cnhi-6k_20180630.htm

	June 30, 2018			December 31, 2017(*)
	(in millions)
ASSETS
Cash and cash equivalents	$	4,560		$	5,430
Restricted cash		657			770
Trade receivables, net		548			496
Financing receivables, net		18,957			19,795
Inventories, net		7,131			6,452
Property, plant and equipment, net		6,254			6,831
Investments in unconsolidated subsidiaries and affiliates		537			561
Equipment under operating leases		1,744			1,845
Goodwill		2,460			2,472
Other intangible assets, net		762			792
Deferred tax assets		748			852
Derivative assets		113			77
Other assets		1,892			1,925
Total Assets	$	46,363		$	48,298
LIABILITIES AND EQUITY
Debt	$	24,353		$	25,895
Trade payables		6,300			6,060
Deferred tax liabilities		97			94
Pension, postretirement and other postemployment benefits		1,627			2,300
Derivative liabilities		126			98
Other liabilities		9,254			9,594
Total Liabilities	$	41,757		$	44,041
Redeemable noncontrolling interest		27			25
Common shares, €0.01, par value; outstanding 1,355,525,319 common shares and 388,876,305 special voting shares at 6/30/2018; and outstanding 1,363,592,506 common shares and 388,906,690 special voting shares at 12/31/2017		25			25
Treasury stock, at cost; 8,874,877 common shares at 6/30/2018 and 807,690 common shares at 12/31/2017		(110	)		(10	)
Additional paid in capital		4,392			4,412
Retained earnings		2,120			1,763
Accumulated other comprehensive loss		(1,868	)		(1,966	)
Noncontrolling interests		20			8
Total Equity	$	4,579		$	4,232
Total Liabilities and Equity	$	46,363		$	48,298

(*) 2017 figures have been recast following the retrospective adoption on January 1, 2018, of the updated accounting standard for revenue recognition (ASC 606).

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017(*)			2018			2017(*)
	(in millions)						(in millions)
Revenues
Net sales	$	7,579		$	6,525		$	13,879		$	11,815
Finance, interest and other income		466			478			939			973
Total Revenues	$	8,045		$	7,003		$	14,818		$	12,788
Costs and Expenses
Cost of goods sold	$	6,188		$	5,393		$	11,444		$	9,875
Selling, general and administrative expenses		593			571			1,183			1,110
Research and development expenses		262			228			489			419
Restructuring expenses		5			12			8			24
Interest expense		192			233			392			452
Other, net		302			247			553			510
Total Costs and Expenses	$	7,542		$	6,684		$	14,069		$	12,390
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		503			319			749			398
Income tax (expense)		(118	)		(110	)		(181	)		(161	)
Equity in income of unconsolidated subsidiaries and affiliates		23			27			42			45
Net income		408			236			610			282
Net income attributable to noncontrolling interests		12			5			18			8
Net income attributable to CNH Industrial N.V.	$	396		$	231		$	592		$	274
Earnings per share attributable to common shareholders
Basic	$	0.29		$	0.17		$	0.43		$	0.20
Diluted	$	0.29		$	0.17		$	0.43		$	0.20
Cash dividends declared per common share	$	0.173		$	0.118		$	0.173		$	0.118

(*) 2017 figures have been recast following the retrospective adoption on January 1, 2018, of the updated accounting standards for revenue recognition (ASC 606) and retirement benefits accounting (ASU 2017-07).

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017(*)			2018			2017(*)
	(in millions)						(in millions)
Net income	$	408		$	236		$	610		$	282
Other comprehensive income (loss), net of tax
Unrealized income (loss) on cash flow hedges		(16	)		70			(5	)		65
Changes in retirement plans’ funded status		446			16			456			30
Foreign currency translation		(46	)		(298	)		(335	)		(274	)
Share of other comprehensive income (loss) of entities using the equity method		(33	)		26			(18	)		35
Other comprehensive income (loss), net of tax		351			(186	)		98			(144	)
Comprehensive income (loss)		759			50			708			138
Less: Comprehensive income attributable to noncontrolling interests		11			5			18			7
Comprehensive income (loss) attributable to CNH Industrial N.V.	$	748		$	45		$	690		$	131

	Six Months Ended June 30,
	2018			2017(*)
	(in millions)
Operating activities:
Net income	$	610		$	282
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		364			354
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments		323			280
Loss on disposal of assets		—			1
Loss on repurchase/early redemption of notes		—			17
Undistributed income (loss) of unconsolidated subsidiaries		4			(10	)
Other non-cash items		110			78
Changes in operating assets and liabilities:
Provisions		(56	)		32
Deferred income taxes		(78	)		(86	)
Trade and financing receivables related to sales, net		(229	)		(291	)
Inventories, net		(765	)		(660	)
Trade payables		586			617
Other assets and liabilities		(142	)		30
Net cash provided by operating activities	$	727		$	644
Investing activities:
Additions to retail receivables		(1,999	)		(1,806	)
Collections of retail receivables		2,151			2,190
Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments		1			2
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments		(161	)		(165	)
Expenditures for assets under operating leases and assets sold under buy-back commitments		(591	)		(850	)
Other		209			(16	)
Net cash used in investing activities	$	(390	)	$	(645	)
Financing activities:
Proceeds from long-term debt		7,258			7,395
Payments of long-term debt		(8,847	)		(8,104	)
Net increase in other financial liabilities		865			90
Dividends paid		(238	)		(165	)
Other		(134	)		(5	)
Net cash used in financing activities	$	(1,096	)	$	(789	)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash		(224	)		227
Decrease in cash and cash equivalents and restricted cash		(983	)		(563	)
Cash and cash equivalents and restricted cash, beginning of year		6,200			5,854
Cash and cash equivalents and restricted cash, end of period	$	5,217		$	5,291

(*) 2017 figures have been recast following the retrospective adoption on January 1, 2018, of the updated accounting standards for revenue recognition (ASC 606) and cash flow presentation (ASU 2016-18).

	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, 2017, as previously reported	$	25	$	(9	)	$	4,408		$	1,787		$	(1,767	)	$	7		$	4,451		$	21
Adoption of ASC 606		—		—			—			(135	)		5			(1	)		(131	)		—
Balance, January 1, 2017, as recast		25		(9	)		4,408			1,652			(1,762	)		6			4,320			21
Net income		—		—			—			274			—			3			277			5
Other comprehensive loss, net of tax		—		—			—			—			(143	)		(1	)		(144	)		—
Dividend paid		—		—			—			(161	)		—			(1	)		(162	)		(3	)
Acquisition of treasury stock		—		(16	)		—			—			—			—			(16	)		—
Common shares issued from treasury stock and capital increase for share-based compensation		—		25			(6	)		—			—			—			19			—
Share-based compensation expense		—		—			11			—			—			—			11			—
Other changes		—		—			—			—			—			(1	)		(1	)		—
Balance, June 30, 2017	$	25	$	—		$	4,413		$	1,765		$	(1,905	)	$	6		$	4,304		$	23

Balance, December 31, 2017, as previously reported	$	25	$	(10	)	$	4,412		$	1,921		$	(1,958	)	$	10		$	4,400		$	25
Adoption of ASC 606		—		—			—			(158	)		(8	)		(2	)		(168	)		—
Balance, January 1, 2018		25		(10	)		4,412			1,763			(1,966	)		8			4,232			25
Net income		—		—			—			592			—			13			605			5
Other comprehensive income, net of tax		—		—			—			—			98			—			98			—
Dividend paid		—		—			—			(235	)		—			—			(235	)		(3	)
Acquisition of treasury stock		—		(134	)		—			—			—			—			(134	)		—
Common shares issued from treasury stock and capital increase for share-based compensation		—		34			(33	)		—			—			—			1			—
Share-based compensation expense		—		—			16			—			—			—			16			—
Other changes		—		—			(3	)		—			—			(1	)		(4	)		—
Balance, June 30, 2018	$	25	$	(110	)	$	4,392		$	2,120		$	(1,868	)	$	20		$	4,579		$	27

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 as a result of the business combination transaction between Fiat Industrial S.p.A. (“Fiat Industrial”) and 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 consolidated 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, 2017. 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. Actual results could differ materially from those estimates.

Certain financial information in this report has been presented by geographic area. Our geographic regions are: (1) NAFTA; (2) EMEA; (3) LATAM; and (4) APAC. The geographic designations have the following meanings:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance under current U.S. GAAP. The new standard requires an entity to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration that the entity expects to receive. This new revenue recognition model defines a five-step process to achieve this objective. The new standard also requires additional disclosures to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts with customers. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, and the cumulative effect of applying the standard would be recognized at the earliest period shown or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the condensed consolidated statement of changes in equity.

The Company has adopted the new standard effective January 1, 2018 using the full retrospective approach. The impact of adopting the new standard on net equity at January 1, 2016 (date of first time retrospective adoption of the new standard) is a reduction of $122 million and primarily relates to certain services (mainly maintenance and repair contracts, as well as extended warranty contracts) and certain other incentives provided by CNH Industrial to customers which require a different timing of recognition of revenues and margin. Furthermore, the adoption of the new standard also resulted in changes in classification between net revenues and expenses, whose overall impact on total net revenues is not significant, as well as certain further changes in classification for certain assets and liabilities, whose overall impact on total assets and total liabilities is not significant.

As it relates to our supplemental information and segment reporting, based upon the provisions of ASC 606, we have determined that sales to dealers accompanied by “floor plan” agreements, under which the Company offers wholesale financing including “interest-free” financing for specified periods, include two separate performance obligations. In particular, concurrent with the sale of the equipment/vehicle, our Industrial Activities companies offer to the dealer wholesale financing through loans extended by financial services companies (primarily through our captive Financial Services business). Industrial Activities compensates Financial Services for the cost of the “interest-free” period. This cost has been determined to represent a cash sale incentive on the initial sale of the good (first performance obligation), and therefore should be recognized as a reduction of net sales of Industrial Activities, and not as interest compensation to Financial Services in the Industrial Activities statement of operations, as presented historically. The second performance obligation consists of a credit facility extended by our Financial Services business to the dealer: the remuneration of this performance obligation is represented by the compensation received from Industrial Activities for the period of the “interest-free” financing and by the interest charged to the dealer for the remaining period. This remuneration is recognized over the period of the outstanding exposure, consistent with the current accounting treatment. These changes did not result in any change in total revenues in the Condensed Consolidated Statement of Operations or in total operating income, as the transactions between Industrial Activities and Financial Services are eliminated on consolidation. However, the new classification of the interest compensation to Financial Services modified the allocation of total revenues between the amounts classified as Net sales (which includes only Net sales of Industrial Activities) and the Finance and Interest Income (which mainly includes income of Financial Services). Furthermore, after the adoption of ASC 606, the different classification of interest compensation to Financial Services reduced the operating profit of Industrial Activities, but did not modify the total consolidated operating profit.

In accordance with the transitional rules included in ASU 2014-09, the Company has applied the standard’s practical expedient where, for all reporting periods presented before the date of initial application, an entity need not disclose the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue. No other practical expedients were applied.

The following paragraph presents the Company’s revenue recognition policy after the adoption of the new accounting standard ASC 606.

Revenue is recognized when control of the vehicles, equipment, services or parts has been transferred and the Company’s performance obligations to the customers have been satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

The timing of when the Company transfers the goods or services to the customer may differ from the timing of the customer’s payment.

Revenues are stated net of discounts, allowances, settlement discounts and rebates, as well as costs for sales incentive programs, which are determined on the basis of historical costs, country by country, and charged against profit for the period in which the corresponding sales are recognized.

The Company also enters into contracts with multiple performance obligations. For these contracts, the Company allocates revenue from the transaction price to the distinct goods and services in the contract on a relative standalone selling price basis. To the extent the Company sells the goods or services separately in the same market, the standalone selling price is the observable price at which the Company sells the goods or services separately. For all other goods or services, the Company estimates the standalone selling price considering all information reasonably available (including market conditions, entity-specific factors and information about the customer or class of customer).

The Company has determined that the customers from the sale of vehicles, equipment and parts are generally dealers, distributors and retail customers.

Transfer of control, and thus related revenue recognition, generally corresponds to when the vehicles, equipment and parts are made available to the customer. Therefore, the Company recognizes revenue at a point in time when control is transferred to the customer at a sale price that the Company expects to receive.

For all sales, no significant uncertainty exists surrounding the purchaser’s obligation to pay for vehicles, equipment and parts. The Company records appropriate allowance for credit losses and anticipated returns as required. Fixed payment schedules exist for all sales, but payment terms vary by geographic market and product line.

The cost of incentives, if any, are estimated at the inception of a contract at the amount that is expected to be paid and is recognized as a reduction to revenue at the time of the sale. If a vehicle or equipment contract transaction has multiple performance obligations, the cost of incentives is allocated entirely to vehicle or equipment as the intent of the incentives is to encourage sales of vehicles or equipment. If the estimate of the incentive changes following the sale to the customer, the change in estimate is recognized as an

adjustment to revenue in the period of the change. CNH Industrial grants certain sales incentives to support sales of its products to retail customers. At the later of the time of sale or the time an incentive is announced to dealers, CNH Industrial records the estimated impact of sales allowances in the form of dealer and customer incentives as a reduction of revenue. Subsequent adjustments to sales incentive programs related to products/vehicles previously sold are recognized as an adjustment to revenues in the period the adjustment is determinable. The determination of sales allowances requires management to make estimates based upon historical data, estimated future market demand for products, field inventory levels, announced incentive programs, competitive pricing and interest rates, among other things.

With reference to the sales to dealers accompanied by “floor plan” agreements under which the Company offers wholesale financing including “interest-free” financing for specified period of time (which also vary by geographic market and product line), two separate performance obligations exist. The first performance obligation consists of the sale of the equipment/vehicle from Industrial Activities to the dealer. Concurrent with the sale of the equipment/vehicle, Industrial Activities offers to the dealer wholesale financing through loans extended by Financial Services. Industrial Activities compensates Financial Services for the cost of the interest-free period. This cost has been determined to represent a cash sale incentive on the initial sale of the good sold, and therefore it should be recognized upfront as a reduction of net sales of Industrial Activities. The second performance obligation consists of a credit facility extended by Financial Services to the dealer. The remuneration of this performance obligation is represented by the compensation received from Industrial Activities for the period of the interest-free financing and by the interest charged to dealer for the remaining period. This remuneration is recognized by Financial Services over the period of the outstanding exposure.

For parts sales, when the Company provides its customers with a right to return a transferred product, revenue and corresponding cost of sales are recognized for parts that are not expected to be returned. The expected returns are estimated based on an analysis of historical experience. The portion of revenue (and corresponding cost of sales) related to the parts that are expected to be returned is recognized at the end of the return period. The amount received or receivable that is expected to be returned is recognized as a refund liability, representing the obligation to return the customer’s consideration.

