ON OPERATIONS 24 Highlights 25 Highlights by Segment 26 Shareholders 30 Main Risks and Uncertainties to Which CNH Industrial N.V
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O2 REPORT ON OPERATIONS 24 Highlights 25 Highlights by Segment 26 Shareholders 30 Main Risks and Uncertainties to which CNH Industrial N.V. and the Group are exposed 44 Business Overview 72 Research and Development 73 Human Resources 76 Financial Review 94 Corporate Governance 108 Remuneration of Directors 115 Subsequent Events and Outlook 24 REPORT ON HIGHLIGHTS OPERATIONS HIGHLIGHTS ($ million) 2014 2013(*) 2012(*)(**) 2011(*)(**) 2010(*)(**) Net revenues 32,957 34,231 33,128 33,809 28,294 Trading profit 2,399 2,637 2,650 2,353 1,453 Operating profit/(loss) 2,167 2,481 2,377 2,283 1,354 Profit/(loss) before taxes 1,482 2,002 1,882 1,627 751 Profit/(loss) 916 1,218 1,162 977 490 Attributable to: Owners of the parent 917 1,048 1,023 871 442 Non-controlling interests (1) 170 139 106 48 Basic earnings/(loss) per common share ($) (1) 0.68 0.83 0.84 0.68 0.34 Diluted earnings/(loss) per common share ($) (1) 0.68 0.83 0.84 0.68 0.34 Investments in tangible and intangible assets 1,698 1,985 1,733 1,382 1,156 of which: capitalized R&D costs 676 759 685 556 525 R&D expenditure (2) 1,122 1,240 1,149 1,033 864 Total Assets 54,441 56,462 51,273 49,908 46,597 Net (debt)/cash (23,590) (23,290) (21,102) (18,825) (16,273) of which: net industrial (debt)/cash (2,874) (2,195) (2,166) (1,603) (2,539) Total equity 7,577 7,662 7,093 6,795 6,088 Equity attributable to owners of the parent 7,534 7,591 6,107 5,711 5,099 Employees at year end 69,207 71,192 68,257 66,998 62,123 (*) Amounts recast in order to reflect the change in presentation currency from euro to U.S. dollar. Reference should be made to the section “Significant accounting policies”, paragraph “Change in presentation currency”, in the Notes to the Consolidated Financial Statements . (**) Figures have been recast following the adoption of IAS 19 Revised. There was no significant impact for any individual line item. (1) As a consequence of the effective date of the merger, full-year 2013 basic EPS has been calculated on approximately 1,255 million of weighted average number of common shares outstanding. For 2012 and prior years, earnings per share calculation is based on the average number of Fiat Industrial ordinary shares outstanding after taking into account the effect of the conversion of preference and savings shares that occurred on May 21, 2012. See Note 13 to the Consolidated Financial Statements for additional information on the calculation of basic and diluted earnings per share. (2) Includes capitalized development costs and R&D charged directly to the income statement. SELECTED DATA BY REGION Revenues Employees Plants R&D Centers ($ million) 2014 2013 2014 2013 2014 2013 2014 2013 EMEA 41,756 41,961 34 33 26 26 14,951 14,372 NAFTA 11,647 11,948 12 11 13 13 9,447 9,742 LATAM 10,485 12,081 10 10 6 5 4,914 6,391 APAC 5,319 5,202 8 8 4 4 3,645 3,726 Total 69,207 71,192 64 62 49 48 32,957 34,231 HIGHLIGHTS REPORT ON 25 BY SEGMENT OPERATIONS HIGHLIGHTS BY SEGMENT Net revenues Trading profit/(loss) Operating profit/(loss) ($ million) 2014 2013(*) 2014 2013(*) 2014 2013(*) Agricultural Equipment 15,204 16,763 1,689 1,949 1,641 1,949 Construction Equipment 3,346 3,258 66 (109) 10 (140) Commercial Vehicles 11,087 11,447 2 145 (122) 73 Powertrain 4,475 4,423 220 210 220 209 Eliminations and Other (2,704) (3,050) (110) (76) (114) (87) Total of Industrial Activities 31,408 32,841 1,867 2,119 1,635 2,004 Financial Services 2,086 1,950 532 518 532 477 Eliminations (537) (560) - - - - Total for the Group 32,957 34,231 2,399 2,637 2,167 2,481 Of which capitalized Capital expenditure(1) development costs R&D expense(2) Number of employees ($ million) 2014 2013(*) 2014 2013(*) 2014 2013(*) 2014 2013 Agricultural Equipment 730 879 322 340 519 564 27,322 27,972 Construction Equipment 129 157 64 83 130 151 6,431 6,800 Commercial Vehicles 625 732 234 275 350 395 25,881 27,011 Powertrain 192 210 56 61 123 130 8,295 8,232 Eliminations and Other 5 1 - - - - 114 109 Total of Industrial Activities 1,681 1,979 676 759 1,122 1,240 68,043 70,124 Financial Services 17 6 - - - - 1,164 1,068 Eliminations - - - - - - - - Total for the Group 1,698 1,985 676 759 1,122 1,240 69,207 71,192 (*) Amounts recast in order to reflect the change in presentation currency from euro to U.S. dollar. (1) Investments in tangible and intangible assets (net of vehicles sold under buy-back commitments and operating lease). (2) It includes capitalized development costs and R&D charged directly to the income statement. 