SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF JULY, 2002.
CNH GLOBAL N.V.
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
WORLD TRADE CENTER
TOWER B, 10TH FLOOR
AMSTERDAM AIRPORT
THE NETHERLANDS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
----------- ------------
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No X
----------- -----------
(If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82- _______.)
[CNH LOGO]
NEWS RELEASE
CNH REPORTS SECOND QUARTER PROFIT
FOR MORE INFORMATION CONTACT:
JEFFREY T. WALSH Media Relations (1) 847 955 3939
ALBERT TREFTS, JR. Investor Relations (1) 847 955 3821
- Profit improvement initiatives drive second quarter profit above plan.
- Strong sales drive revenue growth in the agricultural equipment business.
- First half at breakeven, excluding one-time restructuring charges.
- All divested products replaced with new models presented in the quarter.
- Successful debt reduction actions brought $1.5 billion of new equity into CNH.
Lake Forest, IL (July 24, 2002) CNH Global N.V. (NYSE:CNH) today reported second
quarter net income of $39 million. Earnings per share were $.11 for the quarter,
which includes the impact of restructuring costs amounting to $.02. Earnings per
share for the second quarter of 2001 were $.02, including the impact of goodwill
amortization and restructuring costs of $.11 per share. Excluding restructuring
charges, CNH's second quarter profit was $45 million, compared to $34 million,
excluding restructuring charges and goodwill amortization, in 2001.
CNH's second quarter consolidated revenues totaled $2.713 billion, compared to
$2.689 billion in 2001. Higher sales in Western Europe and Latin America, along
with favorable foreign exchange rates, offset lower sales in North America
during the quarter.
For the first half of 2002, consolidated revenues were essentially unchanged at
$5.102 billion compared to $5.143 billion in 2001. This was achieved in spite of
the significant drop in construction equipment industry unit sales. The
company's net loss for the first six months of 2002 was $10 million compared to
a net loss of $64 million in 2001. Excluding restructuring charges, the net
result for the first half of 2002 was breakeven.
"Once again, our Case IH and New Holland agricultural brands have led the way
with another quarter of strong growth, particularly in Western Europe," Paolo
Monferino, CNH president and chief executive officer, said. "Our profit
improvement initiatives are ahead of schedule at mid year and we have already
achieved $481 million toward the original target of $600 million. With this kind
of success we are confident that we can achieve even more, and so we have raised
the bar by an additional $250 million, to a new target of $850 million in profit
improvements by 2005."
[ ] CNH Global N.V. Global Management Office 100 South Saunders Rd,
Lake Forest, IL 60045 U.S.A. http://www.cnh.com [ ]
------------------
New Products Set the Stage for Future Growth in the Agricultural Equipment
--------------------------------------------------------------------------
Business.
---------
During the second quarter, the brands of CNH introduced new products to replace
all the various models the company was required to divest at the time of the
merger. These models, the first of the new products designed since the merger,
will carry higher margins than the products they replace when they come into
full production over the next twelve months. By the end of 2004, Case IH and New
Holland plan to replace most of their respective product lines with new, higher
margin products, yielding substantial profit improvements.
In recent dealer conventions held on three continents, an extensive array of
these and other new products and models received a universally enthusiastic
reception. Case IH presented two all new high horsepower row crop tractor
ranges: the top of the line Magnum range and the new MXM Maxxum range. Joining
the Case IH product offering were a new self-propelled forage harvester, a new
range of utility tractors and substantial additions to its growing line of hay
tools.
New Holland previewed its all new TG range, replacing the divested G-70 Genesis
tractors, and launched a new, expanded TM medium-high horsepower row crop
tractor range. Also introduced was the new CR range of rotary combines,
expanding the innovative style and features that earned the CX conventional
combine the 2002 Industrial Design Excellence Gold Award as well as the European
Combine of the Year Award. New round balers in Europe and North America, a new
range of utility combines, upgrades to the existing forage harvester lines, and
a significant expansion of the medium and utility tractor ranges in Latin
America completed the New Holland offering.
Equipment Operations Second Quarter Results.
--------------------------------------------
Second quarter net sales from Equipment Operations rose to $2.582 billion,
compared to $2.497 billion for the same period in 2001.
Sales of agricultural equipment. Revenues from sales of agricultural equipment
totaled $1.778 billion, up 8% compared to $1.649 billion in the second quarter
of 2001. Worldwide industry unit sales in the period were up, except in the
North American high horsepower tractor segment, which declined. In Western
Europe, unit sales of CNH agricultural equipment increased significantly
compared to the prior year. In North America, unit sales of CNH agricultural
equipment were essentially unchanged from 2001 levels. In Latin America, unit
sales increased while in Asia and the developing markets unit sales of CNH
equipment declined. During the quarter, CNH under-produced retail demand by 14%,
reducing both company and dealer inventory levels.
