Exhibit 99.1

CNH INDUSTRIAL N.V.

QUARTERLY REPORT FOR THE THREE AND SIX MONTHS

ENDED June 30, 2020

TABLE OF CONTENTS

INDEX

	Page
PART I – FINANCIAL INFORMATION
Condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 (unaudited)	1
Condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019 (unaudited)	2
Condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2020 and 2019 (unaudited)	3
Condensed consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 (unaudited)	4
Condensed consolidated statements of changes in equity for the six months ended June 30, 2020 and 2019 (unaudited)	5
Notes to condensed consolidated financial statements (unaudited)	7
Management’s discussion and analysis of financial condition and results of operations	41
Quantitative and qualitative disclosures about market risk	63
PART II – OTHER INFORMATION
Legal proceedings	64
Risk factors	64
Unregistered sales of equity securities and use of proceeds	64
Default upon senior securities	64
Mine safety disclosures	64
Other information	64

PART I – FINANCIAL INFORMATION

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2020 and December 31, 2019

(Unaudited)

	June 30, 2020		December 31, 2019
	(in millions)
ASSETS
Cash and cash equivalents	$	5,145	$	4,875
Restricted cash	723		898
Trade receivables, net	478		416
Financing receivables, net	17,379		19,428
Inventories, net	6,893		7,082
Property, plant and equipment, net	4,448		5,269
Investments in unconsolidated subsidiaries and affiliates	471		631
Investments at fair value through profit and loss	1,733		—
Equipment under operating leases	1,813		1,857
Goodwill, net	1,941		2,538
Other intangible assets, net	703		806
Deferred tax assets	1,232		1,134
Derivative assets	170		73
Other assets	1,890		2,345
Total Assets	$	45,019	$	47,352
LIABILITIES AND EQUITY
Debt	24,449		24,854
Trade payables	4,542		5,632
Deferred tax liabilities	106		172
Pension, postretirement and other postemployment benefits	1,468		1,578
Derivative liabilities	103		121
Other liabilities	8,388		8,839
Total Liabilities	$	39,056	$	41,196
Redeemable noncontrolling interest	38		35
Common shares, €0.01, par value; outstanding 1,364,400,196 common shares and 396,474,276 loyalty program special voting shares at 6/30/2020; and outstanding 1,350,132,117 common shares and 387,951,166 loyalty program special voting shares at 12/31/2019	25		25
Treasury stock, at cost -13,099,000 common shares at 6/30/2020 and 14,268,079 common shares at 12/31/2019	(140)		(154)
Additional paid in capital	4,392		4,404
Retained earnings	4,057		3,808
Accumulated other comprehensive loss	(2,460)		(2,002)
Noncontrolling interests	51		40
Total Equity	5,925		$	6,121
Total Liabilities and Equity	$	45,019	$	47,352

See accompanying notes to the condensed consolidated financial statements

1

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2020 and 2019

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Revenues
Net sales	$	5,150	$	7,068	$	10,143	$	13,074
Finance, interest and other income	428		499		896		950
Total Revenues	$	5,578	$	7,567	$	11,039	$	14,024
Costs and Expenses
Cost of goods sold	5,114		5,751		9,528		10,717
Selling, general and administrative expenses	484		555		1,010		1,094
Research and development expenses	203		273		417		517
Restructuring expenses	7		28		12		36
Interest expense	170		195		351		378
Goodwill impairment charge	585		—		585		—
Other, net	(1,295)		211		(1,098)		379
Total Costs and Expenses	$	5,268	$	7,013	$	10,805	$	13,121
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	310		554		234		903
Income tax (expense) benefit	40		(135)		63		(225)
Equity in income of unconsolidated subsidiaries and affiliates	11		8		10		13
Net income	$	361	$	427	$	307	$	691
Net income attributable to noncontrolling interests	11		13		22		20
Net income attributable to CNH Industrial N.V.	$	350	$	414	$	285	$	671
Earnings per share attributable to common shareholders
Basic	$	0.26	$	0.31	$	0.21	$	0.50
Diluted	$	0.26	$	0.31	$	0.21	$	0.50
Cash dividends declared per common share	$	—	$	0.203	$	—	$	0.203

See accompanying notes to the condensed consolidated financial statements

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CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

For the Three and Six Months Ended June 30, 2020 and 2019

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Net income	$	361	$	427	$	307	$	691
Other comprehensive income (loss), net of tax
Unrealized income (loss) on cash flow hedges	(8)		10		57		(17)
Changes in retirement plans’ funded status	(7)		(8)		(27)		(14)
Foreign currency translation	(49)		(8)		(476)		77
Share of other comprehensive income (loss) of entities using the equity method	5		1		(14)		(2)
Other comprehensive income (loss), net of tax	(59)		(5)		(460)		44
Comprehensive income (loss)	302		422		(153)		735
Less: Comprehensive income attributable to noncontrolling interests	11		11		21		19
Comprehensive income (loss) attributable to CNH Industrial N.V.	$	291	$	411	$	(174)	$	716

See accompanying notes to condensed consolidated financial statements

3

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2020 and 2019

(Unaudited)

	Six Months Ended June 30,
	2020		2019
	(in millions)
Operating activities:
Net income	$	307	$	691
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense, net of assets under operating leases and assets sold under buy-back commitments	307		332
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments	259		282
Gain on disposal of assets	4		1
Undistributed income of unconsolidated subsidiaries	21		—
Goodwill impairment charge	585		—
Other non-cash items(1)	(982)		74
Changes in operating assets and liabilities:
Provisions	(152)		(66)
Deferred income taxes	(161)		42
Trade and financing receivables related to sales, net	984		(902)
Inventories, net	299		(1,032)
Trade payables	(954)		253
Other assets and liabilities	18		(178)
Net cash provided by (used in) operating activities	$	535	$	(503)
Investing activities:
Additions to retail receivables	(2,069)		(1,987)
Collections of retail receivables	2,129		2,314
Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments	5		2
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments	(132)		(182)
Expenditures for assets under operating leases and assets sold under buy-back commitments	(482)		(625)
Other	(86)		8
Net cash used in investing activities	$	(635)	$	(470)
Financing activities:
Proceeds from long-term debt	5,495		7,376
Payments of long-term debt	(5,709)		(7,413)
Net increase (decrease) in other financial liabilities	586		(105)
Dividends paid	(3)		(278)
Other	—		(45)
Net cash provided by (used in) financing activities	$	369	$	(465)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash	(174)		(19)
Increase (decrease) in cash and cash equivalents	95		(1,457)
Cash and cash equivalents and restricted cash, beginning of year	5,773		5,803
Cash and cash equivalents and restricted cash, end of period	$	5,868	$	4,346

(1) In the six months ended June 30, 2020, this item includes the pre-tax gain of $1,475 million from the remeasurement at fair value of the investment in Nikola Corporation.

See accompanying notes to the condensed consolidated financial statements

4

CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Six Months Ended June 30, 2020

(Unaudited)

	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
	(in millions)
Balance, January 1, 2020, as previously reported	$	25	$	(154)	$	4,404	$	3,808	$	(2,002)	$	40	$	6,121	$	35
Adoption of ASC 326	—		—		—		(36)		—		—		(36)		—
Balance, January 1, 2020 as recast	25		(154)		4,404		3,772		(2,002)		40		6,085		35
Net income (loss)	—		—		—		(65)		—		9		(56)		2
Other comprehensive income (loss), net of tax	—		—		—		—		(399)		(2)		(401)		—
Dividends paid	—		—		—		—		—		—		—		(1)
Decrease in non controlling interest due to the change of ownership	—		—		(5)		—		—		(4)		(9)		—
Share-based compensation expense	—		—		5		—		—		—		5		—
Other changes	—		—		(3)		—		—		1		(2)		—
Balance, March 31, 2020	$	25	$	(154)	$	4,401	$	3,707	$	(2,401)	$	44	$	5,622	$	36
Net income	—		—		—		350		—		7		357		4
Other comprehensive income (loss), net of tax	—		—		—		—		(59)		—		(59)		—
Dividends paid	—		—		—		—		—		—		—		(2)
Common shares issued from treasury stock and capital increase for share-based compensation	—		14		(14)		—		—		—		—		—
Share-based compensation expense	—		—		4		—		—		—		4		—
Other changes	—		—		1		—		—		—		1		—
Balance, June 30, 2020	$	25	$	(140)	$	4,392	$	4,057	$	(2,460)	$	51	$	5,925	$	38

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CNH INDUSTRIAL N.V.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Six Months Ended June 30, 2019

(Unaudited)

	Common Shares		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total		Redeemable Noncontrolling Interest
	(in millions)
Balance, January 1, 2019	$	25	$	(128)	$	4,409	$	2,596	$	(1,859)	$	25	$	5,068	$	30
Net income	—		—		—		257		—		6		263		1
Other comprehensive income (loss), net of tax	—		—		—		—		47		2		49		—
Reclassification of certain tax effects	—		—		—		65		(65)		—		—		—
Dividends paid	—		—		—		—		—		—		—		(1)
Common shares issued from treasury stock and capital increase for share-based compensation	—		6		(6)		—		—		—		—		—
Share-based compensation expense	—		—		9		—		—		—		9		—
Other changes	—		—		3		—		—		(1)		2		—
Balance, March 31, 2019	$	25	$	(122)	$	4,415	$	2,918	$	(1,877)	$	32	$	5,391	$	30
Net income	—		—		—		414		—		8		422		5
Other comprehensive income (loss), net of tax	—		—		—		—		(3)		(2)		(5)		—
Dividends paid	—		—		—		(275)		—		—		(275)		(2)
Acquisition of treasury stock	—		(45)		—		—		—		—		(45)		—
Common shares issued from treasury stock and capital increase for share-based compensation	—		19		(21)		—		—		—		(2)		—
Share-based compensation expense	—		—		12		—		—		—		12		—
Other changes	—		—		(9)		—		—		—		(9)		—
Balance, June 30, 2019	$	25	$	(148)	$	4,397	$	3,057	$	(1,880)	$	38	$	5,489	$	33

See accompanying notes to condensed consolidated financial statements

6

CNH INDUSTRIAL N.V.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

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

The condensed consolidated financial statements of CNH Industrial N.V. and its consolidated subsidiaries have been voluntarily prepared by the Company without audit. Although prepared on a voluntary basis, the condensed consolidated financial statements included in the report comply in all material respects with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) governing interim financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting only of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented. These interim financial statements should be read in conjunction with the financial statements and the notes thereto appearing in the Company’s annual report on Form 20-F for the year ended December 31, 2019. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related accompanying notes and disclosures. Due to the speed with which the COVID-19 situation is developing, actual results could differ materially from the estimates and assumptions used in preparation of the financial statements including, but not limited to, future cash flows associated with goodwill, indefinite life intangibles, definite life intangibles, long-lived impairment tests, determination of discount rates and other assumptions for pension and other post-retirement benefit expense and income taxes. Changes in estimates are recorded in results of operations in the period during which the events or circumstances giving rise to such changes occur.

Certain financial information in this report has been presented by geographic area. Our geographical regions are: (1) North America; (2) Europe; (3) South America and (4) Rest of World. The geographic designations have the following meanings:

•North America: United States, Canada and Mexico;

•Europe: member countries of the European Union, European Free Trade Association, Ukraine, and Balkans;

•South America: 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), and African continent and Middle East.

2. NEW ACCOUNTING PRONOUNCEMENTS

Adopted in 2020

Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which established ASC 326, Financial Instruments – Credit Losses (ASC 326”). In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”), which superseded existing ASU 2016-13. The ASU introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Additional disclosures about significant estimates and credit quality were also required. The Company adopted ASU 2018-19 on January 1, 2020, using the modified retrospective approach. The impact to the consolidated balance sheet on January 1, 2020 was an increase to the allowance for credit losses of $26 million, a decrease to the investments in non-consolidated affiliates of $17 million and an increase to deferred tax assets of $7 million, with the offset to retained earnings of $36 million.

The following paragraphs present the Company’s policy for Allowance for Credit Losses:

Allowance for Credit Losses

The allowance for credit losses is the Company’s estimate of the lifetime expected credit losses inherent in the trade receivables and financing receivables portfolios owned by the Company. Retail financing receivables that share the same risk characteristics (such as, collateralization levels, geography, product type and other relevant factors) are reviewed on a collective basis using measurement

7

models and management judgment. The allowance for 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, such as GDP and Net Farm Income. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Wholesale financing receivables and trade receivables that share the same risk characteristics (such as collateralization levels, term, geography and other relevant factors) are reviewed on a collective basis using measurement models and management judgment. The allowances for trade and wholesale credit losses are based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward looking macroeconomic factors, such as industry sales volumes. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowances for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Wholesale and retail financing receivables and trade receivables that do not have similar risk characteristics are individually reviewed based on, among other items, amounts outstanding, days past due and prior collection history. Expected credit losses are measured by considering: the probability-weighted estimates of cash flows and collateral value; the time value of money; current conditions and forecasts of future economic conditions. Expected credit losses are measured as the probability-weighted present value of all cash shortfalls (including the value of the collateral, if appropriate) over the expected life of each financial asset.

Intangibles - Cloud Computing Arrangements

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement ("ASU 2018-15"), which expands upon the guidance set forth in ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2018-15 aligns the requirements for capitalization of implementation costs in a cloud computing service contract with those requirements for capitalization of implementation costs incurred for an internal-use software license. The Company adopted ASU 2018-15 on a prospective basis on January 1, 2020. The adoption did not have a material impact on our results of operations, financial position and cash flows.

Related Party Guidance for Variable Interest Entities

In October 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"), which expands the application of a specific private company alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. The Company adopted ASU 2018-17 on January 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which makes targeted changes to standards on credit losses, hedging, and recognizing and measuring financial instruments to clarify them and address implementation issues. The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. On recognizing and measuring financial instruments, the amendments address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. The Company adopted the amendments related to ASU 2016-13, ASU 2017-12 and ASU 2016-01 at January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The removed and modified disclosures were adopted on a retrospective basis and the new disclosures were adopted on a prospective basis. The adoption of this standard did not have a material impact on our consolidated financial statements.

8

Not Yet Adopted

Defined Benefit Plans Disclosure

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General: Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. ASU 2018-14 is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This ASU eliminates certain exceptions to the general principles in ASC 740, Income Taxes. Specifically, it eliminates the exception to (1) the incremental approach for intraperiod tax allocation when there is a loss from continuing operations, and income or a gain from other items; (2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019-12 will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of the adoption of this standard on its consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions affected by Reference Rate Reform if certain criteria are met. ASU 2020-04 can be adopted beginning as of March 12, 2020 through December 31, 2022 and may be applied as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company has not adopted ASU 2020-04 as of June 30, 2020. ASU 2020-04 is not expected to have a significant impact on the Company's consolidated financial statements.

3. REVENUE

The following table summarizes revenues for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,
	2020		2019
	(in millions)
Agriculture	$	2,541	$	3,095
Construction	420		757
Commercial and Specialty Vehicles	1,739		2,698
Powertrain	763		1,133
Eliminations and Other	(313)		(615)
Total Industrial Activities	$	5,150	$	7,068
Financial Services	441		519
Eliminations and Other	(13)		(20)
Total Revenues	$	5,578	$	7,567

9

	Six Months Ended June 30,
	2020		2019
	(in millions)
Agriculture	$	4,785	$	5,585
Construction	842		1,397
Commercial and Specialty Vehicles	3,760		5,112
Powertrain	1,516		2,169
Eliminations and Other	(760)		(1,189)
Total Industrial Activities	$	10,143	$	13,074
Financial Services	930		993
Eliminations and Other	(34)		(43)
Total Revenues	$	11,039	$	14,024

The following table disaggregates revenues by major source for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,
	2020		2019
	(in millions)
Revenues from:
Sales of goods	$	4,946	$	6,808
Rendering of services and other revenues	126		159
Rents on assets sold with a buy-back commitment	78		101
Revenues from sales of goods and services	5,150		7,068
Finance and interest income	254		291
Rents and other income on operating lease	174		208
Finance, interest and other income	428		499
Total Revenues	$	5,578	$	7,567

	Six Months Ended June 30,
	2020		2019
	(in millions)
Revenues from:
Sales of goods	$	9,701	$	12,565
Rendering of services and other revenues	282		304
Rents on assets sold with a buy-back commitment	160		205
Revenues from sales of goods and services	10,143		13,074
Finance and interest income	527		579
Rents and other income on operating lease	369		371
Finance, interest and other income	896		950
Total Revenues	$	11,039	$	14,024

10

Contract liabilities recorded in Other liabilities were $1,134 million and $1,236 million at June 30, 2020 and December 31, 2019, respectively. Contract liabilities primarily relate to extended warranties/maintenance and repair contracts, and transactions for the sale of vehicles with a buy-back commitment. During the three months ended June 30, 2020 and 2019, revenues included $112 million and $134 million, respectively, relating to contract liabilities outstanding at the beginning of each period. During the six months ended June 30, 2020 and 2019 revenues included $257 million and $297 million respectively, relating to contract liabilities outstanding at the beginning of each period.

