities under U.S. GAAP: are derived from financial information prepared in accordance with U.S. GAAP. Net Debt under U.S. GAAP is defined as total debt less intersegment notes receivable, cash and cash equivalents, restricted cash and derivative hedging debt.

▪ Free Cash Flow of Industrial Activities under EU-IFRS: refers to Industrial Activities, only, and is computed as consolidated cash flow from operating activities less: cash flow from operating activities of Financial Services; investments of Industrial Activities in property, plant and equipment and intangible assets; as well as other changes and intersegment eliminations.

▪ Available Liquidity: is defined as cash and cash equivalents plus restricted cash and undrawn committed facilities.

▪ Change excl. FX or Constant Currency: we discuss the fluctuations in revenues on a constant currency basis by applying the prior year average exchange rates to current year’s revenues expressed in local currency in order to eliminate the impact of foreign exchange rate fluctuations.

Interim Report on Operations 4

RESULTS OF OPERATIONS

Adoption of new accounting standards

Effective January 1, 2019, CNH Industrial has adopted IFRS 16 - Leases, replacing IAS 17 - Leases. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and instead introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. CNH Industrial has applied the new lease standard using the modified retrospective approach, without recasting prior periods. On January 1, 2019 (date of first time adoption), CNH Industrial recognizes approximately $480 million right-of-use assets and lease liabilities in its consolidated statement of financial position, without transition effect to equity. The impact of the adoption of IFRS 16 on the condensed consolidated income statement for the three and nine months ended September 30, 2019 and on the condensed consolidated statement of cash flows for the nine months ended September 30, 2019 is immaterial. For additional information relating to the unaudited impact of adoption of the new standard, refer to paragraph “New standards and amendments effective from January 1, 2019” in the Notes to the Interim Condensed Consolidated Financial Statements at September 30, 2019, and to paragraphs “Impact of adoption of IFRS 16 on Adjusted EBIT and Adjusted EBITDA” and "Liquidity and Capital Resources - Consolidated Debt" in the Interim Report on Operations.

Introduction

The operations, and key financial measures and financial analysis, differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, for a better understanding of our operations and financial results, we present the following table providing the consolidated income statements and a breakdown of CNH Industrial results between Industrial Activities and Financial Services. Industrial Activities represent the activities carried out by the four industrial segments Agriculture, Construction, Commercial and Specialty Vehicles, and Powertrain, as well as Corporate functions. The parent company, CNH Industrial N.V., is included under Industrial Activities as well as subsidiaries that provide centralized treasury services (i.e., raising funding in the market and financing Group subsidiaries). The activities of the treasury subsidiaries do not include the offer of financing to third parties.

Planned Spin-off of On-Highway Business

On September 3, 2019, the Company announced its intention to separate its "On-Highway" (commercial vehicles and powertrain) and "Off-Highway" (agriculture, construction and specialty vehicles) businesses. The separation is expected to be effected through the spin-off of CNH Industrial N.V.’s equity interest in "On-Highway" to CNH Industrial N.V. shareholders. The proposed spin-off is expected to be completed in early 2021, subject to approval at an Extraordinary General Meeting of shareholders.

Interim Report on Operations 5

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Consolidated Results of Operations^(*) 

	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
($ million)	Consolidated		Industrial Activities		Financial Services		Consolidated		Industrial Activities		Financial Services
Net revenues	6,296		5,851		477		6,704		6,276		471
Cost of sales(1)	5,267		4,976		322		5,418		5,146		315
Selling, general and administrative costs	519		481		38		527		488		39
Research and development costs	269		269		—		278		278		—
Result from investments	(2	)	(8	)	6		11		2		9
Gains/(losses) on disposal of investments	—		—		—		(1	)	(1	)	—
Restructuring costs	46		45		1		7		7		—
Other income/(expenses)(2)	46		45		—		(29	)	(28	)	(1	)
Financial income/(expenses)	(97	)	(97	)	—		(199	)	(199	)	—
PROFIT/(LOSS) BEFORE TAXES	142		20		122		256		131		125
Income tax (expense)	(53	)	(20	)	(33	)	(108	)	(78	)	(30	)
PROFIT/(LOSS) FOR THE PERIOD	89		—		89		148		53		95
Result from intersegment investments(**)	—		89		—		—		95		—
PROFIT/(LOSS) FOR THE PERIOD	89		89		89		148		148		95

Notes:

(*) Transactions between Industrial Activities and Financial Services have been eliminated to arrive to the consolidated data.

(**) Investments held by subsidiaries belonging to one segment in subsidiaries included in the other segment are accounted for under the equity method and are classified in this item.

(1) In the third quarter of 2019, this item also includes other asset optimization charges of $135 million due to actions included in the "Transform 2 Win" Strategic Business Plan announced at the Company's Capital Markets Day on September 3, 2019.

(2) In the third quarter of 2019, this item also includes the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S.

Net revenues

We recorded net revenues of $6,296 million for the third quarter of 2019, down 6.1% compared to the third quarter of 2018 (down 5.5% on a constant currency basis). Net revenues of Industrial Activities were $5,851 million in the third quarter of 2019, down 6.8% compared to the third quarter of 2018 (down 6.1% on a constant currency basis), as lower sales volume and negative currency translation offset positive price realization.

Cost of sales

Cost of sales were $5,267 million for the third quarter of 2019 compared with $5,418 million for the third quarter of 2018. As a percentage of net revenues of Industrial Activities, cost of sales was 85.0% in the third quarter of 2019 (82.0% for the third quarter of 2018). In the third quarter of 2019, cost of sales includes $135 million of asset optimization charges included in the Company's previously announced "Transform 2 Win" Strategy.

Selling, general and administrative costs

Selling, general and administrative costs were $519 million during the third quarter of 2019 (8.2% of net revenues), down $8 million compared to the third quarter of 2018 (7.9% of net revenues).

Research and development costs

For the third quarter of 2019, research and development (“R&D”) costs were $269 million ($278 million for the third quarter of 2018) and included all R&D costs not recognized as assets amounting to $147 million ($161 million in the third quarter of 2018), $16 million of impairment losses (zero in the third quarter of 2018) and the amortization of capitalized development costs of $106 million ($117 million in the third quarter of 2018). During the period, CNH Industrial capitalized new development costs for $95 million ($100 million in the third quarter of 2018). The costs in both periods were primarily attributable to spending on engine development costs associated with emission requirements and continued investment in new products.

Result from investments

Result from investments was a net loss of $2 million and a net gain of $11 million for the third quarter of 2019 and 2018, respectively.

Interim Report on Operations 6

Restructuring costs

Restructuring costs for the third quarter of 2019 were $46 million compared to $7 million for the third quarter of 2018. The costs in the third quarter of 2019 were primarily attributable to actions taken by CNH Industrial in the context of the "Transform 2 Win" Strategy announced on September 3, 2019 at the Company's Capital Markets Day (“CMD”).Restructuring costs recognized in the quarter refer to the asset write-offs related to the recently announced closure of two plants and other activities related to the previously announced launch of a new organization structure focused on operating segments.

Other income/(expenses)

Other income was $46 million for the third quarter of 2019 compared to other expenses of $29 million in the third quarter of 2018. In the third quarter of 2019, this item also includes a pre-tax gain of $47 million related to a healthcare plan amendment in the U.S.

Financial income/(expenses)

Net financial expenses were $97 million for the third quarter of 2019 compared to $199 million for the third quarter of 2018. The decrease was primarily attributable to lower negative foreign exchange impact, the refinancing and early retirement of certain high-yield debt, as well as lower average indebtedness.

Income tax (expense)

	Three Months Ended September 30,
($ million)	2019		2018
Profit before taxes	142		256
Income tax (expense)	(53	)	(108	)
Effective tax rate	37.3	%	42.2	%

Income tax expense for the third quarter of 2019 was $53 million compared to $108 million for the third quarter of 2018. The effective tax rates for the third quarter of 2019 and 2018 were 37.3% and 42.2%, respectively. Excluding the impacts of restructuring and adjustments to valuation allowances on certain deferred tax assets in both periods, the other asset optimization charges taken due to actions included in the "Transform 2 Win" Strategy and the gain related to a healthcare plan amendment in the U.S. in 2019, as well as the 2018 refinement to the 2017 impact of U.S. Tax Reform, the effective tax rates were 28% and 42% in the third quarter of 2019 and 2018, respectively.

Profit/(loss) for the period

Net profit was $89 million in the third quarter of 2019 compared to $148 million in the third quarter of 2018. In the third quarter of 2019, net profit included a charge of $135 million related to the asset optimization portion of the "Transform 2 Win" Strategy, the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. and $46 million of restructuring costs. In the third quarter of 2018, net profit included $7 million of restructuring costs.

Interim Report on Operations 7

Industrial Activities Performance

The following tables show net revenues, Adjusted EBIT and Adjusted EBITDA by segment. We have also included a discussion of our results by Industrial Activities and each of our business segments.

Net revenues by segment

	Three Months Ended September 30,
($ million)	2019		2018		% change	% change  excl. FX
Agriculture	2,418		2,681		-9.8	-10.7
Construction	663		726		-8.7	-7.8
Commercial and Specialty Vehicles	2,313		2,395		-3.4	-1.4
Powertrain	925		961		-3.7	-3.0
Eliminations and Other	(468	)	(487	)	—	—
Total Net revenues of Industrial Activities	5,851		6,276		-6.8	-6.1
Financial Services	477		471		1.3	-0.5
Eliminations and Other	(32	)	(43	)	—	—
Total Net revenues	6,296		6,704		-6.1	-5.5

Adjusted EBIT by segment

	Three Months Ended September 30,
($ million)	2019		2018		Change	2019 Adjusted EBIT margin		2018 Adjusted EBIT margin
Agriculture	180		221		-41	7.4	%	8.2	%
Construction	8		21		-13	1.2	%	2.9	%
Commercial and Specialty Vehicles	25		71		-46	1.1	%	3.0	%
Powertrain	68		83		-15	7.4	%	8.6	%
Unallocated items, eliminations and other	(28	)	(59	)	31	—		—
Total Adjusted EBIT of Industrial Activities	253		337		-84	4.3	%	5.4	%
Financial Services	122		125		-3	25.6	%	26.5	%
Eliminations and Other	—		—		—	—		—
Total Adjusted EBIT	375		462		-87	6.0	%	6.9	%

Interim Report on Operations 8

Adjusted EBITDA by segment

	Three Months Ended September 30,
($ million)	2019		2018		Change	2019 Adjusted EBITDA margin		2018 Adjusted EBITDA margin
Agriculture	307		351		-44	12.7	%	13.1	%
Construction	32		48		-16	4.8	%	6.6	%
Commercial and Specialty Vehicles	208		255		-47	9.0	%	10.6	%
Powertrain	109		124		-15	11.8	%	12.9	%
Unallocated items, eliminations and other	(27	)	(59	)	32	—		—
Total Adjusted EBITDA of Industrial Activities	629		719		-90	10.8	%	11.5	%
Financial Services	183		184		-1	38.4	%	39.1	%
Eliminations and Other	—		—		—	—		—
Total Adjusted EBITDA	812		903		-91	12.9	%	13.5	%

Net revenues of Industrial Activities were $5,851 million during the third quarter of 2019, down 6.8% compared to the third quarter of 2018 (down 6.1% on a constant currency basis), as lower sales volume and negative currency translation offset positive price realization.

Adjusted EBIT of Industrial Activities was $253 million during the third quarter of 2019 ($337 million during the third quarter of 2018), equivalent to an Adjusted EBIT margin of 4.3%, down 110 basis points (“bps”) compared to the third quarter of 2018.

Adjusted EBITDA of Industrial Activities was $629 million during the third quarter of 2019 compared to $719 million during the third quarter of 2018, representing an Adjusted EBITDA margin of 10.8% (11.5% in the third quarter of 2018).

Interim Report on Operations 9

The following tables summarize the reconciliation of Adjusted EBIT and Adjusted EBITDA, non-GAAP financial measures, to consolidated profit/(loss), the most comparable EU-IFRS financial measure, for the three months ended September 30, 2019 and 2018.

	Three Months Ended September 30, 2019
($ million)	Agriculture	Construction	Commercial and Specialty Vehicles	Powertrain	Unallocated items, elimination and other		Total Industrial Activities	Financial Services		Total
Profit/(loss)(1)							—	89		89
Add back:
Financial expenses							97	—		97
Income tax expense							20	33		53
Adjustments:
Restructuring costs	9	23	8	5	—		45	1		46
Other discrete items(2)	—	—	135	—	(44	)	91	(1	)	90
Adjusted EBIT	180	8	25	68	(28	)	253	122		375
Depreciation and amortization	127	24	106	41	1		299	1		300
Depreciation of assets under operating leases and assets sold with buy-back commitments	—	—	77	—	—		77	60		137
Adjusted EBITDA	307	32	208	109	(27	)	629	183		812

(1) For Industrial Activities, net income (loss) is net of “Results from intersegment investments”.

(2) In the third quarter of 2019, this item mainly includes other asset optimization charges for $135 million due to actions included in the "Transform 2 Win" Strategy and the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S.

				Three Months Ended September 30, 2018
($ million)	Agriculture	Construction	Commercial and Specialty Vehicles	Powertrain	Unallocated items, elimination and other		Total Industrial Activities	Financial Services	Total
Profit/(loss)(1)							53	95	148
Add back:
Financial expenses							199	—	199
Income tax expense							78	30	108
Adjustments:
Restructuring costs	3	—	4	—	—		7	—	7
Adjusted EBIT	221	21	71	83	(59	)	337	125	462
Depreciation and amortization	129	27	89	41	—		286	—	286
Depreciation of assets under operating leases and assets sold with buy-back commitments	1	—	95	—	—		96	59	155
Adjusted EBITDA	351	48	255	124	(59	)	719	184	903

(1) For Industrial Activities, net income (loss) is net of “Results from intersegment investments”.

Interim Report on Operations 10

Agriculture

Net revenues

The following table shows Agriculture net revenues by geographic region for the three months ended September 30, 2019 compared to the three months ended September 30, 2018:

Agriculture Net revenues – by geographic region:

	Three Months Ended September 30,
($ million)	2019	2018	% Change
North America	877	945	-7.2
Europe	788	822	-4.1
South America	378	446	-15.2
Rest of World	375	468	-19.9
Total	2,418	2,681	-9.8

Agriculture's net revenues decreased 9.8% in the third quarter of 2019 compared to the third quarter of 2018 (down 10.7% on a constant currency basis). Industry volume deceleration, coupled with an unfavorable product mix, drove sales down, primarily in North America and the Rest of World geographies. This was partially offset by a sustained price realization performance in excess of 2 percentage points.

For the third quarter of 2019, worldwide industry unit sales for tractors were down 5% compared to the third quarter of 2018, while worldwide industry sales for combines were down 9%. In North America, industry volumes in the over 140 horsepower (“hp”) tractor market sector were down 5% and combines were down 12%. Industry volumes for under 140 hp tractors in North America were up 5%. European markets were up 2% and down 13% for tractors and combines, respectively. In South America, the tractor market decreased 13% and the combine market was flat. Rest of World markets decreased 7% for tractors and 10% for combines.

Adjusted EBIT

Adjusted EBIT was $180 million in the third quarter of 2019 ($221 million in the third quarter of 2018), representing an Adjusted EBIT margin at 7.4%. Net price realization and sustained aftermarket activity were more than offset by the unfavorable volume and product mix impact, the lower fixed cost absorption primarily due to production adjustments to reflect the lower industry demand levels experienced during the third quarter, as well as higher product costs as result of increased raw material and tariffs.

Construction

Net revenues

The following table shows Construction net revenues by geographic region for the three months ended September 30, 2019 compared to the three months ended September 30, 2018:

Construction Net revenues – by geographic region:

	Three Months Ended September 30,
($ million)	2019	2018	% change
North America	341	388	-12.1
Europe	105	116	-9.5
South America	95	83	14.5
Rest of World	122	139	-12.2
Total	663	726	-8.7

Construction's net revenues decreased 8.7% in the third quarter of 2019 compared to the third quarter of 2018 (down 7.8% on a constant currency basis), as a result of lower production and sales volume in North America to rebalance channel inventory and in certain Rest of World markets as a result of lower industry demand, partially offset by positive price realization.

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During the third quarter of 2019, Construction’s worldwide compact equipment industry sales were flat compared to the third quarter of 2018. Worldwide general equipment and road building and site equipment industry sales were down 5% and 7%, respectively.

Adjusted EBIT

Adjusted EBIT was $8 million in the third quarter of 2019 ($21 million in the third quarter of 2018), representing an Adjusted EBIT margin of 1.2%. The decrease was due mainly to higher raw material cost and tariffs and to an acceleration of spending related to our quality excellence initiative, as announced at the CMD. These negative factors were partially offset by positive net price realization.

Commercial and Specialty Vehicles

Net revenues

The following table shows Commercial and Specialty Vehicles’ net revenues by geographic region for the three months ended September 30, 2019 compared to the three months ended September 30, 2018:

Commercial and Specialty Vehicles Net revenues – by geographic region:

	Three Months Ended September 30,
($ million)	2019	2018	% change
North America	17	3	n.m.
Europe	1,894	1,935	-2.1
South America	108	158	-31.6
Rest of World	294	299	-1.7
Total	2,313	2,395	-3.4

n.m. - not meaningful.

Commercial and Specialty Vehicles’ net revenues decreased 3.4% in the third quarter of 2019 compared to the third quarter of 2018 (down 1.4% on a constant currency basis). Decreased volumes in truck and bus, primarily related to the non-repeat of fleet transactions in Medium-duty trucks in Europe and extremely low industry demand in Argentina, were offset by increased deliveries in specialty vehicles and a sustained activity in aftermarket.

During the third quarter of 2019, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, decreased 1% compared to the same period in 2018. In Europe, the Light Commercial Vehicles (“LCV”) market (GVW 3.5-7.49 tons) increased 11% and the Medium & Heavy (“M&H”) truck market (GVW ≥7.5 tons) decreased 21%. In South America, new truck registrations (GVW ≥3.5 tons) increased 20% over the same period of 2018 with an increase of 32% in Brazil, partially offset by a decrease of 30% in Argentina. In Rest of World, new truck registrations decreased by 5%.

In the third quarter of 2019, trucks’ estimated market share in the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was 11.4%, flat compared to the third quarter of 2018. Trucks' market share in South America in the third quarter of 2019 was 7.0%, down 1.8 p.p. compared to the third quarter of 2018.

Commercial and Specialty Vehicles delivered approximately 28,700 vehicles (including buses and specialty vehicles) in the third quarter of 2019, representing an 8% decrease from the same prior-year period. Volumes were 7% and 13% lower in LCV and M&H truck segments, respectively. Commercial and Specialty Vehicles’ deliveries were 5% lower in Europe and decreased 25% and 11% in South America and in Rest of World, respectively.

In the third quarter of 2019, trucks’ ratio of orders received to units shipped and billed, or book-to-bill ratio, for the European truck market was 0.91. In the third quarter of 2019, truck order intake in Europe decreased 10% compared to the third quarter of 2018, with a decrease of 12% and 1% in LCV and in M&H, respectively.

Adjusted EBIT

Adjusted EBIT was $25 million in the third quarter of 2019 ($71 million in the third quarter of 2018) and includes a $50 million gain realized from granting to Nikola Corporation access to certain Iveco technology as part of the consideration for the initial interest in Nikola. Absent the Nikola gain, the adjusted EBIT would have been $-25 million, a reduction of $96 million compared to the prior year, primarily due to higher production costs, mainly related to inflationary cost increases and supply chain inefficiencies in our truck and bus business, higher R&D costs including the amortization of capitalized costs related to new products recently launched and $16 million impairment of previously capitalized costs, and higher expenses related to the

Interim Report on Operations 12

launch of the new S-Way heavy-duty truck. Adjusted EBIT margin including the Nikola gain was 1.1% in the third quarter of 2019, and was -1.1% excluding the Nikola deal.

Powertrain

Net revenues

Powertrain's net revenues decreased 3.7% in the third quarter of 2019 compared to the third quarter of 2018 (down 3.0% on a constant currency basis). Sales to external customers accounted for 51% of total net revenues (52% in the third quarter of 2018).