Sales of construction equipment. During the second quarter, construction
equipment revenues totaled $804 million, down 5% compared to $848 million last
year. Excluding acquisitions, revenues declined by 13%. Second quarter industry
unit sales of heavy equipment were down in North America and Europe and up in
Latin America and the Asia Pacific region. Industry unit sales of light
equipment were down significantly compared to the prior year, especially in
North America. Unit sales of CNH heavy equipment, excluding acquisitions, were
unchanged from 2001 levels, as gains in North America, Latin America and the
Asia Pacific region offset declines in Europe. Sales of light equipment
increased significantly in the Asia Pacific region and declined elsewhere.
During the quarter, CNH reduced both company and dealer inventories,
under-producing retail demand by 8% overall. In absolute terms, production of
light equipment was down 20% compared to the second quarter of 2001.
Financial results. As in the prior quarter, CNH's Equipment Operations gross
margin was negatively impacted by the overall weakness in the construction
equipment industry
Page 2
which resulted in lower wholesale volumes and lower fixed cost absorption.
Higher employee benefit and pension costs also had a negative impact on the
gross margin. These factors were partially offset by material cost savings.
Interest expense was lower in the quarter due mainly to lower interest rates.
The impact of the company's debt reduction actions was minimal since the company
enjoyed the benefit only in the last two weeks of the quarter.
Year-to-date net sales from Equipment Operations were $4.821 billion, compared
to $4.783 billion in the first half of 2001.
CNH's profit improvement initiatives totaled $28 million in the second quarter,
bringing the total for the year to $48 million. Since the merger, the company
has achieved a total of $481 million in profit improvements.
Financial Services.
-------------------
In the second quarter of 2002, CNH Capital reported net income of $12 million,
compared to $16 million in the same period last year. Second quarter net income
benefited from lower loan loss provisions. However, in 2002 the company
completed an ABS transaction in the first quarter while in 2001 an ABS
transaction was completed in the second quarter, and this difference in timing
negatively impacted the year-over-year comparison for the quarter. Underlying
results are showing clear improvement as Financial Services earned a first half
profit of $21 million compared with a profit of $13 million in the first half of
2001. Originations in the core business were up 10% compared to the second
quarter of 2001.
Equity Increase.
----------------
On June 14, 2002, CNH issued 50,000,000 new shares of common stock priced at
$4.00 per share. Concurrently, the Fiat Group, CNH's majority shareholder,
exchanged $1.3 billion of debt owed to Fiat by CNH for new common CNH shares
also at $4.00 per share. The net proceeds from these actions were applied to the
company's debt (defined as Equipment Operations total debt less inter-segment
receivables), reducing its debt to capitalization ratio from 76% on December 31,
2001 to 55% on June 30, 2002. As a result of these actions, on June 30, 2002,
the total number of shares of common stock was 652,683,830, of which 93,353,648
were held by investors other than Fiat.
Subsequently, on July 15, 2002, CNH announced that its underwriters had
exercised their over-allotment option for an additional 3,500,000 new shares of
common stock, concluding the company's public offering.
Balance Sheet and Cash Flow.
----------------------------
The $1.780 billion reduction in Equipment Operations net debt since March 31,
2002 was due primarily to the equity increase and debt exchange noted above. The
increase in Financial Services debt of $540 million since March 31, 2002 was due
primarily to an increase in the size of the retail financing portfolio pending
ABS transactions later in the year.
Market Outlook for Agricultural Equipment.
------------------------------------------
Based on the results of the first six months, CNH believes that 2002 total
industry sales of agricultural equipment will be essentially unchanged from 2001
levels. In Europe, where CNH is the market leader, sales have been stronger than
expected in the first half and this should continue into the second half of the
year. In North America, unit sales of under 40 horsepower tractors have been
stronger than anticipated while sales of high horsepower equipment have steadily
weakened. Both trends are expected to continue through the balance of the year.
In Latin America, CNH now believes that sales will be above 2001 levels through
the end of 2002.
Page 3
Market Outlook for Construction Equipment.
------------------------------------------
In North America and in Europe, CNH now believes that industry sales are
unlikely to show improvement in 2002 and should finish the year down by over 10%
compared to last year. In Latin America and the Asia Pacific region industry
sales are showing some improvement, and sales in these regions may finish the
year above 2001 levels.
CNH Outlook for 2002.