At June 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1.8 billion ($2.0 billion as of December 31, 2019). The Company expects to recognize revenue on approximately 39% and 84% of the remaining performance obligations over the next 12 and 36 months, respectively (approximately 39% and 84% as of December 31, 2019), with the remaining recognized thereafter.

4. VARIABLE INTEREST ENTITIES

The Company consolidates various securitization trusts and facilities that have been determined to be variable interest entities (“VIEs”) and of which the Company is a primary beneficiary. The Company has both the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. For further information regarding VIEs, please see “Note 9: Receivables.”

The following table presents certain assets and liabilities of consolidated VIEs, which are included in the condensed consolidated balance sheets included in this report. The assets in the table below include only those assets that can be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third party liabilities of the consolidated VIEs for which creditors do not have recourse to the general credit of the Company.

	June 30, 2020		December 31, 2019
	(in millions)
Restricted cash	$	605	$	739
Financing receivables	8,413		9,026
Total Assets	$	9,018	$	9,765
Debt	$	8,304	$	9,011
Total Liabilities	$	8,304	$	9,011

5. EARNINGS PER SHARE

The Company’s basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period.

Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock units and performance stock units are considered dilutive securities.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Basic:
Net income (loss) attributable to CNH Industrial	$	350	$	414	$	285	$	671
Weighted average common shares outstanding—basic	1,350		1,353		1,350		1,354
Basic earnings per share	$	0.26	$	0.31	$	0.21	$	0.5
Diluted:
Net income (loss) attributable to CNH Industrial	$	350	$	414	$	285	$	671
Weighted average common shares outstanding—basic	1,350		1,353		1,350		1,354
Effect of dilutive securities (when dilutive):
Stock compensation plans (1)	2		3		2		2
Weighted average common shares outstanding—diluted	1,352		1,356		1,352		1,356
Diluted earnings per share	$	0.26	$	0.31	$	0.21	$	0.5

(1) For the three and six months ended June 30, 2020 and 2019, no shares were excluded from the computation of diluted earnings per share due to an anti-dilutive impact.

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6. EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT BENEFITS

The following table summarizes the components of net periodic benefit cost of CNH Industrial’s defined benefit pension plans and postretirement health and life insurance plans for the three and six months ended June 30, 2020 and 2019:

	Pension				Healthcare				Other
	Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended June 30,
	2020		2019		2020		2019		2020		2019
	(in millions)
Service cost	$	6	$	6	$	1	$	2	$	4	$	3
Interest cost	12		19		2		4		1		1
Expected return on assets	(22)		(25)		(1)		(2)		—		—
Amortization of:
Prior service credit	—		—		(32)		(30)		—		1
Actuarial loss	10		17		—		—		—		—
Net periodic benefit cost	$	6	$	17	$	(30)	$	(26)	$	5	$	5

	Pension				Healthcare				Other
	Six Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019
	(in millions)
Service cost	$	11	$	12	$	2	$	3	$	8	$	6
Interest cost	23		38		5		8		1		2
Expected return on assets	(42)		(50)		(3)		(4)		—		—
Amortization of:
Prior service credit	—		—		(65)		(60)		—		1
Actuarial loss	20		34		1		—		—		—
Net periodic benefit cost	$	12	$	34	$	(60)	$	(53)	$	9	$	9

On February 20, 2018, CNH Industrial announced that the United States Supreme Court ruled in its favor in Reese vs. CNH Industrial N.V. and CNH Industrial America LLC. The decision allowed CNH Industrial to terminate or modify various retiree healthcare benefits previously provided to certain UAW Union represented Company retirees. On April 16, 2018, CNH Industrial announced its determination to modify the benefits provided to the applicable retirees (“Benefit Modification”) to make them consistent with the benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW. The Benefit Modification resulted in a reduction of the plan liability by $527 million. This amount will be amortized from Other Comprehensive Income ("OCI") to the income statement over approximately 4.5 years, which represents the average service period to attain eligibility conditions for active participants. For the three and six months ended June 30, 2020 and 2019, $30 million and $60 million of amortization (“Benefit Modification Amortization”) was recorded as a pre-tax gain in Other, net, respectively.

7. INCOME TAXES

The effective tax rates for the three months ended June 30, 2020 and 2019 were negative 12.9% and positive 24.4%, respectively. The effective tax rates for the six months ended June 30, 2020 and 2019 were negative 26.9% and positive 24.9%, respectively. The negative effective tax rates for the three and six months ended June 30, 2020 primarily resulted from the income tax benefits associated with pre-tax operational losses exceeding the income tax expense related to the pre-tax income due to remeasurement of the Company’s investment in Nikola Corporation. The income tax expense related to the remeasurement of its investment in Nikola Corporation was discretely calculated in accordance with the applicable jurisdictional tax laws. In addition, the current period income tax benefits include no benefits related to either the goodwill impairment charge associated with the Company’s Construction segment or the pre-tax losses in certain jurisdictions where the Company could not recognize any corresponding deferred tax assets. These items were also the primary causes of tax rate differences between the current and comparative periods.

As in all financial reporting periods, the Company assessed the realizability of its various deferred tax assets, which relate to multiple tax jurisdictions in all regions of the world. While no assessment changes occurred during the three months ended June 30, 2020, given the economic impact of the COVID-19 pandemic, it is possible assessment changes could occur within the remainder of the year, with those changes potentially having a material impact on the Company’s results of operations.

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

8. SEGMENT INFORMATION

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

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

Construction designs, manufactures and distributes a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders and compact track loaders. Construction equipment is sold under the CASE Construction Equipment 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, under the FPT Industrial brand, a range of engines, transmission systems and axles for on- and off-road applications, as well as for marine and power generation.

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 brands dealers. In addition, Financial Services provides wholesale financing to CNH Industrial brands 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.

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. The Company believes Adjusted EBIT and Adjusted EBITDA more fully reflect segment and consolidated profitability. Adjusted EBIT 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 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.

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The following tables summarize selected financial information by segment as well as the reconciliation from consolidated net income (loss) under U.S. GAAP to Adjusted EBIT and Adjusted EBITDA for the three and six months ended June 30, 2020 and 2019.

	Three Months Ended June 30, 2020
	Agriculture		Construction		Commercial and Specialty Vehicles		Powertrain		Unallocated items, eliminations and other		Total Industrial Activities		Financial Services		Eliminations		Total
	(in millions)
Revenues	$	2,541	$	420	$	1,739	$	763	$	(313)	$	5,150	$	441	$	(13)	$	5,578
Net income (loss)(1)											308		53		—		361
Add back:
Income tax expense (benefit)											(60)		20		—		(40)
Interest expense of Industrial Activities, net of interest income and eliminations											59		—		—		59
Foreign exchange losses, net											7		—		—		7
Finance and non-service component of Pension and OPEB costs(2)											(26)		—		—		(26)
Adjustments:
Restructuring expenses	5		1		1		—		—		7		—		—		7
Nikola investment fair value adjustment	—		—		—		—		(1,475)		(1,475)		—		—		(1,475)
Goodwill impairment charge	—		—		—		—		585		585		—		—		585
Other discrete items	176		72		289		—		—		537		—		—		537
Adjusted EBIT	$	203	$	(87)	$	(156)	$	32	$	(50)	$	(58)	$	73	$	—	$	15
Depreciation and amortization	61		12		46		30		2		151		1		—		152
Depreciation of assets on operating lease and assets sold with buy-back commitment	1		—		66		—		—		67		64		—		131
Adjusted EBITDA	$	265	$	(75)	$	(44)	$	62	$	(48)	$	160	$	138	$	—	$	298

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

(2)This item includes the pre-tax gain of $30 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the modification of certain healthcare benefits in the U.S.

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	Six Months Ended June 30, 2020
	Agriculture		Construction		Commercial and Specialty Vehicles		Powertrain		Unallocated items, eliminations and other		Total Industrial Activities		Financial Services		Eliminations		Total
	(in millions)
Revenues	$	4,785	$	842	$	3,760	$	1,516	$	(760)	$	10,143	$	930	$	(34)	$	11,039
Net income (loss)(1)											174		133		—		307
Add back:
Income tax expense (benefit)											(113)		50		—		(63)
Interest expense of Industrial Activities, net of interest income and eliminations											118		—		—		118
Foreign exchange losses, net											5		—		—		5
Finance and non-service component of Pension and OPEB costs(2)											(56)		—		—		(56)
Adjustments:
Restructuring expenses	7		2		3		—		—		12		—		—		12
Nikola investment fair value adjustment	—		—		—		—		(1,475)		(1,475)		—		—		(1,475)
Goodwill impairment charge	—		—		—		—		585		585		—		—		585
Other discrete items	176		72		289		—		7		544		—		—		544
Adjusted EBIT	$	227	$	(170)	$	(212)	$	63	$	(114)	$	(206)	$	183	$	—	$	(23)
Depreciation and amortization	125		25		95		59		2		306		1		—		307
Depreciation of assets on operating lease and assets sold with buy-back commitment	1		—		131		—		—		132		127		—		259
Adjusted EBITDA	$	353	$	(145)	$	14	$	122	$	(112)	$	232	$	311	$	—	$	543

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

(2)This item includes the pre-tax gain of $60 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the modification of certain healthcare benefits in the U.S.

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	Three Months Ended June 30, 2019
	Agriculture		Construction		Commercial and Specialty Vehicles		Powertrain		Unallocated items, eliminations and other		Total Industrial Activities		Financial Services		Eliminations		Total
	(in millions)
Revenues	$	3,095	$	757	$	2,698	$	1,133	$	(615)	$	7,068	$	519	$	(20)	$	7,567
Net income(1)											336		91		—		427
Add back:
Income tax expense											104		31		—		135
Interest expense of Industrial Activities, net of interest income and eliminations											66		—		—		66
Foreign exchange losses, net											11		—		—		11
Finance and non-service component of Pension and OPEB costs(2)											(16)		—		—		(16)
Adjustments:
Restructuring expenses	15		4		6		—		1		26		2		—		28
Adjusted EBIT	$	341	$	25	$	100	$	102	$	(41)	$	527	$	124	$	—	$	651
Depreciation and amortization	69		15		47		31		—		162		1		—		163
Depreciation of assets on operating lease and assets sold with buy-back commitment	—		—		79		—		—		79		59		—		138
Adjusted EBITDA	$	410	$	40	$	226	$	133	$	(41)	$	768	$	184	$	—	$	952

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

(2)This item includes the pre-tax gain of $30 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the modification of certain healthcare benefits in the U.S.

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	Six Months Ended June 30, 2019
	Agriculture		Construction		Commercial and Specialty Vehicles		Powertrain		Unallocated items, eliminations and other		Total Industrial Activities		Financial Services		Eliminations		Total
	(in millions)
Revenues	$	5,585	$	1,397	$	5,112	$	2,169	$	(1,189)	$	13,074	$	993	$	(43)	$	14,024
Net income(1)											505		186		—		691
Add back:
Income tax expense											158		67		—		225
Interest expense of Industrial Activities, net of interest income and eliminations											119		—		—		119
Foreign exchange losses, net											20		—		—		20
Finance and non-service component of Pension and OPEB costs(2)											(31)		—		—		(31)
Adjustments:
Restructuring expenses	18		4		11		—		1		34		2		—		36
Adjusted EBIT	$	509	$	38	$	151	$	198	$	(91)	$	805	$	255	$	—	$	1,060
Depreciation and amortization	144		29		94		63		—		330		2		—		332
Depreciation of assets on operating lease and assets sold with buy-back commitment	—		—		158		—		—		158		124		—		282
Adjusted EBITDA	$	653	$	67	$	403	$	261	$	(91)	$	1,293	$	381	$	—	$	1,674

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

(2)This item includes the pre-tax gain of $60 million as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the modification of certain healthcare benefits in the U.S.

9. RECEIVABLES

Financing Receivables, net

A summary of financing receivables as of June 30, 2020 and December 31, 2019 is as follows:

	June 30, 2020		December 31, 2019
	(in millions)
Retail	$	8,545	$	9,218
Wholesale	8,674		10,081
Other	160		129
Total	$	17,379	$	19,428

The Company assesses and monitors the credit quality of its portfolio based on whether a receivable is classified as Performing or Non-Performing. Financing receivables are considered past due if the required principal and interest payments have not yet been received as of the contractual payment due date. Delinquency is reported in financing receivables greater than 30 days past due. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. These receivables are generally 90 days delinquent. Finance income for non-performing receivables is recognized on a cash basis. Accrued interest is charged-off to Interest income. Interest income charged-off was not material for the three and six months ended June 30, 2020. Accrual of finance income is resumed when the receivable becomes contractually current and collections are reasonably assured. As the terms for retail financing receivables are greater than one year, the performing/non-performing information is presented by year of origination for North America, South America and Rest of World.

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The aging of financing receivables as of June 30, 2020 and December 31, 2019 is as follows (in millions):

	31-60 Days Past Due		61-90 Days Past Due		Total Past Due		Current		Total Performing		Non- Performing		Total
Retail
North America
2020									$	1,226	$	—	$	1,226
2019									1,993		2		1,995
2018									1,356		2		1,358
2017									751		2		753
2016									409		2		411
Prior to 2016									216		2		218
Total	$	12	$	—	$	12	$	5,939	$	5,951	$	10	$	5,961
South America
2020									$	390	$	—	$	390
2019									497		6		503
2018									329		7		336
2017									186		4		190
2016									95		2		97
Prior to 2016									80		4		84
Total	$	62	$	1	$	63	$	1,514	$	1,577	$	23	$	1,600
Rest of World
2020									$	245	$	—	$	245
2019									255		—		255
2018									192		1		193
2017									124		1		125
2016									47		1		48
Prior to 2016									5		—		5
Total	$	5	$	5	$	10	$	858	$	868	$	3	$	871
Europe	$	—	$	—	$	—	$	113	$	113	$	—	$	113
Total Retail	$	79	$	6	$	85	$	8,424	$	8,509	$	36	$	8,545
Wholesale
North America	$	—	$	—	$	—	$	3,221	$	3,221	$	22	$	3,243
South America	—		—		—		587		587		39		626
Rest of World	4		1		5		501		506		3		509
Europe	18		13		31		4,257		4,288		8		4,296
Total Wholesale	$	22	$	14	$	36	$	8,566	$	8,602	$	72	$	8,674

The above aging table is not necessarily reflective of the potential credit risk in the portfolio due to payment schedules changes granted by the Company and government stimulus policies benefiting the Company's dealers and end-use customers.

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	December 31, 2019
	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing		Non- Performing		Total
Retail
North America	$	24	$	4	$	—	$	28	$	6,123	$	6,151	$	16	$	6,167
Europe	—		—		—		—		136		136		—		136
South America	9		2		6		17		1,974		1,991		18		2,009
Rest of World	3		1		2		6		900		906		—		906
Total Retail	$	36	$	7	$	8	$	51	$	9,133	$	9,184	$	34	$	9,218
Wholesale
North America	$	—	$	—	$	—	$	—	$	3,641	$	3,641	$	26	$	3,667
Europe	24		9		7		40		4,857		4,897		—		4,897
South America	2		—		1		3		829		832		55		887
Rest of World	5		3		6		14		616		630		—		630
Total Wholesale	$	31	$	12	$	14	$	57	$	9,943	$	10,000	$	81	$	10,081

Allowance for credit losses activity for the three and six months ended June 30, 2020 and 2019 is as follows (in millions):

	Three Months Ended June 30, 2020
	Retail		Wholesale
Opening balance	$	314	$	144
Provision	34		15
Charge-offs, net of recoveries	(24)		(1)
Foreign currency translation and other	2		1
Ending balance	$	326	$	159

	Six Months Ended June 30, 2020
	Retail		Wholesale
Opening Balance, as previously reported	$	299	$	159
Adoption of ASC 326	35		(9)
Opening Balance, as recast	334		150
Provision	54		17
Charge-offs, net of recoveries	(44)		(1)
Foreign currency translation and other	(18)		(7)
Ending Balance	$	326	$	159

At June 30, 2020, the allowance for credit losses includes a reserve build primarily due to a weaker economic outlook related to the COVID-19 pandemic. As this situation has rapidly evolved and is fluid, there is significant subjectivity in the Company's assessment. The Company continues to monitor the situation and will update the macroeconomic factors and qualitative factors in future periods, as warranted. The provision for credit losses is included in selling, general, and administrative expenses.