During the third quarter of 2019, Powertrain sold approximately 139,900 engines, an increase of 4% compared to the third quarter of 2018. In terms of major customers, 22% of engine units were supplied to Commercial and Specialty Vehicles, 17% to Agriculture, 5% to Construction and the remaining 56% to external customers. Additionally, Powertrain delivered approximately 14,400 transmissions, a decrease of 7% compared to the third quarter of 2018, and approximately 35,900 axles, an increase of 3% compared to the third quarter of 2018.

Adjusted EBIT

Adjusted EBIT was $68 million for the third quarter of 2019 ($83 million in the third quarter of 2018), with positive net pricing and product cost efficiencies more than offset by an unfavorable mix of engine sales and incremental selling expenses related to the development of the third-party business portfolio, where certain new contracts were awarded during the quarter with a run-rate revenue potential in excess of $150 million annually. Adjusted EBIT margin was 7.4% in the third quarter of 2019 (8.6% in the third quarter of 2018).

Financial Services Performance

Net revenues

Financial Services' net revenues totaled $477 million in the third quarter of 2019, a 1.3% increase compared to the third quarter of 2018 (down 0.5% on a constant currency basis), primarily due to higher average portfolio.

Net income

Net income of Financial Services was $89 million for the third quarter of 2019, a decrease of $6 million compared to the third quarter of 2018, primarily attributable to differences in risk cost accruals period to period and an acceleration of aged used equipment liquidation. Delinquencies continue to improve and reached a historical low of 2.8% in the third quarter of 2019.

In the third quarter of 2019, retail loan originations, including unconsolidated joint ventures, were $2.4 billion, flat compared to the third quarter of 2018. The managed portfolio, including unconsolidated joint ventures, was $25.5 billion as of September 30, 2019 (of which retail was 62% and wholesale 38%), flat compared to September 30, 2018. Excluding the impact of currency translation, the managed portfolio increased $0.8 billion compared to the same period in 2018.

Interim Report on Operations 13

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Consolidated Results of Operations^(*) 

	Nine Months Ended September 30, 2019						Nine months ended September 30, 2018
($ million)	Consolidated		Industrial Activities		Financial Services		Consolidated		Industrial Activities		Financial Services
Net revenues	20,307		18,946		1,467		21,487		20,156		1,471
Cost of sales(1)	16,578		15,690		994		17,416		16,598		958
Selling, general and administrative costs	1,590		1,472		118		1,685		1,562		123
Research and development costs	824		824		—		804		804		—
Result from investments	15		(4	)	19		55		29		26
Gains/(losses) on disposal of investments	—		—		—		(1	)	(1	)	—
Restructuring costs	82		79		3		17		17		—
Other income/(expenses)(2)	(4	)	(3	)	(1	)	425		429		(4	)
Financial income/(expenses)	(232	)	(232	)	—		(505	)	(505	)	—
PROFIT/(LOSS) BEFORE TAXES	1,012		642		370		1,539		1,127		412
Income tax (expense)	(269	)	(174	)	(95	)	(422	)	(312	)	(110	)
PROFIT/(LOSS) FOR THE PERIOD	743		468		275		1,117		815		302
Result from intersegment investments(**)	—		275		—		—		302		—
PROFIT/(LOSS) FOR THE PERIOD	743		743		275		1,117		1,117		302

Notes:

(*) Transactions between Industrial Activities and Financial Services have been eliminated to arrive to the consolidated data.

(**) Investments held by subsidiaries belonging to one segment in subsidiaries included in the other segment are accounted for under the equity method and are classified in this item.

(1) In the nine months ended September 30, 2019, this item also includes other asset optimization charges of $135 million due to actions included in the "Transform 2 Win" Strategy.

(2) In the nine months ended September 30, 2019, this item also includes the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. In the nine months ended September 30, 2018, this item also included a pre-tax gain of $527 million related to the modification of a healthcare plan in the U.S.

Net revenues

We recorded net revenues of $20,307 million for the nine months ended September 30, 2019, a decrease of 5.5% (down 0.5% on a constant currency basis) compared to the nine months ended September 30, 2018. Net revenues of Industrial Activities were $18,946 million in the nine months ended September 30, 2019, a decrease of 6.0% (down 0.9% on a constant currency basis) compared to the prior period as a result of an unfavorable foreign currency translation impact and lower sales volume.

Cost of sales

Cost of sales were $16,578 million for the nine months ended September 30, 2019 compared with $17,416 million for the nine months ended September 30, 2018. As a percentage of net revenues of Industrial Activities, cost of sales was 82.8% in the nine months ended September 30, 2019 (82.3% for the nine months ended September 30, 2018). For the nine months ended September 30, 2019, cost of sales includes $135 million of asset optimization charges included in the Company's previously announced "Transform 2 Win" Strategy.

Selling, general and administrative costs

Selling, general and administrative costs were $1,590 million during the nine months ended September 30, 2019, down $95 million compared to the nine months ended September 30, 2018 (7.8% of net revenues in both periods).

Research and development costs

For the nine months ended September 30, 2019, R&D costs were $824 million ($804 million for the nine months ended September 30 2018) and included all R&D costs not recognized as assets amounting to $479 million ($445 million in the nine months ended September 30, 2018), $18 million of impairment losses (zero in the nine months ended September 30, 2018) and the amortization of capitalized development costs of $327 million ($359 million in the nine months ended September 30, 2018). During the period, CNH Industrial capitalized new development costs for $291 million ($321 million in the nine months ended September 30, 2018). The costs in both periods were primarily attributable to spending on engine development costs associated with emission requirements and continued investment in new products.

Interim Report on Operations 14

Result from investments

Result from investments was a net gain of $15 million and $55 million for the nine months ended September 30, 2019 and 2018, respectively.

Restructuring costs

Restructuring costs for the nine months ended September 30, 2019 were $82 million compared to $17 million for the nine months ended September 30, 2018. The costs in the nine months ended September 30, 2019 were primarily attributable to actions taken by CNH Industrial in the context of the "Transform 2 Win" Strategy announced on September 3, 2019, and other activities related to the previously announced launch of a new organization structure focused on operating segments.

Other income/(expenses)

Other expenses were $4 million for the nine months ended September 30, 2019 compared to other income of $425 million in the nine months ended September 30, 2018. In the nine months ended September 30, 2019, this item also includes the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. In the nine months ended September 30, 2018, this item also included a pre-tax gain of $527 million related to the modification of a healthcare plan (the "Benefit Modification gain") following the favorable judgement issued by the United States Supreme Court announced by CNH Industrial on April 16, 2018.

Financial income/(expenses)

Net financial expenses were $232 million for the nine months ended September 30, 2019 compared to $505 million for the nine months ended September 30, 2018. The decrease was primarily attributable to lower negative foreign exchange impact, the refinancing and early retirement of certain high-yield debt, as well as lower average indebtedness.

Income tax (expense)

	Nine Months Ended September 30,
($ million)	2019		2018
Profit before taxes	1,012		1,539
Income tax (expense)	(269	)	(422	)
Effective tax rate	26.6	%	27.4	%

Income tax expense for the nine months ended September 30, 2019 was $269 million compared to $422 million for the nine months ended September 30, 2018. The effective tax rates for the nine months ended September 30, 2019 and 2018 were 26.6% and 27.4%, respectively. Excluding the impacts of restructuring and adjustments to valuation allowances on certain deferred tax assets in both periods, the other asset optimization charges taken due to actions included in the "Transform 2 Win" Strategy and the gain related to a healthcare plan amendment in the U.S. in 2019, as well as the refinement to the 2017 impact of U.S. Tax Reform and the Benefit Modification gain in 2018, the effective tax rates were 25% and 29% in the nine months ended September 30, 2019 and 2018, respectively.

Profit/(loss) for the period

Net profit was $743 million in the nine months ended September 30, 2019 compared to $1,117 million in the nine months ended September 30, 2018. In the nine months ended September 30, 2019, net profit included a charge of $135 million related to the asset optimization portion of the "Transform 2 Win" Strategy, the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. and $82 million of restructuring costs. In the nine months ended September 30, 2018, net profit included the after-tax gain of $399 million related to the Benefit Modification gain and $17 million of restructuring costs.

Interim Report on Operations 15

Industrial Activities Performance

The following tables show net revenues, Adjusted EBIT and Adjusted EBITDA by segment. We have also included a discussion of our results by Industrial Activities and each of our business segments.

Net revenues by segment

	Nine Months Ended September 30,
($ million)	2019		2018		% change	% change excl. FX
Agriculture	8,013		8,572		-6.5	-2.4
Construction	2,060		2,207		-6.7	-4.3
Commercial and Specialty Vehicles	7,431		7,779		-4.5	2.4
Powertrain	3,098		3,366		-8.0	-1.2
Eliminations and Other	(1,656	)	(1,768	)	—	—
Total Net revenues of Industrial Activities	18,946		20,156		-6.0	-0.9
Financial Services	1,467		1,471		-0.3	3.4
Eliminations and Other	(106	)	(140	)	—	—
Total Net revenues	20,307		21,487		-5.5	-0.5

Adjusted EBIT by segment

	Nine Months Ended September 30,
($ million)	2019		2018		Change	2019 Adjusted EBIT margin		2018 Adjusted EBIT margin
Agriculture	670		776		-106	8.4	%	9.1	%
Construction	39		41		-2	1.9	%	1.9	%
Commercial and Specialty Vehicles	209		214		-5	2.8	%	2.8	%
Powertrain	252		281		-29	8.1	%	8.3	%
Unallocated items, eliminations and other	(126	)	(190	)	64	—		—
Total Adjusted EBIT of Industrial Activities	1,044		1,122		-78	5.5	%	5.6	%
Financial Services	372		412		-40	25.4	%	28.0	%
Eliminations and Other	—		—		—	—		—
Total Adjusted EBIT	1,416		1,534		-118	7.0	%	7.1	%

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Adjusted EBITDA by segment

	Nine Months Ended September 30,
($ million)	2019		2018		Change	2019 Adjusted EBITDA margin		2018 Adjusted EBITDA margin
Agriculture	1,074		1,183		-109	13.4	%	13.8	%
Construction	117		123		-6	5.7	%	5.6	%
Commercial and Specialty Vehicles	750		775		-25	10.1	%	10.0	%
Powertrain	383		412		-29	12.4	%	12.2	%
Unallocated items, eliminations and other	(123	)	(189	)	66	—		—
Total Adjusted EBITDA of Industrial Activities	2,201		2,304		-103	11.6	%	11.4	%
Financial Services	559		600		-41	38.1	%	40.8	%
Eliminations and Other	—		—		—	—		—
Total Adjusted EBITDA	2,760		2,904		-144	13.6	%	13.5	%

Net revenues of Industrial Activities were $18,946 million during the nine months ended September 30, 2019, down 6.0% compared to the nine months ended September 30, 2018 (down 0.9% on a constant currency basis), as a result of unfavorable foreign currency translation and lower sales volume.

Adjusted EBIT of Industrial Activities was $1,044 million during the nine months ended September 30, 2019, compared to $1,122 million during the nine months ended September 30, 2018, representing an Adjusted EBIT margin of 5.5%, down 10 bps compared to the nine months ended September 30, 2018.

Adjusted EBITDA of Industrial Activities was $2,201 million during the nine months ended September 30, 2019 compared to $2,304 million during the nine months ended September 30, 2018, equivalent to an Adjusted EBITDA margin of 11.6%, up 20 bps compared to the nine months ended September 30, 2018.

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The following tables summarize the reconciliation of Adjusted EBIT and Adjusted EBITDA, non-GAAP financial measures, to consolidated profit/(loss), the most comparable EU-IFRS financial measure, for the nine months ended September 30, 2019and 2018.

	Nine Months Ended September 30, 2019
($ million)	Agriculture	Construction	Commercial and Specialty Vehicles	Powertrain	Unallocated items, elimination and other		Total Industrial Activities	Financial Services		Total
Profit/(loss)(1)							468	275		743
Add back:
Financial expenses							232	—		232
Income tax expense							174	95		269
Adjustments:
Restructuring costs	26	27	20	5	1		79	3		82
Other discrete items(2)	—	—	135	—	(44	)	91	(1	)	90
Adjusted EBIT	670	39	209	252	(126	)	1,044	372		1,416
Depreciation and amortization	404	78	306	131	3		922	3		925
Depreciation of assets under operating leases and assets sold with buy-back commitments	—	—	235	—	—		235	184		419
Adjusted EBITDA	1,074	117	750	383	(123	)	2,201	559		2,760

(1) For Industrial Activities, net income (loss) is net of “Results from intersegment investments”.

(2) In the nine months ended September 30, 2019, this item mainly includes the other asset optimization charges for $135 million due to actions included in the "Transform 2 Win" Strategy and the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S.

				Nine Months Ended September 30, 2018
($ million)	Agriculture	Construction	Commercial and Specialty Vehicles	Powertrain	Unallocated items, elimination and other		Total Industrial Activities		Financial Services	Total
Profit/(loss)(1)							815		302	1,117
Add back:
Financial expenses							505		—	505
Income tax expense							312		110	422
Adjustments:
Restructuring costs	4	—	12	1	—		17		—	17
Pre-tax gain related to the modification of a healthcare plan in the U.S.	—	—	—	—	(527	)	(527	)	—	(527	)
Adjusted EBIT	776	41	214	281	(190	)	1,122		412	1,534
Depreciation and amortization	405	82	270	131	1		889		3	892
Depreciation of assets under operating leases and assets sold with buy-back commitments	2	—	291	—	—		293		185	478
Adjusted EBITDA	1,183	123	775	412	(189	)	2,304		600	2,904

(1) For Industrial Activities, net income (loss) is net of “Results from intersegment investments”.

Interim Report on Operations 18

Agriculture

Net revenues

The following table shows Agriculture net revenues by geographic region for the nine months ended September 30, 2019compared to the nine months ended September 30, 2018:

Agriculture Net revenues – by geographic region:

	Nine Months Ended September 30,
($ million)	2019	2018	% Change
North America	2,843	2,793	1.8
Europe	2,921	3,113	-6.2
South America	1,108	1,155	-4.1
Rest of World	1,141	1,511	-24.5
Total	8,013	8,572	-6.5

Agriculture's net revenues decreased 6.5% in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 (down 2.4% on a constant currency basis) as a result of lower sales volume primarily in Europe and Rest of World, and negative impact of foreign currency translation, partially offset by sustained positive price realization.

For the nine months ended September 30, 2019, worldwide industry unit sales for tractors were down 7% compared to the nine months ended September 30, 2018, while worldwide industry sales for combines were down 2%. In North America, industry volumes in the over 140 hp tractor market sector were down 4% and combines were down 7%. Industry volumes for under 140 hp tractors in North America were up 4%. European markets were up 8% and down 18% for tractors and combines, respectively. In South America, the tractor market decreased 11% and the combine market increased 7%. Rest of World markets decreased 12% for tractors and increased 3% for combines.

Adjusted EBIT

Adjusted EBIT was $670 million in the nine months ended September 30, 2019 ($776 million in the nine months ended September 30, 2018), representing an Adjusted EBIT margin at 8.4%. Positive net price realization and sustained aftermarket activity was more than offset by unfavorable volume and product mix, lower fixed cost absorption and higher raw material product costs as a result of increased tariffs.

Construction

Net revenues

The following table shows Construction net revenues by geographic region for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018:

Construction Net revenues – by geographic region:

	Nine Months Ended September 30,
($ million)	2019	2018	% change
North America	1,035	1,113	-7.0
Europe	371	389	-4.6
South America	254	252	0.8
Rest of World	400	453	-11.7
Total	2,060	2,207	-6.7

Construction's net revenues decreased 6.7% in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 (down 4.3% on a constant currency basis) primarily due to production and sales volume in North America to rebalance channel inventory and weaker markets in Rest of World partially offset by positive price realization.

During the nine months ended September 30, 2019, Construction’s worldwide compact equipment industry sales were up 4% compared to the nine months ended September 30, 2018, while worldwide general equipment industry sales were down 1%

Interim Report on Operations 19

compared to the nine months ended September 30, 2018 and worldwide road building and site equipment industry sales were down 9%.

Adjusted EBIT

Adjusted EBIT was $39 million for the nine months ended September 30, 2019 (down$2 million compared to the nine months ended September 30, 2018), representing an Adjusted EBIT margin of 1.9%. The decrease was due to the increase in raw material costs, tariffs, and spending related to the quality excellence initiative in North America, partially offset by positive net price realization.

Commercial and Specialty Vehicles

Net revenues

The following table shows Commercial and Specialty Vehicles’ net revenues by geographic region for the nine months ended September 30, 2019compared to the nine months ended September 30, 2018:

Commercial and Specialty Vehicles Net revenues – by geographic region:

	Nine Months Ended September 30,
($ million)	2019	2018	% change
North America	47	9	n.m.
Europe	6,033	6,263	-3.7
South America	421	546	-22.9
Rest of World	930	961	-3.2
Total	7,431	7,779	-4.5

n.m. - not meaningful.

Commercial and Specialty Vehicles’ net revenues decreased 4.5% in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 (up 2.4% on a constant currency basis). Positive price across all geographies, was more than offset by the negative impact of foreign currency translation.

During the nine months ended September 30, 2019, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, increased 9% compared to the same period in 2018. In Europe, the LCV market (GVW 3.5-7.49 tons) increased 12% and the M&H truck market (GVW ≥7.5 tons) increased 3%. In South America, new truck registrations (GVW ≥3.5 tons) increased 20% over the same period of 2018 with an increase of 43% in Brazil, partially offset by a decrease of 44% in Argentina. In Rest of World, new truck registrations decreased by 9%.

In the nine months ended September 30, 2019, trucks’ estimated market share in the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was 10.7%, down 1.1 percentage points compared to the nine months ended September 30, 2018. In the nine months ended September 30, 2019, trucks' market share in South America was 7.6%, down 2.3 p.p. compared to the nine months ended September 30, 2018.

Commercial and Specialty Vehicles delivered approximately 99,200 vehicles (including buses and specialty vehicles) in the nine months ended September 30, 2019, representing a 5% decrease compared to the same period of 2018. Volumes were down 2% in LCV and 15% lower in M&H truck segments. Commercial and Specialty Vehicles’ deliveries were lower 3% in Europe, and decreased 18% and 11% in South America and in Rest of World, respectively.

Adjusted EBIT

Adjusted EBIT was $209 million for the nine months ended September 30, 2019 ($214 million in the nine months ended September 30, 2018) and includes a $50 million gain realized from granting to Nikola Corporation access to certain Iveco technology as part of the consideration for the initial interest in Nikola. Absent the Nikola gain, the adjusted EBIT would have been $159 million, a reduction of $55 million compared to the prior year, primarily due to higher production costs, mainly related to inflationary cost increases and supply chain inefficiencies in our truck and bus business, higher R&D costs including the amortization of capitalized costs related to new products recently launched and $16 million impairment of previously capitalized costs, and unfavorable foreign exchange impacts. Adjusted EBIT margin including the Nikola gain was 2.8% in the third quarter of 2019, and was 2.1% excluding the Nikola deal.

Interim Report on Operations 20

Powertrain

Net revenues

Powertrain's net revenues decreased 8.0% in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 (down 1.2% on a constant currency basis) due to lower sales volume. Sales to external customers accounted for 49% of total net revenues (50% in the nine months ended September 30, 2018).

During the nine months ended September 30, 2019, Powertrain sold approximately 449,100 engines, a decrease of 1% compared to the nine months ended September 30, 2018. In terms of major customers, 25% of engine units were supplied to Commercial and Specialty Vehicles, 17% to Agriculture, 5% to Construction and the remaining 53% to external customers. Additionally, Powertrain delivered approximately 49,400 transmissions, a decrease of 10% compared to the nine months ended September 30, 2018, and approximately 133,000 axles, a decrease of 2% compared to the nine months ended September 30, 2018.

Adjusted EBIT

Adjusted EBIT was $252 million for the nine months ended September 30, 2019 ($281 million in the nine months ended September 30, 2018). Manufacturing efficiencies and positive pricing were more than offset by an unfavorable mix of engine sales, higher product development expenses and unfavorable foreign exchange impacts. Adjusted EBIT margin was 8.1% in the nine months ended September 30, 2019 (8.3% in the nine months ended September 30, 2018).