---------------------
CNH believes that the growing strength of its global agricultural business will
contribute significantly to the company's bottom line in the second half of the
year. The successful completion of the company's debt reduction actions during
the second quarter should reduce second half interest expense by about $40
million.
New product introductions in the agricultural equipment business should begin to
contribute to the bottom line in the second half. However, launch costs, plant
shutdowns for model change-over, and other new product introduction costs will
more than offset margin improvements in the third quarter.
As announced at the beginning of 2002, the company intends to continue to reduce
dealer and company inventory by keeping wholesale levels below retail sales
levels and production below wholesale levels through the balance of the year.
Employee benefit and pension costs are expected to increase in 2002 by about $60
million.
Despite the decline in the North American construction equipment industry and
North American high horsepower agricultural equipment market, CNH believes that
the company's 2002 loss per share will be close to breakeven, before
restructuring costs. The company expects that continued growth in the European
agricultural equipment industry, together with the reduction in interest expense
achieved through the company's successful debt reduction actions, will be
sufficient to offset the declines in North America. However, should the European
construction equipment market perform below current expectations in the second
half, the company's bottom line will be directly impacted.
As described in the company's 20-F and F-3 filings, preliminary results of
transitional impairment tests of goodwill (under US GAAP) have indicated that
the company may incur a goodwill impairment charge associated with its
construction equipment business of up to $300 million in 2002, reflecting the
negative trends in the construction equipment industry.
###
CNH management will hold a conference call later today to review its second
quarter 2002 results. The conference call webcast will begin at approximately
10:00 am U.S. EDT. This call can be accessed through the investor information
section of the company's web site at www.cnh.com and is being carried by CCBN.
-----------
CNH is the number one manufacturer of agricultural tractors and combines in the
world, the third largest maker of construction equipment, and has one of the
industry's largest equipment finance operations. Revenues in 2001 totaled $9.7
billion. Based in the United States, CNH's network of dealers and distributors
operates in over 160 countries. CNH agricultural products are sold under the
Case IH, New Holland and Steyr brands. CNH construction equipment is sold under
the Case, FiatAllis, Fiat Kobelco, Kobelco, New Holland, and O&K brands.
Forward Looking Statements.
---------------------------
The information contained herein involves forward-looking statements based on
what CNH considers key economic assumptions, and involves risk and uncertainties
that could cause actual results to differ. Some significant factors for
Page 4
CNH include general economic and capital market conditions, the cyclical nature
of its business, foreign currency movements, hedging practices, CNH's and its
customers' access to credit, political uncertainty and civil unrest in various
areas of the world, pricing, product initiatives and other actions taken by
competitors, disruptions in production capacity, excess inventory levels, the
effect of changes in laws and regulations (including government subsidies and
international trade regulations), technological difficulties, changes in
environmental laws, employee and labor relations, weather conditions, energy
prices, real estate values, animal diseases, crop pests, harvest yields,
government farm programs and consumer confidence, housing starts and
construction activity, concerns pertaining to genetically modified organisms,
fuel and fertilizer costs.
Additionally, CNH's achievement of the anticipated benefits of the merger of New
Holland and Case, including the realization of expected annual operating
synergies, depends upon, among other things, industry volumes, as well as CNH's
ability to integrate effectively the operations and employees of New Holland and
Case, and to execute its multi-branding strategy. Further information concerning
factors that could significantly impact expected results is included in the
following sections of CNH's Form 20-F for 2001, as filed with the Securities and
Exchange Commission: Key Information; Information on the Company; Operating and
Financial Review and Prospects; Directors, Senior Management and Employees; and
Financial Information.
Page 5
CNH GLOBAL N.V.