	Three Months Ended June 30, 2019
	Retail		Wholesale
Opening Balance	$	317	$	157
Provision	15		4
Charge-offs, net of recoveries	(16)		(4)
Foreign Currency Translation and Other	3		1
Ending Balance	$	319	$	158

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	Six Months Ended June 30, 2019
	Retail		Wholesale
Opening Balance	$	326	$	164
Provision	23		1
Charge-offs, net of recoveries	(27)		(6)
Foreign Currency Translation and Other	(3)		(1)
Ending Balance	$	319	$	158

Allowance for credit losses activity for the year ended December 31, 2019 is as follows (in millions):

	December 31, 2019
	Retail		Wholesale
Opening Balance	$	326	$	164
Provision	44		12
Charge-offs, net of recoveries	(51)		(18)
Foreign Currency Translation and Other	(20)		1
Ending Balance	$	299	$	159

Troubled Debt Restructurings

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

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

Before removing a receivable from TDR classification, a review of the borrower is conducted. If concerns 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 June 30, 2020, the Company had 275 retail and finance lease contracts classified as TDRs where a court in North America has determined the concession. The pre-modification value was $9 million and the post-modification value was $8 million. Additionally, the Company had 330 accounts with a balance of $21 million in North America undergoing bankruptcy proceedings where a concession has not yet been determined. As of June 30, 2019, the Company had 272 retail and finance lease contracts classified as TDRs where a court in North America has determined the concession. The pre-modification value was $10 million and the post-modification value was $9 million. Additionally, the Company had 381 accounts with a balance of $16 million in North America undergoing bankruptcy proceedings where a concession has not yet been determined. As the outcome of the bankruptcy cases is determined by 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 June 30, 2020 and 2019.

As of June 30, 2020 and 2019, the Company had retail and finance lease receivable contracts classified as TDRs in Europe. The pre-modification value was $78 million and $98 million, respectively, and the post-modification value was $71 million and $91 million, respectively. 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 June 30, 2020 and 2019.

As of June 30, 2020 and 2019, the Company’s wholesale TDR were immaterial.

Transfers of Financial Assets

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

A securitization transaction entails the sale of a portfolio of receivables to a securitization vehicle. This special purpose entity (“SPE”) finances the purchase of the receivables by issuing asset-backed securities (i.e. securities whose repayment and interest flow depend upon the cash flow generated by the portfolio). SPEs utilized in securitizations differ from other entities included in the Company’s condensed consolidated financial statements because the assets they hold are legally isolated. For bankruptcy analysis purposes, the

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Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of the SPEs’ investors. The Company’s interests in the SPEs’ receivables are subordinate to the interests of third party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay the Company’s creditors until all obligations of the SPE have been fulfilled.

These securitization trusts were determined to be VIEs, and consequently, the Company has consolidated these trusts. In its role as servicer, the Company has the power to direct the trusts’ activities. Through its retained interests, the Company has an obligation to absorb certain losses or the right to receive certain benefits that could potentially be significant to the trusts.

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

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

At June 30, 2020 and December 31, 2019, the carrying amount of such restricted assets included in financing receivables above are the following (in millions):

	Restricted Receivables
	June 30, 2020		December 31, 2019
Retail note and finance lease receivables	$	5,813	$	6,340
Wholesale receivables	6,415		7,266
Total	$	12,228	$	13,606

10. INVENTORIES

Inventories as of June 30, 2020 and December 31, 2019 consist of the following:

	June 30, 2020		December 31, 2019
	(in millions)
Raw materials	$	1,483	$	1,332
Work-in-process	826		612
Finished goods	4,584		5,138
Total inventories	$	6,893	$	7,082

11. LEASES

Lessee

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

Leases with a term of 12 months or less are not recorded in the balance sheet. For these leases the Company recognized, on a straight-line basis over the lease term, lease expense of $3 million and $4 million in the three months ended June 30, 2020 and 2019, respectively, and $6 million and $8 million in the six months ended June 30, 2020 and 2019, respectively.

For the three and six months ended June 30, 2020 the Company incurred operating lease expenses of $35 million and $70 million, respectively. For the three and six months ended June 30, 2019, the Company incurred operating lease expenses of $40 million and $79 million, respectively.

At June 30, 2020, the Company has recorded approximately $398 million of right-of-use assets and $396 million of related lease liability included in Other Assets and Other Liabilities, respectively. At June 30, 2020, the weighted average remaining lease term

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(calculated on the basis of the remaining lease term and the lease liability balance for each lease) and the weighted average discount rate for operating leases were 6.9 years and 3.3%, respectively.

During the six months ended June 30, 2020 and 2019, leased assets obtained in exchange for operating lease obligations were $33 million and $41 million, respectively. The operating cash outflow for amounts included in the measurement of operating lease obligations was $70 million and $79 million as of June 30, 2020 and 2019, respectively.

Future minimum lease payments under non-cancellable leases as of June 30, 2020 were as follows:

Operating Leases	($ million)
2020 (excluding the six months ended June 30, 2020)	$	61
2021	99
2022	72
2023	54
2024	39
2025 and thereafter	119
Total future minimum lease payments	$	444
Less: Interest	48
Total	$	396

Lessor

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

The following table sets out a maturity analysis of operating lease payments, showing the undiscounted lease payments to be received after the reporting date:

	Amount
	(in millions)
2020	$	200
2021	149
2022	82
2023	30
2024	8
2025 and thereafter	3
Total undiscounted lease payments	$	472

12. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES

A summary of investments in unconsolidated subsidiaries and affiliates as of June 30, 2020 and December 31, 2019 is as follows:

	June 30, 2020		December 31, 2019
	(in millions)
Equity method	$	464	$	513
Cost method(1)	7		118
Total	$	471	$	631

(1) At December 31, 2019, investments in unconsolidated subsidiaries and affiliates using the cost method included the investment in Nikola. This investment is now included in “Investments at fair value through profits and loss” on the Condensed Consolidated Balance Sheet as it is measured at fair value following the completion of Nikola Corporation’s business combination with VectoIQ Acquisition Corp. and listing of its shares on NASDAQ. See footnote 16 for further details.

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13. GOODWILL AND OTHER INTANGIBLES

Changes in the carrying amount of goodwill for the six months ended June 30, 2020 are as follows:

	Agriculture		Construction		Commercial and Specialty Vehicles		Powertrain		Financial Services		Total
	(in millions)
Balance at January 1, 2020	$	1,732	$	587	$	59	$	5	$	155	$	2,538
Foreign currency translation and other	(8)		(2)		—		—		(2)		(12)
Goodwill impairment charge	$	—	$	(585)	$	—	$	—	$	—	$	(585)
Balance at June 30, 2020	$	1,724	$	—	$	59	$	5	$	153	$	1,941

Goodwill and other indefinite-lived intangible assets are tested for impairment annually or more frequently if a triggering event occurs that would indicate it is more likely than not that the fair value of a reporting unit is less than book value. CNH Industrial performed its most recent annual impairment review as of December 31, 2019. At that date, the estimated fair values of the Agriculture, Construction and Financial Services reporting units exceeded the carrying value by approximately 143%, 28%, and 43% respectively. For the Construction reporting unit, CNH Industrial had determined that the goodwill was at risk for impairment going forward should there be a deterioration of projected cash flows of the reporting unit. Refer to Footnote 9 of the Company’s December 31, 2019 annual report filed on Form 20-F for further details.

During the second quarter of 2020, the Company considered whether a quantitative interim assessment of goodwill for impairment was required as a result of the significant economic disruption caused by the COVID-19 pandemic. Based on the internal and external sources of information considered through June 30, 2020, including the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units, industry and market considerations, overall financial performance (both current and projected), as well as the amount by which the fair value of the Company’s reporting units exceeded their respective carrying values at the date of the last quantitative assessment, the Company, as part of the qualitative assessment performed, determined these conditions indicated that it is more likely than not that the carrying value of the Construction reporting unit exceeded its fair value as of June 30, 2020. At June 30, 2020, CNH Industrial completed a quantitative impairment assessment for the Construction reporting unit which resulted in a fair value below carrying value. Based on the assessment, the Company recognized a goodwill impairment charge of $585 million for the Construction reporting unit.

CNH Industrial determined the fair value of the Construction reporting unit using the income approach. Under the income approach, CNH Industrial calculates the fair value based on the present value of estimated future cash flows. The income approach is dependent on several critical management assumptions, including estimates of future sales in the discrete future period and the weighted average cost of capital (discount rate), and also less significant assumptions such as gross margins, operating costs, income tax rates, terminal value growth rates, capital expenditures, and changes in working capital requirements. Discount rate assumptions include an assessment of the risk inherent in the future cash flows of the respective reporting units.

As of June 30, 2020 and December 31, 2019, the Company’s other intangible assets and related accumulated amortization consisted of the following:

		June 30, 2020						December 31, 2019
	Weighted Avg. Life	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
		(in millions)
Other intangible assets subject to amortization:
Dealer networks	15	$	339	$	265	$	74	$	320	$	224	$	96
Patents, concessions, and licenses and other	5-25	2,015		1,659		356		1,965		1,528		437
		2,354		1,924		430		2,285		1,752		533
Other intangible assets not subject to amortization:
Trademarks		273		—		273		273		—		273
Total Other intangible assets		$	2,627	$	1,924	$	703	$	2,558	$	1,752	$	806

Finite-lived intangible assets are amortized over their estimated useful lives and tested for impairment if events or changes in circumstances indicate that the asset may be impaired. During the second quarter of 2020, the Company recorded impairment charges

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of $27 million related to its Construction dealer network and $65 million related to certain software costs in its Agriculture segment. The impairments are included in Cost of goods sold on the Condensed Consolidated Statement of Operations.

CNH Industrial recorded amortization expense of $23 million and $27 million for the three months ended June 30, 2020 and 2019, respectively, and $47 million and $54 million for the six months ended June 30, 2020 and 2019, respectively.

14. OTHER LIABILITIES

A summary of Other liabilities as of June 30, 2020 and December 31, 2019 is as follows:

	June 30, 2020		December 31, 2019
	(in millions)
Repurchase price on buy-back agreements	$	1,230	$	1,472
Warranty and campaign programs	903		919
Marketing and sales incentive programs	1,185		1,279
Tax payables	587		696
Accrued expenses and deferred income	660		639
Accrued employee benefits	624		562
Lease liabilities	396		449
Legal reserves and other provisions	324		299
Contract reserve	349		319
Contract liabilities(1)	1,134		1,236
Restructuring reserve	73		103
Other	923		866
Total	$	8,388	$	8,839

(1)Contract liabilities include $573 million and $657 million at June 30, 2020 and December 31, 2019, respectively, for future rents related to buy-back agreements.

Warranty and Campaign Programs

CNH Industrial pays for basic warranty and other service action costs. A summary of recorded activity for the three and six months ended June 30, 2020 and 2019 for the basic warranty and accruals for campaign programs are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Balance at beginning of period	$	887	$	915	$	919	$	925
Current year additions	157		220		342		404
Claims paid	(152)		(203)		(322)		(383)
Currency translation adjustment and other	11		9		(36)		(5)
Balance at June 30, 2020	$	903	$	941	$	903	$	941

Restructuring Provision

The Company incurred restructuring expenses of $7 million and $12 million during the three and six months ended June 30, 2020, respectively. The Company incurred restructuring expenses of $28 million and $36 million during the three and six months ended June 30, 2019, respectively.

15. COMMITMENTS AND CONTINGENCIES

As a global company 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 the Company to pay substantial damages or undertake service

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actions, recall campaigns or other costly actions. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect CNH Industrial’s financial position and results. When it is probable that such a loss has been incurred and the amount can be reasonably estimated, an accrual has been made against the Company’s earnings and included in “Other liabilities” on the condensed consolidated balance sheets.

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

Environmental

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

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

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

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

Investigation, analysis and remediation of environmental sites is a time consuming activity. The Company expects such costs to be incurred and claims to be resolved over an extended period of time that could exceed 30 years for some sites. As of June 30, 2020 and December 31, 2019, environmental reserves of approximately $31 million and $32 million, respectively, were established to address these specific estimated potential liabilities. Such reserves are undiscounted and do not include anticipated recoveries, if any, from insurance companies. After considering these reserves, management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

Other Litigation and Investigation

Follow-up on Damages Claims: Iveco S.p.A., 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 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 basis 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 the same and 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 on non-consolidated affiliates as of June 30, 2020 and December 31, 2019 totaling of $433 million and $453 million, respectively.

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16. FINANCIAL INSTRUMENTS

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

Fair-Value Hierarchy

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

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

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

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

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

Determination of Fair Value

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

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

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

Derivatives

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

Foreign Exchange Derivatives

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

CNH Industrial also uses forwards and swaps to hedge certain assets and liabilities denominated in foreign currencies. Such derivatives are considered economic hedges and not designated as hedging instruments. The changes in the fair values of these

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instruments are recognized directly in income in “Other, net” and are expected to offset the foreign exchange gains or losses on the exposures being managed.

All of CNH Industrial’s foreign exchange derivatives are considered Level 2 as the fair value is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s foreign exchange derivatives was $7.1 billion and $6.9 billion at June 30, 2020 and December 31, 2019, respectively.

Interest Rate Derivatives

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

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

CNH Industrial also enters into offsetting interest rate derivatives with substantially similar terms that are not designated as hedging instruments to mitigate interest rate risk related to CNH Industrial’s committed asset-backed facilities. Unrealized and realized gains and losses resulting from fair value changes in these instruments are recognized directly in income. Net gains and losses on these instruments were insignificant for the three and six months ended June 30, 2020 and 2019.

All of CNH Industrial’s interest rate derivatives outstanding as of June 30, 2020 and December 31, 2019 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 $5.1 billion and $5.5 billion at June 30, 2020 and December 31, 2019, respectively.

As a result of the reform and replacement of specific benchmark interest rates, uncertainty remains regarding the timing and exact nature of those changes. At June 30, 2020, the notional amount of hedging instruments directly affected by the reform of benchmark interest rates is $1,001 million.

In the six months ended June 30, 2020, the COVID-19 pandemic significantly impacted the economic environment. With regard to hedge accounting, the Company continues to monitor significant developments in order to assess the potential future impacts of the COVID-19 pandemic on the hedging relationships in place and to update its estimates concerning whether forecasted transactions can still be considered probable of occurring.