Financial Services Performance

Net revenues

Financial Services' net revenues totaled $1,467 million in the nine months ended September 30, 2019, a 0.3% decrease compared to the nine months ended September 30, 2018 (up 3.4% on a constant currency basis), primarily due to higher used equipment sales and higher average portfolios, partially offset by pricing and the negative impact from the foreign currency translation.

Net income

Net income of Financial Services was $275 million for the nine months ended September 30, 2019 compared to $302 million for the nine months ended September 30, 2018. The decrease is primarily attributable to pricing and negative impact from currency translation and risk cost accruals offset by higher average portfolios in South America and Rest of World and improved operating lease performance.

In the nine months ended September 30, 2019, retail loan originations, including unconsolidated joint ventures, were $7.1 billion, down $0.1 billion compared to the nine months ended September 30, 2018. The managed portfolio, including unconsolidated joint ventures, was $25.5 billion as of September 30, 2019 (of which retail was 62% and wholesale 38%), flat compared to September 30, 2018 (up $0,8 billion on a constant currency basis).

Interim Report on Operations 21

Impact of adoption of IFRS 16 on Adjusted EBIT and Adjusted EBITDA

The following tables show the unaudited impact of the adoption of IFRS 16 on Adjusted EBIT, Adjusted EBIT margin, Adjusted EBITDA and Adjusted EBITDA margin by segment in the three and nine months ended September 30, 2019.

Adjusted EBIT by segment

	Three Months Ended September 30, 2019
($ million)	As reported		Amounts without adoption of IFRS 16		Effect of change higher/(lower)	2019 Adjusted EBIT margin as reported		2019 Adjusted EBIT margin without adoption of IFRS 16		Effect of change higher/(lower) bps
Agriculture	180		179		1	7.4	%	7.4	%	—
Construction	8		7		1	1.2	%	1.1	%	10
Commercial and Specialty Vehicles	25		25		—	1.1	%	1.1	%	—
Powertrain	68		68		—	7.4	%	7.4	%	—
Unallocated items, eliminations and other	(28	)	(28	)	—	—		—		—
Total Adjusted EBIT of Industrial Activities	253		251		2	4.3	%	4.3	%	—
Financial Services	122		122		—	25.6	%	25.6	%	—
Eliminations and Other	—		—		—	—		—		—
Total Adjusted EBIT	375		373		2	6.0	%	5.9	%	10

	Nine Months Ended September 30, 2019
($ million)	As reported		Amounts without adoption of IFRS 16		Effect of change higher/(lower)	2019 Adjusted EBIT margin as reported		2019 Adjusted EBIT margin without adoption of IFRS 16		Effect of change higher/(lower) bps
Agriculture	670		667		3	8.4	%	8.3	%	10
Construction	39		38		1	1.9	%	1.8	%	10
Commercial and Specialty Vehicles	209		207		2	2.8	%	2.8	%	—
Powertrain	252		252		—	8.1	%	8.1	%	—
Unallocated items, eliminations and other	(126	)	(126	)	—	—		—		—
Total Adjusted EBIT of Industrial Activities	1,044		1,038		6	5.5	%	5.5	%	—
Financial Services	372		372		—	25.4	%	25.4	%	—
Eliminations and Other	—		—		—	—		—		—
Total Adjusted EBIT	1,416		1,410		6	7.0	%	6.9	%	10

Interim Report on Operations 22

Adjusted EBITDA by segment

	Three Months Ended September 30, 2019
($ million)	As reported		Amounts without adoption of IFRS 16		Effect of change higher/(lower)	2019 Adjusted EBITDA margin as reported		2019 Adjusted EBITDA margin without adoption of IFRS 16		Effect of change higher/(lower) bps
Agriculture	307		291		16	12.7	%	12.0	%	70
Construction	32		28		4	4.8	%	4.2	%	60
Commercial and Specialty Vehicles	208		193		15	9.0	%	8.3	%	70
Powertrain	109		107		2	11.8	%	11.6	%	20
Unallocated items, eliminations and other	(27	)	(27	)	—	—		—		—
Total Adjusted EBITDA of Industrial Activities	629		592		37	10.8	%	10.1	%	70
Financial Services	183		183		—	38.4	%	38.4	%	—
Eliminations and Other	—		—		—	—		—		—
Total Adjusted EBITDA	812		775		37	12.9	%	12.3	%	60

	Nine Months Ended September 30, 2019
($ million)	As reported		Amounts without adoption of IFRS 16		Effect of change higher/(lower)	2019 Adjusted EBITDA margin as reported		2019 Adjusted EBITDA margin without adoption of IFRS 16		Effect of change higher/(lower) bps
Agriculture	1,074		1,027		47	13.4	%	12.8	%	60
Construction	117		106		11	5.7	%	5.1	%	60
Commercial and Specialty Vehicles	750		700		50	10.1	%	9.4	%	70
Powertrain	383		377		6	12.4	%	12.2	%	20
Unallocated items, eliminations and other	(123	)	(124	)	1	—		—		—
Total Adjusted EBITDA of Industrial Activities	2,201		2,086		115	11.6	%	11.0	%	60
Financial Services	559		558		1	38.1	%	38.0	%	10
Eliminations and Other	—		—		—	—		—		—
Total Adjusted EBITDA	2,760		2,644		116	13.6	%	13.0	%	60

Interim Report on Operations 23

CONDENSED STATEMENT OF FINANCIAL POSITION BY ACTIVITY

	At September 30, 2019(1)			At December 31, 2018
($ million)	Consolidated	Industrial Activities	Financial Services	Consolidated	Industrial Activities	Financial Services
ASSETS
Intangible assets:	5,330	5,187	143	5,497	5,354	143
Goodwill	2,463	2,335	128	2,464	2,336	128
Other intangible assets	2,867	2,852	15	3,033	3,018	15
Property, plant and equipment	5,633	5,630	3	5,963	5,961	2
Investments and other financial assets	717	3,290	229	592	3,169	213
Leased assets	1,803	40	1,763	1,774	34	1,740
Defined benefit plan assets	20	20	—	25	25	—
Deferred tax assets	776	761	155	853	810	170
Total Non-current assets	14,279	14,928	2,293	14,704	15,353	2,268
Inventories	8,121	7,900	221	6,719	6,503	216
Trade receivables	417	416	30	395	393	34
Receivables from financing activities	18,451	1,334	19,578	19,175	1,258	20,260
Current taxes receivables	251	270	8	356	375	56
Other current assets	1,512	1,273	288	1,390	1,203	264
Other financial assets	135	81	62	98	81	24
Cash and cash equivalents	4,165	3,064	1,101	5,803	4,553	1,250
Total Current assets	33,052	14,338	21,288	33,936	14,366	22,104
Assets held for sale	9	9	—	10	10	—
TOTAL ASSETS	47,340	29,275	23,581	48,650	29,729	24,372
EQUITY AND LIABILITIES
Total Equity	7,822	7,822	2,801	7,472	7,472	2,788
Provisions:	4,687	4,636	51	5,051	4,994	57
Employee benefits	1,508	1,478	30	1,763	1,731	32
Other provisions	3,179	3,158	21	3,288	3,263	25
Debt:	24,402	7,158	19,705	24,543	6,392	20,494
Asset-backed financing	10,701	—	10,701	11,269	2	11,269
Other debt	13,701	7,158	9,004	13,274	6,390	9,225
Other financial liabilities	132	92	48	108	89	26
Trade payables	5,167	5,132	81	5,886	5,768	173
Current taxes payables	59	54	32	89	111	53
Deferred tax liabilities	241	91	291	251	129	249
Other current liabilities	4,830	4,290	572	5,250	4,774	532
Liabilities held for sale	—	—	—	—	—	—
Total Liabilities	39,518	21,453	20,780	41,178	22,257	21,584
TOTAL EQUITY AND LIABILITIES	47,340	29,275	23,581	48,650	29,729	24,372

(1) On January 1, 2019, CNH Industrial adopted the updated accounting standard on leases (IFRS 16) using the modified retrospective approach, without recasting prior periods. On the adoption of the standard, CNH Industrial recognized approximately $480 million right-of-use assets and leases liabilities (included in Property, plant and equipment and Other debt, respectively) in its consolidated statement of financial position without transition effect to equity.

Interim Report on Operations 24

LIQUIDITY AND CAPITAL RESOURCES

The following discussion of liquidity and capital resources principally focuses on our condensed consolidated statement of cash flows and our condensed consolidated statement of financial position. Our operations are capital intensive and subject to seasonal variations in financing requirements for dealer receivables and dealer and company inventories. Whenever necessary, funds from operating activities are supplemented from external sources. We expect to have available cash reserves and cash generated from operations and from sources of debt and financing activities that are sufficient to fund our working capital requirements, capital expenditures and debt service at least through the next twelve months.

Cash Flow Analysis

The following table presents the cash flows from operating, investing and financing activities by activity for the nine months ended September 30, 2019 and 2018:

				Nine months ended September 30,
				2019						2018
($ million)				Consolidated		Industrial Activities		Financial Services		Consolidated		Industrial Activities		Financial Services
A)	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			5,803		4,553		1,250		6,200		4,901		1,299
B)	CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES:
	Profit/(loss) for the period			743		743		275		1,117		1,117		302
	Amortization and depreciation (net of vehicles sold under buy-back commitments and operating leases)			926		922		4		892		889		3
	(Gains)/losses on disposal of non-current assets (net of vehicles sold under buy-back commitments) and other non-cash items			87		(218	)	30		(1	)	(306	)	3
	Dividends received			15		226		—		49		178		—
	Change in provisions			(240	)	(234	)	(6	)	(617	)	(621	)	4
	Change in deferred income taxes			53		—		53		108		92		16
	Change in items due to buy-back commitments		(a)	(51	)	(63	)	12		24		(5	)	29
	Change in operating lease items		(b)	(30	)	(8	)	(22	)	59		(9	)	68
	Change in working capital			(2,211	)	(2,175	)	(36	)	(1,467	)	(1,410	)	(57	)
	TOTAL			(708	)	(807	)	310		164		(75	)	368
C)	CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES:
	Investments in:
		Property, plant and equipment and intangible assets (net of vehicles sold under buy-back commitments and operating leases)		(616	)	(614	)	(2	)	(613	)	(608	)	(5	)
		Consolidated subsidiaries and other equity investments		(109	)	(129	)	—		—		(39	)	—
	Proceeds from the sale of non-current assets (net of vehicles sold under buy-back commitments)			10		10		—		8		8		—
	Net change in receivables from financing activities			138		(4	)	142		443		4		439
	Other changes			204		106		98		231		670		(439	)
	TOTAL			(373	)	(631	)	238		69		35		(5	)
D)	CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES:
	Net change in debt and other financial assets/liabilities			(51	)	438		(489	)	(936	)	(691	)	(245	)
	Capital increase			—		—		20		—		—		39
	Dividends paid			(280	)	(280	)	(211	)	(240	)	(240	)	(129	)
	Purchase of treasury shares			(45	)	(45	)	—		(156	)	(156	)	—
	TOTAL			(376	)	113		(680	)	(1,332	)	(1,087	)	(335	)
	Translation exchange differences			(181	)	(164	)	(17	)	(280	)	(225	)	(55	)
E)	TOTAL CHANGE IN CASH AND CASH EQUIVALENTS			(1,638	)	(1,489	)	(149	)	(1,379	)	(1,352	)	(27	)
F)	CASH AND CASH EQUIVALENTS AT END OF PERIOD			4,165		3,064		1,101		4,821		3,549		1,272

Interim Report on Operations 25

(a) Cash generated from the sale of vehicles under buy-back commitments, net of amounts included in Profit/(loss) for the period, is recognized under operating activities in a single line item, which includes changes in working capital, capital expenditure, depreciation and impairment losses. The item also includes gains and losses arising from the sale of vehicles subject to buy-back commitments.

(b) Cash from operating lease is recognized under operating activities in a single line item, which includes capital expenditure, depreciation, write-downs and changes in inventory.

During the nine months ended September 30, 2019, consolidated cash and cash equivalents decreased by $1,638 million primarily as a result of $2,211 million usage in working capital, the repayment of the remaining outstanding CNH Industrial Finance Europe S.A. 2.75% notes for $621 million (€547 million), and of the CNH Industrial Capital LLC 3.375% notes of $500 million, and the distribution of annual dividend to CNH Industrial N.V.'s shareholders for $275 million, partially offset by the issuance of €600 million ($679 million) in principal amount of 1.75% CNH Industrial Finance Europe S.A. notes due 2027 and the issuance of the CNH Industrial Finance Europe S.A. €500 million ($565 million) in principal amount of 1.625% notes due in 2029. Cash and cash equivalents of Industrial Activities decreased by $1,489 million, while cash and cash equivalents of Financial Services decreased by $149 million.

Cash flows of Industrial Activities

Net cash used by operating activities was $807 million in the nine months ended September 30, 2019, compared to $75 million used by operating activities in the nine months ended September 30, 2018. The increase in cash usage was primarily due to increased net working capital mainly due to lower trade payables and higher inventories.

Net cash used by investing activities was $631 million in the nine months ended September 30, 2019 compared to $35 million provided by investing activities in the nine months ended September 30, 2018. The increase in cash usage was primarily due to a decrease in net cash receipts related to intersegment receivables and payables included in “Other changes”.

Net cash provided by financing activities was $113 million in the nine months ended September 30, 2019 compared to net cash used of $1,087 million in the nine months ended September 30, 2018, which was primarily impacted by the repayment of the outstanding €853 million ($1.0 billion) CNH Industrial Finance Europe S.A. 6.25% notes, partially offset by new bond issuance.

Cash flows of Financial Services

Net cash provided by operating activities was $310 million in the nine months ended September 30, 2019 compared to $368 million provided by operating activities in the nine months ended September 30, 2018.

Net cash provided by investing activities was $238 million in the nine months ended September 30, 2019 compared to net cash used by investing activities of $5 million in the nine months ended September 30, 2018, primarily reflecting an increase in net cash received related to intersegment payables and receivables included in Other changes.

Net cash used by financing activities was $680 million in the nine months ended September 30, 2019 compared to $335 million used by financing activities in the nine months ended September 30, 2018. The increase in cash used was primarily due to higher net repayments of debt and an increase in dividends paid.

Consolidated Debt

Our consolidated Debt as of September 30, 2019 and December 31, 2018, is as detailed in the following table:

	At September 30, 2019			At December 31, 2018
($ million)	Consolidated	Industrial Activities	Financial Services	Consolidated	Industrial Activities	Financial Services
Total Debt	24,402	7,158	19,705	24,543	6,392	20,494

We believe that Net Debt, defined as debt plus other financial liabilities, net of cash, cash equivalents, current securities and other financial assets (all as recorded in the consolidated statement of financial position) is a useful analytical tool for measuring our effective borrowing requirements. This non-GAAP financial measure should neither be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with EU-IFRS. In addition, this non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies.

We provide a separate analysis of Net Debt for Industrial Activities and Net Debt for Financial Services, to reflect the different cash flow management practices in the two activities. The separation between Industrial Activities and Financial Services represents a sub-consolidation based on the core business activities (industrial activities or financial services) of each CNH Industrial legal entity. The sub-consolidation for Industrial Activities also includes legal entities that perform centralized treasury activities, such as raising funding in the market and financing Group legal entities, but do not, however, provide financing to third parties.

Interim Report on Operations 26

The calculation of Net Debt as of September 30, 2019 and December 31, 2018 and the reconciliation of Total Debt, the EU-IFRS financial measure that we believe to be most directly comparable, to Net Debt, are shown below:

	At September 30, 2019						At December 31, 2018
($ million)	Consolidated		Industrial Activities		Financial Services		Consolidated		Industrial Activities		Financial Services
Third party debt	24,402		5,985		18,417		24,543		5,256		19,287
Intersegment notes payable	—		1,173		1,288		—		1,136		1,207
Total Debt(1)	24,402		7,158		19,705		24,543		6,392		20,494
Less:
Cash and cash equivalents	4,165		3,064		1,101		5,803		4,553		1,250
Intersegment financial receivables	—		1,288		1,173		—		1,207		1,136
Other financial assets(2)	135		81		62		98		81		24
Other financial liabilities(2)	(132	)	(92	)	(48	)	(108	)	(89	)	(26	)
Net Debt (Cash)(3)	20,234		2,817		17,417		18,750		640		18,110

(1) As a result of the role played by the central treasury, debt for Industrial Activities also includes funding raised by the central treasury on behalf of Financial Services (included under intersegment financial receivables). Intersegment financial receivables for Financial Services, on the other hand, represent loans or advances to Industrial Activities – for receivables sold to Financial Services that do not meet the derecognition requirements – as well as cash deposited temporarily with the central treasury. Total Debt of Industrial Activities includes Intersegment notes payable to Financial Services of $1,173 million and $1,136 million at September 30, 2019 and December 31, 2018, respectively. Total Debt of Financial Services includes Intersegment notes payable to Industrial Activities of $1,288 million and $1,207 million at September 30, 2019 and December 31, 2018, respectively.

(2) Other financial assets and other financial liabilities include, respectively, the positive and negative fair values of derivative financial instruments.

(3) The net intersegment receivable/payable balance owed by Financial Services to Industrial Activities was $115 million and $71 million as of September 30, 2019 and December 31, 2018, respectively.

The increase in Net Debt at September 30, 2019 compared to December 31, 2018 mainly reflects the seasonal cash usage related to operating activities, the distribution of the annual dividend to CNH Industrial N.V.'s shareholders for $275 million, the purchase of CNH Industrial N.V. shares for $45 million under the Company buy-back program and the impact of adoption of IFRS 16 on January 1, 2019.

The following table shows the change in Net Debt of Industrial Activities for the nine months ended September 30, 2019 and 2018:

	Nine months ended September 30,
($ million)	2019		2018
Net (debt)/cash of Industrial Activities at beginning of period as reported	(640	)	(1,023	)
Impact of IFRS 16 adoption	(476	)	—
Net (debt)/cash of Industrial Activities at beginning of period	(1,116	)	(1,023	)
Adjusted EBITDA of Industrial Activities	2,201		2,304
Cash interest and taxes	(328	)	(465	)
Changes in provisions and similar(1)	(505	)	(504	)
Change in working capital	(2,175	)	(1,410	)
Operating cash flow of Industrial Activities	(807	)	(75	)
Investments in property, plant and equipment, and intangible assets(2)	(614	)	(608	)
Other changes	(189	)	(10	)
Free cash flow of Industrial Activities	(1,610	)	(693	)
Capital increases and dividends(3)	(325	)	(396	)
Currency translation differences and other	234		131
Change in Net debt of Industrial Activities	(1,701	)	(958	)
Net (debt)/cash of Industrial Activities at end of period	(2,817	)	(1,981	)

(1) Including other cash flow items related to operating lease and buy-back activities.

(2) Excluding assets sold under buy-back commitments and assets under operating leases.

(3) Including share buy-back transactions.

Interim Report on Operations 27

For the nine months ended September 30, 2019, the Free cash flow of Industrial Activities was an usage of $1,610 million, primarily due to the increase in net working capital.

The reconciliation of Free cash flow of Industrial Activities to Net cash provided by (used in) Operating Activities, the EU-IFRS financial measure that we believe to be most directly comparable, for the nine months ended September 30, 2019 and 2018, is shown below:

	Nine Months Ended September 30,
($ million)	2019		2018
Net cash provided by (used in) Operating Activities	(708	)	164
Net cash (provided by) used in Operating Activities of Financial Services	(310	)	(368	)
Intersegment eliminations	211		129
Operating cash flow of Industrial Activities	(807	)	(75	)
Investments in property, plant and equipment, and intangible assets of Industrial Activities	(614	)	(608	)
Other changes(1)	(189	)	(10	)
Free cash flow of Industrial Activities	(1,610	)	(693	)

(1) This item primarily includes change in intersegment financial receivables and capital increases in intersegment investments.

In March 2019, CNH Industrial signed a five-year committed revolving credit facility for €4 billion ($4.5 billion at March 31, 2019 exchange rate) due to mature in 2024 with two extension options of 1-year each, exercisable on the first and second anniversary of the signing date. The credit facility replaces the existing five-year €1.75 billion credit facility due to mature in 2021. Available committed unsecured facilities expiring after twelve months amounted to approximately $5.3 billion at September 30, 2019 ($3.1 billion at December 31, 2018). Total committed secured facilities expiring after twelve months amounted to approximately $3.9 billion at September 30, 2019 ($3.9 billion at December 31, 2018), of which $1 billion was available at September 30, 2019 ($0.9 billion at December 31, 2018).