REVENUES AND NET SALES
(DOLLARS IN MILLIONS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- ------------------------------------
% %
2002 2001 CHANGE 2002 2001 CHANGE
------- ------- -------- ------- ------- --------
Revenues:
Net sales
Agricultural Equipment $ 1,778 $ 1,649 8% $ 3,330 $ 3,167 5%
Construction Equipment 804 848 (5%) 1,491 1,616 (8%)
------- ------- ------- -------
Total net sales 2,582 2,497 3% 4,821 4,783 1%
Financial Services 137 212 (35%) 305 394 (23%)
Eliminations and other (6) (20) (24) (34)
------- ------- ------- -------
Total revenues $ 2,713 $ 2,689 1% $ 5,102 $ 5,143 (1%)
======= ======= ======= =======
Net sales:
North America $ 1,156 $1,302 (11%) $ 2,293 $ 2,352 (3%)
Western Europe 901 758 19% 1,586 1,655 (4%)
Latin America 173 145 19% 338 292 16%
Rest of World 352 292 21% 604 484 25%
------- ------- ------- -------
Total net sales $ 2,582 $ 2,497 3% $ 4,821 $ 4,783 1%
======= ======= ======= =======
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
---------------------- ---------------------- ------------------
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------ ------
Revenues
Net sales $ 2,582 $ 2,497 $ 2,582 $ 2,497 $ - $ -
Finance and interest income 131 192 23 37 137 212
------- ------- ------- ------- ----- -----
Total 2,713 2,689 2,605 2,534 137 212
Costs and Expenses
Cost of goods sold 2,127 2,027 2,127 2,027 - -
Selling, general and administrative 264 310 229 242 35 72
Research and development 75 74 75 74 - -
Restructuring and other merger related costs 8 10 8 10 - -
Interest expense 131 199 120 163 51 89
Other, net 50 51 6 25 33 26
------- ------- ------- ------- ----- -----
Total 2,655 2,671 2,565 2,541 119 187
Equity in income (loss) of unconsolidated
subsidiaries and affiliates:
Financial Services 1 2 12 16 1 2
Equipment Operations (2) 3 (2) 3 - -
------- ------- ------- ------- ----- -----
Income (loss) before taxes and minority interest 57 23 50 12 19 27
Income tax provision (benefit) 15 14 8 3 7 11
Minority interest 3 3 3 3 - -
------- ------- ------- ------- ----- -----
Net income (loss) $ 39 $ 6 $ 39 $ 6 $ 12 $ 16
======= ======= ======= ======= ===== =====
Basic and diluted earnings (loss) per common
share (EPS):
EPS before goodwill and restructuring and
other merger related costs $0.13 $0.13
EPS before restructuring and other merger
related costs $0.13 $0.05
EPS $0.11 $0.02
See Notes to Condensed Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
-------------------- -------------------- -------------------
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Revenues
Net sales $ 4,821 $ 4,783 $ 4,821 $ 4,783 $ - $ -
Finance and interest income 281 360 50 70 305 394
------- ------- ------- ------- ------- -------
Total 5,102 5,143 4,871 4,853 305 394
Costs and Expenses
Cost of goods sold 4,018 3,921 4,018 3,921 - -
Selling, general and administrative 542 613 445 470 97 146
Research and development 145 147 145 147 - -
Restructuring and other merger related costs 12 14 12 14 - -
Interest expense 287 383 251 303 119 181
Other, net 86 121 19 73 58 48
------- ------- ------- ------- ------- -------
Total 5,090 5,199 4,890 4,928 274 375
Equity in income (loss) of unconsolidated
subsidiaries and affiliates:
Financial Services 2 3 21 13 2 3
Equipment Operations (8) (17) (8) (17) - -
------- ------- ------- ------- ------- -------
Income (loss) before taxes and minority
interest 6 (70) (6) (79) 33 22
Income tax provision (benefit) 12 (9) - (18) 12 9
Minority interest 4 3 4 3 - -
------- ------- ------- ------- ------- -------
Net income (loss) $ (10) $ (64) $ (10) $ (64) $ 21 $ 13
======= ======= ======= ======= ======= =======
Basic and diluted earnings (loss) per common
share (EPS):
EPS before goodwill and restructuring and
other merger related costs $0.00 ($0.04)
EPS before restructuring and other merger
related costs $0.00 ($0.19)
EPS ($0.03) ($0.23)
See Notes to Condensed Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(MILLIONS)
(UNAUDITED)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
----------------------- ---------------------- ----------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2002 2001 2002 2001 2002 2001
-------- ------------ -------- ------------ -------- ------------
Assets
Cash and cash equivalents $ 554 $ 663 $ 418 $ 378 $ 136 $ 285
Accounts, notes receivable and other - net 7,216 6,160 2,441 1,993 4,956 4,413
Intersegment notes receivable - - 1,697 1,636 99 344
Inventories 2,269 2,204 2,269 2,204 - -
Property, plant and equipment - net 1,399 1,354 1,387 1,333 12 21
Equipment on operating leases - net 604 612 - - 604 612
Investment in Financial Services - - 984 1,147 - -
Investments in unconsolidated affiliates 329 266 285 235 44 31
Goodwill and intangibles 3,709 3,647 3,568 3,508 141 139
Other assets 2,137 2,306 1,716 1,799 421 507
------- ------- ------- ------- ------- -------
Total Assets $18,217 $17,212 $14,765 $14,233 $ 6,413 $ 6,352
======= ======= ======= ======= ======= =======
Liabilities and Equity
Short-term debt $ 3,761 $ 3,217 $ 2,372 $ 2,043 $ 1,389 $ 1,174
Intersegment short-term debt - - 99 344 582 524
Accounts payable 1,466 1,217 1,497 1,287 129 166
Long-term debt 5,237 6,646 3,476 4,856 1,761 1,790
Intersegment long-term debt - - - - 1,115 1,112
Accrued and other liabilities 4,308 4,223 3,876 3,794 453 439
------- ------- ------- ------- ------- -------
14,772 15,303 11,320 12,324 5,429 5,205
Equity 3,445 1,909 3,445 1,909 984 1,147
------- ------- ------- ------- ------- -------
Total Liabilities and Equity $18,217 $17,212 $14,765 $14,233 $ 6,413 $ 6,352
======= ======= ======= ======= ======= =======
Total debt less cash and cash equivalents
and intersegment notes receivables $ 8,444 $ 9,200 $ 3,832 $ 5,229 $ 4,612 $ 3,971
======= ======= ======= ======= ======= =======
See Notes to Condensed Financial Statements.