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Financial Statement Impact of CNH Industrial Derivatives

The following table summarizes the gross impact of changes in the fair value of derivatives designated as cash flow hedges on accumulated other comprehensive income (loss) and net income (loss) during the three and six months ended June 30, 2020 and 2019 (in millions):

			Recognized in Net Income
For the Three Months Ended June 30,	Gain (Loss) Recognized in Accumulated Other Comprehensive Income		Classification of Gain (Loss)	Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
2020
Foreign exchange contracts	$	(15)
			Net sales	—
			Cost of goods sold	(3)
			Other, Net	(5)
Interest rate contracts	(4)		Interest expense	(1)
Total	$	(19)		$	(9)
2019
Foreign currency contracts	$	18
			Net sales	1
			Cost of goods sold	(18)
			Other, Net	4
Interest rate contracts	(11)		Interest expense	(2)
Total	$	7		$	(15)

			Recognized in Net Income
For the Six Months Ended June 30,	Gain (Loss) Recognized in Accumulated Other Comprehensive Income		Classification of Gain (Loss)	Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
2020
Foreign exchange contracts	$	66
			Net sales	(1)
			Cost of goods sold	(20)
			Other, Net	10
Interest rate contracts	(19)		Interest expense	(2)
Total	$	47		$	(13)
2019
Foreign currency contracts	$	(44)
			Net sales	(4)
			Cost of goods sold	(29)
			Other, Net	(7)
Interest rate contracts	(20)		Interest expense	(3)
Total	$	(64)		$	(43)

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The following table summarizes the activity in accumulated other comprehensive income related to the derivatives held by the Company during the six months ended June 30, 2020 and 2019:

In Millions	Before-Tax Amount		Income Tax		After-Tax Amount
Accumulated derivative net losses as of December 31, 2019	$	(62)	$	8	$	(54)
Net changes in fair value of derivatives	47		—		47
Net losses reclassified from accumulated other comprehensive income into income	13		(3)		10
Accumulated derivative net losses as of June 30, 2020	$	(2)	$	5	$	3

In Millions	Before-Tax Amount		Income Tax		After-Tax Amount
Accumulated derivative net losses as of December 31, 2018	$	(23)	$	1	$	(22)
Net changes in fair value of derivatives	(64)		10		(54)
Net losses reclassified from accumulated other comprehensive income into income	43		(6)		37
Accumulated derivative net losses as of June 30, 2019	$	(44)	$	5	$	(39)

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

		For the Three Months Ended June 30,
	Classification of Gain	2020		2019
Fair Value Hedges
Interest rate derivatives	Interest expense	$	3	$	20
Not Designated as Hedges
Foreign exchange contracts	Other, Net	$	13	$	(44)

		For the Six Months Ended June 30,
	Classification of Gain	2020		2019
Fair Value Hedges
Interest rate derivatives	Interest expense	$	42	$	31
Not Designated as Hedges
Foreign exchange contracts	Other, Net	$	154	$	(68)

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The fair values of CNH Industrial’s derivatives as of June 30, 2020 and December 31, 2019 in the condensed consolidated balance sheets are recorded as follows:

	June 30, 2020		December 31, 2019
in millions of dollars	Balance Sheet Location	Fair Value	Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under Subtopic 815-20
Interest rate contracts	Derivative assets	89	Derivative assets	44
Foreign currency contracts	Derivative assets	57	Derivative assets	17
Total derivative assets designated as hedging instruments		146		61
Interest rate contracts	Derivative liabilities	45	Derivative liabilities	29
Foreign currency contracts	Derivative liabilities	33	Derivative liabilities	69
Total derivative liabilities designated as hedging instruments		78		98
Derivatives not designated as hedging instruments under Subtopic 815-20
Interest rate contracts	Derivative assets	—	Derivative assets	—
Foreign currency contracts	Derivative assets	24	Derivative assets	12
Total derivative assets not designated as hedging instruments		24		12
Interest rate contracts	Derivative liabilities	—	Derivative liabilities	—
Foreign currency contracts	Derivative liabilities	25	Derivative liabilities	23
Total derivative liabilities not designated as hedging instruments		25		23

Items Measured at Fair Value on a Recurring Basis

The following tables present for each of the fair-value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019:

	Level 1				Level 2				Total
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(in millions)
Assets
Foreign exchange derivatives	$	—	$	—	$	81	$	29	$	81	$	29
Interest rate derivatives	—		—		89		44		89		44
Investments	—		1		—		—		—		1
Investments at fair value through profit & loss	1,733		—		—		—		1,733		—
Total Assets	$	1,733	$	1	$	170	$	73	$	1,903	$	74
Liabilities
Foreign exchange derivatives	$	—	$	—	$	(57)	$	(92)	$	(57)	$	(92)
Interest rate derivatives	—		—		(45)		(29)		(45)		(29)
Commodities	—		—		(1)		—		(1)		—
Total Liabilities	$	—	$	—	$	(103)	$	(121)	$	(103)	$	(121)

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At June 30, 2020, the line item “Investments at fair value through profit & loss” includes the fair value of the approximate 7% investment held by CNH Industrial in Nikola Corporation, made in the context of the strategic partnership with Nikola to industrialize fuel-cell and battery electric Heavy-Duty trucks. During the second quarter of 2020, Nikola Corporation completed a business combination with VectoIQ Acquisition Corp., a publicly-traded special purpose acquisition company. Under the terms and conditions of the business combination, the former shareholders of Nikola received 1.901 shares of VectoIQ for every one share held in Nikola and became shareholders of VectoIQ, which, in turn, changed its name to “Nikola Corporation”. The combined company's shares continued listing on NASDAQ under the new ticker symbol “NKLA”. Before the completion of the business combination, CNH Industrial increased its investment in Nikola, that was accounted for using the cost method in the absence of a readily determinable fair value, to $250 million. The market price of Nikola Corporation shares as of June 30, 2020 was $67.53, determining a value of $1,733 million for the 25,661,448 shares held by CNH Industrial through its fully-owned subsidiary Iveco S.p.A. As a consequence, at June 30, 2020 the Company recorded a pre-tax gain of $1,475 million ($1,457 million after tax) from the remeasurement at fair value of the investment in Nikola Corporation, recorded in the line item “Other, net”.

Iveco S.p.A. and Nikola Corporation are jointly developing cab over battery-electric vehicle (“BEV”) and hydrogen fuel cell electric vehicle (“FCEV”) trucks, which will be manufactured through a 50/50 owned joint venture in Europe and sold to Iveco for the distribution in European market and to Nikola for distribution in North America. During 2020, Iveco S.p.A. and Nikola Corporation began entering into a series of agreements to establish the joint venture. The operations of the joint venture are expected to commence in the fourth quarter of 2020.

Items Measured at Fair Value on a Non-Recurring Basis

During the second quarter of 2020, the Company recorded property and equipment impairments of $163 million related to Agriculture ($111 million), Construction ($45 million) and Commercial and Specialty Vehicles ($7 million). The impairments are the result of declines in forecasted performance that indicated it was probable that the future cash flows would not cover the carrying amount of assets used in manufacturing equipment of the respective segments.

In addition, the Company recorded impairments to certain dealer network and software intangible assets. See Note 13 for further details.

The following tables present the fair value for nonrecurring Level 3 measurements from impairments as of June 30, 2020 and 2019:

	Fair Value				Losses
	2020		2019		2020		2019
	(in millions)
Property, plant and equipment	$	107	$	—	$	163	$	—
Other intangible assets	$	—	$	—	$	92	$	—

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

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

Other intangible assets, net: The impairments are measured at the lower of the carrying amount or fair value. The valuations were based on the income approach (discounted cash flows). The inputs include estimates of future cash flows.

Fair Value of Other Financial Instruments

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

Financial Instruments Not Carried at Fair Value

The estimated fair market values of financial instruments not carried at fair value in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 are as follows:

	June 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Financing receivables	$	17,379	$	17,534	$	19,428	$	19,375
Debt	$	24,449	$	24,790	$	24,854	$	25,249

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Financing Receivables

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

Debt

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

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

	Three Months Ended June 30, 2020
	Gross Amount		Income Taxes		Net Amount
Unrealized gain (loss) on cash flow hedges	$	(9)	$	1	$	(8)
Changes in retirement plans’ funded status	(13)		6		(7)
Foreign currency translation	(49)		—		(49)
Share of other comprehensive (loss) of entities using the equity method	5		—		5
Other comprehensive income (loss)	$	(66)	$	7	$	(59)

	Six Months Ended June 30, 2020
	Gross Amount		Income Taxes		Net Amount
Unrealized gain (loss) on cash flow hedges	$	60	$	(3)	$	57
Changes in retirement plans’ funded status	(42)		15		(27)
Foreign currency translation	(476)		—		(476)
Share of other comprehensive (loss) of entities using the equity method	(14)		—		(14)
Other comprehensive income (loss)	$	(472)	$	12	$	(460)

	Three Months Ended June 30, 2019
	Gross Amount		Income Taxes		Net Amount
Unrealized gain (loss) on cash flow hedges	$	21	$	(11)	$	10
Changes in retirement plans’ funded status	(13)		5		(8)
Foreign currency translation	(8)		—		(8)
Share of other comprehensive income of entities using the equity method	1		—		1
Other comprehensive income (loss)	$	1	$	(6)	$	(5)

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	Six Months Ended June 30, 2019
	Gross Amount		Income Taxes		Net Amount
Unrealized gain (loss) on cash flow hedges	$	(22)	$	5	$	(17)
Changes in retirement plans’ funded status	(22)		8		(14)
Foreign currency translation	77		—		77
Share of other comprehensive income of entities using the equity method	(2)		—		(2)
Other comprehensive income (loss)	$	31	$	13	$	44

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

	Unrealized Gain (Loss) on Cash Flow Hedges		Change in Retirement Plans’ Funded Status		Foreign Currency Translation		Share of Other Comprehensive Income (Loss) of Entities Using the Equity Method		Total
Balance, January 1, 2019	$	(22)	$	(473)	$	(1,216)	$	(148)	$	(1,859)
Other comprehensive income (loss), before reclassifications	(54)		20		77		(2)		41
Amounts reclassified from other comprehensive income	37		(34)		—		—		3
Other comprehensive income (loss) *	(17)		(14)		77		(2)		44
Reclassification of certain tax effects	—		(65)		—		—		(65)
Balance, Balance, June 30, 2019	$	(39)	$	(552)	$	(1,139)	$	(150)	$	(1,880)
Balance, January 1, 2020	$	(54)	$	(650)	$	(1,145)	$	(153)	$	(2,002)
Other comprehensive income (loss), before reclassifications	47		32		(474)		(14)		(409)
Amounts reclassified from other comprehensive income (loss)	10		(59)		—		—		(49)
Other comprehensive income (loss) *	57		(27)		(474)		(14)		(458)
Balance, June 30, 2020	$	3	$	(677)	$	(1,619)	$	(167)	$	(2,460)

(*) Excluded from the table above is other comprehensive income (loss) allocated to noncontrolling interests of $(2) million and $(2) million for the six months ended June 30, 2020 and 2019, respectively.

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Significant amounts reclassified out of each component of accumulated other comprehensive income (loss) in the three and six months ended June 30, 2020 and 2019 consisted of the following:

	Amounts Reclassified from Other Comprehensive Income (Loss)				Amount Reclassified from Other Comprehensive Income (Loss)				Consolidated Statement of Operations Line
	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Cash flow hedges	$	—	$	(1)	$	1	$	4	Net sales
	3		18		20		29		Cost of goods sold
	5		(4)		(10)		7		Other, net
	1		2		2		3		Interest expense
	(2)		(2)		(3)		(6)		Income taxes
	$	7	$	13	$	10	$	37
Change in retirement plans’ funded status:
Amortization of actuarial losses	$	10	$	(29)	$	21	$	34	*
Amortization of prior service cost	(32)		17		(65)		(59)		*
	(8)		(91)		(15)		(9)		Income taxes
	$	(30)	$	(103)	$	(59)	$	(34)
Total reclassifications, net of tax	$	(23)	$	(90)	$	(49)	$	3

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

18. RELATED PARTY INFORMATION

CNH Industrial’s related parties are primarily EXOR N.V. 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”). As of June 30, 2020, 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 June 30, 2020. In addition, CNH Industrial engages in transactions with its unconsolidated subsidiaries and affiliates over which CNH Industrial has a significant influence or jointly controls.

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 six months ended June 30, 2020 and 2019.

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.

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These transactions with FCA are reflected in the Company’s condensed consolidated financial statements as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Net sales	$	123	$	202	$	243	$	362
Cost of goods sold	$	31	$	83	$	87	$	196
Selling, general and administrative expenses	$	32	$	35	$	56	$	68

	June 30, 2020		December 31, 2019
	(in millions)
Trade receivables	$	4	$	4
Trade payables	$	60	$	83

Transactions with Unconsolidated Subsidiaries and Affiliates

CNH Industrial sells commercial vehicles, agricultural and construction equipment, and provides technical services to unconsolidated subsidiaries and affiliates 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 unconsolidated subsidiaries and affiliates, such as Turk Traktor ve Ziraat Makineleri A.S. These transactions primarily affected revenues, finance and interest income, cost of goods sold, trade receivables and payables and are presented as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)				(in millions)
Net sales	$	264	$	251	$	428	$	502
Cost of goods sold	$	63	$	150	$	155	$	256

	June 30, 2020		December 31, 2019
	(in millions)
Trade receivables	$	204	$	121
Trade payables	$	86	$	70

At June 30, 2020 and December 31, 2019, CNH Industrial had provided guarantees on commitments of its joint ventures for an amount of $117 million and $145 million, respectively, mainly related to IVECO-OTO MELARA Società Consortile a responsabilità limitata. At June 30, 2020 and December 31, 2019, CNH Industrial had provided guarantees on commitments of its associated company for an amount of $285 million and $276 million, respectively, related to CNH Industrial Capital Europe S.a.S.

19. SUPPLEMENTAL INFORMATION

The operations and key financial measures and financial analysis differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, management believes that certain supplemental disclosures are important in understanding the consolidated operations and financial results of CNH Industrial. This supplemental data is as follows:

Industrial Activities - The financial information captioned “Industrial Activities” reflects the consolidation of all majority-owned subsidiaries except for Financial Services. Financial Services has been included using the equity method of accounting whereby the net income and net assets of Financial Services are reflected, respectively, in “Equity in income of unconsolidated subsidiaries and affiliates” in the accompanying condensed consolidated statements of operations, and in “Investment in Financial Services” in the accompanying condensed consolidated balance sheets.

Financial Services - The financial information captioned “Financial Services” reflects the consolidation or combination of Financial Services business.

Transactions between the “Industrial Activities” and “Financial Services” have been eliminated to arrive at the condensed consolidated financial statements.

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	Statement of Operations
	Industrial Activities				Financial Services
	Three Months Ended June 30,				Three Months Ended June 30,
	2020		2019		2020		2019
	(in millions)
Revenues
Net sales	$	5,150	$	7,068	$	—	$	—
Finance, interest and other income	13		23		441		519
Total Revenues	$	5,163	$	7,091	$	441	$	519
Costs and Expenses
Cost of goods sold	$	5,114	$	5,751	$	—	$	—
Selling, general and administrative expenses	396		497		88		58
Research and development expenses	203		273		—		—
Restructuring expenses	7		26		—		2
Interest expense	72		89		124		149
Goodwill impairment charge	585		—		—		—
Other, net	(1,455)		18		160		193
Total Costs and Expenses	$	4,922	$	6,654	$	372	$	402
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	241		437		69		117
Income tax (expense) benefit	60		(104)		(20)		(31)
Equity in income of unconsolidated subsidiaries and affiliates	7		3		4		5
Results from intersegment investments	53		91		—		—
Net income	$	361	$	427	$	53	$	91

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	Statement of Operations
	Industrial Activities				Financial Services
	Six Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)
Revenues
Net sales	$	10,143	$	13,074	$	—	$	—
Finance, interest and other income	28		53		930		993
Total Revenues	$	10,171	$	13,127	$	930	$	993
Costs and Expenses
Cost of goods sold	$	9,528	$	10,717	$	—	$	—
Selling, general and administrative expenses	860		990		150		104
Research and development expenses	417		517		—		—
Restructuring expenses	12		34		—		2
Interest expense	146		172		267		302
Goodwill impairment charge	585		—		—		—
Other, net	(1,440)		34		342		345
Total Costs and Expenses	$	10,108	$	12,464	$	759	$	753
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	63		663		171		240
Income tax (expense) benefit	113		(158)		(50)		(67)
Equity in income of unconsolidated subsidiaries and affiliates	(2)		—		12		13
Results from intersegment investments	133		186		—		—
Net income	$	307	$	691	$	133	$	186