Interim Report on Operations 28

2019 U.S. GAAP OUTLOOK⁽¹⁾ 

CNH Industrial manages its operations, assesses its performance and makes decisions about resource allocation based on financial results prepared only in accordance with U.S. GAAP, and, accordingly, also the full year guidance presented below is prepared under U.S. GAAP.

In the third quarter, industry conditions in the main agricultural markets have further deteriorated due to market uncertainties and negative farmers’ sentiment, particularly affected by poor yield conditions in various regions. Recent developments in U.S.-China trade negotiations and the related potential implications for commodity prices could have a positive impact on sentiment and, accordingly, equipment purchases in the U.S. and Canada towards the end of the year. CNH Industrial continues to have a positive view on demand in South America. As yet, however, we have not seen the increased penetration of Brazil into the grains export market translate into incremental equipment purchases, likely as a result of the slow start of the new subsidy program into the 2019/20 harvesting season.

The construction equipment market remained in positive territory during the third quarter, but elevated inventory levels across the industry require a careful review of production levels, especially in the North American market during the upcoming quarter.

European demand for heavy trucks has been affected by the electronic tachograph introduction at the end of June, with a pre-buy effect in the second quarter. In addition, negative sentiment in some of the major European markets has dampened demand for fleet replacement, at a time when our commercial vehicles business is changing to new vehicle families both in the light and in the heavy segments. CNH Industrial expects the demand to remain soft during the fourth quarter of 2019, while it continues to ramp-up production on the recently launched vehicles on the back of a good start of the order book and to complete the phasing out of the older models from the dealer network. Demand for LNG/CNG powered vehicles was below expectations during the third quarter as a result of the current subsidy scheme transitioning into the new fiscal year budgets in a number of European countries, with the expectation of an increase in demand for these vehicles in the fourth quarter.

The updated end-markets outlook has been reflected in an updated full year 2019 guidance as follows:

▪ Net sales of Industrial Activities revised between $26.5 billion and $27 billion;

▪ Adjusted diluted EPS⁽²⁾ confirmed up year-over-year between 5% and 10% at a range of $0.84 to $0.88 per share;

▪ Net debt of Industrial Activities at the end of 2019 revised to $0.6 billion and $0.4 billion, mainly reflecting the M&A activity announced since September 3.

(1) 2019 guidance does not include any impacts under U.S. GAAP deriving from the gain resulting from the modification of a healthcare plan in the U.S. anticipated on April 16, 2018, as this gain has been considered non-recurring and therefore treated as an adjusting item for the purpose of the adjusted diluted EPS calculation. In addition, 2019 guidance does not include any impacts deriving from possible further repurchases of Company’s shares under the plan authorized by the AGM on April 12, 2019.

(2) Outlook is not provided on diluted EPS under U.S. GAAP, the most comparable GAAP financial measure of this non-GAAP financial measure, as the income or expense excluded from the calculation of adjusted diluted EPS and instead included in the calculation of diluted EPS are, by definition, not predictable and uncertain.

Interim Report on Operations 29

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At September 30, 2019

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 30

CONDENSED CONSOLIDATED INCOME

STATEMENT

(Unaudited)

		Three months ended September 30,				Nine months ended September 30,
($ million)	Note	2019		2018		2019		2018
Net revenues	(1)	6,296		6,704		20,307		21,487
Cost of sales	(2)	5,267		5,418		16,578		17,416
Selling, general and administrative costs	(3)	519		527		1,590		1,685
Research and development costs	(4)	269		278		824		804
Result from investments:	(5)	(2	)	11		15		55
Share of the profit/(loss) of investees accounted for using the equity method		(2	)	11		15		55
Other income/(expenses) from investments		—		—		—		—
Gains/(losses) on the disposal of investments	(6)	—		(1	)	—		(1	)
Restructuring costs	(7)	46		7		82		17
Other income/(expenses)	(8)	46		(29	)	(4	)	425
Financial income/(expenses)	(9)	(97	)	(199	)	(232	)	(505	)
PROFIT/(LOSS) BEFORE TAXES		142		256		1,012		1,539
Income tax (expense)	(10)	(53	)	(108	)	(269	)	(422	)
PROFIT/(LOSS) FROM CONTINUING OPERATIONS		89		148		743		1,117
PROFIT/(LOSS) FOR THE PERIOD		89		148		743		1,117
PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO:
Owners of the parent		83		140		718		1,091
Non-controlling interests		6		8		25		26
(in $)
BASIC EARNINGS/(LOSS) PER COMMON SHARE	(11)	0.06		0.10		0.53		0.80
DILUTED EARNINGS/(LOSS) PER COMMON SHARE	(11)	0.06		0.10		0.53		0.80

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 31

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

		Three months ended September 30,				Nine months ended September 30,
($ million)	Note	2019		2018		2019		2018
PROFIT/(LOSS) FOR THE PERIOD (A)		89		148		743		1,117
Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss:
Gains/(losses) on the remeasurement of defined benefit plans	(21)	(29	)	—		(29	)	55
Tax effect of Other comprehensive (loss)/income that will not be reclassified subsequently to profit or loss	(21)	7		—		7		(14	)
Total Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss, net of tax (B1)		(22	)	—		(22	)	41
Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss:
Gains/(losses) on cash flow hedging instruments	(21)	(28	)	16		(49	)	8
Exchange gains/(losses) on translating foreign operations	(21)	(104	)	(157	)	(57	)	(478	)
Net change in fair value of equity investments at fair value through other comprehensive income	(21)	(4	)	—		(4	)	—
Share of Other comprehensive income/(loss) of entities accounted for using the equity method	(21)	(16	)	(23	)	(19	)	(43	)
Tax effect of Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss	(21)	7		(2	)	13		—
Total Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss, net of tax (B2)		(145	)	(166	)	(116	)	(513	)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX (B) = (B1) + (B2)		(167	)	(166	)	(138	)	(472	)
TOTAL COMPREHENSIVE INCOME/(LOSS) (A)+(B)		(78	)	(18	)	605		645
TOTAL COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO:
Owners of the parent		(82	)	(20	)	582		626
Non-controlling interests		4		2		23		19

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 32

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Unaudited)

($ million)	Note	At September 30, 2019	At December 31, 2018
ASSETS
Intangible assets	(12)	5,330	5,497
Property, plant and equipment	(13)	5,633	5,963
Investments and other financial assets:	(14)	717	592
Investments accounted for using the equity method		537	555
Other investments and financial assets		180	37
Leased assets	(15)	1,803	1,774
Defined benefit plan assets		20	25
Deferred tax assets		776	853
Total Non-current assets		14,279	14,704
Inventories	(16)	8,121	6,719
Trade receivables	(17)	417	395
Receivables from financing activities	(17)	18,451	19,175
Current tax receivables	(17)	251	356
Other current assets	(17)	1,512	1,390
Other financial assets	(18)	135	98
Cash and cash equivalents	(19)	4,165	5,803
Total Current assets		33,052	33,936
Assets held for sale	(20)	9	10
TOTAL ASSETS		47,340	48,650

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 33

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Unaudited)

(CONTINUED)

($ million)	Note	At September 30, 2019	At December 31, 2018
EQUITY AND LIABILITIES
Issued capital and reserves attributable to owners of the parent		7,781	7,443
Non-controlling interests		41	29
Total Equity	(21)	7,822	7,472
Provisions:		4,687	5,051
Employee benefits	(22)	1,508	1,763
Other provisions	(22)	3,179	3,288
Debt:	(23)	24,402	24,543
Asset-backed financing	(23)	10,701	11,269
Other debt	(23)	13,701	13,274
Other financial liabilities	(18)	132	108
Trade payables	(24)	5,167	5,886
Current tax payables		59	89
Deferred tax liabilities		241	251
Other current liabilities	(25)	4,830	5,250
Liabilities held for sale		—	—
Total Liabilities		39,518	41,178
TOTAL EQUITY AND LIABILITIES		47,340	48,650

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 34

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

($ million)	Note	Nine months ended September 30, 2019		Nine months ended September 30, 2018
A) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	(19)	5,803		6,200
B) CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES:
Profit/(loss) for the period		743		1,117
Amortization and depreciation (net of vehicles sold under buy-back commitments and operating leases)		926		892
(Gains)/losses on disposal of non-current assets (net of vehicles sold under buy-back commitments)		2		—
Other non-cash items		85		(1	)
Dividends received		15		49
Change in provisions		(240	)	(617	)
Change in deferred income taxes		53		108
Change in items due to buy-back commitments	(a)	(51	)	24
Change in operating lease items	(b)	(30	)	59
Change in working capital		(2,211	)	(1,467	)
TOTAL		(708	)	164
C) CASH FLOWS FROM/(USED IN) INVESTMENT ACTIVITIES:
Investments in:
Property, plant and equipment and intangible assets (net of vehicles sold under buy-back commitments and operating leases)		(616	)	(613	)
Consolidated subsidiaries and other equity investments		(109	)	—
Proceeds from the sale of non-current assets (net of vehicles sold under buy-back commitments)		10		8
Net change in receivables from financing activities		138		443
Other changes		204		231
TOTAL		(373	)	69
D) CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES:
Bonds issued		1,301		1,083
Repayment of bonds		(1,121	)	(1,648	)
Issuance of other medium-term borrowings (net of repayment)		20		103
Net change in other financial payables and other financial assets/liabilities		(251	)	(474	)
Capital increase		—		—
Dividends paid		(280	)	(240	)
Purchase of treasury shares		(45	)	(156	)
TOTAL		(376	)	(1,332	)
Translation exchange differences		(181	)	(280	)
E) TOTAL CHANGE IN CASH AND CASH EQUIVALENTS		(1,638	)	(1,379	)
F) CASH AND CASH EQUIVALENTS AT END OF PERIOD	(19)	4,165		4,821

(a) Cash generated from the sale of vehicles under buy-back commitments, net of amounts included in Profit/(loss) for the period, is recognized under operating activities in a single line item, which includes changes in working capital, capital expenditure, depreciation and impairment losses. The item also includes gains and losses arising from the sale of vehicles subject to buy-back commitments.

(b) Cash from operating lease is recognized under operating activities in a single line item, which includes capital expenditure, depreciation, write-downs and changes in inventory.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 35

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

	Attributable to the owners of the parent
($ million)	Share capital	Treasury shares		Capital reserves		Earnings reserves		Cash flow hedge reserve		Cumulative translation adjustment reserve		Defined benefit plans remeasure-ment reserve		Equity investments at FVTOCI		Cumulative share of OCI of entities consolidated under the equity method		Non-controlling interests		Total
AT DECEMBER 31, 2017	25	(10	)	3,253		5,059		7		(1,012	)	(525	)	—		(126	)	13		6,684
Impact of IFRS 9 adoption(*)	—	—		—		(12	)	—		—		—		—		—		—		(12	)
AT JANUARY 1, 2018	25	(10	)	3,253		5,047		7		(1,012	)	(525	)	—		(126	)	13		6,672
Changes in equity for the nine months ended September 30, 2018
Dividends distributed	—	—		—		(235	)	—		—		—		—		—		(5	)	(240	)
Acquisition of treasury stock	—	(156	)	—		—		—		—		—		—		—		—		(156	)
Common shares issued from treasury stock and capital increase for share-based compensation	—	37		(35	)	—		—		—		—		—		—		—		2
Share-based compensation expense	—	—		25		—		—		—		—		—		—		—		25
Total comprehensive income/(loss) for the period	—	—		—		1,091		8		(471	)	41		—		(43	)	19		645
Other changes	—	—		(12	)	57		—		—		—		—		—		(2	)	43
AT SEPTEMBER 30, 2018	25	(129	)	3,231		5,960		15		(1,483	)	(484	)	—		(169	)	25		6,991
	Attributable to the owners of the parent
($ million)	Share capital	Treasury shares		Capital reserves		Earnings reserves		Cash flow hedge reserve		Cumulative translation adjustment reserve		Defined benefit plans remeasure-ment reserve		Equity investments at FVTOCI		Cumulative share of OCI of entities consolidated under the equity method		Non-controlling interests		Total
AT DECEMBER 31, 2018	25	(128	)	3,247		6,272		(17	)	(1,414	)	(375	)	—		(167	)	29		7,472
Changes in equity for the nine months ended September 30, 2019
Dividends distributed	—	—		—		(275	)	—		—		—		—		—		(5	)	(280	)
Acquisition of treasury stock	—	(45	)	—		—		—		—		—		—		—		—		(45	)
Common shares issued from treasury stock and capital increase for share-based compensation	—	31		—		—		—		—		—		—		—		—		31
Share-based compensation expense	—	—		30		(34	)	—		—		—		—		—		—		(4	)
Total comprehensive income/(loss) for the period	—	—		—		718		(36	)	(55	)	(22	)	(4	)	(19	)	23		605
Other changes	—	—		2		47		—		—		—		—		—		(6	)	43
AT SEPTEMBER 30, 2019	25	(142	)	3,279		6,728		(53	)	(1,469	)	(397	)	(4	)	(186	)	41		7,822

(*) See section “Significant accounting policies”, paragraph “New standards and amendments effective from January 1, 2018”, in the CNH Industrial Consolidated Financial Statements at December 31, 2018 for a description of the impacts of IFRS 9 adoption on January 1, 2018.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 36

NOTES

(Unaudited)

CORPORATE INFORMATION

CNH Industrial N.V. (the “Company” and, collectively with its subsidiaries, “CNH Industrial” or the “CNH Industrial Group” or the “Group”) is incorporated in, and under the laws of, the Netherlands, and 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”). CNH Industrial is a global leader in the capital goods sector that, through its various businesses, designs, produces and sells agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles, in addition to a broad portfolio of powertrain applications.

SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The Interim condensed consolidated financial statements at September 30, 2019 together with the notes thereto (the Interim Condensed Consolidated Financial Statements”) were authorized for issuance on November 12, 2019 and have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU-IFRS”). The designation “IFRS” also includes International Accounting Standards (“IAS”), as well as all interpretations of the IFRS Interpretations Committee (“IFRIC”).

The Interim Condensed Consolidated Financial Statements, which have been prepared in accordance with IAS 34 - Interim Financial Reporting, do not include all of the information and disclosures required for annual financial statements and should be read in conjunction with the audited CNH Industrial Consolidated Financial Statements at December 31, 2018, included in the Annual Report prepared under EU-IFRS (in the following, the “CNH Industrial Consolidated Financial Statements at December 31, 2018”). The accounting standards and policies are consistent with those used at December 31, 2018, except as described in the following paragraph “New standards and amendments effective from January 1, 2019”.

The preparation of the Interim Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, accumulated other comprehensive income and disclosure of contingent assets and contingent liabilities. If in the future such estimates and assumptions, which are based on management’s best judgment at the date of the Interim Condensed Consolidated Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Interim Condensed Consolidated Financial Statements include all adjustments considered necessary by management to fairly state the Group’s results of operations, financial position and cash flows. See section “Significant accounting policies”, paragraph “Use of estimates”, in the CNH Industrial Consolidated Financial Statements at December 31, 2018 for a description of the significant estimates, judgments and assumptions of CNH Industrial, as well as those discussed in the following paragraph “New standards and amendments effective from January 1, 2019”.

Furthermore, certain valuation procedures, in particular those of a more complex nature regarding matters such as any impairment of non-current assets, are only carried out in full during the preparation of the annual financial statements, when all the information required is available, other than in the event that there are indications of impairment, when an immediate assessment is necessary. In the same way, the actuarial valuations that are required for the determination of employee benefit provisions are also usually carried out during the preparation of the annual consolidated financial statements. The recoverability of deferred tax assets is assessed quarterly using figures from budget and plans for subsequent years consistent with those used for impairment testing. Income taxes are recognized based upon the best estimate of the actual income tax rate expected for the full financial year.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 37

Certain financial information in this Interim Consolidated Financial Statements has been presented by geographic area. Starting from the first quarter of 2019, the composition of CNH Industrial's regions has been revised as follows: (1) North America; (2) Europe; (3) South America and (4) Rest of World. The geographic designations have the following meanings:

▪ North America (formerly NAFTA): United States, Canada and Mexico;

▪ Europe: member countries of the European Union, European Free Trade Association, Ukraine, and Balkans, formerly included in EMEA;

▪ South America (formerly LATAM): Central and South America, and the Caribbean Islands; and

▪ Rest of World: Continental Asia (including Turkey and Russia), Oceania and member countries of the Commonwealth of Independent States (excluding Ukraine), formerly included in APAC, and African continent and Middle East, formerly included in EMEA.

CNH Industrial is exposed to operational financial risks such as credit risk, liquidity risk and market risk, mainly relating to exchange rates and interest rates. The Interim Condensed Consolidated Financial Statements do not include all the information and notes about financial risk management required in the preparation of annual financial statements. For a detailed description of this information see the “Risk management, Risks and Control System” section and Note 32 “Information on financial risks” of CNH Industrial Consolidated Financial Statements at December 31, 2018, as well as those discussed in Note 17 “Current receivables and Other current assets”.

These Interim Condensed Consolidated Financial Statements are prepared with the U.S. dollar as presentation currency. The functional currency of the parent company (CNH Industrial N.V.) is the euro.

Format of the financial statements

CNH Industrial presents an income statement using a classification based on the function of expenses (otherwise known as the “cost of sales” method), rather than one based on their nature, as this is believed to provide information that is more relevant.

For the statement of financial position, a mixed format has been selected to present current and non-current assets and liabilities, as permitted by IAS 1 – Presentation of Financial Statements. Legal entities carrying out industrial activities and those carrying out financial services are both consolidated in the Group’s financial statements. The investment portfolios of Financial Services are included in current assets, as the investments will be realized in their normal operating cycle. Financial Services, though, obtains funds only partially from the market: the remainder is obtained from CNH Industrial N.V. through its treasury legal entities (included in Industrial Activities), which lend funds both to Industrial Activities and to Financial Services legal entities as the need arises. This Financial Services structure within the Group means that any attempt to separate current and non-current liabilities in the consolidated statement of financial position is not meaningful.

The statement of cash flows is presented using the indirect method.

New standards and amendments effective from January 1, 2019

▪ IFRS 16 - Leases

On January 13, 2016, the IASB issued IFRS 16 - Leases, replacing IAS 17 - Leases. IFRS 16 eliminates the classification of leases for the lessee as either operating leases or finance leases as required by IAS 17 and instead introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Lessees are required to recognize a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments, and to recognize depreciation of leased assets separately from interest on lease liabilities in the income statement. Lessor accounting under IFRS 16 is largely unchanged from the previous accounting standard.

CNH Industrial has adopted the new standard effective January 1, 2019, using the modified retrospective approach, without recasting prior periods. CNH Industrial has applied certain practical expedients upon transition, including: not to reassess under the new guidance its prior conclusions about lease identification, lease classification and initial direct costs; and, those provided for short-term leases and leases of low-value assets. In such cases, the lease payments associated with leases are recognized as expense, in the income statement. In addition, CNH Industrial has elected not to separate lease and non-lease components.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 38

At January 1, 2019, CNH Industrial recognized approximately $480 million of right-of-use assets and lease liabilities in its consolidated statement of financial position, without transition effect to equity, as detailed in the following table:

($ million)	At December 31, 2018 in accordance with IAS 17	Impact of IFRS 16 adoption		At January 1, 2019 in accordance with IFRS 16
ASSETS
Property, plant and equipment	5,963	480		6,443
Other current assets	1,390	(2	)	1,388
EQUITY AND LIABILITIES
Debt:
Other debt	13,274	478		13,752

The following reconciliation to the opening balance for the lease liabilities as of January 1, 2019 is based upon the operating lease obligations as of December 31, 2018:

($ million)	At January 1, 2019
Operating lease obligations at December 31, 2018	570
Relief option for short-term leases	(8	)
Relief option for leases of low-value assets	(10	)
Other	(9	)
Gross lease liabilities at January 1, 2019	543
Discounting	(65	)
Additional lease liabilities as a result of the initial application of IFRS 16 as of January 1, 2019	478
Finance lease liabilities at December 31, 2018	2
Lease liabilities at January 1, 2019	480

The lease liabilities were discounted at the incremental borrowing rate as of January 1, 2019. The weighted average incremental borrowing rate was 3.2%.