Furthermore, at the time of the initial sale, CNH Industrial recognizes a return asset for the right to recover the goods returned by the customer. This asset is initially measured at the former carrying amount of the inventory. At each reporting date, both the refund liability and the return asset are remeasured to record for any revisions to the expected level of returns, as well as any decreases in the value of the returned products.

Revenues from services provided are primarily comprised of extended warranties and maintenance and repair services and are recognized over the contract period when the costs are incurred, that is when the claims are charged by the dealer. Amounts invoiced to customers for which CNH Industrial receives consideration before the performance is satisfied are recognized as contract liability. These services are either separately-priced or included in the selling price of the vehicle. In the second case, revenue for the services is allocated based on the estimated stand-alone selling price. In the event that the costs expected to be incurred to satisfy the remaining performance obligations exceed the transaction price, an estimated contract loss is recognized.

Shipping and other transportation activities performed as an agent are recognized on a net basis, which is netting the related freight cost against the freight revenue.

Commercial Vehicles enters into transactions for the sale of vehicles to some customers with an obligation to repurchase (“buy-back commitment”) the vehicles at the end of a period (“buy-back period”) at the customer’s request. For these types of arrangements, at inception, CNH Industrial assesses whether a significant economic incentive exists for the customer to exercise the option.

If CNH Industrial determines that a significant economic incentive exists for the customer to exercise the buy-back option, the transaction is accounted for as an operating lease. In such case, vehicles are accounted for as Property, plant and equipment because the agreements typically have a long-term buy-back period. The difference between the carrying value (corresponding to the manufacturing cost) and the estimated resale value (net of refurbishing costs) at the end of the buy-back period is depreciated on a straight-line basis over the same period. The initial sale price received is recognized in “Other liabilities” and is comprised of the repurchase value of the vehicle, and the rents to be recognized in the future recorded as contract liability. These rents are determined at the inception of the contract as the difference between the initial sale price and the repurchase price and are recognized as revenue on a straight-line basis over the term of the agreement. At the end of the agreement term, upon exercise of the option, the used vehicles are reclassified from Property, plant and equipment to Inventories. The proceeds from the sale of such vehicles are recognized as Revenues.

If CNH Industrial determines that a significant economic incentive does not exist for the customer to exercise the buy-back option, the transaction is treated as a sale with a variable consideration whose variable component is the buy-back provision accrual. The buy-back provision accrual is the difference between the repurchase price and the estimated market value of the used vehicle at the end of the buy-back period and is recorded only when the repurchase price is greater than the estimated market value of the used vehicle. The

buy-back provision accrual is estimated and recognized as a reduction of revenues at the time of the sale. Any subsequent change following such periodic reassessment is recognized as a reduction of revenues at that time.

Finance and interest income on retail and other notes receivables and finance leases is recorded using the effective yield method. Deferred costs on the origination of financing receivables are recognized as a reduction in finance revenue over the expected lives of the receivables using the effective yield method. Recognition of income on loans is suspended when management determines that collection of future income is not probable or when an account becomes 120 days delinquent, whichever occurs earlier. Interest accrual is resumed when and if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at that time. The Company applies cash received on nonaccrual financing receivables to first reduce any unrecognized interest and then the recorded investment and any other fees. Receivables are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Delinquency is reported on receivables greater than 30 days past due. Charge-offs of principal amounts of receivables outstanding are deducted from the allowance at the point when it is determined to be probable that all amounts due will not be collected.

Income from operating leases is recognized over the term of the lease on a straight-line basis.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company adopted ASU 2017-07 on a retrospective basis as of January 1, 2018, which did not have a material impact on its condensed consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”) that changes the presentation of restricted cash and cash equivalents on the statement of cash flows. Restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company adopted ASU 2016-18 on a retrospective basis as of January 1, 2018, which did not have a material impact on its condensed consolidated financial statements.

The unaudited impact of adoption of the new Revenue Recognition standard and the impact of ASU 2017-07 on the condensed consolidated statement of operations for the three and six months ended June 30, 2017 is as follows:

	Three Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of ASC 606			Adjustment Due to ASU 2017-07			As Recast
	(in millions)
Revenues
Net Sales	$	6,655		$	(130	)	$	—		$	6,525
Finance, interest and other income		293			185			—			478
Total Revenues	$	6,948		$	55		$	—		$	7,003
Costs and Expenses
Cost of goods sold	$	5,427		$	(32	)	$	(2	)	$	5,393
Selling, general and administrative expenses		575			—			(4	)		571
Research and development expenses		228			—			—			228
Restructuring expenses		12			—			—			12
Interest expense		234			(1	)		—			233
Other, net		139			102			6			247
Total Costs and Expenses	$	6,615		$	69		$	—		$	6,684
Income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates		333			(14	)		—			319
Income tax (expense)		(113	)		3			—			(110	)
Equity in income of unconsolidated subsidiaries and affiliates		27			—			—			27
Net Income (loss)	$	247		$	(11	)	$	—		$	236
Net income (loss) attributable to noncontrolling interests		5			—			—			5
Net income/(loss) attributable to controlling interests	$	242		$	(11	)	$	—		$	231
Earnings per share attributable to common shareholders
Basic	$	0.18		$	(0.01	)	$	—		$	0.17
Diluted	$	0.18		$	(0.01	)	$	—		$	0.17
Cash dividends declared per common share	$	0.118		$	—		$	—		$	0.118

	Six Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of ASC 606			Adjustment Due to ASU 2017-07			As Recast
	(in millions)
Revenues
Net Sales	$	12,039		$	(224	)	$	—		$	11,815
Finance, interest and other income		590			383			—			973
Total Revenues	$	12,629		$	159		$	—		$	12,788
Costs and Expenses
Cost of goods sold	$	9,924		$	(44	)	$	(5	)	$	9,875
Selling, general and administrative expenses		1,117			—			(7	)		1,110
Research and development expenses		419			—			—			419
Restructuring expenses		24			—			—			24
Interest expense		453			(1	)		—			452
Other, net		280			218			12			510
Total Costs and Expenses	$	12,217		$	173		$	—		$	12,390
Income (loss) before income taxes and equity in income of unconsolidated subsidiaries and affiliates		412			(14	)		—			398
Income tax (expense)		(161	)		—			—			(161	)
Equity in income of unconsolidated subsidiaries and affiliates		45			—			—			45
Net Income (loss)	$	296		$	(14	)	$	—		$	282
Net income (loss) attributable to noncontrolling interests		8			—			—			8
Net income/(loss) attributable to controlling interests	$	288		$	(14	)	$	—		$	274
Earnings per share attributable to common shareholders
Basic	$	0.21		$	(0.01	)	$	—		$	0.20
Diluted	$	0.21		$	(0.01	)	$	—		$	0.20
Cash dividends declared per common share	$	0.118		$	—		$	—		$	0.118

The unaudited impact of adoption of the new Revenue Recognition standard on our condensed consolidated balance sheet at December 31, 2017 is as follows:

	December 31, 2017
	As Previously Reported		Adjustment Due to Adoption of ASC 606			As Recast
	(in millions)
ASSETS
Cash and cash equivalents	$	5,430	$	—		$	5,430
Restricted cash		770		—			770
Trade receivables, net		496		—			496
Financing receivables, net		19,842		(47	)		19,795
Inventories, net		6,280		172			6,452
Property, plant and equipment, net		7,003		(172	)		6,831
Investments in unconsolidated subsidiaries and affiliates		561		—			561
Equipment under operating leases		1,845		—			1,845
Goodwill		2,472		—			2,472
Other intangible assets, net		792		—			792
Deferred tax assets		818		34			852
Derivative assets		77		—			77
Other assets		1,889		36			1,925
Total Assets	$	48,275	$	23		$	48,298
LIABILITIES AND EQUITY
Debt	$	25,895	$	—		$	25,895
Trade payables		6,060		—			6,060
Deferred tax liabilities		97		(3	)		94
Pension, postretirement and other postemployment benefits		2,300		—			2,300
Derivative liabilities		98		—			98
Other liabilities		9,400		194			9,594
Total Liabilities	$	43,850	$	191		$	44,041
Redeemable noncontrolling interest		25		—			25
Total Equity	$	4,400	$	(168	)	$	4,232
Total Liabilities and Equity	$	48,275	$	23		$	48,298

The unaudited impact of adoption of the new Revenue Recognition standard and the impact of ASU 2016-18 on our condensed consolidated statement of cash flows for the six months ended June 30, 2017 is as follows:

	Six Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of ASC 606			Adjustment Due to ASU 2016-18			As Recast
	(in millions)
Operating activities:
Net income	$	296		$	(14	)	$	—		$	282
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		354			—			—			354
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments		280			—			—			280
Loss from disposal of assets		12			(11	)		—			1
Loss on repurchase/early redemption of notes		17			—			—			17
Undistributed income of unconsolidated subsidiaries		(10	)		—			—			(10	)
Other non-cash items		87			(9	)		—			78
Changes in operating assets and liabilities:
Provisions		41			(9	)		—			32
Deferred income taxes		(85	)		(1	)		—			(86	)
Trade and financing receivables related to sales, net		(291	)		—			—			(291	)
Inventories, net		(1,057	)		397			—			(660	)
Trade payables		617			—			—			617
Other assets and liabilities		6			24			—			30
Net cash provided by operating activities	$	267		$	377		$	—		$	644
Investing activities:
Additions to retail receivables		(1,806	)		—			—			(1,806	)
Collections of retail receivables		2,190			—			—			2,190
Proceeds from the sale of assets, net of assets under operating leases and assets sold under buy-back commitments		2			—			—			2
Proceeds from the sale of assets previously under operating leases and assets sold under buy-back commitments		377			(377	)		—			—
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and assets sold under buy-back commitments		(165	)		—			—			(165	)
Expenditures for assets under operating leases and assets sold under buy-back commitments		(850	)		—			—			(850	)
Other		145			—			(161	)		(16	)
Net cash used in investing activities	$	(107	)	$	(377	)	$	(161	)	$	(645	)
Financing activities:
Proceeds from long-term debt		7,395			—			—			7,395
Payments of long-term debt		(8,104	)		—			—			(8,104	)
Net increase in other financial liabilities		90			—			—			90
Dividends paid		(165	)		—			—			(165	)
Other		(5	)		—			—			(5	)
Net cash used in financing activities	$	(789	)	$	—		$	—		$	(789	)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash		213			—			14			227
Decrease in cash and cash equivalents and restricted cash		(416	)		—			(147	)		(563	)
Cash and cash equivalents and restricted cash, beginning of year		5,017			—			837			5,854
Cash and cash equivalents and restricted cash, end of period	$	4,601		$	—		$	690		$	5,291

The unaudited impact of adoption of the new Revenue Recognition standard and the impact of ASU 2017-07 on our segment reporting for the three and six months ended June 30, 2017 is as follows:

	Three Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of ASC 606			Adjustment Due to ASU 2017-07		As Recast
	(in millions)
Operating Profit:
Agricultural Equipment	$	303		$	(65	)	$	4	$	242
Construction Equipment		17			(11	)		1		7
Commercial Vehicles		91			(20	)	—			71
Powertrain		98			(1	)	—			97
Eliminations and other		(28	)	—			—			(28	)
Operating profit of Industrial Activities		481			(97	)		5		389
Financial Services		125		—			—			125
Eliminations and other		(83	)		83		—			—
Total Operating profit	$	523		$	(14	)	$	5	$	514

	Six Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of ASC 606			Adjustment Due to ASU 2017-07		As Recast
	(in millions)
Operating Profit:
Agricultural Equipment	$	462		$	(124	)	$	8	$	346
Construction Equipment		(5	)		(21	)		2		(24	)
Commercial Vehicles		119			(32	)	—			87
Powertrain		172			(1	)	—			171
Eliminations and other		(48	)	—			—			(48	)
Operating profit of Industrial Activities		700			(178	)		10		532
Financial Services		245		—			—			245
Eliminations and other		(165	)		165		—			—
Total Operating profit	$	780		$	(13	)	$	10	$	777

The unaudited impact on Industrial Activities of adoption of the new Revenue Recognition standard, the impact of ASU 2017-07 and ASU 2016-18 on our supplemental statements of operations for the three and six months ended June 30, 2017, our supplemental balance sheet at December 31, 2017, and our supplemental statement of cash flows for the six months ended June 30, 2017 is as follows:

	Statement of Operations
	Industrial Activities
	Three Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of New Accounting Pronouncements			As Recast
	(in millions)
Revenues
Net sales	$	6,655		$	(130	)	$	6,525
Finance and interest income		29			—			29
Total Revenues	$	6,684		$	(130	)	$	6,554
Costs and Expenses
Cost of goods sold	$	5,427		$	(34	)	$	5,393
Selling, general and administrative expenses		519			(4	)		515
Research and development expenses		228			—			228
Restructuring expenses		11			—			11
Interest expense		150			—			150
Interest compensation to Financial Services		84			(84	)		—
Other, net		53			6			59
Total Costs and Expenses	$	6,472		$	(116	)	$	6,356
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		212			(14	)		198
Income tax (expense) benefit		(72	)		3			(69	)
Equity in income of unconsolidated subsidiaries and affiliates		20			—			20
Results from intersegment investments		87			—			87
Net income	$	247		$	(11	)	$	236

	Statement of Operations
	Industrial Activities
	Six Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of New Accounting Pronouncements			As Recast
	(in millions)
Revenues
Net sales	$	12,039		$	(224	)	$	11,815
Finance, interest and other income		65			—			65
Total Revenues	$	12,104		$	(224	)	$	11,880
Costs and Expenses
Cost of goods sold	$	9,924		$	(49	)	$	9,875
Selling, general and administrative expenses		996			(7	)		989
Research and development expenses		419			—			419
Restructuring expenses		22			—			22
Interest expense		289			—			289
Interest compensation to Financial Services		166			(166	)		—
Other, net		116			12			128
Total Costs and Expenses	$	11,932		$	(210	)	$	11,722
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		172			(14	)		158
Income tax (expense) benefit		(82	)		—			(82	)
Equity in income of unconsolidated subsidiaries and affiliates		32			—			32
Results from intersegment investments		174			—			174
Net income	$	296		$	(14	)	$	282

	Balance Sheet
	Industrial Activities
	December 31, 2017
	As Previously Reported		Adjustment Due to Adoption of New Accounting Pronouncements			As Recast
	(in millions)
ASSETS
Cash and cash equivalents	$	4,901	$	—		$	4,901
Restricted cash		—		—			—
Trade receivables		490		—			490
Financing receivables		1,718		—			1,718
Inventories, net		6,064		172			6,236
Property, plant and equipment, net		7,001		(172	)		6,829
Investments in unconsolidated subsidiaries and affiliates		3,173		—			3,173
Equipment under operating leases		35		—			35
Goodwill		2,316		—			2,316
Other intangible assets, net		779		—			779
Deferred tax assets		835		34			869
Derivative assets		73		—			73
Other assets		1,706		36			1,742
Total Assets	$	29,091	$	70		$	29,161
LIABILITIES AND EQUITY
Debt	$	7,396	$	47		$	7,443
Trade payables		5,936		—			5,936
Deferred tax liabilities		97		(3	)		94
Pension, postretirement and other postemployment benefits		2,280		—			2,280
Derivative liabilities		88		—			88
Other liabilities		8,869		194			9,063
Total Liabilities	$	24,666	$	238		$	24,904
Equity		4,400		(168	)		4,232
Redeemable noncontrolling interest		25		—			25
Total Liabilities and Equity	$	29,091	$	70		$	29,161

The unaudited impact on Financial Services of adoption of the new Revenue Recognition standard, the impact of ASU 2017-07 and ASU 2016-18 on our supplemental statements of operations for the three and six months ended June 30, 2017, our supplemental balance sheet at December 31, 2017, and our supplemental statement of cash flows for the six months ended June 30, 2017 is as follows:

For the three and six months ended June 30, 2017, the impact of the new standards to the Financial Services statement of operations was to increase Finance, interest and other income by $102 million and $218 million, respectively, with a corresponding increase to Other, net.