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	Balance Sheets
	Industrial Activities				Financial Services
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(in millions)
ASSETS
Cash and cash equivalents	$	4,638	$	4,407	$	507	$	468
Restricted cash	77		120		646		778
Trade receivables, net	481		416		25		28
Financing receivables, net	962		1,223		18,210		20,657
Inventories, net	6,744		6,907		149		175
Property, plant and equipment, net	4,447		5,268		1		1
Investments in unconsolidated subsidiaries and affiliates	2,933		3,213		232		237
Investments at fair value through profit and loss	1,733		—		—		—
Equipment under operating leases	45		51		1,768		1,806
Goodwill, net	1,788		2,383		153		155
Other intangible assets, net	688		790		15		16
Deferred tax assets	1,228		1,090		173		178
Derivative assets	97		34		85		47
Other assets	1,862		2,148		169		319
Total Assets	$	27,723	$	28,050	$	22,133	$	24,865
LIABILITIES AND EQUITY
Debt	$	7,958	$	6,558	$	18,284	$	20,748
Trade payables	4,427		5,490		155		191
Deferred tax liabilities	10		19		265		286
Pension, postretirement and other postemployment benefits	1,448		1,558		20		20
Derivative liabilities	67		97		48		32
Other liabilities	7,850		8,172		668		771
Total Liabilities	$	21,760	$	21,894	$	19,440	$	22,048
Equity	5,925		6,121		2,693		2,817
Redeemable noncontrolling interest	38		35		—		—
Total Liabilities and Equity	$	27,723	$	28,050	$	22,133	$	24,865

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	Statements of Cash Flows
	Industrial Activities				Financial Services
	Six Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in millions)
Operating activities:
Net income (loss)	$	307	$	691	$	133	$	186
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense, net of assets under operating leases and assets sold under buy-back commitments	306		330		1		2
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments	132		158		127		124
Gain on disposal of assets	4		1		—		—
Undistributed loss of unconsolidated subsidiaries	(10)		(41)		(12)		(13)
Goodwill impairment charge	585		—		—		—
Other non-cash items(1)	(1,059)		50		77		24
Changes in operating assets and liabilities:
Provisions	(151)		(55)		(1)		(11)
Deferred income taxes	(155)		1		(6)		41
Trade and financing receivables related to sales, net	(91)		(74)		1,075		(822)
Inventories, net	75		(1,246)		224		214
Trade payables	(929)		294		(30)		(48)
Other assets and liabilities	13		(270)		10		93
Net cash provided by (used in) operating activities	$	(973)	$	(161)	$	1,598	$	(210)
Investing activities:
Additions to retail receivables	—		—		(2,069)		(1,987)
Collections of retail receivables	—		—		2,129		2,314
Proceeds from sale of assets, net of assets sold under operating leases and assets sold under buy-back commitments	5		2		—		—
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and sold under buy-back commitments	(132)		(180)		—		(2)
Expenditures for assets under operating leases and assets sold under buy-back commitments	(173)		(261)		(309)		(364)
Other	(178)		(264)		83		252
Net cash provided by (used in) investing activities	$	(478)	$	(703)	$	(166)	$	213
Financing activities:
Proceeds from long-term debt	448		694		5,047		6,682
Payments of long-term debt	(12)		(726)		(5,697)		(6,687)
Net increase (decrease) in other financial liabilities	1,338		20		(752)		(125)
Dividends paid	(3)		(278)		(90)		(132)
Other	—		(45)		9		20
Net cash provided by (used in) financing activities	$	1,771	$	(335)	$	(1,483)	$	(242)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash	(132)		(24)		(42)		5
Decrease in cash and cash equivalents and restricted cash	188		(1,223)		(93)		(234)
Cash and cash equivalents and restricted cash, beginning of year	4,527		4,553		1,246		1,250
Cash and cash equivalents and restricted cash, end of period	$	4,715	$	3,330	$	1,153	$	1,016

(1) In the six months ended June 30, 2020, this item includes the pre-tax gain of $1,475 million from the remeasurement at fair value of the investment in Nikola Corporation.

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20. SUBSEQUENT EVENTS

On July 2, 2020, CNH Industrial Capital LLC issued $600 million of notes at an annual fixed rate of 1.950% due in 2023 at an issue price of 99.370% of their principal amount.

On July 20, 2020, CNH Industrial announced its intention, subject to clearance from South Africa’s Competition Commission, to expand its direct presence in Southern Africa’s agriculture and construction equipment sectors, through an agreement to acquire full control of an Agriculture and Construction commercial distribution network in Southern Africa, with the planned purchase of four divisions of Capital Equipment Group (CEG), previously owned by Invicta Holdings Limited. The acquired divisions will form part of a fully-owned CNH Industrial legal entity based in South Africa.

On July 22, 2020, CNH Industrial confirmed that a number of the Group's offices in Europe have been visited by investigators in the context of a request for assistance by the public prosecutors of Frankfurt am Main and Turin in relation to an alleged noncompliance of two engines produced by FPT Industrial S.p.A., a wholly owned subsidiary of the Company. The Company immediately made itself available to these investigators, providing its full cooperation. CNH Industrial is examining the relevant documentation in order to properly address the requests received. Although at the date thereof the Company has no evidence of any wrongdoing, the extent and outcome of these requests and related legal proceedings cannot be predicted at this time.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in, and under the laws of, the Netherlands. CNH Industrial has its corporate seat in Amsterdam, the Netherlands, and its principal office in London, England, United Kingdom. Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial” and the “Company” refer to CNH Industrial and its subsidiaries.

The Company has five reportable segments reflecting the five businesses directly managed by CNH Industrial N.V., consisting of: (i) Agriculture, which designs, produces and sells agricultural equipment (ii) Construction, which designs, produces and sells construction equipment (iii) Commercial and Specialty Vehicles, which designs, produces and sell trucks, commercial and specialty vehicles, and buses, (iv) Powertrain, which designs, produces and sells engines, transmissions and axles for those vehicles and engines for marine and power generation applications; and (v) Financial Services, which provides financial services to customers acquiring our products. The Company’s worldwide agricultural equipment, construction equipment, commercial and specialty vehicles, powertrain operations as well as corporate functions are collectively referred to as “Industrial Activities.”

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to our unaudited condensed consolidated financial statements in this report, as well as our annual report on Form 20-F for the year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”). Results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal and other factors.

Certain financial information in this report has been presented by geographic area. Our geographical regions are: (1) North America; (2) Europe; (3) South America and (4) Rest of World. The geographic designations have the following meanings:

•North America: United States, Canada and Mexico;

•Europe: member countries of the European Union, European Free Trade Association, Ukraine, and Balkans;

•South America: 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), and African continent and Middle East.

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 reader’s ability to assess our financial performance and financial position. These measures facilitate management’s ability 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 financial measures have no standardized meaning in U.S. GAAP, 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 U.S. GAAP.

Our primary non-GAAP financial measures are defined as follows:

Adjusted EBIT

Adjusted EBIT 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 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. We provide a reconciliation of Net Income (Loss), the most directly comparable U.S. GAAP financial measure included in our consolidated statements of operations, to Adjusted EBIT and Adjusted EBITDA.

Adjusted EBITDA

Adjusted EBITDA is defined as Adjusted EBIT plus depreciation and amortization including on assets sold under operating leases and assets sold under buy-back commitments. We provide a reconciliation of Net Income (Loss), the most directly comparable U.S. GAAP financial measure included in our consolidated statements of operations, to Adjusted EBIT and Adjusted EBITDA.

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Net Debt and Net Debt of Industrial Activities (or Net Industrial Debt)

Net Debt is defined as total debt less intersegment notes receivable, cash and cash equivalents, restricted cash and derivative hedging debt. We provide a reconciliation of Total Debt, which is the most directly comparable U.S. GAAP financial measure included in our consolidated balance sheets, to Net Debt. 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.

Revenues on a Constant Currency Basis

We discuss the fluctuations in revenues on a constant currency basis by applying the prior-year average exchange rates to current year’s revenue expressed in local currency in order to eliminate the impact of foreign exchange (“FX”) rate fluctuations.

Free Cash Flow of Industrial Activities

Free Cash Flow of Industrial Activities (or Industrial Free Cash Flow): 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 assets sold under buy-back commitments, assets under operating leases, property, plant and equipment and intangible assets; change in derivatives hedging debt of Industrial Activities; as well as other changes and intersegment eliminations.

RESULTS OF OPERATIONS

The operations, and key financial measures and financial analysis, differ significantly for manufacturing and distribution businesses and financial services businesses; therefore, management believes that certain supplemental disclosures are important in understanding our consolidated operations and financial results. For further information, see “Note 19: Supplemental Information” to our condensed consolidated financial statements for the six months ended June 30, 2020, where we present supplemental consolidating data split by Industrial Activities and Financial Services. Industrial Activities include the Financial Services business on the equity basis of accounting. Transactions between Industrial Activities and Financial Services have been eliminated to arrive at the consolidated data.

COVID-19 Update

During the second quarter of 2020, the COVID-19 pandemic continued to negatively impact most of CNH Industrial’s end-markets and operations.

Worldwide agriculture industry demand was muted during the second quarter of 2020, with global demand for tractors down 1% and combines up 12%. In North America, tractor demand was up 20% in the quarter for the lower horsepower segment (under 140 HP), while demand was down 22% for high horsepower tractors (over 140 HP); combines were up 3%. In Europe, tractor and combine markets were down 25% and 23%, respectively. South America tractor markets decreased 10% and combine markets increased 29% compared to the same quarter in the prior year. In Rest of World, demand decreased 3% for tractors and increased 21% for combines.

In the second quarter of 2020, demand in all sub-segments of construction end-markets were showing double-digit declines in all geographies, with the exception of Rest of World where general construction equipment was up 28%, while compact and service equipment and road building and site preparation equipment were both flat.

The European truck market was down 39% year-over-year in the second quarter, with light duty trucks down 29%, and medium and heavy trucks down 57%. The South America truck market was down 39% in light duty trucks and 28% in medium and heavy trucks. For buses, the European market decreased 57% in the quarter, and the South American market decreased by 62%.

With respect to liquidity for the quarter, the Company completed the quarter ended June 30, 2020 with Cash and cash equivalents of $5.1 billion, Restricted cash of $723 million and undrawn committed facilities of $5.7 billion, for a total of $11.5 billion of liquidity available.

As a consequence of the significant decline in industry demand and other market conditions due to the economic disruption caused by the COVID-19 pandemic during the second quarter of 2020, the Company reviewed its current manufacturing footprint and, consequently, has reassessed the recoverability of certain assets. As a result, Agriculture recognized $111 million of impairment charges against tangible assets and $65 million of impairment charges against intangible assets in the second quarter of 2020. In the same period, Construction recognized impairment charges of $72 million against intangible and other long-lived assets and Commercial and Specialty Vehicles recognized charges of $282 million in connection with new actions identified in order to realize the asset portfolio of vehicles sold under buy-back commitments. These actions were taken as a result of the significant deterioration of the used vehicle markets in which the segment operates and the consequent impact on truck residual values. The segment also recognized other assets impairment charges of $7 million. Lastly, the Company performed a quantitative interim assessment of impairment for Construction goodwill, previously disclosed as being at risk of impairment. Having reassessed the

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expected future business performance of the segment and its projected cash flows, which have deteriorated significantly, the Company recognized a charge of $585 million in the quarter, representing the total impairment of Construction goodwill.

As previously announced, on April 27, the Company began to resume operations at some of its industrial facilities in Europe, within the constraints of applicable emergency regulations, and continued to restore capacity in all regions, returning to normal operations at all manufacturing sites by the end of May. However, as a consequence of the general decline in certain industries, volumes continue to fluctuate, requiring production level adjustments to reflect the lower demand. Although the large majority of suppliers have maintained the required flow of goods to the Company’s plants since the restart of its manufacturing operations, localized interruptions might still occur in different parts of the world creating additional constraints to the flow of production.

During the second quarter of 2020, the Company continued to work to ensure the safety of its people, to maintain business continuity, to preserve its liquidity and to leverage its continued access to funding. The Company has implemented many actions to reduce costs and protect its financial position, its liquidity and capital structure, and its ratings. Specifically, these measures included reviewing every possible and prudent opportunity to eliminate discretionary operating expenses, accessing public funding and other measures enacted as a response to the global pandemic, reducing capital expenditures and tightly managing inventories. During the quarter, the Company also benefited from the voluntary temporary reduction of compensation to its senior management, including the Acting Chief Executive Officer, the entire Board of Directors and almost 900 members of the management team. Furthermore, as previously announced, as a precautionary measure, the Board of Directors decided to withdraw the dividend distribution previously proposed for payment in the quarter.

Depending on the duration and extent of the COVID 19 pandemic, the Company’s results of operations, financial condition and cash flows in 2020 may also be significantly negatively impacted by, among other things, further restructuring actions and other non-cash asset impairments, price pressure on new and used vehicles, which may give rise to further reserve requirements, excess inventory, difficulties in collecting financial receivables and subsequent increased allowances for credit losses.

Nikola Investment

At June 30, 2020, the line item “Investments at fair value through profit & loss” includes the fair value of the approximate 7% investment held by CNH Industrial in Nikola Corporation, made in the context of the strategic partnership with Nikola to industrialize fuel-cell and battery electric Heavy-Duty trucks. During the second quarter of 2020, Nikola Corporation completed a business combination with VectoIQ Acquisition Corp., a publicly-traded special purpose acquisition company. As a consequence, at June 30, 2020 the Company recorded a pre-tax gain of $1,475 million ($1,457 million after tax) from the remeasurement at fair value of the investment in Nikola Corporation, recorded in the line item “Other, net”.

The quarterly fair value remeasurement of the Company’s investment in Nikola Corporation might also significantly impact the Company reported results in future quarters given the volatility of Nikola’s share price. However, as anticipated in the press release issued on June 8, 2020, this noncash impact will be consistently excluded from the calculation of CNH Industrial Non-GAAP Adjusted measures, and, in particular, from the Adjusted diluted EPS.

Planned Spin-off of On-Highway Business

The Company has confirmed its intention to separate its "On-Highway" (commercial and specialty vehicles, and powertrain) and "Off-Highway" (agriculture, and construction) businesses. The original timeline for the implementation of the proposed separation has been, however, extended as a consequence of the negative market conditions due to the COVID-19 pandemic.

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Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Consolidated Results of Operations

	Three Months Ended June 30,
	2020		2019
	(in millions)
Revenues:
Net sales	$	5,150	$	7,068
Finance, interest and other income	428		499
Total Revenues	5,578		7,567
Costs and Expenses:
Cost of goods sold	5,114		5,751
Selling, general and administrative expenses	484		555
Research and development expenses	203		273
Restructuring expenses	7		28
Interest expense	170		195
Goodwill impairment charge	585		—
Other, net	(1,295)		211
Total Costs and Expenses	5,268		7,013
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	310		554
Income tax (expense) benefit	40		(135)
Equity in income of unconsolidated subsidiaries and affiliates	11		8
Net income	361		427
Net income attributable to noncontrolling interests	11		13
Net income attributable to CNH Industrial N.V.	$	350	$	414

Revenues

We recorded revenues of $5,578 million for the three months ended June 30, 2020, down 26.3% compared to the three months ended June 30, 2019 (down 22.9% on a constant currency basis). Net sales of Industrial Activities were $5,150 million in the three months ended June 30, 2020, down 27.1% compared to the three months ended June 30, 2019 (down 23.8% on a constant currency basis), due to the severe adverse COVID-19 impacts on supply chain and market conditions across all regions and segments.

Cost of Goods Sold

Cost of goods sold were $5,114 million for the three months ended June 30, 2020 compared with $5,751 million for the three months ended June 30, 2019. As a percentage of net sales of Industrial Activities, cost of goods sold was 99.3% in the three months ended June 30, 2020 (81.4% for the three months ended June 30, 2019). In the second quarter of 2020, costs of goods sold included impairment charges of $255 million and asset optimization charges of $282 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $484 million during the three months ended June 30, 2020 (8.7% of total revenues), down $71 million compared to the three months ended June 30, 2019 (7.3% of total revenues).

Research and Development Expenses

For the three months ended June 30, 2020, research and development expenses were $203 million compared to $273 million for the three months ended June 30, 2019. The costs in both periods were primarily attributable to continued investment in new products and spending on engine development costs associated with emission requirements.

Restructuring Expenses

Restructuring expenses for the three months ended June 30, 2020 were $7 million, compared to $28 million for the three months ended June 30, 2019.

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Interest Expense

Interest expense was $170 million for the three months ended June 30, 2020 compared to $195 million for the three months ended June 30, 2019. The interest expense attributable to Industrial Activities for the three months ended June 30, 2020, net of interest income and eliminations, was $59 million compared to $66 million in the three months ended June 30, 2019.