The following paragraph presents CNH Industrial's accounting policy for leases for which it is a lessee after the adoption of IFRS 16.

Lease accounting policy

A lease is a contract that conveys the right to control the use of an identified asset (the leased asset) for a period of time in exchange for consideration. The lease term determined by the Group comprises the non-cancellable period of lease contract together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. For lease agreements, the Group combines lease and non-lease components.

For leases with terms not exceeding twelve months (short-term leases) and for leases of low-value assets, CNH Industrial recognizes the lease payments associated with those leases on a straight-line basis over the lease term as operating expense in the income statement.

For all other leases, at the commencement date (i.e., the date the underlying asset is available for use), CNH Industrial recognizes a right-of-use asset, classified within Property, plant and equipment, and a lease liability, classified within Other Debt.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 39

At the commencement date, the right-of-use asset includes the amount of lease liability recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. At the same date, the lease liability is measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, CNH Industrial uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

After the commencement date, the right-of-use asset is measured at cost less any accumulated depreciation and any accumulated impairment losses, and adjusted for any remeasurement of the lease liability. The right-of-use asset is depreciated on a straight-line basis. If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, CNH Industrial depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. After the commencement date, the lease liability is increased to reflect the accretion of interest, recognized within Financial income/(expenses) in the income statement, and reduced for the lease payments made, and remeasured to reflect any reassessment or lease modifications.

▪ On June 7, 2017, the IASB issued IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments which clarifies application of recognition and measurement requirements in IAS 12 - Income Taxes when there is uncertainty over income tax treatments. The Interpretation is effective from January 1, 2019. The application of this interpretation did not have any material effect on the interim Condensed Consolidated Financial Statements.

In September 2019, the IFRIC finalized its agenda decision regarding the presentation of liabilities or assets related to uncertain tax treatments which have been recognized through applying IFRIC 23. The agenda decision concluded that uncertain tax liabilities should be presented as current tax liabilities, or deferred tax liabilities, and uncertain tax assets as current tax assets, or deferred tax assets. The Group is reviewing the impact of this decision, but does not expect any material impact to its Consolidated Financial Statements or disclosures upon application of the agenda decision during the fourth quarter of 2019.

▪ On December 12, 2017, the IASB issued the Annual Improvements to IFRSs 2015–2017 Cycle. The most important topics addressed in these amendments are: (i) on IFRS 3 - Business Combinations, clarifying that a company shall remeasure its previously held interest in a joint operation when it obtains control of the business, and on IFRS 11 - Joint Arrangements, a company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business, (ii) on IAS 12 - Income Taxes, clarifying that all income tax consequences of dividends (i.e. distribution of profits) should be recognized according to where the entity originally recognized the past transactions or events generating distributable profits, and (iii) on IAS 23 - Borrowing Costs, clarifying that a company shall treat as part of general borrowing any borrowing originally made to develop an asset when the asset is ready for its intended use or sale. These amendments are effective from January 1, 2019. The application of these improvements did not have any material effect on the Interim Condensed Consolidated Financial Statements.

▪ On February 7, 2018, the IASB issued Plan Amendment, Curtailment or Settlement(Amendments to IAS 19), requiring an entity after remeasuring its defined benefit obligations as a consequence on a plan amendment, curtailment or settlement, to use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. The amendments are effective prospectively from January 1, 2019. The application of these amendments did not have any material effect on the Interim Condensed Consolidated Financial Statements.

Accounting standards, amendments and interpretations not yet applicable and not early adopted by the Group

See paragraph “Accounting standards, amendments and interpretations not yet applicable and not early adopted by the Group” of the section “Significant accounting policies” in the Notes to the Consolidated Financial Statements as of December 31, 2018, for a description of other new standards not yet effective and not adopted as of September 30, 2019. Furthermore:

▪ On September 29, 2019, IASB issued Interest Rate Benchmark Reform (amendments to IFRS 9, IAS 39 and IFRS 7), which modifies some specific hedge accounting requirements to provide relief from the potential effects of uncertainty caused by Interbank Offered Rates (IBOR) reform. The amendments shall be applied retrospectively from January 1, 2020. The European Union has not yet completed its endorsement process for these amendments. The Group is currently evaluating the impact of the adoption of these amendments on its Consolidated Financial Statements or disclosures upon adoption of the amendments.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 40

SCOPE OF CONSOLIDATION

Planned spin-off of On-Highway business

On September 3, 2019, the Company announced its intention to separate its "On-Highway" (commercial vehicles and powertrain) and "Off-Highway" (agriculture, construction and specialty vehicles) businesses. The separation is expected to be effected through the spin-off of CNH Industrial N.V.’s equity interest in "On-Highway" to CNH Industrial N.V. shareholders. The proposed spin-off is expected to be completed in early 2021, subject to approval at an Extraordinary General Meeting of shareholders.

CNH Industrial did not classify the business that will be separated as asset held for sale at September 30, 2019. The criteria within IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations were not met as the structure, organization, terms and financing aspects of the transaction had not yet been finalized and will be subject to final approval by the Extraordinary General Meeting of CNH Industrial N.V.'s shareholders.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 41

COMPOSITION AND PRINCIPAL CHANGES

1. Net revenues

The following table summarizes Net revenues for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Nine Months Ended September 30,
($ million)	2019		2018		2019		2018
Agriculture	2,418		2,681		8,013		8,572
Construction	663		726		2,060		2,207
Commercial and Specialty Vehicles	2,313		2,395		7,431		7,779
Powertrain	925		961		3,098		3,366
Eliminations and Other	(468	)	(487	)	(1,656	)	(1,768	)
Total Industrial Activities	5,851		6,276		18,946		20,156
Financial Services	477		471		1,467		1,471
Eliminations and Other	(32	)	(43	)	(106	)	(140	)
Total Net revenues	6,296		6,704		20,307		21,487

The following table disaggregates Net revenues by major source for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,		Nine Months Ended September 30,
($ million)	2019	2018	2019	2018
Revenues from:
Sales of goods	5,563	6,049	18,149	19,499
Rendering of services and other revenues	195	112	499	297
Rents and other income on assets sold with a buy-back commitment	93	115	298	360
Revenues from sales of goods and services	5,851	6,276	18,946	20,156
Finance and interest income	267	248	812	786
Rents and other income on operating lease	178	180	549	545
Total Net Revenues	6,296	6,704	20,307	21,487

During the three months ended September 30, 2019 and 2018, revenues included $118 million and $125 million, respectively, relating to contract liabilities outstanding at the beginning of each period. During the nine months ended September 30, 2019 and 2018, revenues included $415 million and $440 million, respectively, relating to contract liabilities outstanding at the beginning of each period.

As of September 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1.9 billion. CNH Industrial expects to recognize revenue on approximately 40% and 84% of the remaining performance obligations over the next 12 and 36 months, respectively, with the remaining recognized thereafter.

2. Cost of sales

The following summarizes the main components of Cost of sales:

	Three months ended September 30,		Nine months ended September 30,
($ million)	2019	2018	2019	2018
Interest cost and other financial charges from Financial Services	124	112	392	323
Other costs of sales	5,143	5,306	16,186	17,093
Total Cost of sales	5,267	5,418	16,578	17,416

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 42

3. Selling, general and administrative costs

Selling, general and administrative costs amounted to $519 million and $1,590 million in the three and nine months ended September 30, 2019, respectively, compared to $527 million and $1,685 million recorded in the comparable periods in 2018.

4. Research and development costs

In the three months ended September 30, 2019, research and development costs of $269 million ($278 million in the comparable period of 2018) comprise all the research and development costs not recognized as assets in the period amounting to $147 million ($161 million in the three months ended September 30, 2018), the amortization of capitalized development costs of $106 million ($117 million in the comparable period of 2018) and the impairment of capitalized development costs of $16 million (zero in the comparable period of 2018). During the period, the Group capitalized new development costs of $95 million ($100 million in the three months ended September 30, 2018).

In the nine months ended September 30, 2019, research and development costs of $824 million ($804 million in the comparable period of 2018) included all the research and development costs not recognized as assets in the period amounting to $479 million ($445 million in the nine months ended September 30, 2018), the amortization of capitalized development costs of $327 million ($359 million in the comparable period of 2018) and the impairment of capitalized development costs of $18 million (zero in the comparable period of 2018). During the period, the Group capitalized new development costs of $291 million ($321 million in the nine months ended September 30, 2018).

5. Result from investments

This item mainly includes CNH Industrial’s share in the net profit or loss of the investees accounted for using the equity method, as well as any impairment losses, reversal of impairment losses, accruals to the investment provision, and dividend income. In the three and nine months ended September 30, 2019, CNH Industrial’s share in the net profit or loss of the investees accounted for using the equity method is a loss of $2 million and a gain of $15 million, respectively (a gain of $11 million and $55 million in the comparable periods of 2018, respectively).

6. Gains/(losses) on the disposal of investments

The balance of this item was immaterial in the three and nine months ended September 30, 2019 and 2018.

7. Restructuring costs

CNH Industrial incurred restructuring costs of $46 million and $82 million during the three and nine months ended September 30, 2019, respectively, primarily attributable to actions taken in the context of the "Transform 2 Win" Strategic Business Plan announced at the Company's Capital Markets Day on September 3, 2019.Restructuring costs recognized in the period refer to the asset write-offs related to the recently announced closure of two plants and other activities related to the previously announced launch of a new organization structure focused on operating segments. CNH Industrial incurred restructuring costs of $7 million and $17 million during the three and nine months ended September 30, 2018, respectively.

8. Other income/(expenses)

This item consists of miscellaneous costs which cannot be allocated to specific functional areas, such as accruals for various provisions not attributable to other items of Cost of sales or Selling, general and administrative costs, net of income arising from operations which is not attributable to the sale of goods and services. This item amounted to other income of $46 million and other expenses of $4 million in the three and nine months ended September 30, 2019, respectively, and included in both periods the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. This item amounted to other expenses of $29 million and other income of $425 million in the three and nine months ended September 30, 2018, respectively, and included in the nine months ended September 30, 2018 a pre-tax income of $527 million related to the Benefit Modification gain, as further described in paragraph “Employee benefits” of Note 22 “Provisions”.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 43

9. Financial income/(expenses)

In addition to the items forming part of the specific lines of the condensed consolidated income statement, the following analysis of Net financial income/(expenses) in the three and nine months ended September 30, 2019 also takes into account the Interest income earned by Financial Services (presented in item “Interest income from customers and other financial income of Financial Services” in the following table) included in Net revenues for $204 million and $613 million in the three and nine months ended September 30, 2019, respectively ($193 million and $604 million in the comparable periods of 2018, respectively), and the costs incurred by Financial Services (included in item “Interest cost and other financial expenses” in the following table) included in Cost of sales for $124 million and $392 million in the three and nine months ended September 30, 2019, respectively ($112 million and $323 million in the comparable periods of 2018, respectively).

A reconciliation to the condensed consolidated income statement is provided under the following table.

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Financial income:
Interest earned and other financial income	14		16		46		52
Interest income from customers and other financial income of Financial Services	204		193		613		604
Total financial income	218		209		659		656
of which:
Financial income, excluding Financial Services (a)	14		16		46		52
Interest and other financial expenses:
Interest cost and other financial expenses	148		204		481		578
Write-downs of financial assets at amortized cost	23		3		49		29
Interest costs on employee benefits	6		6		19		26
Total interest and other financial expenses	177		213		549		633
Net (income)/expenses from derivative financial instruments at fair value through profit or loss	(120	)	(64	)	(128	)	(280	)
Exchange rate differences from derivative financial instruments	178		178		249		527
Total interest and other financial expenses, net (income)/expenses from derivative financial instruments and exchange differences	235		327		670		880
of which:
Interest and other financial expenses, effects resulting from derivative financial instruments and exchange differences, excluding Financial Services (b)	111		215		278		557
Net financial income/(expenses) excluding Financial Services (a) - (b)	(97	)	(199	)	(232	)	(505	)

10. Income taxes

Income taxes recognized in the condensed consolidated income statement consist of the following:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Current taxes	(45	)	(81	)	(225	)	(225	)
Deferred taxes	(5	)	(31	)	(57	)	(200	)
Taxes relating to prior periods	(3	)	4		13		3
Total Income tax (expense)	(53	)	(108	)	(269	)	(422	)

The effective tax rates for the three months ended September 30, 2019 and 2018 were 37.3% and 42.2%, respectively. The effective tax rates for the nine months ended September 30, 2019 and 2018 were 26.6% and 27.4%, respectively.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 44

11. Earnings per share

Basic earnings/(loss) per common share (“EPS”) is computed by dividing the Profit/(loss) for the period attributable to the owners of the parent by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur on the conversion of all dilutive potential common shares into common shares. Stock options, restricted stock units, and performance stock units deriving from the CNH Industrial share-based payment awards are considered dilutive securities.

Shares acquired under the buy-back program are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share. For additional information on the buy-back program, see Note 21 “Equity”.

A reconciliation of basic and diluted earnings per share is as follows:

		Three months ended September 30,		Nine months ended September 30,
		2019	2018	2019	2018
Basic:
Profit attributable to the owners of the parent	$ million	83	140	718	1,091
Weighted average common shares outstanding – basic	million	1,351	1,355	1,353	1,358
Basic earnings per common share	$	0.06	0.10	0.53	0.80
Diluted:
Profit attributable to the owners of the parent	$ million	83	140	718	1,091
Weighted average common shares outstanding – basic	million	1,351	1,355	1,353	1,358
Effect of dilutive securities (when dilutive):
Stock compensation plans (a)	million	1	2	2	3
Weighted average common shares outstanding – diluted	million	1,352	1,357	1,355	1,361
Diluted earnings per common share	$	0.06	0.10	0.53	0.80

(a) For the three and nine months ended September 30, 2019, 2.5 million shares and 2.5 million shares, respectively were excluded from the computation of diluted earnings per share due to an anti-dilutive impact. For the three and nine months ended September 30, 2018, 6.4 million and 6.9 million shares, respectively, were excluded from the computation of diluted earnings per share due to an anti-dilutive impact.

In the nine months ended September 30, 2018, basic and diluted earnings per common share included the positive impact of $399 million, net of taxes, of the $527 million Benefit Modification gain as further described in paragraph “Employee benefits” of Note 22 “Provisions”. The impact per share of the Benefit Modification gain was as follows:

		Nine months ended September 30, 2018
Benefit Modification gain - pre tax	$ million	527
Benefit Modification gain - income tax effect	$ million	(128	)
Benefit Modification gain - after tax (a)	$ million	399
Weighted average common shares outstanding - basic (b)	million	1,358
Benefit Modification gain after tax per share - basic (a)/(b)	$	0.29
Weighted average common shares outstanding - diluted (c)	million	1,361
Benefit Modification gain after tax per share - diluted (a)/(c)	$	0.29

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 45

12. Intangible assets

Changes in the carrying amount of Intangible assets for the nine months ended September 30, 2019 were as follows:

($ million)	Carrying amount at December 31, 2018	Additions	Amortization		Foreign exchange effects and other changes		Carrying amount at September 30, 2019
Goodwill	2,464	—	—		(1	)	2,463
Development costs	2,344	291	(327	)	(107	)	2,201
Other	689	65	(76	)	(12	)	666
Total Intangible assets	5,497	356	(403	)	(120	)	5,330

Goodwill is allocated to the segments as follows: Agriculture for $1,695 million, Construction for $577 million, Commercial and Specialty Vehicles for $58 million, Powertrain for $5 million and Financial Services for $128 million.

13. Property, plant and equipment 

Changes in the carrying amount of Property, plant and equipment for the nine months ended September 30, 2019 were as follows:

($ million)	Carrying amount at December 31, 2018	Impact of IFRS 16 adoption	Other changes		Carrying amount at January 1, 2019	Additions	Depreciation		Foreign exchange effects		Disposals and other changes		Carrying amount at September 30, 2019
Property, plant and equipment acquired	3,670	—	—		3,670	260	(413	)	(162	)	35		3,390
Property, plant and equipment under finance leases	4	—	(4	)	—	—	—		—		—		—
Right-of-use assets	—	480	4		484	50	(110	)	(18	)	(10	)	396
Assets sold with a buy-back commitment	2,289	—	—		2,289	379	(231	)	(103	)	(487	)	1,847
Total Property plant and equipment	5,963	480	—		6,443	689	(754	)	(283	)	(462	)	5,633

At September 30, 2019, right-of-use assets refer primarily to lease contracts for industrial buildings ($279 million), plant, machinery and equipment ($37 million), and other assets ($80 million).

Short-term and low-value leases are not recorded in the statement of financial position; CNH Industrial recognizes lease expense ($5 million and $16 million in the three and nine months ended September 30, 2019, respectively) for these leases on a straight-line basis over the lease term.

14. Investments and other financial assets

Investments and other financial assets at September 30, 2019 and December 31, 2018 consisted of the following:

($ million)	At September 30, 2019	At December 31, 2018
Investments	668	558
Non-current financial receivables and other non-current securities	49	34
Total Investments and other financial assets	717	592

Changes in Investments were as follows:

($ million)	At December 31, 2018	Revaluations/ (Write-downs)	Acquisitions and capitalizations	Other changes		At September 30, 2019
Investments	558	15	132	(37	)	668

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 46

During the three months ended September 30, 2019, CNH Industrial announced a strategic and exclusive Heavy-Duty Truck partnership with Nikola Corporation, a U.S. based leader in fuel cell truck technology. In this context, CNH Industrial made an initial subscription to Nikola's share capital (approximately 2.5% shareholding) through a cash contribution of $50 million and an in-kind contribution of $50 million, granting Nikola access to certain Iveco technology (reported as revenue). The investment in Nikola was designated as at fair value through other comprehensive income and is expected, in coming quarters, to grow to reflect an additional $150 million of contributions ($50 million of cash and $100 million in services).

Investments amounted to $668 million at September 30, 2019 ($558 million at December 31, 2018) and primarily included the following: Naveco (Nanjing Iveco Motor Co.) Ltd. $137 million ($165 million at December 31, 2018), Turk Traktor ve Ziraat Makineleri A.S. $50 million ($50 million at December 31, 2018) and CNH Industrial Capital Europe S.a.S. $179 million ($175 million at December 31, 2018).

Revaluations and write-downs primarily consist of adjustments for the result of the period to the carrying amount of investments accounted for under the equity method.

15. Leased assets

Leased assets primarily include equipment and vehicles leased to retail customers by Financial Services under operating lease arrangements. Such leases typically have terms of 3 to 5 years with options available for the lessee to purchase the equipment at the lease term date. Revenues for non-lease components are accounted for separately.

Changes in the carrying amount of Leased assets for the nine months ended September 30, 2019 were as follows:

($ million)	Carrying amount at December 31, 2018	Additions	Depreciation		Foreign exchange effects	Disposals and other changes		Carrying amount at September 30, 2019
Leased assets	1,774	564	(188	)	7	(354	)	1,803

16. Inventories

At September 30, 2019 and December 31, 2018, Inventories consisted of the following:

($ million)	At September 30, 2019	At December 31, 2018
Raw materials	1,489	1,292
Work-in-progress	775	573
Finished goods	5,857	4,854
Total Inventories	8,121	6,719

At September 30, 2019, Inventories included assets which are no longer subject to operating lease arrangements or buy-back commitments and were held for sale for a total amount of $490 million ($437 million at December 31, 2018).

17. Current receivables and Other current assets

A summary of Current receivables and Other current assets as of September 30, 2019 and December 31, 2018 is as follows:

($ million)	At September 30, 2019	At December 31, 2018
Trade receivables	417	395
Receivables from financing activities	18,451	19,175
Current tax receivables	251	356
Other current assets:
Other current receivables	1,323	1,271
Accrued income, prepaid expenses and other	189	119
Total Other current assets	1,512	1,390
Total Current receivables and Other current assets	20,631	21,316

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 47

Receivables from financing activities

A summary of Receivables from financing activities as of September 30, 2019 and December 31, 2018 is as follows:

($ million)	At September 30, 2019	At December 31, 2018
Retail:
Retail financing	8,776	9,084
Finance leases	227	272
Total Retail	9,003	9,356
Wholesale:
Dealer financing	9,377	9,751
Total Wholesale	9,377	9,751
Other	71	68
Total Receivables from financing activities	18,451	19,175

CNH Industrial provides and administers financing for retail purchases of new and used equipment and vehicles sold through its dealer network. The terms of retail and other notes and finance leases generally range from two to six years, and interest rates on retail and other notes and finance leases vary depending on prevailing market interest rates and certain incentive programs offered by Industrial Activities.