There was no impact to the Financial Services balance sheet for the new standards and the impact to the statement of cash flows is as follows:

Impact of the adoption of the new Revenue Recognition standard and of ASU 2017-07 on 2017 amounts included in the following Notes

2017 figures included in the following Notes have been recast following the retrospective adoption, on January 1, 2018, of the updated accounting standard for revenue recognition (ASC 606) and for retirement benefit accounting (ASU 2017-07).

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which amends ASC 825-10, Financial Instruments - Overall. This ASU changes the treatment for available-for-sale equity investments by recognizing unrealized fair value changes directly in net income, and no longer in other comprehensive income. ASU 2016-01 is effective January 1, 2018, with the cumulative-effect adjustment from initially applying the new standard recognized in the condensed consolidated statement of financial position as of January 1, 2018. The Company adopted this standard on January 1, 2018, which did not have a material impact on its condensed consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which amends ASC 815, Derivatives and Hedging. The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements and improve the disclosures of hedging arrangements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within these years. Early adoption is permitted in any interim period or fiscal year before the effective date. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which establishes ASC 326, Financial Instruments - Credit Losses. 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 are also required. ASU 2016-13 is effective for annual period beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes ASC 840, Leases. The ASU’s most prominent change is the requirement for lessees to recognize leased assets and liabilities classified as operating leases under the previous standard. The ASU does not significantly change the lessee’s recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. It is effective for annual reporting periods beginning after December 15, 2018 including interim periods within those fiscal years, and early adoption is permitted. The ASU requires a modified retrospective transition approach and provides certain optional transition relief. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which amends ASC 220, Income Statement – Reporting Comprehensive Income. In December 2017, the U.S. government enacted new tax legislation (“U.S. Tax Reform”). Included in the provisions of U.S. tax reform is a reduction of the corporate income tax rate from 35 percent to 21 percent. U.S. GAAP requires that the remeasurement of deferred taxes to the new corporate tax rate occur in the period in which the legislation is enacted. The deferred tax adjustment is recorded in the provision for income taxes, including items for which the tax effects were originally recorded in Other Comprehensive Income (“OCI”). This treatment results in the items in OCI reflecting a disproportionate tax rate, a result often referred to as stranded tax effects. This ASU allows a reclassification from accumulated OCI to retained earnings for stranded tax effects resulting from tax reform. ASU 2018-92 is effective for annual reporting periods beginning after December 15, 2018 including interim periods within those fiscal years, and early adoption is permitted. The ASU can be adopted at the beginning of an interim or annual period or retrospectively to each period affected by tax reform. The Company is currently evaluating the impact the adoption of this standard will have on the condensed consolidated financial statements.

The following tables summarize revenues for the three and six months ended June 30, 2018 and 2017:

	Three Months Ended June 30, 2018
	EMEA			NAFTA			LATAM			APAC			Total
	(in millions)
Agricultural Equipment	$	1,399		$	1,077		$	353		$	483		$	3,312
Construction Equipment		157			403			93			146			799
Commercial Vehicles		2,452			2			226			209			2,889
Powertrain		855			36			62			265			1,218
Eliminations and Other		(540	)		(22	)		(54	)		(23	)		(639	)
Total Industrial Activities	$	4,323		$	1,496		$	680		$	1,080		$	7,579
Financial Services		78			330			65			25			498
Eliminations and Other		(31	)		(4	)		4			(1	)		(32	)
Total Revenues	$	4,370		$	1,822		$	749		$	1,104		$	8,045

	Three Months Ended June 30, 2017
	EMEA			NAFTA			LATAM			APAC			Total
	(in millions)
Agricultural Equipment	$	1,126		$	890		$	349		$	401		$	2,766
Construction Equipment		130			346			69			105			650
Commercial Vehicles		2,126			3			202			267			2,598
Powertrain		826			30			67			213			1,136
Eliminations and Other		(537	)		(18	)		(55	)		(15	)		(625	)
Total Industrial Activities	$	3,671		$	1,251		$	632		$	971		$	6,525
Financial Services		84			331			65			22			502
Eliminations and Other		(30	)		2			4			—			(24	)
Total Revenues	$	3,725		$	1,584		$	701		$	993		$	7,003

	Six Months Ended June 30, 2018
	EMEA			NAFTA			LATAM			APAC			Total
	(in millions)
Agricultural Equipment	$	2,397		$	1,848		$	709		$	937		$	5,891
Construction Equipment		309			725			169			278			1,481
Commercial Vehicles		4,583			6			388			407			5,384
Powertrain		1,724			72			126			482			2,404
Eliminations and Other		(1,089	)		(46	)		(106	)		(40	)		(1,281	)
Total Industrial Activities	$	7,924		$	2,605		$	1,286		$	2,064		$	13,879
Financial Services		164			651			134			51			1,000
Eliminations and Other		(65	)		(7	)		12			(1	)		(61	)
Total Revenues	$	8,023		$	3,249		$	1,432		$	2,114		$	14,818

	Six Months Ended June 30, 2017
	EMEA			NAFTA			LATAM			APAC			Total
	(in millions)
Agricultural Equipment	$	1,922		$	1,610		$	715		$	759		$	5,006
Construction Equipment		227			613			123			189			1,152
Commercial Vehicles		3,923			9			364			427			4,723
Powertrain		1,582			60			125			370			2,137
Eliminations and Other		(1,030	)		(40	)		(103	)		(30	)		(1,203	)
Total Industrial Activities	$	6,624		$	2,252		$	1,224		$	1,715		$	11,815
Financial Services		159			680			131			44			1,014
Eliminations and Other		(59	)		4			14			—			(41	)
Total Revenues	$	6,724		$	2,936		$	1,369		$	1,759		$	12,788

The following table disaggregates revenues by major source for the three and six months ended June 30, 2018 and 2017:

Contract liabilities recorded in Other liabilities were $1,404 million and $1,498 million at June 30, 2018 and December 31, 2017, 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, 2018 and 2017, revenues included $161 million and $122 million, respectively, relating to contract liabilities outstanding at the beginning of each period. During the six months ended June 30, 2018 and 2017, revenues included $315 million and $268 million, respectively, relating to contract liabilities outstanding at the beginning of each period. As of June 30, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $2.2 billion. The Company expects to recognize revenue on approximately 40% and 84% of the remaining performance obligations over the next 12 and 36 months, respectively, with the remaining recognized thereafter.

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.

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,
	2018		2017		2018		2017
Basic:
Net income attributable to CNH Industrial	$	396	$	231	$	592	$	274
Weighted average common shares outstanding—basic		1,357		1,364		1,360		1,363
Basic earnings per share	$	0.29	$	0.17	$	0.43	$	0.20
Diluted:
Net income attributable to CNH Industrial	$	396	$	231	$	592	$	274
Weighted average common shares outstanding—basic		1,357		1,364		1,360		1,363
Effect of dilutive securities (when dilutive):
Stock compensation plans (A)		4		3		4		3
Weighted average common shares outstanding—diluted		1,361		1,367		1,364		1,366
Diluted earnings per share	$	0.29	$	0.17	$	0.43	$	0.20

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, 2018 and 2017:

	Pension						Healthcare						Other
	Three Months Ended June 30,						Three Months Ended June 30,						Three Months Ended June 30,
	2018			2017			2018			2017			2018		2017
	(in millions)
Service cost	$	7		$	7		$	1		$	1		$	4	$	4
Interest cost		18			18			5			9			—		—
Expected return on assets		(29	)		(27	)		(2	)		(2	)		—		—
Amortization of:
Prior service credit		(1	)		—			(20	)		—			—		—
Actuarial loss		19			21			1			1			1		1
Other		—			3			—			—			—		—
Net periodic benefit cost	$	14		$	22		$	(15	)	$	9		$	5	$	5


	Pension						Healthcare						Other
	Six Months Ended June 30,						Six Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2018		2017
	(in millions)
Service cost	$	13		$	14		$	3		$	3		$	8	$	7
Interest cost		36			36			14			18			1		1
Expected return on assets		(57	)		(54	)		(4	)		(4	)		—		—
Amortization of:
Prior service credit		(1	)		—			(21	)		(1	)		—		—
Actuarial loss		38			43			3			3			1		1
Other		—			3			—			—			—		—
Net periodic benefit cost	$	29		$	42		$	(5	)	$	19		$	10	$	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 (“Benefits Modification”) to make them consistent with the benefits provided to current eligible CNH Industrial retirees who had been represented by the UAW. The Benefits Modification resulted in a reduction of the plan liability by $527 million. This amount will be amortized from OCI to the income statement over approximately 4.5 years, which represents the average service period to attain eligibility conditions for active participants. During the second quarter of 2018, $20 million of amortization (“Benefits Modification Amortization”) was recorded as a pre-tax gain in Other, net.

The effective tax rate for the three months ended June 30, 2018 and 2017 was 23.5% and 34.5%, respectively. The effective tax rate for the six months ended June 30, 2018 was 24.2% compared to 40.5% for the six months ended June 30, 2017. The effective tax rate for the three and six months ended June 30, 2018 improved as a result of a favorable geographic mix of pre-tax earnings, including improved pre-tax results in jurisdictions where the Company has, historically, been unable to benefit from pre-tax losses as well as a lower U.S. tax rate. The effective tax rate for the three and six months ended June 30, 2017 was mainly impacted by unbenefited losses in certain jurisdictions.

In December 2017, the U.S. government enacted new tax legislation (U.S. Tax Reform). U.S. Tax Reform changed many aspects of U.S. corporate income taxation including reducing the corporate tax rate from 35% to 21%, implementing a quasi-territorial tax system and imposing a tax on deemed repatriated earnings of certain foreign subsidiaries. At the end of 2017, the Company reasonably estimated the effects of U.S. Tax Reform. Those provisional estimates were not changed during the three and six months ended June 30, 2018. During 2018, the Company will continue assessing its previously recorded impacts of U.S. Tax Reform. Any revisions to the Company’s prior estimates will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.

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.

Agricultural Equipment 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 Agriculture brands, as well as the STEYR brand in Europe and the Miller brand, primarily in North America and Australia. Following the acquisition of the grass and soil implement business of Kongskilde Industries in February 2017, certain agricultural equipment products have been sold under the Kongskilde, Överum, and JF brands.

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

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

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

Financial Services offers a range of financial services to dealers and customers. Financial Services provides and administers retail financing to customers for the purchase or lease of new and used industrial equipment or vehicles and other equipment sold by CNH Industrial dealers. In addition, Financial Services provides wholesale financing to CNH Industrial dealers. Wholesale financing consists primarily of floor plan financing and allows the dealers to purchase and maintain a representative inventory of products.

Revenues for each reported segment are those directly generated by or attributable to the segment as a result of its usual 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.

Historically and through 2017, the CODM assessed the performance of the operating segments on the basis of Operating Profit of Industrial Activities calculated using U.S. GAAP. In addition, with reference to Financial Services, the CODM assessed the performance of the segment on the basis of net income prepared in accordance with U.S. GAAP. Furthermore, the CODM reviewed expenditures for long-lived assets while other operating segment asset information was not readily available.

Concurrently with the change in accounting standards, CNH Industrial reviewed the metrics on which the operating segments will be assessed. Effective January 1, 2018, the CODM began to assess segment performance and make 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 charges, the finance and non-service component of pension and other post-employment benefits costs, foreign exchange gains/(losses) and certain non-recurring items. 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 continues to assess the performance of the segment on the basis of net income prepared in accordance with U.S. GAAP.

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, 2018 and 2017.