Goodwill Impairment Charge

Goodwill impairment charge was $585 million for the three months ended June 30, 2020, related to the impairment of the goodwill allocated to Construction. No goodwill impairment charge was recorded for the three months ended June 30, 2019.

Other, net

Other, net expenses were $(1,295) million for the three months ended June 30, 2020 and includes a pre-tax gain of $1,475 million from the remeasurement at fair value of the investment in Nikola Corporation and a pre-tax gain of $30 million as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the Benefit Modification. Other, net expenses were $211 million for the three months ended June 30, 2019 and included a pre-tax gain of $30 million due to the Benefit Modification Amortization.

Income Taxes

	Three Months Ended June 30,
	2020			2019
	(in millions, except percentages)
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	$	310		$	554
Income tax (expense) benefit	$	40		$	(135)
Effective tax rate	(12.9)		%	24.4		%

Income tax benefit for the three months ended June 30, 2020 was $40 million compared to income tax expense of $135 million for the three months ended June 30, 2019. The effective tax rates for the three months ended June 30, 2020 and 2019 were negative 12.9% and positive 24.4%, respectively. The negative effective tax rate for the three months ended June 30, 2020 primarily resulted from the income tax benefits associated with pre-tax operational losses exceeding the income tax expense related to the pre-tax income due to remeasurement of the Company’s investment in Nikola Corporation. The income tax expense related to the remeasurement of the investment in Nikola Corporation was discretely calculated in accordance with the applicable jurisdictional tax laws. In addition, the current period income tax benefit includes no benefits related to either the goodwill impairment charge associated with the Company’s Construction operations or the pre-tax losses in certain jurisdictions where the Company could not recognize any corresponding deferred tax assets. These items were also the primary causes of the tax rate difference between the current and comparative periods. Excluding the impacts of remeasuring the Company’s investment in Nikola Corporation, the goodwill impairment charge related to the Company’s Construction segment, asset optimization charges, impairment charges to other assets, restructuring charges, and the Benefit Modification Amortization, the effective tax rate was negative 45% in the three months ended June 30, 2020. Excluding the impacts of restructuring and the Benefit Modification Amortization, the effective tax rate was positive 23.6% in the second quarter of 2019.

Equity in Income of Unconsolidated Subsidiaries and Affiliates

Equity in income of unconsolidated subsidiaries and affiliates totaled $11 million and $8 million for the three months ended June 30, 2020 and 2019, respectively.

Net Income

Net income was $361 million in the three months ended June 30, 2020, compared to net income of $427 million in the three months ended June 30, 2019. Net income included a pre-tax gain of $1,475 million ($1,457 million after-tax) due to the remeasurement at fair value of the investment in Nikola Corporation. Net income also included a non-cash, pre- and after-tax goodwill impairment charge of $585 million related to Construction, other assets pre-tax impairment charges of $255 million ($214 million after-tax), as well as asset optimization pre-tax charges of $282 million ($227 million after-tax). Furthermore, net income included a pre-tax gain of $30 million ($22 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, as well as pre-tax restructuring expenses of $7 million ($6 million after-tax). In the three months ended June 30, 2019, net income included $30 million ($23 million after tax) as a result of the Benefit Modification Amortization and a charge of $28 million of restructuring expenses ($21 million after-tax).

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Industrial Activities and Business Segments

The following tables show 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.

	Three Months Ended June 30,
	2020		2019		% Change		% Change Excl. FX
	(in millions, except percentages)
Revenues:
Agriculture	$	2,541	$	3,095	(17.9)	%	(14.1)	%
Construction	420		757		(44.5)	%	(40.8)	%
Commercial and Specialty Vehicles	1,739		2,698		(35.5)	%	(32.8)	%
Powertrain	763		1,133		(32.7)	%	(30.6)	%
Eliminations and other	(313)		(615)
Total Net sales of Industrial Activities	5,150		7,068		(27.1)	%	(23.8)	%
Financial Services	441		519		(15.0)	%	(11.0)	%
Eliminations and other	(13)		(20)
Total Revenues	$	5,578	$	7,567	(26.3)	%	(22.9)	%

	Three Months Ended June 30,
	2020		2019		$ Change		2020 Adj EBIT Margin		2019 Adj EBIT Margin
	(in millions, except percentages)
Adjusted EBIT by segment:
Agriculture	$	203	$	341	$	(138)	8.0	%	11.0	%
Construction	(87)		25		(112)		(20.7)	%	3.3	%
Commercial and Specialty Vehicles	(156)		100		(256)		(9.0)	%	3.7	%
Powertrain	32		102		(70)		4.2	%	9.0	%
Unallocated items, eliminations and other	(50)		(41)		(9)
Total Industrial Activities	(58)		527		(585)		(1.1)	%	7.5	%
Financial Services	73		124		(51)		16.6	%	23.9	%
Eliminations and other	—		—		—
Adjusted EBIT	$	15	$	651	$	(636)	0.3	%	8.6	%

	Three Months Ended June 30,
	2020		2019		$ Change		2020 Adj EBITDA Margin		2019 Adj EBITDA Margin
	(in millions, except percentages)
Adjusted EBITDA by segment:
Agriculture	$	265	$	410	$	(145)	10.4	%	13.2	%
Construction	(75)		40		(115)		(17.9)	%	5.3	%
Commercial and Specialty Vehicles	(44)		226		(270)		(2.5)	%	8.4	%
Powertrain	62		133		(71)		8.1	%	11.7	%
Unallocated items, eliminations and other	(48)		(41)		(7)
Total Industrial Activities	160		768		(608)		3.1	%	10.9	%
Financial Services	138		184		(46)		31.3	%	35.5	%
Eliminations and other	—		—		—
Adjusted EBITDA	$	298	$	952	$	(654)	5.3	%	12.6	%

Net sales of Industrial Activities were $5,150 million during the three months ended June 30, 2020, down 27.1% compared to the three months ended June 30, 2019 (down 23.8% on a constant currency basis), due to severe adverse COVID-19 impacts on supply chain and market conditions across all regions and segments.

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Adjusted EBIT of Industrial Activities was a loss of $58 million during the three months ended June 30, 2020 compared to an adjusted EBIT of $527 million during the three months ended June 30, 2019, strongly impacted by industry demand disruption, negative absorption caused by plant shutdowns and other actions to lower inventory levels, only partially offset by reduced selling, general and administrative expenses and deferral of certain research and development expenses not related to new product launches.

Adjusted EBITDA of Industrial Activities was $160 million during the three months ended June 30, 2020 compared to $768 million during the three months ended June 30, 2019.

Business Segment Performance

Agriculture

Net Sales

The following table shows Agriculture net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

Agriculture Sales—by geographic region:

	Three Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	$	896	$	1,107	(19.1)	%
Europe	937		1,201		(22.0)	%
South America	312		376		(17.0)	%
Rest of World	396		411		(3.6)	%
Total	$	2,541	$	3,095	(17.9)	%

Agriculture's net sales totaled $2,541 million in the three months ended June 30, 2020, a decline of 17.9% compared to the three months ended June 30, 2019 (down 14.1% on a constant currency basis). The decrease was driven by lower industry volumes linked to the COVID-19 pandemic, primarily in Europe, partially offset by positive price realization.

For the second quarter of 2020, worldwide industry unit sales for tractors were down 1% compared to the second quarter of 2019, while worldwide industry sales for combines were up 12%. In North America, industry volumes in the over 140 horsepower (“hp”) tractor market sector were down 22% and combines were up 3%. Industry volumes for under 140 hp tractors in North America were up 20%. European markets were down 25% and 23% for tractors and combines, respectively. In South America, the tractor market decreased 10% and the combine market increased 29%. Rest of World markets decreased 3% for tractors and increased 21% for combines.

Adjusted EBIT

Adjusted EBIT was $203 million in the three months ended June 30, 2020, a $138 million decrease compared to the three months ended June 30, 2019. Positive price realization, disciplined cost management and continued prioritization in research and development spending were more than offset by lower volume and mix and negative fixed cost absorption (only partially mitigated by lower purchasing costs). Adjusted EBIT margin was 8.0% (11.0% in the three months ended June 30, 2019).

Construction

Net Sales

The following table shows Construction net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

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Construction Sales—by geographic region:

	Three Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	$	161	$	391	(58.8)	%
Europe	89		132		(32.6)	%
South America	71		89		(20.2)	%
Rest of World	99		145		(31.7)	%
Total	$	420	$	757	(44.5)	%

Construction's net sales totaled $420 million in the three months ended June 30, 2020, a decline of 44.5% compared to the three months ended June 30, 2019 (down 40.8% on a constant currency basis), as a result of weaker market conditions due to the COVID-19 pandemic, continued channel inventory destocking actions, mainly in North America, and negative price realization.

During the second quarter of 2020, Construction’s worldwide general equipment industry sales were up 11% compared to the second quarter of 2019. Worldwide compact equipment and road building and site equipment industry sales were down 15% and 18%, respectively.

Adjusted EBIT

Adjusted EBIT loss was $87 million, ($25 million profit in the three months ended June 30, 2019). The decrease was driven by lower volumes and negative fixed cost absorption due to lower production levels, with destocking actions and unfavorable price realization partially offset by cost-containment actions.

Commercial and Specialty Vehicles

Net Sales

The following table shows Commercial and Specialty Vehicles’ net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

Commercial and Specialty Vehicles Sales—by geographic region:

	Three Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	$	18	$	15	n.m.
Europe	1,391		2,173		(36.0)	%
South America	110		166		(33.7)	%
Rest of World	220		344		(36.0)	%
Total	$	1,739	$	2,698	(35.5)	%

n.m. – not meaningful

Commercial and Specialty Vehicles’ net sales totaled $1,739 million in the three months ended June 30, 2020, a decline of 35.5% compared to the three months ended June 30, 2019 (down 32.8% on a constant currency basis), driven by decreased volumes across all geographies due to the COVID-19 pandemic.

During the second quarter of 2020, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, decreased 39% compared to the same period in 2019. In Europe, the Light Commercial Vehicles (“LCV”) market (GVW 3.5-7.49 tons) decreased 29% and the Medium & Heavy (“M&H”) truck market (GVW ≥7.5 tons) decreased 57%. In South America, new truck registrations (GVW ≥3.5 tons) decreased 31% over the same period of 2019, with a decrease of 32% in Brazil and of 20% in Argentina. In Rest of World, new truck registrations decreased by 23%.

In the second quarter of 2020, trucks’ estimated market share in the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was 9.6%, down 0.8 percentage point ("p.p.") compared to the second quarter of 2019. Trucks' market share in South America in the second quarter of 2020 was 8.6%, up 0.6 p.p. compared to the second quarter of 2019.

Commercial and Specialty Vehicles delivered approximately 20,800 vehicles (including buses and specialty vehicles) in the second quarter of 2020, representing a 45% decrease from the same prior-year period. Volumes were 51% and 30% lower in LCV and M&H truck segments, respectively. Commercial and Specialty Vehicles’ deliveries were down 49%, 16% and 31% in Europe, in South America and in Rest of World, respectively.

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In the second quarter of 2020, trucks’ ratio of orders received to units shipped and billed, or book-to-bill ratio, for the European truck market was 1.12. In the second quarter of 2020, truck order intake in Europe decreased 38% compared to the second quarter of 2019, with a decrease of 42% and 26% in LCV and in M&H, respectively.

Adjusted EBIT

Adjusted EBIT loss was $156 million in the three months ended June 30, 2020 ($100 million profit in the three months ended June 30, 2019). The decrease was primarily driven by lower volumes and the negative impact on product cost from plant shutdowns, partially offset by lower selling, general and administrative expenses, positive price realization, and containment actions in research and development spending not related to new product releases.

Powertrain

Net Sales

Powertrain's net sales totaled $763 million in the three months ended June 30, 2020, a decrease of 32.7% compared to the three months ended June 30, 2019 (down 30.6% on a constant currency basis), with volume reduction, particularly for light and medium engines in Europe, as a result of the COVID-19 pandemic. Sales to external customers accounted for 63% of total net sales (48% in the second quarter of 2019), with 61% captive volume reduction, and 14% non-captive volume reduction. Strong sales were recorded in China in the quarter, as the country started to recover from the impacts of the pandemic.

During the second quarter of 2020, Powertrain sold approximately 103,300 engines, a decrease of 36% compared to the second quarter of 2019. In terms of major customers, 18% of engine units were supplied to Commercial and Specialty Vehicles, 10% to Agriculture, 2% to Construction and the remaining 70% to external customers. Additionally, Powertrain delivered approximately 6,400 transmissions and 23,200 axles, a decrease of 64% and 54%, respectively, compared to the second quarter of 2019.

Adjusted EBIT

Adjusted EBIT was $32 million for the three months ended June 30, 2020, a $70 million decrease compared to the three months ended June 30, 2019), mainly due to lower volume, partially offset by purchasing and quality efficiencies, cost-containment actions, and lower spending for regulatory programs. Adjusted EBIT margin was 4.2% in the three months ended June 30, 2020 (9.0% in the three months ended June 30, 2019).

Financial Services

Finance, Interest and Other Income

Financial Services' revenues totaled $441 million in the three months ended June 30, 2020, a decrease of 15.0% compared to the three months ended June 30, 2019 (11.0% on a constant currency basis), primarily due to lower remarketing volume and lower average portfolios in North America and Europe, partially offset by a higher average portfolio in South America.

Net Income

Net income of Financial Services was $53 million in the three months ended June 30, 2020, a decrease of $38 million compared to the three months ended June 30, 2019, primarily attributable to higher risk costs due to expectation of deteriorating credit conditions and lower average portfolios in North America and Europe, partially offset by higher average portfolios in South America and lower income taxes.

In the second quarter of 2020, retail loan originations, including unconsolidated joint ventures, were $2.4 billion, down $0.1 billion compared to the second quarter of 2019. The managed portfolio, including unconsolidated joint ventures, was $24.6 billion as of June 30, 2020 (of which retail was 63% and wholesale 37%), down $2.4 billion compared to June 30, 2019. Excluding the impact of currency translation, the managed portfolio decreased $1.2 billion compared to the second quarter of 2019.

Due to the ongoing COVID-19 situation, Financial Services provided different forms of payment deferrals and due date rescheduling to its dealers and customers as a form of supporting customer cash flows. The receivable balance greater than 30 days past due as a percentage of receivables was 2.8% at June 30, 2020, compared to 3.1% as of June 30, 2019.

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Reconciliation of Net Income (Loss) to Adjusted EBIT and Adjusted EBITDA

The following table includes the reconciliation of Adjusted EBIT and Adjusted EBITDA, non-GAAP financial measures, to net income, the most comparable U.S. GAAP financial measure.

	Three Months Ended June 30,
	2020		2019
	(in millions)
Net income (loss)	$	361	$	427
Income tax expense	(40)		135
Interest expenses of Industrial Activities, net of interest income and eliminations	59		66
Foreign exchange (gains) losses, net	7		11
Finance and non-service component of Pension and other post-employment benefit costs	(26)		(16)
Restructuring expenses	7		28
Nikola investment fair value adjustment	(1,475)		—
Goodwill impairment charge	585		—
Other discrete items (1)	537		—
Adjusted EBIT	$	15	$	651
Depreciation and Amortization	152		163
Depreciation of assets under operating leases and assets sold with buy-back commitments	131		138
Adjusted EBITDA	$	298	$	952

(1) In the three months ended June 30, 2020, this item includes other assets impairment charges of $255 million and asset optimization charges of $282 million.

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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Consolidated Results of Operations

	Six Months Ended June 30,
	2020		2019
	(in millions)
Revenues:
Net sales	$	10,143	$	13,074
Finance, interest and other income	896		950
Total Revenues	11,039		14,024
Costs and Expenses:
Cost of goods sold	9,528		10,717
Selling, general and administrative expenses	1,010		1,094
Research and development expenses	417		517
Restructuring expenses	12		36
Interest expense	351		378
Goodwill impairment charge	585		—
Other, net	(1,098)		379
Total Costs and Expenses	10,805		13,121
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	234		903
Income tax (expense) benefit	63		(225)
Equity in income of unconsolidated subsidiaries and affiliates	10		13
Net income	307		691
Net income attributable to noncontrolling interests	22		20
Net income attributable to CNH Industrial N.V.	$	285	$	671

Revenues

We recorded revenues of $11,039 million for the six months ended June 30, 2020, a decrease of 21.3% compared to the six months ended June 30, 2019 (down 18.2% on a constant currency basis). Net sales of Industrial Activities were $10,143 million in the six months ended June 30, 2020, a decrease of 22.4% compared to the six months ended June 30, 2019 2019 (down 19.3% on a constant currency basis), due to the severe adverse COVID-19 impacts on supply chain and market conditions across all regions and segments, coupled with actions to reduce dealer inventory levels.