CNH GLOBAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS)
(UNAUDITED)
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
--------------------- --------------------- ---------------------
2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- --------
Operating Activities:
Net income (loss) $ (10) $ (64) $ (10) $ (64) $ 21 $ 13
Adjustments to reconcile net income
(loss) to net cash from operating activities:
Depreciation and amortization 176 204 115 150 61 54
Changes in operating assets and liabilities (649) (703) (250) (97) (399) (606)
Other, net 17 (90) (12) (65) 8 (38)
------- ------- ------- ------- ------- -------
Net cash from operating activities (466) (653) (157) (76) (309) (577)
------- ------- ------- ------- ------- -------
Investing Activities:
Expenditures for property, plant and equipment (88) (61) (87) (58) (1) (3)
Expenditures for equipment on operating leases (120) (133) - - (120) (133)
Other, net (primarily acquisitions
and divestitures (44) 83 (160) 46 59 30
------- ------- ------- ------- ------- -------
Net cash from investing activities (252) (111) (247) (12) (62) (106)
------- ------- ------- ------- ------- -------
Financing Activities:
Intersegment activity - - (191) (788) 191 788
Net increase (decrease) in indebtedness 438 307 466 594 (28) (287)
Dividends paid (28) (28) (28) (28) - -
Other, net 188 - 188 - 57 7
------- ------- ------- ------- ------- -------
Net cash from financing activities 598 279 435 (222) 220 508
------- ------- ------- ------- ------- -------
Other, net 11 (29) 9 (29) 2 -
------- ------- ------- ------- ------- -------
Increase (decrease) in cash and cash equivalents (109) (514) 40 (339) (149) (175)
Cash and cash equivalents, beginning of period 663 886 378 593 285 293
------- ------- ------- ------- ------- -------
Cash and cash equivalents, end of period $ 554 $ 372 $ 418 $ 254 $ 136 $ 118
======= ======= ======= ======= ======= =======
2002 Non-Cash Items:
Debt to equity exchange concurrent
with offering $ 1,300 $ 1,300 $ -
Financial Services dividend to
Equipment Operations $ - $ 250 $ 250
See Notes to Condensed Financial Statements
CNH GLOBAL N.V.
Notes to Condensed Financial Statements
---------------------------------------
(1) The accompanying condensed financial statements reflect the consolidated
results of CNH Global N.V. and its consolidated subsidiaries ("CNH") and
have been prepared in accordance with generally accepted accounting
principles in the United States ("US GAAP"). In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 94, "Consolidations of All
Majority-Owned Subsidiaries," the condensed financial statements include
the accounts of CNH's majority-owned and controlled subsidiaries and
reflect the interests of the minority owners of the subsidiaries that are
not fully owned for the periods presented, as applicable. The operations
and key financial measures and financial 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. The supplemental financial information captioned
"Equipment Operations" includes the results of operations of CNH's
agricultural and construction equipment operations, with the Company's
financial services businesses reflected on the equity basis. The
supplemental financial information captioned "Financial Services" reflects
the consolidation of CNH's financial services businesses.
In the opinion of management, information included in these quarterly
financial statements reflect all adjustments, consisting of normal,
recurring adjustments, which includes intersegment eliminations, necessary
for a fair presentation of results for these interim periods. The results
of operations for the interim period ended June 30, 2002, are not
necessarily indicative of the results to be expected for the year ended
December 31, 2002.