	Three Months Ended June 30, 2018
	Agricultural Equipment		Construction Equipment		Commercial Vehicles		Powertrain		Unallocated items, eliminations and other			Total Industrial Activities			Financial Services		Eliminations			Total
	(in millions)
Revenues	$	3,312	$	799	$	2,889	$	1,218	$	(639	)	$	7,579		$	498	$	(32	)	$	8,045
Net income⁽¹⁾													306			102		—			408
Add back:
Income tax expense													79			39		—			118
Interest expense of Industrial Activities, net of interest income and eliminations													88			—		—			88
Foreign exchange losses, net													97			—		—			97
Finance and non-service component of Pension and OPEB costs⁽²⁾													(4	)		—		—			(4	)
Adjustments:
Restructuring expenses		1		—		3		1		—			5			—		—			5
Adjusted EBIT	$	396	$	33	$	92	$	108	$	(58	)	$	571		$	141	$	—		$	712
Depreciation and amortization		75		15		53		33		1			177			2		—			179
Depreciation of assets on operating lease and assets sold with buy-back commitment		1		—		94		—		—			95			60		—			155
Adjusted EBITDA	$	472	$	48	$	239	$	141	$	(57	)	$	843		$	203	$	—		$	1,046

	Six Months Ended June 30, 2018
	Agricultural Equipment		Construction Equipment		Commercial Vehicles		Powertrain		Unallocated items, eliminations and other			Total Industrial Activities		Financial Services		Eliminations			Total
	(in millions)
Revenues	$	5,891	$	1,481	$	5,384	$	2,404	$	(1,281	)	$	13,879	$	1,000	$	(61	)	$	14,818
Net income⁽¹⁾													405		205		—			610
Add back:
Income tax expense													102		79		—			181
Interest expense of Industrial Activities, net of interest income and eliminations													181		—		—			181
Foreign exchange losses, net													122		—		—			122
Finance and non-service component of Pension and OPEB costs⁽²⁾													14		—		—			14
Adjustments:
Restructuring expenses		1		—		6		1		—			8		—		—			8
Adjusted EBIT	$	582	$	33	$	141	$	203	$	(127	)	$	832	$	284	$	—		$	1,116
Depreciation and amortization		154		31		108		67		1			361		3		—			364
Depreciation of assets on operating lease and assets sold with buy-back commitment		1		—		196		—		—			197		126		—			323
Adjusted EBITDA	$	737	$	64	$	445	$	270	$	(126	)	$	1,390	$	413	$	—		$	1,803

	Three Months Ended June 30, 2017
	Agricultural Equipment		Construction Equipment		Commercial Vehicles		Powertrain		Unallocated items, eliminations and other			Total Industrial Activities		Financial Services		Eliminations			Total
	(in millions)
Revenues	$	2,766	$	650	$	2,598	$	1,136	$	(625	)	$	6,525	$	502	$	(24	)	$	7,003
Net income⁽¹⁾													149		87		—			236
Add back:
Income tax expense													69		41		—			110
Interest expense of Industrial Activities, net of interest income and eliminations													121		—		—			121
Foreign exchange losses, net													24		—		—			24
Finance and non-service component of Pension and OPEB costs													22		—		—			22
Adjustments:
Restructuring expenses		5		1		4		1		—			11		1		—			12
Adjusted EBIT	$	261	$	7	$	72	$	97	$	(41	)	$	396	$	129	$	—		$	525
Depreciation and amortization		76		16		53		31		—			176		1		—			177
Depreciation of assets on operating lease and assets sold with buy-back commitment		—		—		78		—		—			78		63		—			141
Adjusted EBITDA	$	337	$	23	$	203	$	128	$	(41	)	$	650	$	193	$	—		$	843

	Six Months Ended June 30, 2017
	Agricultural Equipment		Construction Equipment			Commercial Vehicles		Powertrain		Unallocated items, eliminations and other			Total Industrial Activities		Financial Services		Eliminations			Total
	(in millions)
Revenues	$	5,006	$	1,152		$	4,723	$	2,137	$	(1,203	)	$	11,815	$	1,014	$	(41	)	$	12,788
Net income⁽¹⁾														108		174		—			282
Add back:
Income tax expense														82		79		—			161
Interest expense of Industrial Activities, net of interest income and eliminations														224		—		—			224
Foreign exchange losses, net														56		—		—			56
Finance and non-service component of Pension and OPEB costs														45		—		—			45
Adjustments:
Restructuring expenses		10		4			7		1		—			22		2		—			24
Adjusted EBIT	$	376	$	(24	)	$	89	$	171	$	(75	)	$	537	$	255	$	—		$	792
Depreciation and amortization		155		32			104		61		—			352		2		—			354
Depreciation of assets on operating lease and assets sold with buy-back commitment		—		—			152		—		—			152		128		—			280
Adjusted EBITDA	$	531	$	8		$	345	$	232	$	(75	)	$	1,041	$	385	$	—		$	1,426

A summary of financing receivables as of June 30, 2018 and December 31, 2017 is as follows:

Past due balances of financing receivables still accruing finance income represent the total balance held (principal plus accrued interest) with any payment amounts 30 days or more past the contractual payment due date. Non-performing financing receivables represent loans for which the Company has ceased accruing finance income. These receivables are generally 120 days delinquent. Finance income for non-performing receivables is recognized on a cash basis. Accrual of finance income is resumed when the receivable becomes contractually current and collections are reasonably assured.

The aging of financing receivables as of June 30, 2018 and December 31, 2017 is as follows (in millions):

	June 30, 2018
	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing		Non- Performing		Total
Retail
NAFTA	$	21	$	8	$	—	$	29	$	6,330	$	6,359	$	15	$	6,374
EMEA		2		2		9		13		231		244		20		264
LATAM		48		1		—		49		1,652		1,701		19		1,720
APAC		1		—		1		2		716		718		—		718
Total Retail	$	72	$	11	$	10	$	93	$	8,929	$	9,022	$	54	$	9,076
Wholesale
NAFTA	$	—	$	—	$	—	$	—	$	3,563	$	3,563	$	25	$	3,588
EMEA		17		11		3		31		5,014		5,045		—		5,045
LATAM		—		—		—		—		513		513		—		513
APAC		3		—		—		3		655		658		—		658
Total Wholesale	$	20	$	11	$	3	$	34	$	9,745	$	9,779	$	25	$	9,804


	December 31, 2017
	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing		Non- Performing		Total
Retail
NAFTA	$	26	$	9	$	—	$	35	$	6,671	$	6,706	$	25	$	6,731
EMEA		3		4		4		11		261		272		—		272
LATAM		8		—		—		8		1,851		1,859		40		1,899
APAC		—		—		—		—		823		823		—		823
Total Retail	$	37	$	13	$	4	$	54	$	9,606	$	9,660	$	65	$	9,725
Wholesale
NAFTA	$	—	$	—	$	—	$	—	$	3,651	$	3,651	$	41	$	3,692
EMEA		23		12		4		39		5,061		5,100		9		5,109
LATAM		—		—		—		—		613		613		—		613
APAC		4		—		—		4		583		587		—		587
Total Wholesale	$	27	$	12	$	4	$	43	$	9,908	$	9,951	$	50	$	10,001

Allowance for credit losses activity for the three and six months ended June 30, 2018 and 2017 is as follows:

	Three Months Ended June 30, 2018
	Retail			Wholesale			Other		Total
Opening balance	$	394		$	202		$	—	$	596
Provision		5			4			—		9
Charge-offs, net of recoveries		(26	)		—			—		(26	)
Foreign currency translation and other		(24	)		(13	)		—		(37	)
Ending balance	$	349		$	193		$	—	$	542

	Six Months Ended June 30, 2018
	Retail			Wholesale			Other		Total
Opening Balance	$	383		$	200		$	—	$	583
Provision		25			3			—		28
Charge-offs, net of recoveries		(40	)		(1	)		—		(41	)
Foreign Currency Translation and Other		(19	)		(9	)		—		(28	)
Ending Balance		349			193			—		542
Ending Balance: Individually Evaluated for Impairment		231			161			—		392
Ending Balance: Collectively Evaluated for Impairment		118			32			—		150
Receivables:
Ending Balance		9,076			9,804			77		18,957
Ending Balance: Individually Evaluated for Impairment		338			327			—		665
Ending Balance: Collectively Evaluated for Impairment	$	8,738		$	9,477		$	77	$	18,292

	Three Months Ended June 30, 2017
	Retail			Wholesale			Other		Total
Opening balance	$	371		$	209		$	—	$	580
Provision		16			1			—		17
Charge-offs, net of recoveries		(23	)		(3	)		—		(26	)
Foreign currency translation and other		8			18			—		26
Ending balance	$	372		$	225		$	—	$	597

	Six Months Ended June 30, 2017
	Retail			Wholesale			Other		Total
Opening balance	$	374		$	200		$	—	$	574
Provision		29			7			—		36
Charge-offs, net of recoveries		(42	)		(5	)		—		(47	)
Foreign currency translation and other		11			23			—		34
Ending balance		372			225			—		597
Ending balance: Individually evaluated for impairment		195			172			—		367
Ending balance: Collectively evaluated for impairment		177			53			—		230
Receivables:
Ending balance		9,617			9,208			65		18,890
Ending balance: Individually evaluated for impairment		358			496			—		854
Ending balance: Collectively evaluated for impairment	$	9,259		$	8,712		$	65	$	18,036

Allowance for credit losses activity for the year ended December 31, 2017 is as follows:

	December 31, 2017
	Retail			Wholesale			Other		Total
Opening balance	$	374		$	200		$	—	$	574
Provision		72			11			—		83
Charge-offs, net of recoveries		(103	)		(15	)		—		(118	)
Foreign currency translation and other		40			4			—		44
Ending balance		383			200			—		583
Ending balance: Individually evaluated for impairment		212			164			—		376
Ending balance: Collectively evaluated for impairment		171			36			—		207
Receivables:
Ending balance		9,725			10,001			69		19,795
Ending balance: Individually evaluated for impairment		347			540			—		887
Ending balance: Collectively evaluated for impairment	$	9,378		$	9,461		$	69	$	18,908

Financing receivables are considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms. Receivables reviewed for impairment generally include those that are either past due, have provided bankruptcy notification, or require significant collection efforts. Impaired receivables are generally classified as non-performing.

	June 30, 2018								December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Investment		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Investment
	(in millions)
With an allowance recorded
Retail
NAFTA	$	32	$	30	$	16	$	33	$	39	$	37	$	18	$	41
EMEA	$	266	$	266	$	191	$	278	$	260	$	260	$	170	$	277
LATAM	$	35	$	35	$	21	$	39	$	45	$	45	$	22	$	32
APAC	$	5	$	5	$	3	$	4	$	3	$	3	$	2	$	2
Wholesale
NAFTA	$	30	$	29	$	4	$	40	$	44	$	44	$	3	$	49
EMEA	$	264	$	264	$	132	$	265	$	457	$	457	$	134	$	443
LATAM	$	25	$	16	$	19	$	27	$	30	$	17	$	21	$	28
APAC	$	8	$	8	$	6	$	9	$	9	$	9	$	6	$	4
Total
Retail	$	338	$	336	$	231	$	354	$	347	$	345	$	212	$	352
Wholesale	$	327	$	317	$	161	$	341	$	540	$	527	$	164	$	524

A restructuring of a receivable constitutes a troubled debt restructuring (“TDR”) when a lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. As a collateral based lender, 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 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.

As of June 30, 2018, the Company had 288 retail and finance lease contracts classified as TDRs where a NAFTA court has determined the concession. The pre-modification value was $10 million and the post-modification value was $9 million. Additionally, the Company had 377 accounts with a balance of $20 million undergoing bankruptcy proceedings where a concession has not yet been determined. As of June 30, 2017, the Company had 243 retail and finance lease contracts classified as TDRs where a NAFTA court has determined the concession. The pre-modification value of these contracts was $6 million and the post-modification value was $5 million. Additionally, the Company had 455 accounts with a balance of $26 million undergoing bankruptcy proceedings in NAFTA 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 12 months ended June 30, 2018 and 2017.

As of June 30, 2018 and 2017, the Company had approximately $12 million and $16 million, respectively, in retail and finance lease contracts classified as TDRs in LATAM. The concessions granted on these receivables were primarily skipped payments and extended contract maturities. 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, 2018 and 2017.

As of June 30, 2018 and 2017, the Company’s wholesale TDR agreements were immaterial.

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 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, 2018 and December 31, 2017, the carrying amount of such restricted assets included in financing receivables above are the following (in millions):

A summary of investments in unconsolidated subsidiaries and affiliates as of June 30, 2018 and December 31, 2017 is as follows:

Changes in the carrying amount of goodwill for the six months ended June 30, 2018 are as follows:

As of June 30, 2018 and December 31, 2017, the Company’s other intangible assets and related accumulated amortization consisted of the following:

		June 30, 2018						December 31, 2017
	Weighted Avg. Life	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
		(in millions)
Other intangible assets subject to amortization:
Dealer networks	15	$	321	$	200	$	121	$	328	$	199	$	129
Patents, concessions and licenses and other	5-25		1,808		1,440		368		1,834		1,444		390
			2,129		1,640		489		2,162		1,643		519
Other intangible assets not subject to amortization:
Trademarks			273		—		273		273		—		273
Total Other intangible assets		$	2,402	$	1,640	$	762	$	2,435	$	1,643	$	792

CNH Industrial recorded amortization expense of $29 million and $29 million for the three months ended June 30, 2018 and 2017, respectively, and $57 million and $56 million for the six months ended June 30, 2018 and 2017, respectively.

A summary of Other liabilities as of June 30, 2018 and December 31, 2017 is as follows:

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, 2018 and 2017 for the basic warranty and accruals for campaign programs are as follows:

The Company incurred restructuring expenses of $5 million and $8 million during the three and six months ended June 30, 2018, respectively. The Company incurred restructuring expenses of $12 million and $24 million during the three and six months ended June 30, 2017, respectively. The expenses during the three and six months ended June 30, 2018 primarily related to actions in Commercial Vehicles as part of the Company’s Efficiency Program launched in 2014.

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 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.

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 65 non-owned U.S. sites at which regulated materials allegedly generated by CNH Industrial were released or disposed (“Waste Sites”). Of the Waste Sites, 15 are on the National Priority List (“NPL”) promulgated pursuant to CERCLA. For 59 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 65 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, 2018 and December 31, 2017, environmental reserves of approximately $36 million and $35 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.

European Commission settlement: Iveco, the Company’s wholly owned subsidiary, and its competitors were subject to an investigation by the European Commission (the “Commission”) into certain business practices in the European Union in relation to medium and heavy trucks. On July 19, 2016 the Commission announced a settlement with Iveco. Following the settlement, the Company has been named as defendant in current private litigation commenced in various European jurisdictions and Israel that remains at an early stage. Further, the Company expects to face further claims in various jurisdictions; the extent and outcome of which cannot be predicted at this time.

CNH Industrial provided guarantees on the debt or commitments of third parties and performance guarantees on non-consolidated affiliates as of June 30, 2018 and December 31, 2017 totaling of $424 million and $368 million, respectively.

CNH Industrial is successor to Fiat Industrial S.p.A. (“Fiat Industrial”), a company formed as a result of the separation of the non-automotive capital goods business of Fiat S.p.A. (which, effective October 12, 2014, was merged into Fiat Chrysler Automobiles N.V., “FCA”) (the “Demerger”). As such, CNH Industrial continues to be liable jointly with FCA for the liabilities of FCA that arose prior to the effective date of the Demerger (January 1, 2011) and were still outstanding at that date (the “Liabilities”). This statutory provision is limited to the value of the net assets transferred to Fiat Industrial in the Demerger and survives until the Liabilities are satisfied in full. Furthermore, CNH Industrial may be responsible jointly with FCA in relation to tax liabilities, even if such tax liabilities exceed the value of the net assets transferred to Fiat Industrial in the Demerger. At June 30, 2018, the outstanding Liabilities amounted to approximately €198 million ($231 million). CNH Industrial believes the risk of FCA’s insolvency is extremely remote, and therefore, no specific provision has been accrued in respect of the above-mentioned potential joint liability.

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.

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 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.

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.

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 or 3 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.

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. Ineffectiveness related to these hedge relationships is recognized currently in the condensed consolidated statements of operations in the line “Other, net” and was not significant for all periods presented. The maturity of these instruments does not exceed 24 months and the after-tax gains (losses) deferred in accumulated other comprehensive income (loss) that will be recognized in net sales and cost of goods sold over the next twelve months assuming foreign exchange rates remain unchanged is approximately $(9) million. If a derivative instrument is terminated because the hedge relationship is no longer effective or because the hedged item is a forecasted transaction that is no longer determined to be probable, the cumulative amount recorded in accumulated other comprehensive income (loss) is recognized immediately in earnings. Such amounts were insignificant in all periods presented.