CNH Industrial manages its receivable portfolios using multiple factors, primarily past dues, historical loss experience, collateral value, outstanding balance and internal behavioural classifications.

The aging of Receivables from financing activities as of September 30, 2019 and December 31, 2018 is as follows:

	At September 30, 2019
($ million)	Total Current	31-60 Days Past Due	61-90 Days Past Due	Total Performing	Non-Performing	Total
Retail
North America	6,221	24	6	6,251	—	6,251
Europe	147	—	—	147	—	147
South America	1,768	13	2	1,783	15	1,798
Rest of World	801	3	2	806	1	807
Total Retail	8,937	40	10	8,987	16	9,003
Wholesale
North America	3,669	4	—	3,673	3	3,676
Europe	4,208	14	13	4,235	30	4,265
South America	716	—	—	716	55	771
Rest of World	645	8	6	659	6	665
Total Wholesale	9,238	26	19	9,283	94	9,377

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 48

	At December 31, 2018
($ million)	Total Current	31-60 Days Past Due	61-90 Days Past Due	Total Performing	Non-Performing	Total
Retail
North America	6,296	21	5	6,322	5	6,327
Europe	164	1	—	165	50	215
South America	1,899	11	9	1,919	78	1,997
Rest of World	814	2	1	817	—	817
Total Retail	9,173	35	15	9,223	133	9,356
Wholesale
North America	3,612	—	—	3,612	18	3,630
Europe	4,729	20	8	4,757	—	4,757
South America	656	—	—	656	—	656
Rest of World	697	7	4	708	—	708
Total Wholesale	9,694	27	12	9,733	18	9,751

There is not a disproportionate concentration of credit risk in any geographic area. Receivables from financing activities generally relate to the agricultural, construction and truck businesses. CNH Industrial typically retains a security interest in the equipment or vehicle being financed. In addition, CNH Industrial may also obtain other forms of collateral including letter of credit/guarantees, insurance coverage, real estate and personal guarantees.

Receivables from financing activities are considered to have a significant credit deterioration when they are classified as a problem account, which generally occurs when customers show signs of operational or financial weakness including past dues, which require significant collection effort and monitoring; an account is typically considered in default when they are 90 days past due.

CNH Industrial utilizes three categories for receivables from financing activities that reflect their credit risk and how the loan provision is determined.

Internal risk grade	IFRS 9 classification	Definition	Basis for recognition of expected credit loss provision
Performing	Stage 1	Low risk of default; payments are generally less than 30 days past due	12 month expected credit losses
Performing	Stage 2	Significant increase in credit risk; payments generally between 31 and 90 days past due	Lifetime expected credit losses
Non-performing	Stage 3	Accounts are credit impaired and/or a legal action has been initiated; payments generally greater than 90 days past due	Lifetime expected credit losses

Charge‑offs of principal amounts of receivables outstanding are deducted from the allowance at the point when it is estimated that amounts due are deemed uncollectible. CNH Industrial continues to engage in collection efforts to attempt to recover the receivables. When recoveries are collected, these are recognized as income.

Allowance for Credit Losses

CNH Industrial’s allowance for credit losses is segregated into three portfolio segments: retail, wholesale and other. A portfolio segment is the level at which CNH Industrial develops a systematic methodology for determining its allowance for credit losses. Further, CNH Industrial evaluates its retail and wholesale portfolio segments by class of receivable: North America, Europe, South America and Rest of World regions. Typically, CNH Industrial’s receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk. These classes align with management reporting.

The Group accounts for its credit risk by appropriately providing for expected credit losses on a timely basis. In calculating the expected credit loss rates, CNH Industrial considers historical loss rates for each category of customers, and adjusts for forward looking macroeconomic data.

In calculating the expected credit losses, CNH Industrial’s calculations depend on whether the receivable has been individually identified as being impaired. The first component of the allowance for credit losses covers the receivables specifically reviewed by management for which CNH Industrial has determined it is probable that it will not collect all of

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 49

the contractual principal and interest. Receivables are individually reviewed for impairment based on, among other items, amounts outstanding, days past due and prior collection history. Expected credit losses are measured by considering: the unbiased and probability-weighted amount; the time value of money; and reasonable and supportable information (available without undue costs or effort) at the reporting date about past events, current conditions and forecasts of future economic conditions. Expected credit losses are measured as the probability-weighted present value of all cash shortfalls over the expected life of each financial asset.

The second component of the allowance for credit losses covers all receivables that have not been individually reviewed for impairment. The allowance for these receivables is based on aggregated portfolio evaluations, generally by financial product. The allowance for wholesale and retail credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward looking macroeconomic factors. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Allowance for credit losses activity for the three and nine months ended September 30, 2019 is as follows:

	Three months ended September 30, 2019
	Retail							Wholesale
($ million)	Stage 1 12 months ECL		Stage 2 Lifetime ECL	Stage 3 Lifetime ECL		Total		Stage 1 12 months ECL		Stage 2 Lifetime ECL	Stage 3 Lifetime ECL		Total
Opening balance	92		6	216		314		31		1	127		159
Provision (benefit)	(12	)	1	28		17		(1	)	—	3		2
Charge-offs, net of recoveries	(2	)	—	(14	)	(16	)	—		—	(2	)	(2	)
Transfers	2		2	(4	)	—		4		—	(4	)	—
Foreign currency translation and other	(12	)	—	(7	)	(19	)	(1	)	—	(3	)	(4	)
Ending balance	68		9	219		296		33		1	121		155

	Nine months ended September 30, 2019
	Retail							Wholesale
($ million)	Stage 1 12 months ECL		Stage 2 Lifetime ECL	Stage 3 Lifetime ECL		Total		Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
Opening balance	103		4	212		319		32		2		130		164
Provision (benefit)	(9	)	1	48		40		2		—		2		4
Charge-offs, net of recoveries	(10	)	—	(33	)	(43	)	(1	)	—		(7	)	(8	)
Transfers	(6	)	4	2		—		(1	)	(1	)	2		—
Foreign currency translation and other	(10	)	—	(10	)	(20	)	1		—		(6	)	(5	)
Ending balance	68		9	219		296		33		1		121		155
Receivables:
Ending balance	8,915		44	44		9,003		9,073		135		169		9,377

Allowance for credit losses activity for the three and nine months ended September 30, 2018 is as follows:

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 50

	Three months ended September 30, 2018
	Retail								Wholesale
($ million)	Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total		Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
Opening balance	96		2		245		343		32		2		164		198
Provision (benefit)	8		—		6		14		(1	)	(2	)	(8	)	(11	)
Charge-offs, net of recoveries	(11	)	—		(10	)	(21	)	—		—		(4	)	(4	)
Transfers	22		(1	)	(21	)	—		—		4		(4	)	—
Foreign currency translation and other	(6	)	1		2		(3	)	(1	)	(2	)	(4	)	(7	)
Ending balance	109		2		222		333		30		2		144		176

	Nine months ended September 30, 2018
	Retail								Wholesale
($ million)	Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total		Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total
Opening balance	122		4		255		381		39		2		161		202
Provision (benefit)	23		1		12		36		(4	)	(1	)	(2	)	(7	)
Charge-offs, net of recoveries	(29	)	—		(32	)	(61	)	—		—		(5	)	(5	)
Transfers	14		(3	)	(11	)	—		(3	)	4		(1	)	—
Foreign currency translation and other	(21	)	—		(2	)	(23	)	(2	)	(3	)	(9	)	(14	)
Ending balance	109		2		222		333		30		2		144		176
Receivables:
Ending balance	8,964		44		144		9,152		9,061		59		19		9,139

Allowance for credit losses activity for the year ended December 31, 2018 were as follows:

	Year ended Year ended December 31, 2018
	Retail								Wholesale
($ million)	Stage 1 12 months ECL		Stage 2 Lifetime ECL		Stage 3 Lifetime ECL		Total		Stage 1 12 months ECL		Stage 2 Lifetime ECL	Stage 3 Lifetime ECL		Total
Opening balance	122		4		255		381		39		2	161		202
Provision (benefit)	14		1		31		46		(4	)	—	(2	)	(6	)
Charge-offs, net of recoveries	(33	)	—		(53	)	(86	)	—		—	(14	)	(14	)
Transfers	20		(1	)	(19	)	—		—		—	—		—
Foreign currency translation and other	(20	)	—		(2	)	(22	)	(3	)	—	(15	)	(18	)
Ending balance	103		4		212		319		32		2	130		164
Receivables:
Ending balance	9,151		44		161		9,356		9,443		147	161		9,751

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 51

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 experiencing financial difficulties. As a collateral-based lender, CNH Industrial 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 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 exist 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 September 30, 2019, CNH Industrial had 284 retail and finance lease contracts classified as TDRs where a court in the North America region has determined the concession. The pre-modification value was $11 million and the post-modification value was $10 million. Additionally, the Company had 346 accounts with a balance of $15 million undergoing bankruptcy proceedings where a concession has not yet been determined. As of September 30,2018, the Company had 278 retail and finance lease contracts classified as TDRs where a court in the North America region has determined the concession. The pre-modification value of these contracts was $9 million and the post-modification value was $9 million. Additionally, the Company had 365 accounts with a balance of $17 million undergoing bankruptcy proceedings in North America where a concession has not yet been determined.  As the outcome of the bankruptcy cases is determined by a 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 September 30, 2019 and 2018.

As of September 30, 2019, CNH Industrial had retail and finance lease receivable contracts classified as TDRs in Europe. The pre-modification value was $88 million and the post-modification value was $81 million. Subsequent re-defaults were not material for retail and finance lease receivable contracts that were modified in a TDR during the previous twelve months ended September 30, 2019.

As of September 30, 2019 and 2018, CNH Industrial’s wholesale TDR agreements were immaterial.

Transfers of financial assets

The Group 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 structured entity 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). Asset-backed securities are divided into classes according to their degree of seniority and rating: the most senior classes are placed with investors on the market; the junior class, whose repayment is subordinated to the senior classes, is normally subscribed for by the seller. The residual interest in the receivables retained by the seller is therefore limited to the junior securities it has subscribed for. In accordance with IFRS 10 – Consolidated Financial Statements, all securitization vehicles are included in the scope of consolidation because the subscription of the junior asset-backed securities by the seller implies its control in substance over the structured entity.

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 comply with the requirements of IFRS 9 – Financial Instruments for the derecognition of the assets, since the risks and rewards connected with collection are not substantially transferred and, accordingly, the Group continues to recognize the receivables transferred by this means in its consolidated statement of financial position and recognizes a financial liability of the same amount under Asset-backed financing (see Note 23 “Debt”). The gains and losses arising from the transfer of these assets are only recognized when the assets are derecognized.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 52

At September 30, 2019 and December 31, 2018, the carrying amounts of such restricted assets included in Receivables from financing activities are the following:

($ million)	At September 30, 2019	At December 31, 2018
Restricted receivables:
Retail financing and finance lease receivables	6,322	6,371
Wholesale receivables	6,480	7,052
Total restricted receivables	12,802	13,423

CNH Industrial has discounted receivables and bills without recourse having due dates beyond September 30, 2019 amounting to $235 million ($498 million at December 31, 2018, with due dates beyond that date), which refer to trade receivables and other receivables for $223 million ($477 million at December 31, 2018), and receivables from financing activities for $12 million ($21 million at December 31, 2018).

18. Other financial assets and Other financial liabilities

These items consist of derivative financial instruments measured at fair value at the balance sheet date.

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.

In accordance with IFRS 9, derivative financial instruments qualify for hedge accounting only when, at the inception of the hedge, there is formal designation and documentation of the hedging relationship, there is an economic relationship between the hedging instrument and the hedged item, credit risk does not dominate the value changes that result from the economic relationship, and the hedging relationship’s hedging ratio reflects the actual quantity of the hedging instrument and the hedged item. Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.

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.

For hedging cash flows in a currency different from the functional currency, the hedge relationship reflects the hedge ratio of 1:1, which means that relationship is characterized by the value of the hedging instrument and the value of the hedged item moving in the opposite direction as a result of the common underlying of hedged risk.

The main sources of hedge ineffectiveness are:

▪ the effect of the counterparty and the Group’s own credit risk on the fair value of the foreign exchange derivatives, which is not reflected in the change in the fair value of the hedged cash flow attributable to the change in the exchange rates, and

▪ changes in timing of the hedged transaction.

Ineffectiveness related to these hedge relationships is recognized currently in the condensed consolidated income statement in the line “Financial income/(expenses)” and was not significant for all periods presented. Fair value changes used as a basis to calculate hedge ineffectiveness were $-87 million for foreign exchange contracts in the nine months ended September 30, 2019. The maturity of these instruments does not exceed 24 months and the after-tax gains/(losses) deferred in accumulated other comprehensive income/(loss) that will be recognized in net revenues and cost of sales over the next twelve months, assuming foreign exchange rates remain unchanged, is approximately $-49 million. If a derivative instrument is terminated because the hedge relationship is no longer effective or because the hedged item is a 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.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 53

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 “Financial income/(expenses)” 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 $7.3 billion and $7.2 billion at September 30, 2019 and December 31, 2018, 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 CNH Industrial 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, to the extent that the hedge relationship has been effective, are deferred in other comprehensive income/(loss) and recognized in “Financial income/(expenses)” over the period in which CNH Industrial recognizes interest expense on the related debt. The after-tax gains (losses) deferred in other comprehensive income/(loss) that will be recognized in interest expense over the next twelve months is insignificant.

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 “Financial income/(expenses)” in the period in which they occur and an offsetting gain or loss is also reflected in “Financial income/(expenses)” based on changes in the fair value of the debt instrument being hedged due to changes in floating interest rate benchmarks.

For hedging interest rate exposures, the hedge relationship reflects the hedge ratio 1:1, which means that relationship is characterized by the value of the hedging instrument and the value of the hedged item that move in the opposite direction as a result of the common underlying of hedged risk.

The main sources of hedge ineffectiveness are:

▪ the effect of the counterparty and the Group’s own credit risk on the fair value of the swaps, which is not reflected in the change in the fair value of the hedged cash flow attributable to the change in the interest rates, and

▪ differences in repricing dates between the swaps and the borrowings.

Any ineffectiveness is recorded in “Financial income/(expenses)” in the condensed consolidated income statement and its amount was insignificant for all periods presented. Fair value changes used as a basis to calculate hedge ineffectiveness were $24 million for interest rate derivatives in the nine months ended September 30, 2019.

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 in all periods presented.

All of CNH Industrial’s interest rate derivatives outstanding as of September 30, 2019 and December 31, 2018 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 $5.2 billion and $5.4 billion at September 30, 2019 and December 31, 2018, respectively.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 54

Financial statement impact of CNH Industrial derivatives

The following table summarizes the gross impact of changes in the fair value of derivatives on other comprehensive income and profit or loss during the three and nine months ended September 30, 2019 and 2018:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Fair value hedges
Interest rate derivatives - Financial income/(expenses)	7		(3	)	38		(13	)
Gains/(losses) on hedged items - Financial income/(expenses)	(7	)	3		(38	)	13
Cash flow hedges
Recognized in Other comprehensive income (effective portion):
Foreign exchange derivatives	(43	)	20		(87	)	31
Interest rate derivatives	(6	)	(4	)	(26	)	10
Reclassified from other comprehensive income (effective portion):
Foreign exchange derivatives - Net revenues	2		(2	)	(2	)	(1	)
Foreign exchange derivatives - Cost of sales	(17	)	(6	)	(46	)	14
Foreign exchange derivatives - Financial income/(expenses)	(3	)	10		(10	)	24
Interest rate derivatives - Cost of sales	(3	)	(2	)	(6	)	(4	)
Not designated as hedges
Foreign exchange derivatives - Financial income/(expenses)	29		24		(39	)	133

The fair values of CNH Industrial’s derivatives as of September 30, 2019 and December 31, 2018 in the condensed consolidated statement of financial position are recorded as follows:

	At September 30, 2019			At December 31, 2018
($ million)	Positive fair value	Negative fair value		Positive fair value	Negative fair value
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate derivatives	42	(3	)	16	(16	)
Total Fair value hedges	42	(3	)	16	(16	)
Cash flow hedges:
Foreign exchange derivatives	38	(80	)	52	(41	)
Interest rate derivatives	19	(41	)	5	(13	)
Total Cash flow hedges	57	(121	)	57	(54	)
Total Derivatives designated as hedging instruments	99	(124	)	73	(70	)
Derivatives not designated as hedging instruments
Foreign exchange derivatives	36	(8	)	24	(38	)
Interest rate derivatives	—	—		1	—
Total Derivatives not designated as hedging instruments	36	(8	)	25	(38	)
Other financial assets/(liabilities)	135	(132	)	98	(108	)

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 55

Derivatives not designated as hedging instruments consist mainly of derivatives (mostly currency-based derivatives) acquired to hedge receivables and payables subject to currency risk and/or interest rate risk which are not formally designated as hedges at Group level.

19. Cash and cash equivalents

Cash and cash equivalents include cash at bank and other easily marketable securities that are readily convertible into cash and are subject to an insignificant risk of changes in value.

At September 30, 2019, this item included $781 million ($772 million at December 31, 2018) of restricted cash which mainly includes bank deposits that may be used exclusively for the repayment of the debt relating to securitizations classified as Asset-backed financing. At September 30, 2019, this item also included $603 million ($736 million at December 31, 2018) of money market securities and other cash equivalents.

20. Assets held for sale

Assets held for sale at September 30, 2019 and December 31, 2018 primarily included buildings.

21. Equity

Share capital

As of September 30, 2019, the Company’s share capital was €18 million (equivalent to $25 million), fully paid-in, andconsisted of 1,364,400,196 common shares (1,351,332,628 common shares outstanding, net of 13,067,568 common shares held in treasury by the Company as described in the following section) and 396,474,276 special voting shares (387,951,529 special voting shares outstanding, net of 8,522,747 special voting shares held in treasury by the Company as described in the following), all with a par value of €0.01 each.

For more complete information on the share capital of CNH Industrial N.V., see Note 23 “Equity” to the CNH Industrial Consolidated Financial Statements at December 31, 2018.

Treasury shares

As of September 30, 2019, the Company held 13.1 million common shares in treasury, net of transfers of common shares to fulfill its obligations under its stock compensation plans, at an aggregate cost of $141 million. As of September 30, 2019, the Company held 8.5 million special voting shares in treasury. During the nine months ended September 30, 2019, the Company repurchased 5.1 million shares of its common stock on the MTA and on multilateral trading facilities (“MTFs”) under the buy-back program in place at an aggregate cost of $45 million. During the same period, the Company acquired 0.8 million special voting shares following the de-registration of qualifying common shares from the Loyalty Register, net of the transfer and allocation of special voting shares to those shareholders whose qualifying common shares became eligible to receive special voting shares after the uninterrupted three-year registration period in the Loyalty Register.

In order to maintain the necessary operating flexibility over an adequate time period, including the implementation of the program in place, on April 12, 2019, the Annual General Meeting (“AGM”) granted to the Board of Directors the authority to acquire common shares in the capital of the Company through stock exchange trading on the MTA and the NYSE or otherwise for a period of 18 months (i.e., up to and including October 11, 2020). Under such authorization the Board’s authority is limited to a maximum of up to 10% of the issued common shares as of the date of the AGM and, in compliance with applicable rules and regulations, subject to a maximum price per common share equal to the average of the highest price on each of the five trading days prior to the date of acquisition, as shown in the Official Price List of the MTA or NYSE (as the case may be) plus 10% (maximum price) and to a minimum price per common share equal to the average of the lowest price on each of the five trading days prior to the date of acquisition, as shown in the Official Price List of the MTA or NYSE (as the case may be) minus 10% (minimum price). Since May 2019, the Company restarted its share buy-back program. Neither the renewal of the authorization, nor the launch of any program obliges the Company to buy-back any common shares. In any event, such program may be suspended, discontinued or modified at any time for any reason and without previous notice, in accordance with applicable laws and regulations.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 56

Capital reserves

At September 30, 2019 capital reserves, amounting to $3,279 million ($3,247 million at December 31, 2018), mainly consisted of the share premium deriving from the merger occurred in 2013 between Fiat Industrial and its majority owned subsidiary CNH Global.