(2) In January 2002, CNH finalized its global alliance with Kobelco
Construction Machinery Co. Ltd. ("Kobelco Japan") and Kobe Steel, Ltd. for
the development, production and selling of crawler excavators, including
mini-excavators, on a worldwide basis. During the first quarter of 2002,
CNH acquired a 65% interest in Kobelco America for approximately $101
million net of cash acquired and assumption of debt. In addition, CNH
acquired a 10% interest in Kobelco Japan and other certain intangibles for
a total of $78 million. CNH received proceeds of approximately $24 million
from the divestiture of CNH's construction equipment operations in
Australia and China to Kobelco Japan. In July 2002, the European regional
alliance between CNH and Hitachi Construction Machinery Company, Ltd.
("Hitachi") was terminated. CNH acquired Hitachi's interest in Fiat-Hitachi
Excavator for approximately $40 million. Concurrent with acquiring
Hitachi's interest, CNH, Kobelco Japan and Somitomo Corporation formed
Fiat-Kobelco Machinery S.p.A. (Italy) ("Fiat- Kobelco"). Fiat-Kobelco
generally consists of the former Fiat-Hitachi Excavator and Kobelco
Construction Machinery Europe businesses. After giving consideration to
Kobelco Japan purchasing shares in Fiat-Kobelco from CNH for approximately
$10 million, Fiat-Kobelco is owned by the venture partners as follows: CNH
75%, Kobelco Japan 20% and Somitomo Corporation 5%. Additionally, in July
2002, CNH increased its interest in Kobelco Japan from 10% to 20% for
approximately $42 million. The CNH and Kobelco alliance allows for CNH to
increase its interest in Kobelco Japan from 20% to 35% and Kobelco Japan to
increase its interest in Fiat-Kobelco from 20% to 35% by the third quarter
of 2004.
During the second quarter of 2002, CNH and BNP Paribas Lease Group ("BPLG")
formed a retail financing partnership across Europe. It will cover all
brands and commercial activities of CNH in Europe. Under the partnership,
BPLG owns 50.1% of the shares of CNH Capital Europe SAS, which will hold
the retail financing portfolio, and CNH owns the remaining 49.9% of the
shares. BPLG will provide funding and administrative services for CNH
Capital Europe SAS, while CNH's own European financial services businesses
will be responsible for the marketing and origination of financial
products. CNH expects to contribute or sell various assets and liabilities
of its existing European financial services businesses to this partnership.
(3) In June 2002, CNH completed a public offering of 50 million newly issued
shares of common stock priced at $4.00 per share. The net proceeds from the
offering were approximately $188 million. Concurrently with this offering,
Fiat S.p.A. ("Fiat"), CNH's majority shareholder, exchanged $1.3 billion
principal amount of CNH debt for a number of common shares equal to $1.3
billion divided by the public offering price of $4.00 or 325 million
shares.
CNH GLOBAL N.V.
Notes to Condensed Financial Statements
---------------------------------------
In July 2002, CNH announced that the underwriters of CNH's equity offering
exercised their over-allotment option for 3.5 million additional shares of
common stock, concluding CNH's public offering of new shares of common
stock.
Following the offering, including exercise of the over-allotment option,
and concurrent Fiat debt exchange, Fiat owns 85.3% of the 655.6 million
issued common shares of CNH.
(4) In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 addresses financial
accounting and reporting for intangible assets and goodwill. The Statement
requires that goodwill and intangible assets having indefinite useful lives
not be amortized, rather tested at least annually for impairment.