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

All of CNH Industrial’s foreign exchange derivatives are considered Level 2 as the fair value is calculated using market data input and can be compared to actively traded derivatives. The total notional amount of CNH Industrial’s foreign exchange derivatives was $7.6 billion and $6.9 billion at June 30, 2018 and December 31, 2017, respectively.

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, to the extent that the hedge relationship has been effective, 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. Any ineffectiveness is recorded in “Other, net” in the condensed consolidated statements of operations and was insignificant for all periods presented. The after-tax gains (losses) deferred in accumulated other comprehensive income (loss) that will be recognized in interest expense over the next twelve months is insignificant.

Interest rate derivatives that have been designated as fair value hedge relationships have been used by CNH Industrial to mitigate the volatility in the fair value of existing fixed rate bonds and medium-term notes due to changes in floating interest rate benchmarks. Gains and losses on these instruments are recorded in “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. Costs relating to the ineffectiveness of such transactions were insignificant for the three and six months ended June 30, 2018 and 2017.

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. These facilities require CNH Industrial to enter into interest rate derivatives. To ensure that these transactions do not result in the Company being exposed to this risk, CNH Industrial enters into a compensating position. Net gains and losses on these instruments were insignificant for the three and six months ended June 30, 2018 and 2017.

All of CNH Industrial’s interest rate derivatives outstanding as of June 30, 2018 and December 31, 2017 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 $4.9 billion and $3.9 billion at June 30, 2018 and December 31, 2017, respectively.

The fair values of CNH Industrial’s derivatives as of June 30, 2018 and December 31, 2017 in the condensed consolidated balance sheets are recorded as follows:

Pre-tax gains (losses) on the condensed consolidated statements of operations related to CNH Industrial’s derivatives for the three and six months ended June 30, 2018 and 2017 are recorded in the following accounts:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in millions)						(in millions)
Fair Value Hedges
Interest rate derivatives—Interest expense	$	(3	)	$	(3	)	$	(10	)	$	(7	)
Gains/(losses) on hedged items—Interest expense	$	3		$	3		$	10		$	7
Cash Flow Hedges
Recognized in accumulated other comprehensive income (effective portion):
Foreign exchange contracts—accumulated other comprehensive income	$	(17	)	$	95		$	11		$	24
Interest rate derivatives—accumulated other comprehensive income	$	11		$	(30	)	$	14		$	5
Reclassified from accumulated other comprehensive income (effective portion):
Foreign exchange contracts—Net sales	$	1		$	3		$	1		$	2
Foreign exchange contracts—Cost of goods sold	$	8		$	(20	)	$	20		$	(34	)
Foreign exchange contracts—Other, net	$	9		$	7		$	14		$	4
Interest rate derivatives—Interest expense	$	(1	)	$	—		$	(2	)	$	(1	)
Not Designated as Hedges
Foreign exchange contracts—Other, net	$	89		$	71		$	109		$	24

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, 2018 and December 31, 2017:

	Level 1				Level 2						Total
	June 30, 2018		December 31, 2017		June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
	(in millions)
Assets
Foreign exchange derivatives	$	—	$	—	$	104		$	66		$	104		$	66
Interest rate derivatives		—		—		9			11			9			11
Cross currency swaps		—		—		—			—			—			—
Investments		1		1		—			—			1			1
Total Assets	$	1	$	1	$	113		$	77		$	114		$	78
Liabilities
Foreign exchange derivatives	$	—	$	—	$	(92	)	$	(77	)	$	(92	)	$	(77	)
Interest rate derivatives		—		—		(34	)		(21	)		(34	)		(21	)
Total Liabilities	$	—	$	—	$	(126	)	$	(98	)	$	(126	)	$	(98	)

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.

The estimated fair market values of financial instruments not carried at fair value in the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017 are as follows:

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.

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

The Company’s share of 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, 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 15: 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, 2018
	Gross Amount			Income Taxes			Net Amount
Unrealized gain (loss) on cash flow hedges	$	(22	)	$	6		$	(16	)
Changes in retirement plans’ funded status		585			(139	)		446
Foreign currency translation		(46	)		—			(46	)
Share of other comprehensive loss of entities using the equity method		(33	)		—			(33	)
Other comprehensive income (loss)	$	484		$	(133	)	$	351

	Six Months Ended June 30, 2018
	Gross Amount			Income Taxes			Net Amount
Unrealized gain (loss) on cash flow hedges	$	(8	)	$	3		$	(5	)
Changes in retirement plans’ funded status		599			(143	)		456
Foreign currency translation		(335	)		—			(335	)
Share of other comprehensive loss of entities using the equity method		(18	)		—			(18	)
Other comprehensive income (loss)	$	238		$	(140	)	$	98

	Three Months Ended June 30, 2017
	Gross Amount			Income Taxes			Net Amount
Unrealized gain (loss) on cash flow hedges	$	76		$	(6	)	$	70
Changes in retirement plans’ funded status		27			(11	)		16
Foreign currency translation		(298	)		—			(298	)
Share of other comprehensive income of entities using the equity method		26			—			26
Other comprehensive income (loss)	$	(169	)	$	(17	)	$	(186	)


	Six Months Ended June 30, 2017
	Gross Amount			Income Taxes			Net Amount
Unrealized gain (loss) on cash flow hedges	$	58		$	7		$	65
Changes in retirement plans’ funded status		46			(16	)		30
Foreign currency translation		(274	)		—			(274	)
Share of other comprehensive income of entities using the equity method		35			—			35
Other comprehensive income (loss)	$	(135	)	$	(9	)	$	(144	)

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, 2017, as previously reported	$	(88	)	$	(1,036	)	$	(490	)	$	(153	)	$	(1,767	)
Adoption of ASC 606		—			—			5			—			5
Balance, January 1, 2017, as recast		(88	)		(1,036	)		(485	)		(153	)		(1,762	)
Other comprehensive income (loss), before reclassifications		37			—			(274	)		36			(201	)
Amounts reclassified from other comprehensive income		28			30			—			—			58
Other comprehensive income (loss) *		65			30			(274	)		36			(143	)
Balance, June 30, 2017	$	(23	)	$	(1,006	)	$	(759	)	$	(117	)	$	(1,905	)

Balance, December 31, 2017, as previously reported	$	1		$	(950	)	$	(891	)	$	(118	)	$	(1,958	)
Adoption of ASC 606		—			—			(8	)		—			(8	)
Balance, January 1, 2018		1			(950	)		(899	)		(118	)		(1,966	)
Other comprehensive income (loss), before reclassifications		24			431			(335	)		(18	)		102
Amounts reclassified from other comprehensive income (loss)		(29	)		25			—			—			(4	)
Other comprehensive income (loss) *		(5	)		456			(335	)		(18	)		98
Balance, June 30, 2018	$	(4	)	$	(494	)	$	(1,234	)	$	(136	)	$	(1,868	)

Significant amounts reclassified out of each component of accumulated other comprehensive income (loss) in the three and six months ended June 30, 2018 and 2017 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,
	2018			2017			2018			2017
	(in millions)						(in millions)
Cash flow hedges	$	(1	)	$	(3	)	$	(1	)	$	(2	)	Net sales
		(8	)		20			(20	)		34		Cost of goods sold
		(9	)		(7	)		(14	)		(4	)	Other, net
		1			—			2			1		Interest expense
		4			—			4			(1	)	Income taxes
	$	(13	)	$	10		$	(29	)	$	28
Change in retirement plans’ funded status:
Amortization of actuarial losses	$	21		$	23		$	42		$	47		*
Amortization of prior service cost		(21	)		—			(22	)		(1	)	*
		—			(10	)		5			(16	)	Income taxes
	$	—		$	13		$	25		$	30
Total reclassifications, net of tax	$	(13	)	$	23		$	(4	)	$	58

(*) 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.

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, 2018, EXOR N.V. held 42.1% 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 beneficially 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, 2018. 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.

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, 2018 and 2017.

In connection with the Demerger, Fiat (now known as FCA) and Fiat Industrial (now known as CNH Industrial) 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 (such as purchasing, tax, accounting and other back office services, security and training) to the service receiving subsidiaries. As structured, the applicable service provider and service receiver subsidiaries become parties to the MSA through the execution of an Opt-in letter that may contain additional terms and conditions. Pursuant to the MSA, service receivers are required to pay to service providers the actual cost of the services plus a negotiated margin. FCA subsidiaries provide CNH Industrial with administrative services such as accounting, cash management, maintenance of plant and equipment, security, information systems and training under the terms and conditions of the MSA and the applicable Opt-in letters.

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

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

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:

At June 30, 2018 and December 31, 2017, CNH Industrial had pledged guarantees on commitments of its joint ventures for an amount of $150 million and $255 million, respectively, mainly related to IVECO—OTO MELARA Società Consortile a responsabilità limitata. At June 30, 2018 CNH Industrial had pledged guarantees on commitments of its associated company for an amount of $223 million related to CNH Industrial Capital Europe S.a.S.

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.

	Statement of Operations
	Industrial Activities						Financial Services
	Three Months Ended June 30,						Three Months Ended June 30,
	2018			2017			2018			2017
	(in millions)
Revenues
Net sales	$	7,579		$	6,525		$	—		$	—
Finance, interest and other income		23			29			498			502
Total Revenues	$	7,602		$	6,554		$	498		$	502
Costs and Expenses
Cost of goods sold	$	6,188		$	5,393		$	—		$	—
Selling, general and administrative expenses		545			515			48			56
Research and development expenses		262			228			—			—
Restructuring expenses		5			11			—			1
Interest expense		111			150			136			137
Other, net		124			59			178			187
Total Costs and Expenses	$	7,235		$	6,356		$	362		$	381
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		367			198			136			121
Income tax (expense) benefit		(79	)		(69	)		(39	)		(41	)
Equity in income of unconsolidated subsidiaries and affiliates		18			20			5			7
Results from intersegment investments		102			87			—			—
Net income	$	408		$	236		$	102		$	87

	Statement of Operations
	Industrial Activities						Financial Services
	Six Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in millions, except share data)
Revenues
Net sales	$	13,879		$	11,815		$	—		$	—
Finance and interest income		50			65			1,000			1,014
Total Revenues	$	13,929		$	11,880		$	1,000		$	1,014
Costs and Expenses
Cost of goods sold	$	11,444		$	9,875		$	—		$	—
Selling, general and administrative expenses		1,072			989			111			121
Research and development expenses		489			419			—			—
Restructuring expenses		8			22			—			2
Interest expense		231			289			272			268
Interest compensation to Financial Services		—			—			—			—
Other, net		204			128			349			383
Total Costs and Expenses	$	13,448		$	11,722		$	732		$	774
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		481			158			268			240
Income taxes		(102	)		(82	)		(79	)		(79	)
Equity income of unconsolidated subsidiaries and affiliates		26			32			16			13
Results from intersegment investments		205			174			—			—
Net income	$	610		$	282		$	205		$	174

	Balance Sheets
	Industrial Activities				Financial Services
	June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017
	(in millions)
ASSETS
Cash and cash equivalents	$	4,026	$	4,901	$	534	$	529
Restricted cash		—		—		657		770
Trade receivables		543		490		38		53
Financing receivables		1,739		1,718		20,441		20,699
Inventories, net		6,924		6,236		207		216
Property, plant and equipment, net		6,253		6,829		1		2
Investments in unconsolidated subsidiaries and affiliates		3,171		3,173		208		205
Equipment under operating leases		38		35		1,706		1,810
Goodwill		2,306		2,316		154		156
Other intangible assets, net		749		779		13		13
Deferred tax assets		755		869		186		198
Derivative assets		111		73		13		14
Other assets		1,742		1,742		320		358
Total Assets	$	28,357	$	29,161	$	24,478	$	25,023
LIABILITIES AND EQUITY
Debt	$	6,983	$	7,443	$	20,593	$	21,075
Trade payables		6,191		5,936		150		193
Deferred tax liabilities		97		94		192		215
Pension, postretirement and other postemployment benefits		1,599		2,280		28		20
Derivative liabilities		107		88		30		20
Other liabilities		8,774		9,063		645		686
Total Liabilities	$	23,751	$	24,904	$	21,638	$	22,209
Equity		4,579		4,232		2,840		2,814
Redeemable noncontrolling interest		27		25		—		—
Total Liabilities and Equity	$	28,357	$	29,161	$	24,478	$	25,023

	Statements of Cash Flows
	Industrial Activities						Financial Services
	Six Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in millions)
Operating activities:
Net income	$	610		$	282		$	205		$	174
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		361			352			3			2
Depreciation and amortization expense of assets under operating leases and assets sold under buy-back commitments		197			152			126			128
Loss on disposal of assets		—			1			—			—
Loss on repurchase/early redemption of notes		—			17			—			—
Undistributed loss of unconsolidated subsidiaries		(94	)		(2	)		(16	)		(13	)
Other non-cash items		83			39			27			39
Changes in operating assets and liabilities:
Provisions		(52	)		36			(4	)		(4	)
Deferred income taxes		(51	)		(74	)		(27	)		(12	)
Trade and financing receivables related to sales, net		(99	)		(2	)		(122	)		(284	)
Inventories, net		(988	)		(909	)		223			249
Trade payables		608			658			(31	)		(45	)
Other assets and liabilities		(182	)		(28	)		41			57
Net cash provided by operating activities	$	393		$	522		$	425		$	291
Investing activities:
Additions to retail receivables		—			—			(1,999	)		(1,806	)
Collections of retail receivables		—			—			2,151			2,190
Proceeds from sale of assets, net of assets sold under operating leases and assets sold under buy-back commitments		1			2			—			—
Expenditures for property, plant and equipment and intangible assets, net of assets under operating leases and sold under buy-back commitments		(158	)		(165	)		(3	)		—
Expenditures for assets under operating leases and assets sold under buy-back commitments		(334	)		(496	)		(257	)		(354	)
Other		643			(133	)		(473	)		88
Net cash provided by (used in) investing activities	$	152		$	(792	)	$	(581	)	$	118
Financing activities:
Proceeds from long-term debt		1			713			7,257			6,682
Payments of long-term debt		(1,175	)		(973	)		(7,672	)		(7,131	)
Net increase (decrease) in other financial liabilities		298			(67	)		567			157
Dividends paid		(238	)		(165	)		(91	)		(169	)
Other		(134	)		(5	)		39			29
Net cash provided by (used in) financing activities	$	(1,248	)	$	(497	)	$	100		$	(432	)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash		(172	)		209			(52	)		18
Decrease in cash and cash equivalents and restricted cash		(875	)		(558	)		(108	)		(5	)
Cash and cash equivalents and restricted cash, beginning of year		4,901			4,649			1,299			1,205
Cash and cash equivalents and restricted cash, end of period	$	4,026		$	4,091		$	1,191		$	1,200

The Company has evaluated subsequent events through August 3, 2018, which is the date the condensed consolidated financial statements were authorized for issuance. No significant events have occurred.