Cost of Goods Sold

Cost of goods sold were $9,528 million for the six months ended June 30, 2020 compared with $10,717 million for the six months ended June 30, 2019. As a percentage of net sales of Industrial Activities, cost of goods sold was 93.9% in the six months ended June 30, 2020 (82.0% for the six months ended June 30, 2019). For the six months ended June 30, 2020, costs of goods sold included impairment charges of $255 million and asset optimization charges of $282 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,010 million during the six months ended June 30, 2020 (9.1% of total revenues), down $84 million compared to the six months ended June 30, 2019 (7.8% of total revenues).

Research and Development Expenses

For the six months ended June 30, 2020, research and development expenses were $417 million compared to $517 million for the six months ended June 30, 2019. The costs in both periods were primarily attributable to continued investment in new products and spending on engine development costs associated with emission requirements.

Restructuring Expenses

Restructuring expenses for the six months ended June 30, 2020 were $12 million, compared to $36 million for the six months ended June 30, 2019.

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Interest Expense

Interest expense was $351 million for the six months ended June 30, 2020 compared to $378 million for the six months ended June 30, 2019. The interest expense attributable to Industrial Activities for the six months ended June 30, 2020, net of interest income and eliminations, was $118 million compared to $119 million in the six months ended June 30, 2019.

Goodwill Impairment Charge

Goodwill impairment charge was $585 million for the six months ended June 30, 2020, related to the impairment of the goodwill allocated to Construction. No goodwill impairment charge was recorded for the six months ended June 30, 2019.

Other, net

Other, net expenses were $(1,098) million for the six months ended June 30, 2020 and includes a pre-tax gain of $1,475 million from the remeasurement at fair value of the investment in Nikola Corporation and a pre-tax gain of $60 million as a result of the Benefit Modification Amortization over approximately 4.5 years of the $527 million positive impact from the Benefit Modification. Other, net expenses were $379 million for the six months ended June 30, 2019 and included a pre-tax gain of $60 million due to the Benefit Modification Amortization.

Income Taxes

	Six Months Ended June 30,
	2020			2019
	(in millions, except percentages)
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates	$	234		$	903
Income tax (expense) benefit	$	63		$	(225)
Effective tax rate	(26.9)		%	24.9		%

Income tax benefit for the six months ended June 30, 2020 was $63 million compared to income tax expense of $225 million for the six months ended June 30, 2019. The effective tax rates for the six months ended June 30, 2020 and 2019 were negative 26.9% and positive 24.9%, respectively. The negative effective tax rate for the six months ended June 30, 2020 primarily resulted from the income tax benefits associated with pre-tax operational losses exceeding the income tax expense related to the pre-tax income due to remeasurement of the Company’s investment in Nikola Corporation. The income tax expense related to the remeasurement of the investment in Nikola Corporation was discretely calculated in accordance with the applicable jurisdictional tax laws. In addition, the current period income tax benefit includes no benefits related to either the goodwill impairment charge associated with the Company’s Construction operations or the pre-tax losses in certain jurisdictions where the Company could not recognize any corresponding deferred tax assets. These items were also the primary causes of the tax rate difference between the current and comparative periods. Excluding the impacts of remeasuring the Company’s investment in Nikola Corporation, the goodwill impairment charge related to the Company’s Construction segment, asset optimization charges, impairment charges to other assets, restructuring charges, the Benefit Modification Amortization, and charges taken due to actions included in the 'Transform-2-Win' Strategy, the effective tax rate was negative 0.6% in the six months ended June 30, 2020. Excluding the impacts of restructuring and the Benefit Modification Amortization, the effective tax rate was positive 24.3% in the second quarter of 2019.

Equity in Income of Unconsolidated Subsidiaries and Affiliates

Equity in income of unconsolidated subsidiaries and affiliates totaled $10 million and $13 million for the six months ended June 30, 2020 and 2019, respectively.

Net Income

Net income was $307 million in the six months ended June 30, 2020, compared to net income of $691 million in the six months ended June 30, 2019. Net income included a pre-tax gain of $l,475 million ($l,457 million after-tax) due to the remeasurement at fair value of the investment in Nikola Corporation. Net income also included a non-cash, pre- and after-tax goodwill impairment charge of $585 million related to Construction, other assets pre-tax impairment charges of $255 million ($214 million after-tax), as well as other asset optimization pre-tax charges of $282 million ($227 million after-tax). Furthermore, net income included a pre-tax gain of $60 million ($45 million after-tax) as a result of the amortization over approximately 4.5 years of the $527 million positive impact from the 2018 U.S. healthcare plan modification, as well as pre-tax restructuring expenses of $12 million ($10 million after-tax) due to actions included in the “Transform2Win” strategy. In the six months ended June 30, 2019, net income included $60 million ($45 million after-tax) as a result of the Benefit Modification Amortization and a charge of $36 million of restructuring expenses ($29 million after-tax).

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Industrial Activities and Business Segments

The following tables show 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.

	Six Months Ended June 30,
	2020		2019		% Change		% Change Excl. FX
	(in millions, except percentages)
Revenues:
Agriculture	$	4,785	$	5,585	(14.3)	%	(11.0)	%
Construction	842		1,397		(39.7)	%	(36.7)	%
Commercial and Specialty Vehicles	3,760		5,112		(26.4)	%	(23.5)	%
Powertrain	1,516		2,169		(30.1)	%	(27.8)	%
Eliminations and other	(760)		(1,189)
Total Net sales of Industrial Activities	10,143		13,074		(22.4)	%	(19.3)	%
Financial Services	930		993		(6.3)	%	(2.9)	%
Eliminations and other	(34)		(43)
Total Revenues	$	11,039	$	14,024	(21.3)	%	(18.2)	%

	Six Months Ended June 30,
	2020		2019		$ Change		2020 Adj EBIT Margin		2019 Adj EBIT Margin
	(in millions, except percentages)
Adjusted EBIT by segment:
Agriculture	$	227	$	509	(282)		4.7	%	9.1	%
Construction	(170)		38		(208)		(20.2)	%	2.7	%
Commercial and Specialty Vehicles	(212)		151		(363)		(5.6)	%	3.0	%
Powertrain	63		198		(135)		4.2	%	9.1	%
Unallocated items, eliminations and other	(114)		(91)		(23)
Total Industrial Activities	(206)		805		(1,011)		(2.0)	%	6.2	%
Financial Services	183		255		(72)		19.7	%	25.7	%
Eliminations and other	—		—		—
Adjusted EBIT	$	(23)	$	1,060	$	(1,083)	(0.2)	%	7.6	%

	Six Months Ended June 30,
	2020		2019		$ Change		2020 Adj EBITDA Margin		2019 Adj EBITDA Margin
	(in millions, except percentages)
Adjusted EBITDA by segment:
Agriculture	$	353	$	653	$	(300)	7.4	%	11.7	%
Construction	(145)		67		(212)		(17.2)	%	4.8	%
Commercial and Specialty Vehicles	14		403		(389)		0.4	%	7.9	%
Powertrain	122		261		(139)		8.0	%	12.0	%
Unallocated items, eliminations and other	(112)		(91)		(21)
Total Industrial Activities	232		1,293		(1,061)		2.3	%	9.9	%
Financial Services	311		381		(70)		33.4	%	38.4	%
Eliminations and other	—		—		—
Adjusted EBITDA	$	543	$	1,674	$	(1,131)	4.9	%	11.9	%

Net sales of Industrial Activities were $10,143 million during the six months ended June 30, 2020, down 22.4% compared to the six months ended June 30, 2019 (down 19.3% on a constant currency basis), due to severe adverse COVID-19 impacts on supply chain and market conditions across all regions, coupled with actions to reduce dealer inventory levels.

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Adjusted EBIT of Industrial Activities was a loss of $23 million during the six months ended June 30, 2020 compared to an adjusted EBIT of $1,060 million during the six months ended June 30, 2019, strongly impacted by industry demand disruption, negative absorption caused by plant shutdowns and actions to lower inventory levels, only partially compensated by a reduced selling, general and administrative expenses and deferral of certain research and development expenses not related to new product launches.

Adjusted EBITDA of Industrial Activities was $543 million during the six months ended June 30, 2020 compared to $1,674 million during the six months ended June 30, 2019.

Business Segment Performance

Agriculture

Net Sales

The following table shows Agriculture net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

Agriculture Sales—by geographic region:

	Six Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	1,725		$	1,966	(12.3)	%
Europe	1,720		2,133		(19.4)	%
South America	602		720		(16.4)	%
Rest of World	738		766		(3.7)	%
Total	$	4,785	$	5,585	(14.3)	%

Agriculture's net sales totaled $4,785 million in the six months ended June 30, 2020, a decline of 14.3% compared to the six months ended June 30, 2019 (down 11.0% on a constant currency basis). The decrease was driven by lower industry volumes across all geographies linked to the COVID-19 pandemic partially offset by positive price realization performance across all regions.

For the six months ended June 30, 2020, worldwide industry unit sales for tractors were down 5% compared to the six months ended June 30, 2019, while worldwide industry sales for combines were up 3%. In North America, industry volumes in the over 140 hp tractor market sector were down 14% and combines were down 9%. Industry volumes for under 140 hp tractors in North America were up 10%. European markets were down 16% and 23% for tractors and combines, respectively. In South America, the tractor market decreased 10% and the combine market decreased 7%. Rest of World markets decreased 7% for tractors and increased 14% for combines.

Adjusted EBIT

Adjusted EBIT was $227 million in the six months ended June 30, 2020, a $282 million decrease compared to the six months ended June 30, 2020. Positive price realization, disciplined cost management, favorable purchasing performance and continued prioritization in research and development spending were more than offset by lower wholesale volume and market and product mix, negative fixed cost absorption (primarily in Europe) due to manufacturing facility shutdowns, higher product costs, and costs associated with product quality actions. Foreign exchange impact was negative, primarily from South America. Adjusted EBIT margin was 4.7% (9.1% in the six months ended June 30, 2019).

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Construction

Net Sales

The following table shows Construction net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

Construction Sales—by geographic region:

	Six Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	331		$	694	(52.3)	%
Europe	180		266		(32.3)	%
South America	137		159		(13.8)	%
Rest of World	194		278		(30.2)	%
Total	$	842	$	1,397	(39.7)	%

Construction's net sales totaled $842 million in the six months ended June 30, 2020, a decline of 39.7% compared to the six months ended June 30, 2019 (down 36.7% on a constant currency basis), as a result of deteriorating market conditions across all regions due to the COVID-19 pandemic, combined with actions to reduce dealer inventory levels and negative price realization.

During the six months ended June 30, 2020, Construction’s worldwide general equipment industry sales were down 1% compared to the six months ended June 30, 2019, while worldwide compact and worldwide road building and site equipment industry sales were down 12% and 14%, respectively.

Adjusted EBIT

Adjusted EBIT loss was $170 million, a decline of $208 million compared to the six months ended June 30, 2020 ($38 million in the six months ended June 30, 2019). The decrease was driven by lower volumes, negative fixed cost absorption due to plant shutdowns, destocking actions, and unfavorable price realization impacted by retail program enhancements in response to COVID-19 impacted market conditions. These were partially offset by cost-cutting actions.

Commercial and Specialty Vehicles

Net Sales

The following table shows Commercial and Specialty Vehicles’ net sales by geographic region for the three months ended June 30, 2020 compared to the three months ended June 30, 2019:

Commercial and Specialty Vehicles Sales—by geographic region:

	Six Months Ended June 30,
(in millions, except percentages)	2020		2019		% Change
North America	28		$	30	n.m.
Europe	3,022		4,139		(27.0)	%
South America	231		307		(24.8)	%
Rest of World	479		636		(24.7)	%
Total	$	3,760	$	5,112	(26.4)	%

n.m. – not meaningful

Commercial and Specialty Vehicles’ net sales totaled $3,760 million in the six months ended June 30, 2020, a decline of 26.4% compared to the six months ended June 30, 2019 (down 23.5% on a constant currency basis), driven by decreased volumes across all geographies due to the COVID-19 pandemic.

During the six months ended June 30, 2020, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, decreased 30% compared to the same period in 2019. In Europe, the LCV market (GVW 3.5-7.49 tons) decreased 22% and the M&H truck market (GVW ≥7.5 tons) decreased 43%. In South America, new truck registrations (GVW ≥3.5 tons) decreased 20% over the same period of 2019 with a decrease of 19% and 27% in Brazil and in Argentina, respectively. In Rest of World, new truck registrations decreased by 17%.

In the six months ended June 30, 2020, trucks’ estimated market share in the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was 10.2%, down 0.2 p.p. compared to the six months ended June 30, 2019. In the six months ended June 30, 2020, trucks' market share in South America was 8.3%, up 0.3 p.p. compared to the six months ended June 30, 2019.

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Commercial and Specialty Vehicles delivered approximately 45,800 vehicles (including buses and specialty vehicles) in the six months ended June 30, 2020, representing a 35% decrease compared to the same period of 2019. Volumes were down 42% in LCV and 19% in M&H truck segments. Commercial and Specialty Vehicles’ deliveries were lower 39% in Europe, and decreased 12% and 19% in South America and in Rest of World, respectively.

Adjusted EBIT

Adjusted EBIT loss was $212 million in the six months ended June 30, 2020 ($151 million profit in the six months ended June 30, 2019), and was negatively impacted by the critical market conditions, generating lower volumes and higher product costs due to plant shutdowns, as well as by unfavorable foreign exchange impacts, partially offset by positive price realization, lower selling, general and administrative expenses, and containment actions in research and development spending.

Powertrain

Net Sales

Powertrain's net sales totaled $1,516 million in the six months ended June 30, 2020, a decline of 30.1% compared to the six months ended June 30, 2019 (down 27.8% on a constant currency basis) due to lower sales volume mainly in Europe as a consequence of COVID-19. Sales to external customers accounted for 53% of total net sales (49% in the six months ended June 30, 2019 ).

During the six months ended June 30, 2020, Powertrain sold approximately 205,300 engines, a decrease of 34% compared to the six months ended June 30, 2019. In terms of major customers, 25% of engine units were supplied to Commercial and Specialty Vehicles, 12% to Agriculture, 3% to Construction and the remaining 60% to external customers. Additionally, Powertrain delivered approximately 19,300 transmissions, a decrease of 45% compared to the six months ended June 30, 2019, and approximately 59,000 axles, a decrease of 39% compared to the six months ended June 30, 2019.

Adjusted EBIT

Adjusted EBIT was $63 million for the six months ended June 30, 2020, a $135 million decrease compared to the six months ended June 30, 2019 ($198 million), mainly due to unfavorable volume and mix, partially offset by positive price realization, purchasing and quality efficiencies, cost containment actions and lower spending for regulatory programs. Adjusted EBIT margin was 4.2% in the six months ended June 30, 2020 (9.1% in the six months ended June 30, 2019).

Financial Services

Finance, Interest and Other Income

Financial Services' revenues totaled $930 million in the six months ended June 30, 2020, a 6.3% decrease compared to the six months ended June 30, 2019 (down 2.9% on a constant currency basis), primarily due to pricing and lower average portfolios in North America and Europe, partially offset by higher average portfolios in South America.

Net Income

Net income of Financial Services was $133 million for the six months ended June 30, 2020, a decrease of $53 million compared to the six months ended June 30, 2019, primarily attributable to higher risk costs due to deteriorating credit conditions due to the COVID-19 pandemic.

In the six months ended June 30, 2020, retail loan originations, including unconsolidated joint ventures, were $4.5 billion, down $0.2 billion compared to the six months ended June 30, 2019. The managed portfolio, including unconsolidated joint ventures, was $24.6 billion as of June 30, 2020 (of which retail was 63% and wholesale 37%), down $2.4 billion compared to June 30, 2019 (down $1.2 billion on a constant currency basis).