Intangible assets that have finite useful lives will continue to be
amortized over their useful lives. As required by SFAS No. 142, we adopted
this new accounting standard on January 1, 2002. Application of the
non-amortization provision of SFAS No. 142 is expected to result in a
pretax increase in earnings of approximately $116 million per year related
to goodwill and approximately $11 million per year related to acquired
trademarks with indefinite lives. Beginning January 1, 2002, goodwill and
indefinite-lived intangible assets will be tested for impairment annually,
and will be tested for impairment between annual tests if an event occurs
or circumstances change that would indicate the carrying amount may be
impaired. Impairment testing for goodwill is done at a reporting unit
level. We have identified three reporting units under the criteria set
forth by SFAS No. 142: Agricultural Equipment, Construction Equipment and
Financial Services. SFAS No. 142 prescribes a two-phase process for
impairment testing of goodwill. The first phase, required to be completed
by June 30, 2002, tests for impairment. The second phase (if necessary),
required to be completed by December 31, 2002, measures the amount of
impairment. To determine fair value, we have relied on two valuation
models: guideline company method and discounted cash flow. We have
completed the first phase of the transitional impairment tests. Preliminary
results, inclusive of a second phase estimate, indicate that we may incur a
goodwill impairment charge of up to $300 million associated with our
Construction Equipment reporting unit. Results indicated that the fair
value of our Agricultural Equipment reporting unit, Financial Services
reporting unit and indefinite-lived intangible assets exceed their
respective carrying amounts and therefore were not impaired. Any
transitional impairment loss will be recognized as the effect of a change
in accounting principle effective as of January 1, 2002. During 2001, we
continued to evaluate the recoverability of goodwill in compliance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
The following table provides a reconciliation of previously reported net
earning and EPS had SFAS No. 142 been applied as of January 2001: (in
millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2002 2001 2002 2001
------- ------- ------- -------
Basic and Diluted EPS
---------------------
Net income (loss) $ 39 $ 6 $ (10) $ (64)
Goodwill and trademark amortization -- 22 -- 44
------- ------- ------- -------
Adjusted net income (loss) $ 39 $ 28 $ (10) $ (20)
======= ======= ======= =======
Weighted-average shares outstanding 343.0 277.0 310.3 277.0
EPS $ 0.11 $ 0.02 $ (0.03) $ (0.23)
Goodwill and trademark amortization $ -- $ 0.08 $ -- $ 0.16
Adjusted EPS $ 0.11 $ 0.10 $ (0.03) $ (0.07)
CNH GLOBAL N.V.
Notes to Condensed Financial Statements
---------------------------------------
(5) CNH has three reportable operating segments: agricultural equipment,
construction equipment and financial services. CNH evaluates segment
performance and reports to Fiat based on results of operations in
accordance with the accounting principles followed by Fiat. CNH revenues
reported to Fiat exclude finance and interest income of the Equipment
Operations. Fiat defines results of operations as the income (loss) before
equity (income) loss in unconsolidated subsidiaries, net financial
expenses, restructuring and taxes. Net financial expenses primarily include
finance and interest income and expenses of the operations.
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
2002 2001 2002 2001
------ ------ ------ ------
A reconciliation of consolidated net income/loss per US GAAP to results of operations reported to Fiat is as follows:
(in millions)
Net income/(loss) per US GAAP statements $ 39 $ 6 $ (10) $ (64)
US GAAP adjustments:
Amortization of goodwill and other intangibles (38) (11) (79) (23)
Other (1) 14 4 19
Minority interest 3 3 4 3
Income tax provision (benefit) 13 13 10 (9)
Restructuring charge 6 5 6 9
Net financial expense 95 128 203 255
Equity in (income) loss of unconsolidated
subsidiaries and affiliates 1 (5) 6 14
------ ------ ------ ------
Results of operations $ 118 $ 153 $ 144 $ 204
====== ====== ====== ======
The following summarizes results of operations by segment:
(in millions)
Agricultural equipment $ 113 $ 76 $ 151 $ 106
Construction equipment (17) 41 (46) 64
Financial services 22 38 42 43
Eliminations - (2) (3) (9)
------ ------ ------ ------
Results of operations $ 118 $ 153 $ 144 $ 204
====== ====== ====== ======
A summary of CNH's results reported to Fiat is as follows:
(in millions)
Revenues $2,719 $2,671 $5,104 $5,102
Results of operations $ 118 $ 153 $ 144 $ 204
During June 2002, a non-cash dividend of $250 million was declared by
financial services, which is fully owned by equipment operations. In
exchange financial services assumed $250 million of debt from equipment
operations.
CNH GLOBAL N.V.
Notes to Condensed Financial Statements
---------------------------------------
(6) During the six months ended June 30, 2002, CNH expensed $12 million of
restructuring costs. The restructuring and other merger-related costs
primarily relate to severance and other costs related to headcount
reductions. During the six months ended June 30, 2002, CNH utilized
approximately $43 million of its restructuring reserves established during
2001 and 2000. The utilized amounts primarily represent involuntary
employee severance costs, as well as costs related to the closing of
existing facilities. As of June 30, 2002, CNH has recorded $5 million in
merger-related restructuring reserves for costs to integrate the Kobelco
America operations (see Note 2).
(7) For the three months ended June 30, 2002, CNH's 2002 and 2001 effective
income tax rates were 26% and 61%, respectively. For the six months ended
June 30, 2002, CNH's 2002 and 2001 effective income tax rates were 200% and
13%, respectively. The tax rates differ from the Dutch statutory rate of
35% primarily due to differences in the geographical mix of profits, losses
in jurisdictions for which no immediate tax benefit is recognizable, and
changes in valuation reserves attributable to prior-year losses. CNH has
been consistent in its approach to benefiting losses in comparison to
previous periods. In April 2002, we filed and received a refund for
approximately $105 million relating to the carryback of approximately $270
million of our 2001 net operating losses.