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

CNH Industrial N.V. (“CNH Industrial” or the “Company”) is incorporated in, and under the laws of, the Netherlands. Unless otherwise indicated or the context otherwise requires, the terms “CNH Industrial” and the “Company” refer to CNH Industrial and its consolidated subsidiaries.

The Company has five reportable segments reflecting the five businesses directly managed by CNH Industrial N.V., consisting of: (i) Agricultural Equipment, which designs, produces and sells agricultural equipment (ii) Construction Equipment, which designs, produces and sells construction equipment (iii) Commercial Vehicles, which designs, produces and sell trucks, commercial vehicles, buses, and specialty vehicles (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 the customers of our products. The Company’s worldwide agricultural equipment, construction equipment, commercial 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, 2017 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.

ADOPTION OF NEW ACCOUNTING STANDARDS AND OF CERTAIN NEW NON-GAAP FINANCIAL MEASURES

As previously mentioned in the “Notes to the condensed consolidated financial statements” section of this quarterly report, on January 1, 2018, the Company adopted, on a retrospective basis, updated FASB accounting standards for revenue recognition (ASC 606), retirement benefits accounting (ASU 2017-07) and cash flow presentation (ASU 2016-18). 2017 figures presented in this “Management’s discussion and analysis of financial condition and results of operations” section have been recast to reflect the adoption of such updated accounting standards.

Furthermore, concurrently with the change in accounting standards, the Company reviewed the metrics on which the operating segments will be assessed. Effective January 1, 2018, the Chief Operating Decision Maker began to assess segment performance and make decisions about resource allocation based upon adjusted EBIT and adjusted EBITDA.

As such, we have introduced adjusted EBIT and adjusted EBITDA as new non-GAAP measures this year. These measures replace our previous Operating Profit non-GAAP measure. The Company believes adjusted EBIT and adjusted EBITDA more fully reflect segment and consolidated profitability. With reference to Financial Services, the CODM continues to assess the performance of the segment on the basis of net income prepared in accordance with U.S. GAAP. See "Non-GAAP Financial Measures" for information about these measures including how CNH Industrial calculates them.

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.

Adjusted EBIT is defined as net income (loss) before income taxes, interest expenses of Industrial Activities, net, restructuring charges, 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 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.

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.

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.

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 18: Supplemental Information” to our condensed consolidated financial statements for the three and six months ended June 30, 2018, 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.

	Three Months Ended June 30,
	2018			2017
	(in millions)
Revenues:
Net sales	$	7,579		$	6,525
Finance, interest and other income		466			478
Total Revenues		8,045			7,003
Costs and Expenses:
Cost of goods sold		6,188			5,393
Selling, general and administrative expenses		593			571
Research and development expenses		262			228
Restructuring expenses		5			12
Interest expense		192			233
Other, net		302			247
Total Costs and Expenses		7,542			6,684
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		503			319
Income tax (expense)		(118	)		(110	)
Equity in income of unconsolidated subsidiaries and affiliates		23			27
Net income		408			236
Net income attributable to noncontrolling interests		12			5
Net income attributable to CNH Industrial N.V.	$	396		$	231

We recorded revenues of $8,045 million for the three months ended June 30, 2018, an increase of 14.9% (up 11.9% on a constant currency basis) compared to the three months ended June 30, 2017. Net sales of Industrial Activities were $7,579 million in the three months ended June 30, 2018, an increase of 16.2% (up 12.8% on a constant currency basis) compared to the three months ended June 30, 2017, mainly as a result of significant improvements in the Agricultural and Construction Equipment segments.

Cost of goods sold were $6,188 million for the three months ended June 30, 2018 compared with $5,393 million for the three months ended June 30, 2017. The increase of 14.7% was driven by the increase in revenues. As a percentage of net sales of Industrial Activities, cost of goods sold was 81.6% in the three months ended June 30, 2018 (82.7% for the three months ended June 30, 2017).

Selling, general and administrative expenses were $593 million during the three months ended June 30, 2018 (7.4% of total revenues), up $22 million compared to the three months ended June 30, 2017 (8.2% of total revenues).

For the three months ended June 30, 2018, research and development expenses were $262 million compared to $228 million for the three months ended June 30, 2017. The expenses in both periods were primarily attributable to spending on engine development costs associated with emission requirements and continued investment in new products.

Restructuring expenses for the three months ended June 30, 2018 were $5 million compared to $12 million for the three months ended June 30, 2017. The expenses in the three months ended June 30, 2018 were primarily attributable to actions in Commercial Vehicles as part of the Efficiency Program launched in 2014.

Interest expense was $192 million for the three months ended June 30, 2018 compared to $233 million for the three months ended June 30, 2017. The interest expense attributable to Industrial Activities for the three months ended June 30, 2018, net of interest income and eliminations, was $88 million compared to $121 million in the three months ended June 30, 2017. In the three months ended June 30, 2017 interest expense included the charge of $17 million related to the early redemption of all outstanding Case New Holland Industrial Inc. 7.875% Senior Notes due 2017 (“2017 Notes”). The decrease was primarily attributable to refinancing and early retirement of certain high yield debt as well as lower average indebtedness.

Other, net expenses were $302 million for the three months ended June 30, 2018 compared to $247 million in the three months ended June 30, 2017, of which $124 million related to Industrial Activities ($59 million in the three months ended June 30, 2017) and $178 million related to Financial Services ($187 million in the three months ended June 30, 2017). Other, net expenses attributable to Industrial Activities included foreign exchange losses of $97 million and $24 million for the three months ended June 30, 2018 and 2017, respectively, Pension/OPEB costs of $16 million and $23 million for the three months ended June 30, 2018 and 2017, respectively, and Benefits Modification Amortization of $(20) million for the three months ended June 30, 2018. There was no Benefits Modification Amortization for the three months ended June 30, 2017. Other, net expenses attributable to Financial Services primarily included depreciation of assets under operating lease of $60 million and $63 million for the three months ended June 30, 2018 and 2017, respectively, as well as the cost of used assets sold at the end of the operating lease contract of $104 million and $102 million for the three months ended June 30, 2018 and 2017, respectively.

Income tax expense for the three months ended June 30, 2018 was $118 million compared to $110 million for the three months ended June 30, 2017. The effective tax rates for the three months ended June 30, 2018 and 2017 were 23.5% and 34.5%, respectively. Excluding the impact of restructuring in both periods, the Benefits Modification Amortization in 2018 and the charge to redeem the 2017 Notes in 2017, the effective tax rates were 23% and 34% in the three months ended June 30, 2018 and 2017, respectively. The lower effective tax rate in the current period is primarily attributable to a favorable geographic mix of pre-tax earnings, including improved pre-tax results in jurisdictions where the Company has, historically, been unable to benefit from pre-tax losses as well as a lower U.S. tax rate. These reductions were partly offset by net discrete tax charges in multiple tax jurisdictions in the current period.

In December 2017, the U.S. government enacted new tax legislation (U.S. Tax Reform). U.S. Tax Reform changed many aspects of U.S. corporate income taxation, including, but not limited to, reducing the corporate tax rate from 35% to 21%, implementing a quasi-territorial tax system and imposing a tax on deemed repatriated earnings of certain foreign subsidiaries. At the end of 2017, the Company reasonably estimated the effects of U.S. Tax Reform. Those provisional estimates were not changed during the three months ended June 30, 2018. During 2018, the Company will continue assessing its previously recorded impacts related to U.S. Tax Reform. Any revisions to the Company’s prior estimates will be treated in accordance with the measurement guidance outlined in Staff Accounting Bulletin No. 118.

Equity in income of unconsolidated subsidiaries and affiliates totaled $23 million and $27 million for the three months ended June 30, 2018 and 2017, respectively.

Net income was $408 million in the three months ended June 30, 2018 compared to net income of $236 million in the three months ended June 30, 2017.

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,
	2018			2017			% Change			% Change Excl. FX
	(in millions, except percentages)
Revenues:
Agricultural Equipment	$	3,312		$	2,766			19.7	%		18.3	%
Construction Equipment		799			650			22.9	%		22.3	%
Commercial Vehicles		2,889			2,598			11.2	%		5.9	%
Powertrain		1,218			1,136			7.2	%		1.4	%
Eliminations and other		(639	)		(625	)
Total Net sales of Industrial Activities		7,579			6,525			16.2	%		12.8	%
Financial Services		498			502			(0.8	)%		0.0	%
Eliminations and other		(32	)		(24	)
Total Revenues	$	8,045		$	7,003			14.9	%		11.9	%

	Three Months Ended June 30,
	2018			2017			$ Change			2018 Adj EBIT Margin			2017 Adj EBIT Margin
	(in millions, except percentages)
Adjusted EBIT by segment:
Agricultural Equipment	$	396		$	261		$	135			12.0	%		9.4	%
Construction Equipment		33			7			26			4.1	%		1.1	%
Commercial Vehicles		92			72			20			3.2	%		2.8	%
Powertrain		108			97			11			8.9	%		8.5	%
Unallocated items, eliminations and other		(58	)		(41	)		(17	)
Total Industrial Activities		571			396			175			7.5	%		6.1	%
Financial Services		141			129			12			28.3	%		25.7	%
Eliminations and other		—			—			—
Adjusted EBIT	$	712		$	525		$	187			8.9	%		7.5	%

	Three Months Ended June 30,
	2018			2017			$ Change			2018 Adj EBITDA Margin			2017 Adj EBITDA Margin
	(in millions, except percentages)
Adjusted EBITDA by segment:
Agricultural Equipment	$	472		$	337		$	135			14.3	%		12.2	%
Construction Equipment		48			23			25			6.0	%		3.5	%
Commercial Vehicles		239			203			36			8.3	%		7.8	%
Powertrain		141			128			13			11.6	%		11.3	%
Unallocated items, eliminations and other		(57	)		(41	)		(16	)
Total Industrial Activities		843			650			193			11.1	%		10.0	%
Financial Services		203			193			10			40.8	%		38.4	%
Eliminations and other		—			—			—
Adjusted EBITDA	$	1,046		$	843		$	203			13.0	%		12.0	%

Net sales of Industrial Activities were $7,579 million during the three months ended June 30, 2018, a 16.2% increase (up 12.8% on a constant currency basis) compared to the same period of 2017, mainly driven by significant improvements in the Agricultural and Construction Equipment segments.

Adjusted EBIT of Industrial Activities was $571 million in the three months ended June 30, 2018, a $175 million increase from the three months ended June 30, 2017 with an adjusted EBIT margin of 7.5% up 1.4 percentage points (“p.p.”) compared to the three months ended June 30, 2017.

Adjusted EBITDA of Industrial Activities was up 30% to $843 million for the three months ended June 30, 2018 compared to $650 million for the three months ended June 30, 2017, with an adjusted EBITDA margin of 11.1%, up 1.1 p.p. compared to the three months ended June 30, 2017.

The following table shows Agricultural Equipment net sales by geographic region for the three months ended June 30, 2018 compared to the three months ended June 30, 2017:

Net sales of Agricultural Equipment were $3,312 million for the three months ended June 30, 2018, an increase of 19.7% (up 18.3% on a constant currency basis) compared to the three months ended June 30, 2017 primarily due to favorable end-user demand as well as favorable price realization across all regions.

For the three months ended June 30, 2018, worldwide industry unit sales were up 9% compared to the three months ended June 30, 2017. In NAFTA, industry volumes in the over 140 horsepower (“hp”) tractor market sector were up 9% and combines were up 26%. Industry volumes for under 140 hp tractors in NAFTA was also up 9%. EMEA markets were down 1% for tractors and up 4% for combines. In LATAM, the tractor market decreased 2% while the combine market increased 25%. APAC markets increased 11% and 6% for tractors and combines, respectively.

Adjusted EBIT was $396 million in the three months ended June 30, 2018 ($261 million in the three months ended June 30, 2017). Adjusted EBIT margin increased 2.6 p.p. to 12.0% compared to the three months ended June 30, 2017. The increase was due to favorable volume and mix, primarily in NAFTA and EMEA, and sustained net price realization across all regions, including the expected reduction in interest compensation to Financial Services as a result of the achievement of an investment grade rating. The anticipated increase in raw material costs was offset by manufacturing efficiencies. Product development spending, related primarily to precision farming and compliance with Stage V emissions requirements, increased 10%.

The following table shows Construction Equipment net sales by geographic region for the three months ended June 30, 2018 compared to the three months ended June 30, 2017:

Net sales of Construction Equipment were $799 million for the three months ended June 30, 2018, an increase of 22.9% compared to the three months ended June 30, 2017 (up 22.3% on a constant currency basis) as a result of a favorable end-user industry demand environment.

During the three months ended June 30, 2018, Construction Equipment’s worldwide heavy equipment and worldwide light equipment industry sales were up 34% and 20%, respectively compared to the three months ended June 30, 2017.

Adjusted EBIT was $33 million for the three months ended June 30, 2018 ($7 million in the three months ended June 30, 2017). Adjusted EBIT margin increased 3.0 p.p. to 4.1% compared to the three months ended June 30, 2017. Results were favorably impacted by higher volume, favorable product mix, and positive net price realization, more than offsetting raw material cost increases. During the three months ended June 30, 2018 production levels were 12% above retail demand, in line with the order book, which was up approximately 15% compared to the prior year period.

The following table shows Commercial Vehicles’ net sales by geographic region for the three months ended June 30, 2018 compared to the three months ended June 30, 2017:

Commercial Vehicles’ net sales were $2,889 million for the three months ended June 30, 2018, an increase of 11.2% (up 5.9% on a constant currency basis) compared to the three months ended June 30, 2017, primarily as a result of a favorable product mix and positive pricing primarily in EMEA and LATAM. Total deliveries were flat year-over-year as increased volumes in light commercial vehicles, resulting from favorable end-user demand in EMEA and Brazil, and buses in EMEA and LATAM, were offset by the impact of re-focusing the heavy vehicle sales to a more profitable product portfolio, including alternative propulsion vehicles.

During the three months ended June 30, 2018, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, increased 11% compared to the same period in 2017. In Europe, the Light Commercial Vehicles (“LCV”) market (GVW 3.5-7.49 tons) increased 13% and the Medium & Heavy (“M&H”) truck market (GVW ≥7.5 tons) increased 7%. In LATAM, new truck registrations (GVW ≥3.5 tons) increased 28% over the same period of 2017 with an increase of 45% in Brazil. In APAC, new truck registrations grew by 7%.