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Reconciliation of Net Income (Loss) to Adjusted EBIT and Adjusted EBITDA

The following table includes the reconciliation of Adjusted EBIT and Adjusted EBITDA, non-GAAP financial measures, to net income, the most comparable U.S. GAAP financial measure.

	Six Months Ended June 30,
	2020		2019
	(in millions)
Net income (loss)	$	307	$	691
Income tax expense	(63)		225
Interest expenses of Industrial Activities, net of interest income and eliminations	118		119
Foreign exchange (gains) losses, net	5		20
Finance and non-service component of Pension and other post-employment benefit costs	(56)		(31)
Restructuring expenses	12		36
Nikola investment fair value adjustment	(1,475)		—
Goodwill impairment charge	585		—
Other discrete items(1)	544		—
Adjusted EBIT	$	(23)	$	1,060
Depreciation and Amortization	307		332
Depreciation of assets under operating leases and assets sold with buy-back commitments	259		282
Adjusted EBITDA	$	543	$	1,674

(1) In the six months ended June 30, 2020, this item includes other assets impairment charges of $255 million and asset optimization charges of $282 million.

CRITICAL ACCOUNTING POLICIES

See our critical accounting policies discussed in the Management’s Discussion and Analysis of the most recent annual report filed on Form 20-F. There have been no material changes to these policies, except for the adoption of ASC 326, Financial Instruments - Credit Losses, on January 1, 2020 which impacts our allowance for credit losses (See Note 2).

LIQUIDITY AND CAPITAL RESOURCES

The following discussion of liquidity and capital resources principally focuses on our condensed consolidated statements of cash flows and our condensed consolidated balance sheets. 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. CNH Industrial, focusing on cash preservation and leveraging on a good access to funding, continues to maintain solid financial strength and liquidity.

Cash Flows

During the six months ended June 30, 2020, consolidated cash, cash equivalents and restricted cash increased by $95 million primarily as a result of cash preservation measures, including $347 million cash provided in working capital, partially offset by the adverse impact of COVID-19. Cash and cash equivalents of Industrial Activities increased by $188 million, while cash and cash equivalents of Financial Services decreased by $93 million.

Cash Flows of Industrial Activities

Net cash used by operating activities was $973 million in the six months ended June 30, 2020 compared to $161 million used by operating activities in the six months ended June 30, 2019. The increase in cash usage was primarily due to the adverse impact of COVID-19 net of adjustments for non-cash items and a decrease in working capital usage mainly as a result of cash preservation measures.

Net cash used by investing activities was $478 million in the six months ended June 30, 2020 compared to $703 million used by investing activities in the six months ended June 30, 2019. The decrease in cash used in investing activities was primarily due to a decrease in net cash paid related to intersegment receivables and payables included in Other changes and a reduction in expenditures for assets under operating leases and assets sold under buy back commitments, partially offset by cash used to increase the investment in Nikola Corporation during the second quarter of 2020.

57

Net cash provided by financing activities was $1,771 million in the six months ended June 30, 2020 compared to net cash used of $335 million in the six months ended June 30, 2019. The increase in cash provided by financing activities was primarily due to new funding transactions aimed at maintaining solid financial position and liquidity.

Cash Flows of Financial Services

Net cash provided by operating activities was $1,598 million in the six months ended June 30, 2020 compared to $210 million used in operating activities in the six months ended June 30, 2019, primarily due to a decrease in financing receivables.

Net cash used by investing activities was $166 million in the six months ended June 30, 2020 compared to net cash provided by investing activities of $213 million in the six months ended June 30, 2019, primarily reflecting a decrease in retail receivables from financing activities and a reduction in net cash received related to intersegment payables and receivables included in Other changes.

Net cash used by financing activities was $1,483 million in the six months ended June 30, 2020 compared to $242 million used by financing activities in the six months ended June 30, 2019. The decrease in cash used was primarily due to a decrease in debt.

Debt

Our consolidated debt as of June 30, 2020 and December 31, 2019 is as detailed in the following table:

	Consolidated				Industrial Activities				Financial Services
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(in millions)
Total Debt	$	24,449	$	24,854	$	7,958	$	6,558	$	18,284	$	20,748

A summary of total debt as of June 30, 2020 and December 31, 2019, is as follows:

	June 30, 2020						December 31, 2019
	Industrial Activities		Financial Services		Total		Industrial Activities		Financial Services		Total
	(in millions)
Total Bonds	$	5,061	$	2,678	$	7,739	$	5,061	$	2,649	$	7,710
Asset-backed debt	—		11,076		11,076		—		11,757		11,757
Other debt	1,929		3,705		5,634		165		5,222		5,387
Intersegment debt	968		825		—		1,332		1,120		—
Total Debt	$	7,958	$	18,284	$	24,449	$	6,558	$	20,748	$	24,854

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A summary of issued bonds outstanding as of June 30, 2020 is as follows:

	Currency	Face value of outstanding bonds (in millions)	Coupon		Maturity	Outstanding amount ($ millions)
Industrial Activities
Euro Medium Term Notes:
CNH Industrial Finance Europe S.A. (1)	EUR	367	2.875	%	September 27, 2021	411
CNH Industrial Finance Europe S.A. (1)	EUR	75	1.625	%	March 29, 2022	84
CNH Industrial Finance Europe S.A. (1)	EUR	316	1.375	%	May 23, 2022	354
CNH Industrial Finance Europe S.A. (1)	EUR	369	2.875	%	May 17, 2023	413
CNH Industrial Finance Europe S.A. (1)	EUR	650	1.750	%	September 12, 2025	728
CNH Industrial Finance Europe S.A. (1)	EUR	100	3.500	%	November 12, 2025	112
CNH Industrial Finance Europe S.A. (1)	EUR	500	1.875	%	January 19, 2026	560
CNH Industrial Finance Europe S.A. (1)	EUR	600	1.750	%	March 25, 2027	672
CNH Industrial Finance Europe S.A. (1)	EUR	50	3.875	%	April 21, 2028	56
CNH Industrial Finance Europe S.A. (1)	EUR	500	1.625	%	July 3, 2029	560
CNH Industrial Finance Europe S.A. (1)	EUR	50	2.200	%	July 15, 2039	56
Other Bonds:
CNH Industrial N.V. (2)	USD	600	4.500	%	August 15, 2023	600
CNH Industrial N.V. (2)	USD	500	3.850	%	November 15, 2027	500
Hedging effects, bond premium/discount, and unamortized issuance costs						(45)
Total Industrial Activities						$	5,061
Financial Services
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 Australia Pty Ltd.	AUD	175	2.100	%	December 12, 2022	120
CNH Industrial Capital LLC	USD	500	4.200	%	January 15, 2024	500
Hedging effects, bond premium/discount, and unamortized issuance costs						58
Total Financial Services						$	2,678

(1) Bond listed on the Irish Stock Exchange.

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

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The calculation of Net Debt as of June 30, 2020 and December 31, 2019 and the reconciliation of Total Debt, the U.S. GAAP financial measure that we believe to be most directly comparable, to Net Debt are shown below:

	Consolidated				Industrial Activities				Financial Services
	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
	(in millions)
Third party debt	$	24,449	$	24,854	$	6,990	$	5,226	$	17,459	$	19,628
Intersegment notes payable	—		—		968		1,332		825		1,120
Total Debt(1)	24,449		24,854		7,958		6,558		18,284		20,748
Less:
Cash and cash equivalents	5,145		4,875		4,638		4,407		507		468
Restricted cash	723		898		77		120		646		778
Intersegment notes receivable	—		—		825		1,120		968		1,332
Other current financial assets	106		58		106		58		—		—
Derivatives hedging debt	5		(1)		5		(1)		—		—
Net Debt (Cash)(2)	$	18,470	$	19,024	$	2,307	$	854	$	16,163	$	18,170

(1) Total Debt of Industrial Activities includes Intersegment notes payable to Financial Services of $968 million and $1,332 million as of June 30, 2020 and December 31, 2019, respectively. Total Debt of Financial Services includes Intersegment notes payable to Industrial Activities of $825 million and $1,120 million as of June 30, 2020 and December 31, 2019, respectively.

(2) The net intersegment (receivable)/payable balance owed by Financial Services relating to Industrial Activities was $(143) million and $(212) million as of June 30, 2020 and December 31, 2019, respectively.

The decrease in Net Debt at June 30, 2020 compared to December 31, 2019 is mainly due to FX impacts for $0.7 billion. Excluding FX impact, Net Debt increased by $0.2 billion, reflecting the Industrial free-cash-flow absorption in the first half from Industrial Activities, mainly due to the adverse impact of COVID-19, for $1.4 billion, partially offset mainly by a reduction in third party debt of Financial Services in line with the reduction of the portfolio

The following table shows the change in Net Debt of Industrial Activities for the six months ended June 30, 2020 and 2019:

(in millions)	2020		2019*
Net Debt of Industrial Activities at beginning of period	$	(854)	$	(599)
Adjusted EBITDA of Industrial Activities	232		1,293
Cash interest and taxes	(117)		(253)
Changes in provisions and similar(1)	(332)		(189)
Change in working capital	(924)		(1,267)
Operating cash flow of Industrial Activities	(1,141)		(416)
Investments in property, plant and equipment, and intangible assets(2)	(132)		(180)
Other changes	(153)		(14)
Free Cash Flow of Industrial Activities	(1,426)		(610)
Capital increases and dividends(3)	(3)		(323)
Currency translation differences and other	(24)		28
Change in Net Debt of Industrial Activities	(1,453)		(905)
Net Debt of Industrial Activities at end of period	$	(2,307)	$	(1,504)

(*) Starting from December 31, 2019, we modified the definition of Net Debt of Industrial Activities in order to include Other current financial assets. As a consequence, certain amounts have been recast accordingly.

(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.

For the six months ended June 30, 2020, the Free Cash Flow of Industrial Activities was a usage of $1,426 million primarily due to the adverse impact of COVID-19.

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The following table shows the change in Net cash provided by (used in) Operating Activities to Free Cash Flow of Industrial Activities for the six months ended June 30, 2020 and 2019:

(in millions)	2020		2019*
Net cash provided by (used in) Operating Activities	$	535	$	(503)
Net cash (provided by) used in Operating Activities of Financial Services	(1,598)		210
Intersegment eliminations	90		132
Net cash (provided by) used in Operating Activities of Industrial Activities	(973)		(161)
Change in derivatives hedging debt of Industrial Activities	5		6
Investments in assets sold under buy-back commitments and operating lease assets of Industrial Activities	(173)		(261)
Operating cash flow of Industrial Activities	(1,141)		(416)
Investments in property plant and equipment, and intangible assets of Industrial Activities	(132)		(180)
Other changes (1)	(153)		(14)
Free Cash Flow of Industrial Activities	$	(1,426)	$	(610)

(*) Starting from December 31, 2019, we modified the definition of Net Debt of Industrial Activities in order to include Other current financial assets. As a consequence, certain amounts have been recast accordingly.

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

On June 15, Fitch Ratings (“Fitch”) affirmed CNH Industrial N.V. and CNH Industrial Capital LLC’s long-term issuer default rating at “BBB-” and changed the outlook to stable from positive. The Company's long-term credit ratings remained unchanged at "BBB" from Standard & Poor's and "Baa3" from Moody's with stable outlooks.

With the purpose of further diversifying Financial Services’ funding structure, CNH Industrial Capital LLC has established a commercial paper program in the U.S. This program had an amount of $250 million outstanding at June 30, 2020 ($387 million at December 31, 2019). CNH Industrial Financial Services S.A. in Europe issues commercial paper under a program which had an amount of $42 million outstanding at June 30, 2020 ($105 million at December 31, 2019). In the month of April 2020, the Company issued £600 million (equivalent to $748 million) of commercial paper through the Joint HM Treasury and Bank of England’s Covid Corporate Financing Facility (CCFF), with the amount outstanding at June 30, 2020 equal to $736 million. Furthermore, in Canada, the Company issued a new retail ABS transaction for a total amount of C$465 million (equivalent to $331 million), with the amount outstanding at June 30, 2020 equal to $328 million.

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 replaced an existing five-year €1.75 billion credit facility due to mature in 2021. As of February 28, 2020, CNH Industrial exercised the first of the two extension options. The facility is now due to mature in March 2025. Available committed unsecured facilities expiring after twelve months amounted to approximately $5.6 billion at June 30, 2020 ($5.5 billion at December 31, 2019). Total committed secured facilities expiring after twelve months amounted to approximately $3.9 billion at June 30, 2020 ($4.1 billion at December 31, 2019), of which $1.3 billion was available at June 30, 2020 ($1.1 billion at December 31, 2019).

The Company will closely monitor its liquidity and capital resources for any potential impact that the COVID-19 pandemic may have on its operations. With the strong liquidity position at the end of June and the demonstrated access to the financial markets, the Company believes that its cash and cash equivalents, access to credit facilities and cash flows from future operations will be adequate to fund its known cash needs during the COVID-19 pandemic.

Please refer to “Note 10: Debt” in our most recent annual report on Form 20-F for more information related to our debt and credit facilities.

CONTINGENCIES

As a global company with a diverse business portfolio, CNH Industrial is exposed to numerous legal risks, including legal proceedings, claims and governmental investigations, particularly in the areas of product liability (including asbestos-related liability), product performance, emissions and fuel economy, retail and wholesale credit, competition and antitrust law, intellectual property matters (including patent infringement), disputes with dealers and suppliers and service providers, environmental risks, and tax and employment matters. For more information, please refer to the information presented in “Note 15: Commitments and Contingencies” to our condensed consolidated financial statements.

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SAFE HARBOR STATEMENT

All statements other than statements of historical fact contained in this filing, including statements regarding our future responses to and effects of the COVID-19 pandemic; 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, liquidity, 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, including those related to the COVID-19 pandemic, are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize (or they occur with a degree of severity that the Company is unable to predict) or other assumptions underlying any of the forward-looking statements prove to be incorrect, 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 unknown duration and economic, operational and financial impacts of the global COVID-19 pandemic and the actions taken or contemplated by governmental authorities or others in connection with the pandemic on our business, our employees, customers and suppliers, including supply chain disruptions caused by mandated shutdowns and the adverse impact on customers, borrowers and other third parties to fulfill their obligations to us; disruption caused by business responses to COVID-19, including remote working arrangements, which may create increased vulnerability to cybersecurity or data privacy incidents; our ability to execute business continuity plans as a result of COVID-19; the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related products; including demand uncertainty caused by COVID-19; general economic conditions in each of our markets, including the significant economic uncertainty and volatility caused by COVID-19; travel bans, border closures, other free movement restrictions, and the introduction of social distancing measures in our facilities may affect in the future our ability to operate as well as the ability of our suppliers and distributors to operate; changes in government policies regarding banking, monetary and fiscal policy; legislation, particularly pertaining to capital goods-related issues such as agriculture, the environment, debt relief and subsidy program policies, trade and commerce and infrastructure development; government policies on international trade and investment, including sanctions, import quotas, capital controls and tariffs; volatility in international trade caused by the imposition of tariffs, sanctions, trade wars; 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; price pressure on new and 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; further developments of the COVID-19 pandemic not only on our operations, supply chains, distribution network, and level of demand for our products, as well as negative evolutions of the economic and financial conditions at global and regional levels; political and civil unrest; volatility and deterioration of capital and financial markets, including possible effects of “Brexit”, other pandemics, terrorist 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 and timely 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.

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.

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.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See our most recent annual report filed on Form 20-F (Part I, Item 11). There has been no material change in this information.

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PART II – OTHER INFORMATION

LEGAL PROCEEDINGS

See “Note 14: Commitments and Contingencies” to our condensed consolidated financial statements.

RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our annual report on Form 20-F for the year ended December 31, 2019 and our quarterly report for the quarter ended March 31, 2020 filed with the SEC on Form 6-K on May 8, 2020 (the “Q1 2020 Form 6-K”) The risks described in the most recent annual report on Form 20-F, our Q1 2020 Form 6-K and in the “Safe Harbor Statement” within this report are not the only risks faced by us. Additional risks and uncertainties not currently known or that are currently judged to be immaterial may also materially affect our business, financial condition or operating results.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company did not purchase any of its equity securities during the second quarter of 2020.

DEFAULT UPON SENIOR SECURITIES

Not applicable.

MINE SAFETY DISCLOSURES

Not applicable.

OTHER INFORMATION

None.

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