(8) Earnings (loss) per common share ("EPS"):
(in millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- -----------------
2002 2001 2002 2001
------- ----- ------ ------
Basic and Diluted EPS
---------------------
Net income (loss) $ 39 $ 6 $ (10) $ (64)
Restructuring, net of tax 6 8 9 11
------- ----- ------ ------
Net income (loss) before restructuring 45 14 (1) (53)
Goodwill -- 20 -- 41
------- ----- ------ ------
Net income (loss) before goodwill and restructuring $ 45 $ 34 $ (1) $ (12)
======= ===== ====== ======
Weighted-average shares outstanding 343.0 277.0 310.3 277.0
EPS before goodwill and restructuring $ 0.13 $0.13 $ - $(0.04)
EPS before restructuring $ 0.13 $0.05 $ - $(0.19)
EPS $ 0.11 $0.02 $(0.03) $(0.23)
(9) In CNH's receivable asset securitization program, retail finance
receivables are sold to limited purpose, bankruptcy remote, consolidated
subsidiaries of CNH. In turn, these subsidiaries establish separate trusts
to which they transfer the receivables in exchange for the proceeds from
asset-backed securities by the trusts. Due to the nature of the assets held
by the trusts and the limited nature of each trust's activities, they are
each classified as a qualifying special purpose entity ("QSPE") under SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." In accordance with SFAS No. 140, assets
and liabilities of the QSPEs are not consolidated in the Company's
consolidated balance sheets. The amount outstanding under these programs
were $3.9 billion and $4.1 billion at June 30, 2002 and December 31, 2001,
respectively. In addition to the retail securitization programs, certain
subsidiaries of CNH securitized or discounted wholesale receivables without
recourse. As of June 30, 2002, $1.4 billion remained outstanding under
these programs as compared to $1.3 billion as of December 31, 2001.
CNH GLOBAL N.V.
Notes to Condensed Financial Statements
---------------------------------------
(10) The following table sets forth the amount of total consolidated debt as of
June 30, 2002 and December 31, 2001: (in millions)
Consolidated Equipment Operations Financial Services
------------ -------------------- ------------------
June 30, December 31, June 30, December 31, June 30, December 31,
2002 2001 2002 2001 2002 2001
----------------------------------------------------------------------------
Short-term debt:
With Fiat Affiliates $1,798 $1,847 $1,393 $1,373 $ 405 $ 474
Other 1,963 1,370 979 670 984 700
Intersegment - - 99 344 582 524
------ ------ ------ ------ ------ ------
Total Short-term debt 3,761 3,217 2,471 2,387 1,971 1,698
------ ------ ------ ------ ------ ------
Long-term debt:
With Fiat Affiliates 2,843 4,041 2,327 3,619 516 422
Other 2,394 2,605 1,149 1,237 1,245 1,368
Intersegment - - - - 1,115 1,112
------ ------ ------ ------ ------ ------
Total Long-term debt 5,237 6,646 3,476 4,856 2,876 2,902
------ ------ ------ ------ ------ ------
Total debt:
With Fiat Affiliates 4,641 5,888 3,720 4,992 921 896
Other 4,357 3,975 2,128 1,907 2,229 2,068
Intersegment - - 99 344 1,697 1,636
------ ------ ------ ------ ------ ------
Total Debt $8,998 $9,863 $5,947 $7,243 $4,847 $4,600
====== ====== ====== ====== ====== ======
Total debt less cash and
cash equivalents and
intersegment notes receivables $8,444 $9,200 $3,832 $5,229 $4,612 $3,971
====== ====== ====== ====== ====== ======
At June 30, 2002, CNH had approximately $3.7 billion available under $8.0
billion total lines of credit and asset-backed facilities.
CNH fully, unconditionally and irrevocably guarantees Case Corporation's
$802 million in outstanding 6.25% Notes due 2003, 7.25% Notes due 2005, and
7.25% Notes due 2016 that were issued pursuant to two registration
statements under the Securities Act of 1933, as amended. Reference is made
to Note 23, "Guarantee of Subsidiary's Outstanding Debt Securities," of
CNH's Form 20-F for the year ended December 31, 2001 for further
discussion.
(11) On March 27, 2002, CNH's Board of Directors recommended a dividend of 10
cents per share for the year 2001. The dividend was paid in June to
shareholders of record at close of business on May 20, 2002.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CNH Global N.V.
By: /s/ Debra E. Kuper
---------------------------------
Debra E. Kuper
Assistant Secretary
July 24, 2002