In the three months ended June 30, 2018, Commercial Vehicles’ estimated market share in the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was 12.2%, down 0.4 p.p. compared to the three months ended June 30, 2017. Commercial Vehicles’ market share in LATAM in the three months ended June 30, 2018 was 10.3%, down 1.6 p.p. compared to the three months ended June 30, 2017.

Commercial Vehicles delivered approximately 40,300 vehicles (including buses and specialty vehicles) in the three months ended June 30, 2018, representing a 1% decrease from the same prior-year period. Volumes were up 8% in LCV and down 22% in M&H truck segments. Commercial Vehicles’ deliveries decreased 2% in EMEA and 3% in APAC, and increased 13% in LATAM.

In the three months ended June 30, 2018, Commercial Vehicles’ ratio of orders received to units shipped and billed, or book-to-bill ratio, for the European truck market was 0.79. In the three months ended June 30, 2018, truck order intake in Europe decreased 16% compared to the three months ended June 30, 2017, with an 8% decrease in LCV and a 35% decrease in M&H.

Adjusted EBIT was $92 million for the three months ended June 30, 2018 ($72 million in the three months ended June 30, 2017). Adjusted EBIT margin increased 0.4 p.p. to 3.2% compared to the three months ended June 30, 2017. The increase was mainly due to favorable volume and mix performance, primarily in buses, and positive net price realization in EMEA and LATAM in trucks, which was partially offset by a 24% increase in research and development spending, primarily related to initiatives to enhance product competitiveness and fuel efficiency.

Powertrain net sales were $1,218 million for the three months ended June 30, 2018, a 7.2% increase over the three months ended June 30, 2017 (up 1.4% on a constant currency basis). Sales to external customers accounted for 49% of total net sales (47% in the three months ended June 30, 2017).

During the three months ended June 30, 2018, Powertrain sold approximately 163,400 engines, an increase of 2% compared to the three months ended June 30, 2017. In terms of major customers, 26% of engine units were supplied to Commercial Vehicles, 15% to Agricultural Equipment, 4% to Construction Equipment and the remaining 55% to external customers. Additionally, Powertrain delivered approximately 19,900 transmissions, an increase of 1% compared to the three months ended June 30, 2017, and approximately 50,700 axles, a 6% decrease compared to the three months ended June 30, 2017.

Adjusted EBIT was $108 million for the three months ended June 30, 2018 ($97 million in the three months ended June 30, 2017). Adjusted EBIT margin increased 0.4 p.p. to 8.9% compared to the three months ended June 30, 2017. The increase was due to a favorable product mix and manufacturing efficiencies, partially offset by increased selling, general and administrative expenses and product development spending.

Financial Services reported revenues of $498 million for the three months ended June 30, 2018, a decrease of 0.8% compared to the three months ended June 30, 2017 (flat on a constant currency basis), primarily due to a lower average portfolio balance in NAFTA.

Net income of Financial Services was $102 million for the three months ended June 30, 2018, a $15 million increase over the three months ended June 30, 2017, primarily due to stronger performance in NAFTA, EMEA and LATAM.

Retail loan originations in the three months ended June 30, 2018, including unconsolidated joint ventures, were $2.6 billion, relatively flat compared to the three months ended June 30, 2017. The managed portfolio, including unconsolidated joint ventures, was $25.9 billion as of June 30, 2018 (of which retail was 61% and wholesale was 39%), up $0.3 billion compared to June 30, 2017. Excluding the impact of currency translation, the managed portfolio increased $0.8 billion compared to the same period in 2017.

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,
	2018			2017
	(in millions)
Revenues:
Net sales	$	13,879		$	11,815
Finance, interest and other income		939			973
Total Revenues		14,818			12,788
Costs and Expenses:
Cost of goods sold		11,444			9,875
Selling, general and administrative expenses		1,183			1,110
Research and development expenses		489			419
Restructuring expenses		8			24
Interest expense		392			452
Other, net		553			510
Total Costs and Expenses		14,069			12,390
Income before income taxes and equity in income of unconsolidated subsidiaries and affiliates		749			398
Income tax (expense)		(181	)		(161	)
Equity in income of unconsolidated subsidiaries and affiliates		42			45
Net income		610			282
Net income attributable to noncontrolling interests		18			8
Net income attributable to CNH Industrial N.V.	$	592		$	274

We recorded revenues of $14,818 million for the six months ended June 30, 2018, an increase of 15.9% (up 10.7% on a constant currency basis) compared to the six months ended June 30, 2017. Net sales of Industrial Activities were $13,879 million in the six months ended June 30, 2018, an increase of 17.5% (up 11.8% on a constant currency basis) compared to the prior period as a result of increased volumes in all Industrial Activities segments.

Cost of goods sold were $11,444 million for the six months ended June 30, 2018 compared with $9,875 million for the six months ended June 30, 2017. The increase of 15.9% was driven by the increase in revenues. As a percentage of net sales of Industrial Activities, cost of goods sold was 82.5% in the six months ended June 30, 2018 (83.6% for the six months ended June 30, 2017).

Selling, general and administrative expenses were $1,183 million during the six months ended June 30, 2018 (8.0% of total revenues), up $73 million compared to the six months ended June 30, 2017 (8.7% of total revenues).

For the six months ended June 30, 2018, research and development expenses were $489 million compared to $419 million for the six months ended June 30, 2017. The expenses in both periods were primarily attributable to spending on engine development costs associated with emission requirements and continued investment in new products.

Restructuring expenses for the six months ended June 30, 2018 were $8 million compared to $24 million for the six months ended June 30, 2017. The expenses in the six months ended June 30, 2018 were primarily attributable to actions in Commercial Vehicles as part of the Efficiency Program launched in 2014.

Interest expense was $392 million for the six months ended June 30, 2018 compared to $452 million for the six months ended June 30, 2017. The interest expense attributable to Industrial Activities for the six months ended June 30, 2018, net of interest income and eliminations, was $181 million compared to $224 million in the six months ended June 30, 2017. In the six months ended June 30, 2017 interest expense included the charge of $17 million related to the early redemption of the 2017 Notes. The decrease was primarily attributable to refinancing and early retirement of certain high yield debt as well as lower average indebtedness.

Other, net expenses were $553 million for the six months ended June 30, 2018 compared to $510 million in the six months ended June 30, 2017, of which $204 million related to Industrial Activities ($128 million in the six months ended June 30, 2017) and $349 million related to Financial Services ($383 million in the six months ended June 30, 2017). Other, net expenses attributable to Industrial Activities included foreign exchange losses of $122 million and $56 million for the six months ended June 30, 2018 and 2017, respectively, Pension/OPEB costs of $34 million and $45 million for the six months ended June 30, 2018 and 2017, respectively, and Benefits Modification Amortization of $(20) million for the six months ended June 30, 2018. There was no Benefits Modification Amortization for the six months ended June 30, 2017. Other, net expenses attributable to Financial Services primarily included depreciation of assets under operating leases of $126 million and $128 million for the six months ended June 30, 2018 and 2017, respectively, as well as the cost of used assets sold at the end of the operating lease contract of $198 million and $218 million for the six months ended June 30, 2018 and 2017, respectively.

Income tax expense for the six months ended June 30, 2018 was $181 million compared to $161 million in the six months ended June 30, 2017. The effective tax rates for the six months ended June 30, 2018 and 2017 were 24.2% and 40.5%, respectively. Excluding the impact of restructuring in both periods, the Benefits Modification Amortization in 2018 and the charge to redeem the 2017 Notes in 2017, the effective tax rates were 24% and 40% in the six months ended June 30, 2018 and 2017, respectively. The lower effective tax rate in the current period is primarily attributable to a favorable geographic mix of pre-tax earnings, including improved pre-tax results in jurisdictions where the Company has, historically, been unable to benefit from pre-tax losses as well as a lower U.S. tax rate.

In December 2017, the U.S. government enacted new tax legislation (U.S. Tax Reform). U.S. Tax Reform changed many aspects of U.S. corporate income taxation, including, but not limited to, reducing the corporate tax rate from 35% to 21%, implementing a quasi-territorial tax system and imposing a tax on deemed repatriated earnings of certain foreign subsidiaries. At the end of 2017, the Company reasonably estimated the effects of U.S. Tax Reform. Those provisional estimates were not changed during the six months ended June 30, 2018. During 2018, the Company will continue assessing its previously recorded impacts related to U.S. Tax Reform. Any revisions to the Company’s prior estimates will be treated in accordance with the measurement guidance outlined in Staff Accounting Bulletin No. 118.

Equity in income of unconsolidated subsidiaries and affiliates totaled $42 million and $45 million for the six months ended June 30, 2018 and 2017, respectively.

Net income was $610 million in the six months ended June 30, 2018 compared to net income of $282 million in the six months ended June 30, 2017.

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,
	2018			2017			% Change			% Change Excl. FX
	(in millions, except percentages)
Revenues:
Agricultural Equipment	$	5,891		$	5,006			17.7	%		15.0	%
Construction Equipment		1,481			1,152			28.6	%		26.3	%
Commercial Vehicles		5,384			4,723			14.0	%		5.4	%
Powertrain		2,404			2,137			12.5	%		3.2	%
Eliminations and other		(1,281	)		(1,203	)
Total Net sales of Industrial Activities		13,879			11,815			17.5	%		11.8	%
Financial Services		1,000			1,014			(1.4	)%		(2.1	)%
Eliminations and other		(61	)		(41	)
Total Revenues	$	14,818		$	12,788			15.9	%		10.7	%

	Six Months Ended June 30,
	2018			2017			$ Change			2018 Adj EBIT Margin			2017 Adj EBIT Margin
	(in millions, except percentages)
Adjusted EBIT by segment:
Agricultural Equipment	$	582		$	376		$	206			9.9	%		7.5	%
Construction Equipment		33			(24	)		57			2.2	%		(2.1	)%
Commercial Vehicles		141			89			52			2.6	%		1.9	%
Powertrain		203			171			32			8.4	%		8.0	%
Unallocated items, eliminations and other		(127	)		(75	)		(52	)
Total Industrial Activities		832			537			295			6.0	%		4.5	%
Financial Services		284			255			29			28.4	%		25.1	%
Eliminations and other		—			—			—
Adjusted EBIT	$	1,116		$	792		$	324			7.5	%		6.2	%

	Six Months Ended June 30,
	2018			2017			$ Change			2018 Adj EBITDA Margin			2017 Adj EBITDA Margin
	(in millions, except percentages)
Adjusted EBITDA by segment:
Agricultural Equipment	$	737		$	531		$	206			12.5	%		10.6	%
Construction Equipment		64			8			56			4.3	%		0.7	%
Commercial Vehicles		445			345			100			8.3	%		7.3	%
Powertrain		270			232			38			11.2	%		10.9	%
Unallocated items, eliminations and other		(126	)		(75	)		(51	)
Total Industrial Activities		1,390			1,041			349			10.0	%		8.8	%
Financial Services		413			385			28			41.3	%		38.0	%
Eliminations and other		—			—			—
Adjusted EBITDA	$	1,803		$	1,426		$	377			12.2	%		11.2	%

Net sales of Industrial Activities were $13,879 million during the six months ended June 30, 2018, an increase of 17.5% (up 11.8% on a constant currency basis) compared to the same period of 2017 driven by increased revenues in each Industrial Activities segment.

Adjusted EBIT of Industrial Activities was $832 million in the six months ended June 30, 2018, a $295 million increase over the six months ended June 30, 2017, with an adjusted EBIT margin of 6.0%, up 1.5 p.p. compared to the six months ended June 30, 2017.

Adjusted EBITDA of Industrial Activities was up 33.5% to $1,390 million for the six months ended June 30, 2018 compared to $1,041 million for the six months ended June 30, 2017, with an adjusted EBITDA margin of 10.0%, up 1.2 p.p. compared to the six months ended June 30, 2017.

The following table shows Agricultural Equipment net sales by geographic region for the six months ended June 30, 2018 compared to the six months ended June 30, 2017:

Net sales of Agricultural Equipment were $5,891 million for the six months ended June 30, 2018, an increase of 17.7% (up 15.0% on a constant currency basis) compared to the six months ended June 30, 2017, primarily due to higher sales volumes and positive net price realization.

For the six months ended June 30, 2018, worldwide industry unit sales increased 8% compared to the prior period. In NAFTA, industry volumes in the over 140 hp tractor market sector were up 5% and combines were up 14%. Industry volumes for under 140 hp tractors in NAFTA were up 6%. EMEA markets were down 3% for tractors and up 8% for combines. In LATAM, the tractor markets decreased 7% and the combine markets increased 1%. APAC markets increased 12% and 1% for tractors and combines, respectively.

Adjusted EBIT was $582 million for the six months ended June 30, 2018 ($376 million for the six months ended June 30, 2017). Adjusted EBIT margin increased 2.4 p.p. to 9.9% compared to the six months ended June 30, 2017. The increase was due to favorable volume, better mix and positive net price realization. The Company continues to invest in its product development program for precision farming and compliance with Stage V emissions requirements.

The following table shows Construction Equipment net sales by geographic region for the six months ended June 30, 2018 compared to the six months ended June 30, 2017:

Net sales of Construction Equipment were $1,481 million for the six months ended June 30, 2018, an increase of 28.6% from the six months ended June 30, 2017 (up 26.3% on a constant currency basis) as a result of a favorable end user industry demand environment.

During the six months ended June 30, 2018, Construction Equipment’s worldwide heavy equipment and worldwide light equipment industry sales were up 32% and 18%, respectively, compared to the six months ended June 30, 2017.

Adjusted EBIT was $33 million for the six months ended June 30, 2018 ($(24) million for the six months ended June 30, 2017). Adjusted EBIT margin increased 4.3 p.p. to 2.2% compared to the six months ended June 30, 2017. Results were favorably impacted by higher sales volume, favorable product mix and positive net price realization, more than offsetting raw material cost increases.

The following table shows Commercial Vehicles’ net sales by geographic region for the six months ended June 30, 2018 compared to the six months ended June 30, 2017:

Commercial Vehicles’ net sales were $5,384 million for the six months ended June 30, 2018, an increase of 14.0% (up 5.4% on a constant currency basis) over the six months ended June 30, 2017, primarily as a result of favorable product mix, positive price realization and the favorable impact of foreign currency translation.

During the six months ended June 30, 2018, the European truck market (GVW ≥3.5 tons), excluding U.K. and Ireland, was up 10% compared to the same period in 2017. In Europe, the LCV market (GVW 3.5-7.49 tons) increased 12% and the M&H truck market (GVW ≥7.5 tons) increased 6%. In LATAM, new truck registrations (GVW ≥3.5 tons) increased 29% over the same period of 2017 with an increase of 43% in Brazil and 4% in Argentina. In APAC, new truck registrations grew by 9%.