Earnings reserves

Earnings reserves, amounting to $6,728 million at September 30, 2019 ($6,272 million at December 31, 2018), primarily consisted of retained earnings and profits attributable to the owners of the parent.

On April 12, 2019, at the AGM, CNH Industrial N.V. shareholders approved a dividend of €0.18 per common share, as recommended on March 1, 2019 by the Board of Directors. The cash dividend was declared in euro and paid on May 2, 2019 for a total amount of $275 million (€244 million).

Other comprehensive income/(loss)

Other comprehensive income/(loss) consisted of the following:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss:
Gains/(losses) on the remeasurement of defined benefit plans	(29	)	—		(29	)	55
Total Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss (A)	(29	)	—		(29	)	55
Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss:
Gains/(losses) on cash flow hedging instruments arising during the period	(49	)	16		(113	)	41
(Gains)/losses on cash flow hedging instruments reclassified to profit or loss	21		—		64		(33	)
Gains/(losses) on cash flow hedging instruments	(28	)	16		(49	)	8
Exchange gains/(losses) on translating foreign operations arising during the period	(104	)	(157	)	(57	)	(478	)
Exchange (gains)/losses on translating foreign operations reclassified to profit or loss	—		—		—		—
Exchange gains/(losses) on translating foreign operations	(104	)	(157	)	(57	)	(478	)
(Gains)/losses on fair value of equity investments at fair value through other comprehensive income arising during the period	(4	)	—		(4	)	—
Gains/(losses) on fair value of equity investments at fair value through other comprehensive income reclassified to profit or loss	—		—		—		—
Net change in fair value of equity investments at fair value through other comprehensive income	(4	)	—		(4	)	—
Share of Other comprehensive income/(loss) of entities accounted for using the equity method arising during the period	(16	)	(23	)	(19	)	(43	)
Reclassification adjustment for the share of Other comprehensive income/(loss) of entities accounted for using the equity method	—		—		—		—
Share of Other comprehensive income/(loss) of entities accounted for using the equity method	(16	)	(23	)	(19	)	(43	)
Total Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss (B)	(152	)	(164	)	(129	)	(513	)
Tax effect (C)	14		(2	)	20		(14	)
Total Other comprehensive income/(loss), net of tax (A) + (B) + (C)	(167	)	(166	)	(138	)	(472	)

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 57

The income tax effect for each component of Other comprehensive income/(loss) consisted of the following:

	Three months ended September 30,											Nine months ended September 30,
	2019					2018						2019					2018
($ million)	Before tax amount		Tax (expense)/ benefit	Net-of-tax amount		Before tax amount		Tax (expense)/ benefit		Net-of-tax amount		Before tax amount		Tax (expense)/ benefit	Net-of-tax amount		Before tax amount		Tax (expense)/ benefit		Net-of-tax amount
Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss:
Gains/(losses) on the remeasurement of defined benefit plans	(29	)	7	(22	)	—		—		—		(29	)	7	(22	)	55		—		55
Total Other comprehensive income/(loss) that will not be reclassified subsequently to profit or loss	(29	)	7	(22	)	—		—		—		(29	)	7	(22	)	55		—		55
Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss:
Gains/(losses) on cash flow hedging instruments	(28	)	7	(21	)	16		(2	)	14		(49	)	13	(36	)	8		(14	)	(6	)
Exchange gains/(losses) on translating foreign operations	(104	)	—	(104	)	(157	)	—		(157	)	(57	)	—	(57	)	(478	)	—		(478	)
Net change in fair value of equity investments at fair value through other comprehensive income	(4	)	—	(4	)	—		—		—		(4	)	—	(4	)	—		—		—
Share of Other comprehensive income/(loss) of entities accounted for using the equity method	(16	)	—	(16	)	(23	)	—		(23	)	(19	)	—	(19	)	(43	)	—		(43	)
Total Other comprehensive income/(loss) that may be reclassified subsequently to profit or loss	(152	)	7	(145	)	(164	)	(2	)	(166	)	(129	)	13	(116	)	(513	)	(14	)	(527	)
Total Other comprehensive income/(loss)	(181	)	14	(167	)	(164	)	(2	)	(166	)	(158	)	20	(138	)	(458	)	(14	)	(472	)

Share-based compensation

CNH Industrial recognized total share-based compensation expense of $8 million and $30 million for the three and nine months ended September 30, 2019, respectively ($9 million and $25 million for the comparable periods of 2018, respectively).

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 58

22. Provisions

A summary of Provisions at September 30, 2019 and December 31, 2018 is as follows:

($ million)	At September 30, 2019		At December 31, 2018
Employee benefits		1,508		1,763
Other provisions:
Warranty and technical assistance provision	891		925
Restructuring provision	106		74
Investment provision	12		12
Other risks	2,170		2,277
Total Other provisions		3,179		3,288
Total Provisions		4,687		5,051

Provisions for Employee benefits include provisions for health care plans, pension plans and other post-employment benefits, as well as other provisions for employees and provisions for other long-term employee benefits.

Provisions for Other risks include provisions for contractual and commercial risks and disputes.

Employee benefits

The following tables summarize the components of net benefit cost of CNH Industrial’s post-employment benefits for the three and nine months ended September 30, 2019 and 2018:

	Pension plans		Healthcare plans			Other
	Three Months Ended September 30,		Three Months Ended September 30,			Three Months Ended September 30,
($ million)	2019	2018	2019		2018	2019	2018
Service cost:
Current service cost	5	6	1		2	2	2
Past service cost and (gain)/loss from curtailments and settlements	—	—	(47	)	—	—	—
Total Service cost	5	6	(46	)	2	2	2
Net interest expense	3	3	3		4	—	—
Other costs	2	2	—		—	—	—
Net benefit (income)/cost recognized to profit or loss	10	11	(43	)	6	2	2

	Pension plans		Healthcare plans				Other
	Nine Months Ended September 30,		Nine Months Ended September 30,				Nine Months Ended September 30,
($ million)	2019	2018	2019		2018		2019	2018
Service cost:
Current service cost	15	18	3		6		6	6
Past service cost and (gain)/loss from curtailments and settlements	—	—	(47	)	(527	)	—	—
Total Service cost	15	18	(44	)	(521	)	6	6
Net interest expense	9	9	9		14		—	2
Other costs	6	6	—		—		—	—
Net benefit (income)/cost recognized to profit or loss	30	33	(35	)	(507	)	6	8

In the three and nine months ended September 30, 2019, Net benefit income included the pre-tax gain of $47 million related to a healthcare plan amendment in the U.S. Moreover, 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 CNH Industrial 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 in the second quarter of 2018. The amounts above have been recognized in their entirety in Other income/(expenses).

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 59

23. Debt

An analysis of debt by nature is as follows:

($ million)	At September 30, 2019		At December 31, 2018
Asset-backed financing		10,701		11,269
Other debt:
Bonds	7,963		7,967
Borrowings from banks	4,215		4,135
Payables represented by securities	1,007		960
Lease liabilities	396		—
Other(1)	120		212
Total Other debt		13,701		13,274
Total Debt		24,402		24,543

(1) At December 31, 2018 it included $2 million of finance lease liabilities in accordance with IAS 17.

Total Debt was $24,402 millionat September 30, 2019, a decrease of $141 million compared to December 31, 2018. Excluding the impact of exchange translation differences, Debt increased by $551 million as a result of a new bond issuance, a net increase in borrowing from banks and the recognition of additional lease liabilities, as described below, partially offset by repayment of bonds, a net decrease in borrowings from other debt and in asset-backed financing.

In March 2019, CNH Industrial Finance Europe S.A. issued €600 million of notes at an annual fixed rate of 1.75% due in 2027 (the “1.75% CIFE Notes”) at an issue price of 98.597 percent of their principal amount. The 1.75% CIFE Notes were issued under the €10 billion Euro Medium Term Note Programme guaranteed by CNH Industrial N.V.

In July 2019, CNH Industrial Finance Europe S.A. issued as a private placement €50 million of notes at an annual fixed rate of 2.200% due in 2039 (the “2.200% CIFE Notes”) at an issue price of 98.285 percent of their principal amount. The 2.200% CIFE Notes were issued under the €10 billion Euro Medium Term Note Programme guaranteed by CNH Industrial N.V.

In July 2019, CNH Industrial Finance Europe S.A. issued €500 million of notes at an annual fixed rate of 1.625% due in 2029 (the “1.625% CIFE Notes”) at an issue price of 98.926 percent of their principal amount. The 1.625% CIFE Notes were issued under the €10 billion Euro Medium Term Note Programme guaranteed by CNH Industrial N.V.

Due to the initial application of IFRS 16 as of January 1, 2019, $478 million of additional liabilities from leases were recognized. At December 31, 2018, only finance lease liabilities in accordance with IAS 17 ($2 million) were recognized.

During the nine months ended September 30, 2019, $105 million for the principal portion of Lease liabilities and $11 million for interest expenses related to lease liabilities were paid.

The following table sets out a maturity analysis of Lease liabilities at September 30, 2019:

($ million)	At September 30, 2019
Less than one year	122
One to two years	85
Two to three years	60
Three to four years	44
Four to five years	25
More than five years	118
Total undiscounted lease payments	454
Less: Interest	(58	)
Total Lease liabilities	396

At September 30, 2019, 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 leases were 6.9 years and 3.6%, respectively.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 60

The following table shows the summary of the Group’s issued bonds outstanding at September 30, 2019:

	Currency	Face value of outstanding bonds (in million)	Coupon		Maturity	Outstanding amount ($ million)
Euro Medium Term Notes
CNH Industrial Finance Europe S.A.(1)	EUR	432	2.875	%	September 27, 2021	470
CNH Industrial Finance Europe S.A.(1)	EUR	75	1.625	%	March 29, 2022	81
CNH Industrial Finance Europe S.A.(1)	EUR	500	1.375	%	May 23, 2022	545
CNH Industrial Finance Europe S.A.(1)	EUR	500	2.875	%	May 17, 2023	545
CNH Industrial Finance Europe S.A.(1)	EUR	650	1.75	%	September 12, 2025	707
CNH Industrial Finance Europe S.A.(1)	EUR	100	3.5	%	November 12, 2025	109
CNH Industrial Finance Europe S.A.(1)	EUR	500	1.875	%	January 19, 2026	545
CNH Industrial Finance Europe S.A.(1)	EUR	600	1.75	%	March 25, 2027	653
CNH Industrial Finance Europe S.A.(1)	EUR	50	3.875	%	April 21, 2028	54
CNH Industrial Finance Europe S.A.(1)	EUR	500	1.625	%	July 3, 2029	545
CNH Industrial Finance Europe S.A.(1)	EUR	50	2.200	%	July 15, 2039	54
Total Euro Medium Term Notes						4,308
Other Bonds
CNH Industrial Capital LLC	USD	600	4.375	%	November 6, 2020	600
CNH Industrial Capital LLC	USD	500	4.875	%	April 1, 2021	500
CNH Industrial Capital LLC	USD	400	3.875	%	October 15, 2021	400
CNH Industrial Capital LLC	USD	500	4.375	%	April 5, 2022	500
CNH Industrial Capital LLC	USD	500	4.2	%	January 15, 2024	500
CNH Industrial N.V.(2)	USD	600	4.5	%	August 15, 2023	600
CNH Industrial N.V.(2)	USD	500	3.85	%	November 15, 2027	500
Total Other bonds						3,600
Hedging effect and amortized cost valuation						55
Total Bonds						7,963

(1) Bond listed on the Irish Stock Exchange.

(2) Bond listed on the New York Stock Exchange.

The bonds issued by the Group may contain commitments of the issuer, and in certain cases commitments of CNH Industrial N.V. in its capacity as guarantor, which are typical of international practice for bond issues of this type such as, in particular, negative pledge (in relation to quoted indebtedness), a status (or pari passu) covenant and cross default clauses. A breach of these commitments can lead to the early repayment of the applicable notes. The bonds guaranteed by CNH Industrial N.V. under the Euro Medium Term Note Programme (and its predecessor the Global Medium Term Note Programme), as well as the notes issued by CNH Industrial N.V., contain clauses which could lead to early repayment if there is a change of control of CNH Industrial N.V. leading to a rating downgrading of CNH Industrial N.V.

The Group intends to repay the issued bonds in cash at the due date by utilizing available liquid resources. In addition, the companies in the Group may from time to time buy back their issued bonds. Such buy backs, if made, depend upon market conditions, the financial situation of the Group and other factors which could affect such decisions. Further information about these bonds is included in Note 26 “Debt” to the CNH Industrial Consolidated Financial Statements at December 31, 2018.

In March 2019, CNH Industrial signed a five-year committed revolving credit facility for €4 billion ($4.5 billion at March 31, 2019 exchange rate) due to mature in 2024 with two extension options of 1-year each, exercisable on the first and second anniversary of the signing date. The credit facility replaces the existing five-year €1.75 billion credit facility due to mature in 2021. Available committed unsecured facilities expiring after twelve months amounted to approximately $5.3 billion at September 30, 2019 ($3.1 billion at December 31, 2018). Total committed secured facilities expiring after twelve months amounted to approximately $3.9 billion at September 30, 2019 ($3.9 billion at December 31, 2018), of which $1 billion was available at September 30, 2019 ($0.9 billion at December 31, 2018).

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 61

Debt secured with mortgages and other liens on assets of the Group amounts to $36 million at September 30, 2019 ($39 million at December 31, 2018).

24.Trade payables

Trade payables of $5,167 million at September 30, 2019 decreased by $719 million from the amount at December 31, 2018.

25. Other current liabilities

At September 30, 2019, Other current liabilities mainly included $1,556 million of amounts payable to customers relating to repurchase price on buy-back agreements ($1,870 million at December 31, 2018), and $1,206 million of contract liabilities ($1,368 million at December 31, 2018), of which $645 million for future rents related to buy-back agreements ($773 million at December 31, 2018). Other current liabilities also included accrued expenses and deferred income of $520 million ($517 million at December 31, 2018).

26. Commitments and contingencies

As a global Group with a diverse business portfolio, CNH Industrial is exposed to numerous legal risks, including 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 and environmental claims that arise in the ordinary course of business. 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 CNH Industrial to pay substantial damages, 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 an outflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, CNH Industrial recognizes specific provisions for this purpose.

Although the ultimate outcome of legal matters pending against CNH Industrial and its subsidiaries cannot be predicted, CNH Industrial 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 Interim Condensed Consolidated Financial Statements.

Other litigation and investigation

Follow-up on Damages Claims: Iveco, the Company’s wholly owned subsidiary, and its competitors were subject to an investigation by the European Commission (the “Commission”) into certain business practices in the European Union in relation to Medium and Heavy ("M&H") trucks. On July 19, 2016, the Commission announced a settlement with Iveco. Following the settlement, CNH Industrial has been named as defendant in private litigation commenced in various European jurisdictions and Israel by customers and other third parties, either acting individually or as part of a wider group or class of claimants. These claims remain at an early stage. Further, on the base of the letters issued by a significant number of customers indicating that they may commence proceedings in the future, CNH Industrial expects to face further claims based on the same legal grounds in various other jurisdictions. The extent and outcome of these claims cannot be predicted at this time.

Guarantees

CNH Industrial provided guarantees on the debt or commitments of third parties and performance guarantees, mainly in the interest of a joint venture related to commercial commitments of defense vehicles, totaling $438 million and $471 million at September 30, 2019 and December 31, 2018, respectively.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 62

27.Segment reporting

The operating segments through which CNH Industrial manages its operations are based on the internal reporting used by the CNH Industrial 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 CNH Industrial.

CNH Industrial has five 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, Överum, and JF brands in Europe and the Miller brand, primarily in North America and Australia.

▪ Constructiondesigns, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, compact track loaders, and telehandlers. Construction equipment is sold under the CASE Construction Equipment and New Holland Construction brands.

▪ Commercial and Specialty Vehicles designs, manufactures and distributes a full range of light, medium, and heavy vehicles for the transportation and distribution of goods under the IVECO brand, commuter buses and touring coaches under the IVECO BUS (previously Iveco Irisbus) and Heuliez Bus brands, quarry and mining equipment under the IVECO ASTRA brand, firefighting vehicles under the Magirus brand, and vehicles for civil defense and peace-keeping missions under the Iveco Defence Vehicles brand.

▪ Powertrain designs, manufactures and distributes a range of engines, transmission systems and axles for on- and off-road applications, as well as for marine and power generation under the FPT Industrial brand.

▪ Financial Services offers a range of financial services to dealers and customers. Financial Services provides and administers retail financing to customers for the purchase or lease of new and used industrial equipment or vehicles and other equipment sold by CNH Industrial dealers. In addition, Financial Services provides wholesale financing to CNH Industrial 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 activities carried out by the four industrial segments Agriculture, Construction, Commercial and Specialty Vehicles and Powertrain, 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.

The CODM assesses segment performance and makes decisions about resource allocation based upon Adjusted EBIT and Adjusted EBITDA calculated using U.S. GAAP. CNH Industrial believes Adjusted EBIT and Adjusted EBITDA more fully reflect segment and consolidated profitability. Adjusted EBIT under U.S. GAAP is defined as net income/(loss) before income taxes, interest expenses of Industrial Activities, net, restructuring expenses, the finance and non-service component of pension and other post-employment benefits costs, foreign exchange gains/(losses), 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. Adjusted EBITDA under U.S. GAAP is defined as Adjusted EBIT plus depreciation and amortization (including on assets under operating leases and assets sold under buy-back commitments). With reference to Financial Services, the CODM assesses the performance of the segment on the basis of net income prepared in accordance with U.S. GAAP.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 63

The following table summarizes Adjusted EBIT under U.S. GAAP by reportable segment:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Agriculture	152		196		661		778
Construction	10		26		48		59
Commercial and Specialty Vehicles	70		68		221		209
Powertrain	81		82		279		285
Unallocated items, eliminations and other	(29	)	(51	)	(120	)	(178	)
Total Industrial Activities	284		321		1,089		1,153
Financial Services	117		123		372		407
Eliminations and other	—		—		—		—
Total Adjusted EBIT under U.S. GAAP	401		444		1,461		1,560

The following table summarizes Adjusted EBITDA under U.S. GAAP by reportable segment:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Agriculture	221		272		874		1,009
Construction	23		41		90		105
Commercial and Specialty Vehicles	196		216		599		661
Powertrain	110		113		371		383
Unallocated items, eliminations and other	(27	)	(51	)	(118	)	(177	)
Total Industrial Activities	523		591		1,816		1,981
Financial Services	177		182		558		595
Eliminations and other	—		—		—		—
Total Adjusted EBITDA under U.S. GAAP	700		773		2,374		2,576

A reconciliation from consolidated Adjusted EBITDA under U.S. GAAP to Profit/(loss) before taxes under EU-IFRS for the three and nine months ended September 30, 2019 and 2018 is provided below:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Adjusted EBITDA under U.S. GAAP	700		773		2,374		2,576
Less: depreciation and amortization under U.S. GAAP(*)	(299	)	(329	)	(913	)	(1,016	)
Adjusted EBIT under U.S. GAAP	401		444		1,461		1,560
Adjustments/reclassifications to convert from Adjusted EBIT under U.S. GAAP to Profit/(loss) before taxes under EU-IFRS:
Financial income/(expenses) under EU-IFRS	(97	)	(199	)	(232	)	(505	)
Development costs	(29	)	(17	)	(54	)	(38	)
Restructuring costs under EU-IFRS	(46	)	(7	)	(82	)	(17	)
Pre-tax gain related to the modification of a healthcare plan in the U.S.	—		—		—		527
Other adjustments	(87	)	35		(81	)	12
Total adjustments/reclassifications	(259	)	(188	)	(449	)	(21	)
Profit/(loss) before taxes under EU-IFRS	142		256		1,012		1,539

(*) Including depreciation of assets on operating lease and assets sold with buy-back commitment.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 64

Net income of Financial Services prepared under U.S. GAAP for the three and nine months ended September 30, 2019 and 2018 is summarized as follows, together with a reconciliation to CNH Industrial’s consolidated Profit/(loss) before taxes under EU-IFRS for the same periods:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Net income of Financial Services under U.S. GAAP (A)	82		92		268		297
Net Income (loss) of Industrial Activities under U.S. GAAP (B)	643		231		1,334		841
Eliminations and other (C)	(82	)	(92	)	(268	)	(297	)
CNH Industrial’s consolidated Net income (loss) under U.S. GAAP (D) = (A) + (B) + (C)	643		231		1,334		841
Adjustments to conform with EU-IFRS (E)(*)	(554	)	(83	)	(591	)	276
Income tax (expense) under EU-IFRS (F)	(53	)	(108	)	(269	)	(422	)
Profit/(loss) before taxes under EU-IFRS (G) = (D) + (E) - (F)	142		256		1,012		1,539

(*)    Details about this item are provided in Note 31 “EU-IFRS to U.S. GAAP reconciliation”.