In the six months ended June 30, 2018, Commercial Vehicles’ estimated market share in the European truck market, excluding U.K. and Ireland, was 11.9%, down 0.5 p.p. compared to the six months ended June 30, 2017. Commercial Vehicles’ market share in LATAM in the six months ended June 30, 2018 was 10.6%, down 1.3 p.p. compared to the six months ended June 30, 2017.

Commercial Vehicles delivered approximately 73,600 vehicles (including buses and specialty vehicles) in the six months ended June 30, 2018, representing a 1% increase over the same prior-year period. Volumes were up 9% in LCV and down 14% in M&H truck segments. Commercial Vehicles’ deliveries were flat in EMEA, increased 11% in LATAM and increased 8% in APAC.

Adjusted EBIT was $141 million for the six months ended June 30, 2018 ($89 million in the six months ended June 30, 2017). Adjusted EBIT margin increased 0.7 p.p. to 2.6% compared to the six months ended June 30, 2017. The increase was mainly due to favorable product mix and net positive price realization, partially offset by increased research and development costs, primarily related to initiatives to enhance product competitiveness and fuel efficiency.

Powertrain net sales were $2,404 million for the six months ended June 30, 2018, a 12.5% increase over the six months ended June 30, 2017 (up 3.2% on a constant currency basis) as a result of higher sales volume and the favorable impact of foreign currency translation. Sales to external customers accounted for 49% of total net sales (46% in the six months ended June 30, 2017).

During the six months ended June 30, 2018, Powertrain sold approximately 316,900 engines, an increase of 3% compared to the six months ended June 30, 2017. In terms of major customers, 27% of engine units were supplied to Commercial Vehicles, 14% to Agricultural Equipment, 4% to Construction Equipment and the remaining 55% to external customers. Additionally, Powertrain delivered approximately 39,400 transmissions, an increase of 3% compared to the six months ended June 30, 2017, and approximately 100,700 axles, a 4% decrease compared to the six months ended June 30, 2017.

Adjusted EBIT was $203 million for the six months ended June 30, 2018 ($171 million in the six months ended June 30, 2017). Adjusted EBIT margin increased 0.4 p.p to 8.4% compared to the six months ended June 30, 2017 as a result of higher volumes and manufacturing efficiencies, partially offset by negative net price realization and product development spending.

Financial Services reported revenues of $1,000 million for the six months ended June 30, 2018, a decline of 1.4% compared to the six months ended June 30, 2017 (down 2.1% on a constant currency basis), primarily due to a lower average portfolio balance in NAFTA.

Net income of Financial Services was $205 million for the six months ended June 30, 2018, a $31 million increase over the six months ended June 30, 2017, primarily due to improved performance in EMEA, LATAM and APAC.

Retail loan originations in the six months ended June 30, 2018, including unconsolidated joint ventures, were $4.8 billion, up $0.6 billion compared to the six months ended June 30, 2017. The managed portfolio, including unconsolidated joint ventures, was $25.9 billion as of June 30, 2018 (of which retail was 61% and wholesale was 39%), down $0.9 billion compared to December 31, 2017 (up $0.1 billion on a constant currency basis).

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.

On July 21, 2018, the Board of Directors, having been apprised of the deteriorating health situation of its Chairman, appointed Ms. Suzanne Heywood as Chairman with immediate effect. On July 25, 2018, the Board of Directors, having been advised that Mr. Marchionne had passed away, registered its deep sadness and profound gratitude to Mr. Marchionne for his service to the Company.

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 those resulting from the adoption of the new accounting standard for revenue recognition (ASC 606) as previously described in the “Notes to the condensed consolidated financial statements” section of this quarterly report.

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. We expect to have available cash reserves and cash generated from operations and from sources of debt and financing activities that are sufficient to fund our working capital requirements, capital expenditures and debt service at least through the next twelve months.

During the six months ended June 30, 2018, consolidated cash, cash equivalents and restricted cash decreased by $983 million primarily as a result of the repayment of the remaining outstanding CNH Industrial Finance Europe S.A. 6.25% Notes of $1.0 billion and of the CNH Industrial Capital LLC 3.625% Notes of $600 million, the annual dividend payment of $235 million to shareholders, and the repurchase of $134 million of common shares under our buy-back program, partially offset by an increase in debt proceeds, mostly in Financial Services. Cash and cash equivalents of Industrial Activities decreased by $875 million, while Cash and cash equivalents of Financial Services decreased by $108 million.

Net cash provided by operating activities was $393 million in the six months ended June 30, 2018 compared to $522 million in the six months ended June 30, 2017. The reduction in cash generation is due to increased working capital needs as a result of increased sales.

Net cash provided by investing activities was $152 million in the six months ended June 30, 2018 compared to $792 million being used in the six months ended June 30, 2017. The improvement in cash provided by investing activities was primarily due to an increase in net cash receipts related to intersegment receivables and payables included in Other changes.

Net cash used in financing activities was $1,248 million in the six months ended June 30, 2018 compared to $497 million in the six months ended June 30, 2017. The increase in cash usage was primarily due to repayments of the outstanding CNH Industrial Finance Europe S.A. 6.25% Notes.

Net cash provided by operating activities was $425 million in 2018 compared to $291 million provided in the six months ended June 30, 2017. The increase in cash generated by operating activities was primarily due to a reduction in the wholesale receivable portfolio.

Net cash used in investing activities was $581 million in the six months ended June 30, 2018 compared to $118 million being generated in 2017, primarily reflecting an increase in net cash paid related to intersegment payables and receivables included in Other changes.

Net cash provided by financing activities was $100 million in the six months ended June 30, 2018 compared to $432 million being used in the prior year. The improvement from the prior year was primarily due to an increase in debt proceeds.

Our consolidated debt as of June 30, 2018 and December 31, 2017 is as detailed in the following table:

A summary of total debt as of June 30, 2018 and December 31, 2017, 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		547		2.750	%	March 18, 2019	$	638
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		700		2.875	%	September 27, 2021		816
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		75		1.625	%	March 29, 2022		87
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		500		1.375	%	May 23, 2022		583
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		500		2.875	%	May 17, 2023		583
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		650		1.750	%	September 12, 2025		758
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		100		3.500	%	November 12, 2025		117
CNH Industrial Finance Europe S.A. ⁽¹⁾	EUR		50		3.875	%	April 21, 2028		58
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									(55	)
Total Industrial Activities								$	4,685
Financial Services
CNH Industrial Capital LLC	USD		500		3.375	%	July 15, 2019	$	500
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 05, 2022		500
Hedging effects, bond premium/discount, and unamortized issuance costs									(29	)
Total Financial Services								$	2,471

The calculation of Net Debt as of June 30, 2018 and December 31, 2017 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, 2018			December 31, 2017			June 30, 2018			December 31, 2017			June 30, 2018		December 31, 2017
	(in millions)
Third party debt	$	24,353		$	25,895		$	5,436		$	6,461		$	18,917	$	19,434
Intersegment notes payable		—			—			1,547			982			1,676		1,641
Total Debt ⁽¹⁾		24,353			25,895			6,983			7,443			20,593		21,075
Less:
Cash and cash equivalents		4,560			5,430			4,026			4,901			534		529
Restricted cash		657			770			—			—			657		770
Intersegment notes receivable		—			—			1,676			1,641			1,547		982
Derivatives hedging debt		(10	)		(7	)		(10	)		(7	)		—		—
Net Debt (Cash) ⁽²⁾	$	19,146		$	19,702		$	1,291		$	908		$	17,855	$	18,794

The decrease in Net Debt at June 30, 2018 compared to December 31, 2017 mainly reflects the positive impact of exchange rate differences. The cash generation from operating activities is more than offset by the distribution of dividends to the Shareholders for $235 million and by the purchase of CNH Industrial N.V. shares for $134 million under the share buy-back program.

The following table shows the change in Net Debt of Industrial Activities for the six months ended June 30, 2018 and 2017:

Available committed unsecured facilities expiring after twelve months amounted to approximately $3.1 billion at June 30, 2018 ($3.2 billion at December 31, 2017). Total committed secured facilities expiring after twelve months amounted to approximately $4.5 billion at June 30, 2018 ($3.8 billion at December 31, 2017) of which $0.9 billion was available at June 30, 2018 ($1.2 billion at December 31, 2017).

Please refer to “Note 9: Debt” in our most recent annual report on Form 20-F for more information related to our debt and credit facilities.

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

This quarterly report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact contained in this filing including statements regarding our: competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, earnings (or loss) per share, capital expenditures, dividends, capital structure or other financial items; costs; and plans and objectives of management regarding operations and products, are forward-looking statements. These statements may include terminology such as “may”, “will”, “expect”, “could”, “should”, “intend”, “estimate”, “anticipate”, “believe”, “outlook”, “continue”, “remain”, “on track”, “design”, “target”, “objective”, “goal”, “forecast”, “projection”, “prospects”, “plan”, or similar terminology. Forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside our control and are difficult to predict. If any of these risks and uncertainties materialize or other assumptions underlying any of the forward-looking statements prove to be incorrect, the actual results or developments may differ materially from any future results or developments expressed or implied by the forward-looking statements.

Factors, risks, and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others: the many interrelated factors that affect consumer confidence and worldwide demand for capital goods and capital goods-related products; general economic conditions in each of our markets; changes in government policies regarding banking, monetary and fiscal policies; legislation, particularly relating to capital goods-related issues such as agriculture, the environment, debt relief and subsidy program policies, trade and commerce and infrastructure development; government policies on international trade and investment, including sanctions, import quotas, capital controls and tariffs; actions of competitors in the various industries in which we compete; development and use of new technologies and technological difficulties; the interpretation of, or adoption of new, compliance requirements with respect to engine emissions, safety or other aspects of our products; production difficulties, including capacity and supply constraints and excess inventory levels; labor relations; interest rates and currency exchange rates; inflation and deflation; energy prices; prices for agricultural commodities; housing starts and other construction activity; our ability to obtain financing or to refinance existing debt; a decline in the price of used vehicles; the resolution of pending litigation and investigations on a wide range of topics, including dealer and supplier litigation, follow-on private litigation in various jurisdictions after the settlement of the EU antitrust investigation announced on July 19, 2016, intellectual property rights disputes, product warranty and defective product claims, and emissions and/or fuel economy regulatory and contractual issues; the Company’s pension plans and other postemployment obligations; political and civil unrest; volatility and deterioration of capital and financial markets, possible effects of “Brexit”, terror attacks in Europe and elsewhere, and other similar risks and uncertainties and our success in managing the risks involved in the foregoing. Further information concerning the Company and its businesses, including factors that potentially could materially affect the Company’s financial results, is included in the Company’s most recent annual report on Form 20-F for the year ended December 31, 2017.

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 the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements contained herein or referred to above.

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

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

See our most recent annual report filed on Form 20-F (Part I, Item 3D). There was no material change in this information during the six months ended June 30, 2018. The risks described in the annual report on Form 20-F 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.

The Company’s purchases of its common shares during the three months ended June 30, 2018 were as follows:

	Page
PART I – FINANCIAL INFORMATION Condensed consolidated balance sheets as of June 30, 2018 (unaudited) and December 31, 2017	1
Condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017 (unaudited)	2
Condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2018 and 2017 (unaudited)	3
Condensed consolidated statements of cash flows for the six months ended June 30, 2018 and 2017 (unaudited)	4
Condensed consolidated statements of changes in equity for the six months ended June 30, 2018 and 2017 (unaudited)	5
Notes to condensed consolidated financial statements (unaudited)	6
Management’s discussion and analysis of financial condition and results of operations	47
Quantitative and qualitative disclosures about market risk	66

PART II – OTHER INFORMATION
Legal proceedings	67
Risk factors	67
Unregistered sales of equity securities and use of proceeds	67
Default upon senior securities	67
Mine safety disclosures	67
Other information	67

	June 30, 2018		December 31, 2017
	(in millions)
Restricted cash	$	616	$	734
Financing receivables		10,224		10,404
Total Assets	$	10,840	$	11,138
Debt	$	10,067	$	10,464
Total Liabilities	$	10,067	$	10,464

	Restricted Receivables
	June 30, 2018		December 31, 2017
Retail note and finance lease receivables	$	6,488	$	6,833
Wholesale receivables		7,388		7,156
Total	$	13,876	$	13,989

	June 30, 2018		December 31, 2017
	(in millions)
Raw materials	$	1,380	$	1,278
Work-in-process		747		601
Finished goods		5,004		4,573
Total inventories	$	7,131	$	6,452

	June 30, 2018		December 31, 2017
	(in millions)
Repurchase price on buy-back agreements	$	2,123	$	2,176
Warranty and campaign programs		927		932
Marketing and sales incentive programs		1,338		1,335
Tax payables		835		765
Accrued expenses and deferred income		529		610
Accrued employee benefits		662		752
Legal reserves and other provisions		354		384
Contract reserve		269		344
Contract liabilities⁽¹⁾		1,404		1,498
Restructuring reserve		52		60
Other		761		738
Total	$	9,254	$	9,594

	Statements of Cash Flows
	Financial Activities
	Six Months Ended June 30, 2017
	As Previously Reported			Adjustment Due to Adoption of New Accounting Pronouncements			As Recast
	(in millions)
Net cash provided by operating activities	$	58		$	233		$	291
Net cash used in investing activities	$	518		$	(400	)	$	118
Net cash used in financing activities	$	(432	)	$	—		$	(432	)
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash		4			14			18
Decrease in cash and cash equivalents and restricted cash		148			(153	)		(5	)
Cash and cash equivalents and restricted cash, beginning of year		368			837			1,205
Cash and cash equivalents and restricted cash, end of period	$	516		$	684		$	1,200

	Agricultural Equipment			Construction Equipment			Commercial Vehicles			Powertrain		Financial Services			Total
	(in millions)
Balance at January 1, 2018	$	1,654		$	593		$	64		$	5	$	156		$	2,472
Foreign currency translation and other		(5	)		(3	)		(2	)		—		(2	)		(12	)
Balance at June 30, 2018	$	1,649		$	590		$	62		$	5	$	154		$	2,460

	June 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Financing receivables	$	18,957	$	18,776	$	19,795	$	19,979
Debt	$	24,353	$	24,401	$	25,895	$	26,137

Period	Total Number of Shares Purchased		Average Price Paid per Share (€)		Average Price Paid per Share ($)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)		Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs ($)(1)(2)
Apr 1 to Apr 30, 2018		—	€	—	$	—		—	$	700,000,000
May 1 to May 31, 2018		—	€	—	$	—		—	$	700,000,000
June 1 to June 30, 2018		3,788,613	€	9.883	$	11.555		3,788,613	$	656,224,095
Total		3,788,613						3,788,613		656,224,095