Additional reportable segment information under U.S. GAAP

Revenues under U.S. GAAP, together with a reconciliation to the corresponding EU-IFRS consolidated item for the three and nine months ended September 30, 2019 and 2018, are provided below:

	Three months ended September 30,				Nine months ended September 30,
($ million)	2019		2018		2019		2018
Agriculture	2,446		2,636		8,031		8,527
Construction	664		726		2,061		2,207
Commercial and Specialty Vehicles	2,331		2,404		7,443		7,788
Powertrain	940		972		3,109		3,376
Eliminations and other	(489	)	(493	)	(1,678	)	(1,774	)
Net sales of Industrial Activities	5,892		6,245		18,966		20,124
Financial Services	487		469		1,480		1,469
Eliminations and other	(19	)	(28	)	(62	)	(89	)
Total Revenues under U.S. GAAP	6,360		6,686		20,384		21,504
Difference(*)	(64	)	18		(77	)	(17	)
Total Net Revenues under EU-IFRS	6,296		6,704		20,307		21,487

(*) Different classification of interest income of Industrial Activities

Depreciation and amortization under U.S. GAAP by reportable segment, together with a reconciliation to the corresponding EU-IFRS consolidated item for three and nine months ended September 30, 2019 and 2018, are provided below:

	Three months ended September 30,		Nine months ended September 30,
($ million)	2019	2018	2019	2018
Agriculture	69	75	213	229
Construction	13	15	42	46
Commercial and Specialty Vehicles	49	53	143	161
Powertrain	29	31	92	98
Eliminations and other	2	—	2	1
Total Industrial Activities	162	174	492	535
Financial Services	—	—	2	3
Eliminations and other	—	—	—	—
Total Depreciation and Amortization(*) under U.S. GAAP	162	174	494	538
Difference(**)	138	112	431	354
Total Depreciation and Amortization(*) under EU-IFRS	300	286	925	892

(*)    Excluding depreciation of assets on operating lease and assets sold with buy-back commitment.

(**)    Primarily amortization of development costs capitalized under EU-IFRS and depreciation of right-of-use assets under EU-IFRS.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 65

28. Fair value measurement

Fair value measurements are categorized within the fair value hierarchy, described as follows, based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the entire measurement:

▪ Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

▪ Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

▪ Level 3 — Unobservable inputs for the asset or liability.

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

Assets and liabilities measured at fair value on a recurring basis

The following table presents, for each of the fair value hierarchy levels, the assets and liabilities that are measured at fair value on a recurring basis at September 30, 2019 and December 31, 2018:

		At September 30, 2019						At December 31, 2018
($ million)	Note	Level 1	Level 2		Level 3	Total		Level 1	Level 2		Level 3	Total
Equity investments measured at fair value through other comprehensive income	(14)	—	—		100	100		—	—		—	—
Other non-current securities	(14)	1	—		—	1		1	—		—	1
Other financial assets	(18)	—	135		—	135		—	98		—	98
Money market securities	(19)	424	—		—	424		428	—		—	428
Total Assets		425	135		100	660		429	98		—	527
Other financial liabilities	(18)	—	(132	)	—	(132	)	—	(108	)	—	(108	)
Total Liabilities		—	(132	)	—	(132	)	—	(108	)	—	(108	)

The following table provides a reconciliation from the opening balance to the closing balance for fair value measurements categorized in Level 3 in the nine months ended September 30, 2019:

($ million)	Nine Months Ended September 30, 2019
At January 1	—
Purchases	104
Gains/(Losses) recognized in Other comprehensive income/losses	(4	)
At September 30	100

In the nine months ended September 30, 2019 and 2018, there were no transfers between levels in the fair value hierarchy.

Description of the valuation techniques used to determine the fair value of derivative financial instruments is included in Note 18 “Other financial assets and Other financial liabilities”.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 66

Assets and liabilities not measured at fair value

The estimated fair values for financial assets and liabilities that are not measured at fair value in the condensed statement of financial position at September 30, 2019 and December 31, 2018 are as follows:

		At September 30, 2019
($ million)	Note	Level 1	Level 2	Level 3	Total Fair Value	Carrying amount
Retail financing	(17)	—	—	8,672	8,672	8,776
Dealer financing	(17)	—	—	9,375	9,375	9,377
Finance leases	(17)	—	—	227	227	227
Other receivables from financing activities	(17)	—		71	71	71
Total Receivables from financing activities		—	—	18,345	18,345	18,451
Asset-backed financing	(23)	—	10,675	—	10,675	10,701
Bonds	(23)	5,748	2,638	—	8,386	7,963
Borrowings from banks	(23)	—	4,175	—	4,175	4,215
Payables represented by securities	(23)	—	1,009	—	1,009	1,007
Lease liabilities	(23)	—	—	396	396	396
Other debt	(23)	—	120	—	120	120
Total		5,748	18,617	396	24,761	24,402

		At December 31, 2018
($ million)	Note	Level 1	Level 2	Level 3	Total Fair Value	Carrying amount
Retail financing	(17)	—	—	8,928	8,928	9,084
Dealer financing	(17)	—	—	9,749	9,749	9,751
Finance leases	(17)	—	—	272	272	272
Other receivables from financing activities	(17)	—	—	68	68	68
Total Receivables from financing activities		—	—	19,017	19,017	19,175
Asset-backed financing	(23)	—	11,150	—	11,150	11,269
Bonds	(23)	5,023	3,040	—	8,063	7,967
Borrowings from banks	(23)	—	4,088	—	4,088	4,135
Payables represented by securities	(23)	—	968	—	968	960
Other debt	(23)	—	212	—	212	212
Total		5,023	19,458	—	24,481	24,543

Receivables from financing activities

The fair value of Receivables from financing activities is based on the discounted values of their related cash flows at market discount rates that reflect conditions applied in various reference markets on receivables with similar characteristic, adjusted to take into account the credit risk of the counterparties.

Debt

All Debt is classified as a Level 2 fair value measurement, with the exception of the bonds issued by CNH Industrial Finance Europe S.A. and the bonds issued by CNH Industrial N.V. that are classified as a Level 1 fair value measurement. Their fair value has been estimated making reference to quoted prices in active markets.

The fair value of Asset-backed financing, Borrowings from banks, Payable represented by securities and Other debt are included in the Level 2 and has been estimated based on discounted cash flows analysis using the current market interest rates at period-end adjusted for the Group non-performance risk over the remaining term of the financial liability.

The fair value of Lease liabilities classified within Level 3 of the fair value hierarchy has been estimated using discounted cash flow models that require significant adjustments using unobservable inputs.

Other financial assets and liabilities

The carrying amount of Cash at banks, Restricted cash, Other cash and cash equivalents, Trade receivables, Other current assets, Trade payables and Other current liabilities included in the condensed consolidated statement of financial position approximates their fair value, due to the short maturity of these items.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 67

29. Related party transactions

In accordance with IAS 24 – Related Party Disclosures, CNH Industrial’s related parties are companies and persons who are capable of exercising control or joint control or who have significant influence over the Group. Related parties include CNH Industrial N.V.’s parent company EXOR N.V. (the holding company of the EXOR Group following the completion of the cross-border merger of EXOR S.p.A. with and into EXOR N.V. occurred on December 11, 2016) and the companies that EXOR N.V. controls or has significant influence over, including Fiat Chrysler Automobiles N.V. and its subsidiaries and affiliates (“FCA”) and Ferrari N.V. and its subsidiaries and affiliates (“Ferrari”), and CNH Industrial’s unconsolidated subsidiaries, associates or joint ventures. In addition, the members of the Board of Directors and managers of CNH Industrial with strategic responsibility and members of their families are also considered related parties.

As of September 30, 2019, based on public information available on the website of the Netherlands Authority for the Financial Markets and in reference to Company's files, EXOR N.V. held 42.2% 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 September 30, 2019.

In addition, CNH Industrial engages in transactions with its unconsolidated subsidiaries, joint ventures, associates and other related parties on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved. The Company’s Audit Committee reviews and evaluates all significant related party transactions.

Transactions with EXOR N.V. and its subsidiaries and affiliates

EXOR N.V. is an investment holding company in Europe. Among other things, EXOR N.V. manages a portfolio that includes investments in FCA and Ferrari. CNH Industrial did not enter into any significant transactions with EXOR N.V. during the three and nine months ended September 30, 2019 and 2018.

In connection with the establishment of Fiat Industrial (now CNH Industrial) through the demerger from Fiat (now FCA), 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 FCA 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. FCA subsidiaries provide CNH Industrial with administrative services such as accounting, cash management, maintenance of plant and equipment, security, information systems and training under the terms and conditions of the MSA and the applicable Opt-in letters.

Additionally, CNH Industrial sells engines and light commercial vehicles to and purchases engine blocks and other components from FCA subsidiaries. Furthermore, CNH Industrial and FCA may engage in other minor transactions in the ordinary course of business.

These transactions with FCA are reflected in the Interim Condensed Consolidated Financial Statements at September 30, 2019 as follows:

	Nine months ended September 30,
($ million)	2019	2018
Net revenues	533	564
Cost of sales	265	348
Selling, general and administrative costs	102	112

($ million)	At September 30, 2019	At December 31, 2018
Trade receivables	15	10
Trade payables	73	118

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 68

Transactions with joint ventures

CNH Industrial sells commercial vehicles, agricultural and construction equipment, and provides technical services to joint ventures such as IVECO - OTO MELARA Società Consortile a responsabilità limitata, 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 joint ventures, such as Turk Traktor ve Ziraat Makineleri A.S. These transactions are reflected in the Interim Condensed Consolidated Financial Statements at September 30, 2019 as follows:

	Nine months ended September 30,
($ million)	2019	2018
Net revenues	557	708
Cost of sales	369	335

($ million)	At September 30, 2019	At December 31, 2018
Trade receivables	83	83
Trade payables	63	68

At September 30, 2019 and December 31, 2018, CNH Industrial had provided guarantees on commitments of its joint ventures for an amount of $140 million and $160 million, respectively, mainly related to IVECO - OTO MELARA Società Consortile a responsabilità limitata.

Transactions with associates

CNH Industrial sells trucks and commercial vehicles and provides services to associates. In the nine months ended September 30, 2019, revenues from associates totaled $120 million ($137 million in the comparable period of 2018) and cost of sales from associates totaled $8 million ($21 million in the comparable period of 2018). At September 30, 2019, receivables from associates amounted to $20 million ($17 million at December 31, 2018). Trade payables to associates amounted to $25 million at September 30, 2019 ($34 million at December 31, 2018). At September 30, 2019, CNH Industrial had provided guarantees on commitments of its associates for an amount of $265 million related to CNH Industrial Capital Europe S.a.S. ($261 million at December 31, 2018).

Transactions with unconsolidated subsidiaries

In the nine months ended September 30, 2019 and 2018, there were no material transactions with unconsolidated subsidiaries.

Compensation to Directors and Key Management

The fees of the Directors of CNH Industrial N.V. for carrying out their respective functions, including those in other consolidated legal entities and the notional compensation cost arising from stock grants awarded to certain Executive Directors and Officers, amounted to an expense of approximately $10 million in the nine months ended September 30, 2019. In the nine months ended September 30, 2018 these same fees amounted to an income of approximately $8 million, inclusive of a $12 million income related to the reversal for forfeitures of certain previously granted stock grant awards.

The aggregate expense incurred in the nine months ended September 30, 2019 and 2018 for the compensation of Executives with strategic responsibilities of the Group amounted to approximately $19 million and $26 million, respectively. These amounts included the notional compensation cost for share-based payments.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 69

30. Translation of financial statements denominated in a currency other than the U.S. dollar

The principal exchange rates used to translate into U.S. dollars the financial statements prepared in currencies other than the U.S. dollar were as follows:

	Nine months ended September 30, 2019		At December 31, 2018	Nine months ended September 30, 2018
	Average	At September 30		Average	At September 30
Euro	0.890	0.918	0.873	0.837	0.864
Pound sterling	0.786	0.813	0.781	0.740	0.767
Swiss franc	0.995	0.996	0.984	0.972	0.978
Polish zloty	3.828	4.021	3.757	3.558	3.695
Brazilian real	3.884	4.159	3.881	3.598	4.020
Canadian dollar	1.329	1.325	1.363	1.287	1.301
Argentine peso(1)	57.470	57.470	37.619	40.000	40.000
Turkish lira	5.642	5.647	5.292	4.614	6.017

(1) From July 1, 2018, Argentina’s economy was considered to be hyperinflationary. After the same date, transactions for entities with the Argentine peso as the functional currency were translated using the closing spot rate.

31. EU-IFRS to US GAAP reconciliation

The Interim Condensed Consolidated Financial Statements have been prepared in accordance with the EU-IFRS (see section “Significant accounting policies”, paragraph “Basis of preparation”, for additional information).

CNH Industrial reports quarterly and annual consolidated financial results in accordance with U.S. GAAP for SEC reporting purposes, and in accordance with EU-IFRS for European listing purposes and for Dutch law requirements.

EU-IFRS differ in certain significant requirements from U.S. GAAP. In order to help readers to understand the difference between the two sets of financial statements of the Group, CNH Industrial has provided, on a voluntary basis, a reconciliation from EU-IFRS to U.S. GAAP as follows:

Reconciliation of Profit

		Three months ended September 30,				Nine months ended September 30,
($ million)	Note	2019		2018		2019	2018(*)
Profit/(loss) in accordance with EU-IFRS		89		148		743	1,117
Adjustments to conform with U.S. GAAP:
Development costs	(a)	29		17		54	38
Other adjustments(1)	(b)	(14	)	89		7	(424	)
Tax impact on adjustments and other income tax differences(1)(2)	(c)	539		(23	)	530	110
Total adjustments		554		83		591	(276	)
Net income (loss) in accordance with U.S. GAAP		643		231		1,334	841

(1) This item also includes the different accounting impact from the modification of a healthcare plan in the U.S.

(2) In the three and nine months ended September 30, 2019, this item also includes the impact of the tax benefit due to the release of valuation allowances on certain net deferred tax assets under U.S. GAAP.

Interim Condensed Consolidated Financial Statements atSeptember 30, 2019 70

Reconciliation of Total Equity

($ million)	Note	At September 30, 2019		At December 31, 2018
Total Equity in accordance with EU-IFRS		7,822		7,472
Adjustments to conform with U.S. GAAP:
Development costs	(a)	(2,201	)	(2,344	)
Other adjustments	(b)	103		65
Tax impact on adjustments and other income tax differences(1)	(c)	402		(125	)
Total adjustments		(1,696	)	(2,404	)
Total Equity in accordance with U.S. GAAP		6,126		5,068

(1) At September 30, 2019, this item also includes the impact of the release of valuation allowances on certain net deferred tax assets under U.S. GAAP.

Description of reconciling items

Reconciling items presented in the tables above are described as follows:

(a) Development costs

Under EU-IFRS, costs relating to development projects are recognized as intangible assets when costs can be measured reliably and the technical feasibility of the product, volumes and pricing support the view that the development expenditure will generate future economic benefits. Under U.S. GAAP, development costs are expensed as incurred. As a result, costs incurred related to development projects that have been capitalized under EU-IFRS are expensed as incurred under U.S. GAAP. Amortization expenses, net of result on disposal and impairment charges of previously capitalized development costs recorded under EU-IFRS, have been reversed under U.S. GAAP.

(b)     Other adjustments

It mainly includes the following items:

▪ Goodwill and other intangible assets: goodwill is not amortized but rather tested for impairment at least annually under both EU-IFRS and U.S. GAAP. The difference in goodwill and other intangible assets between the Group’s two sets of financial statements is primarily due to the different times when EU-IFRS and ASC 350 - Intangibles – Goodwill and Other, were adopted. CNH Industrial transitioned to EU-IFRS on January 1, 2004. Prior to the adoption of EU-IFRS, goodwill was recorded as an intangible asset and amortized to income on a straight-line basis over its estimated period of recoverability, not exceeding 20 years. CNH Industrial adopted ASC 350 on January 1, 2002. Under U.S. GAAP through December 31, 2001, goodwill was recorded as an intangible asset and amortized to income on a straight-line basis over a period not exceeding 40 years.

▪ Defined benefit plans: the differences related to defined benefit plans are mainly due to the different accounting for actuarial gains and losses and the net interest component of the defined benefit cost between EU-IFRS and U.S. GAAP. Under EU-IFRS, actuarial gains and losses are recognized immediately in other comprehensive income without reclassification to profit or loss in subsequent years; net interest expense or income is recognized by applying the discount rate to the net defined benefit liability or asset (the defined benefit obligation less the fair value of plan assets, allowing for any assets ceiling restriction). Under U.S. GAAP, actuarial gains and losses are deferred through the use of the corridor method; interest cost applicable to the liability is recognized using the discount rate, while an expected return on assets is recognized reflecting management’s expectations on long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligations.

▪ Restructuring provisions: the main difference between EU-IFRS and U.S. GAAP with respect to accruing for restructuring costs is that EU-IFRS places emphasis on the recognition of the costs of the exit plan as a whole, whereas U.S. GAAP requires that each type of cost is examined individually to determine when it may be accrued. Under IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, a provision for restructuring costs is recognized when the Group has a constructive obligation to restructure. Under U.S. GAAP, termination benefits are recognized in the period in which a liability is incurred. The application of U.S. GAAP often results in different timing recognition for the Group’s restructuring activities.

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(c)     Tax impact on adjustments and other income tax differences

This item includes the tax effects of adjustments included in (a) and (b), primarily related to development costs, as well as other differences arising in the accounting of deferred tax assets and liabilities. The Group’s policy for accounting for deferred income taxes under EU-IFRS is described in section “Significant accounting policies” of the CNH Industrial Consolidated Financial Statements at December 31, 2018. This policy is similar to U.S. GAAP which states that a deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences and tax loss carry forwards. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized based on available evidence. The most significant accounting difference between EU-IFRS and U.S. GAAP relates to development costs, which also has a significant impact on accumulated deferred tax assets or liabilities and on U.S. GAAP pretax book income or loss in certain jurisdictions. As a result, the assessment of tax contingencies and recoverability of deferred tax assets in each jurisdiction can vary significantly between EU-IFRS and U.S. GAAP for financial reporting purposes. This adjustment relates primarily to jurisdictions with U.S. GAAP pretax book losses higher than those recorded for EU-IFRS purposes.

32.Subsequent events

CNH Industrial has evaluated subsequent events through November 12, 2019 which is the date the condensed consolidated financial statements were authorized for issuance, and identified the following:

▪ On October 31, 2019, CNH Industrial announced it has agreed the sale of its Truckline parts business, a distributor of aftermarket commercial vehicle parts and accessories in Australia.

▪ On November 4, 2019, CNH Industrial announced the acquisition of the Australian agricultural tillage and crop implement manufacturer K-Line Ag.

▪ On November 5, 2019, CNH Industrial announced the acquisition of ATI, Inc., a global manufacturer of rubber track systems for high horsepower tractors and combine harvesters.

▪ On November 7, 2019, in connection with the expiration of the previous buyback program, CNH Industrial announced the launch of its new share buyback program (the “Program”). The Program will involve the repurchase from time to time of up to $700 million in the Company’s common shares and is intended to optimize the capital structure of the Company and to meet the obligations arising from the Company’s equity incentive plans. The Program has a duration up to and including October 11, 2020, will be funded by the Company’s liquidity and will be conducted in the framework of the buyback authorization granted by the Shareholders’ Meeting held on April 12, 2019 (see Note 21 “Equity” for additional information on the buyback authorization).

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