26 REPORT ON SHAREHOLDERS OPERATIONS SHAREHOLDERS FINANCIAL COMMUNICATION During 2014, the Group reignited its outreach and communication with the financial community by completing the transition to one entity following the merger between Fiat Industrial S.p.A. and CNH Global N.V. into CNH Industrial N.V. and culminating in the presentation of its five year strategic business plan in May 2014. The Group’s objective is to continue building on the relationship of trust with analysts and investors through transparent and responsible management aimed at increasing the value of the enterprise on a sustainable basis. The Investor Relations team interacts with the financial community throughout the year, maintaining an active dialogue with shareholders, investors and analysts to keep them informed and enhance their understanding of the Group and its activities. Those communication activities include conference calls, meetings and public Group presentations of its periodic financial results or other events that require direct communication to the market. Information presented or discussed on those occasions is immediately made publicly available on the corporate website. Other activities include participation in seminars and industry conferences, as well as non-deal roadshows in major financial centers that provide the opportunity for direct contact with management. Several non-deal roadshows, one-on-one meetings and conferences on the capital goods sector were organized by equity and fixed income analysts in New York, Boston, Las Vegas, Des Moines, Detroit, Los Angeles, London, Paris, Milan and Turin, at which management and the Investor Relations team also had the opportunity to give additional briefings to investors on the operating performance of CNH Industrial’s various businesses and their strategic plans going forward. Financial information, institutional presentations, periodic publications, official press releases and real-time share price updates are available in the Investors section of the corporate website (www.cnhindustrial.com) or may be requested at the followng e-mail address: [email protected] US registered shareholders may contact the Transfer Agent and Registrar, Computershare Trust Company NA, by: Telephone: +1 855 807 3164 (US) or +1 732 491 0514 (outside US) E-mail: [email protected] Shareholders holding their shares in an intermediary account with a participant in the Monte Titoli clearing system may contact the Italian Agent Computershare S.p.A., by: Telephone: +39 011 0923200 E-mail: [email protected] 27 MI: CNH INDUSTRIAL COMMON SHARES: PERFORMANCE RELATIVE TO FTSE MIB AND DOW JONES INDUSTRIAL AVERAGE (REBASED TO 100 AT 12/31/2013) AND DAILY TRADING VOLUME 120 20 100 15 80 60 10 40 Millions of shares 5 20 0 0 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec CNHI EU - volumes (r.h.s.) CNHI EU FTSE MIB DJIA NYSE: CNH INDUSTRIAL COMMON SHARES: PERFORMANCE RELATIVE TO S&P 500 AND DOW JONES INDUSTRIAL AVERAGE (REBASED TO 100 AT 12/31/2013) AND DAILY TRADING VOLUME 120 20 100 15 80 60 10 40 Millions of shares 5 20 0 0 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec CNHI US - volumes (r.h.s.) CNHI US S&P 500 DJIA In 2014, the global economy grew at a moderate pace of 2.7%. North America continued to grow (+2.3%), above the prior year’s growth trend. While many states in Northern Europe closed the year in positive territory, economic conditions in Southern Europe remain weak. Economic activity was varied in other regions. While growth in Asia (excluding Japan) stabilized at 5.8%, other economies, such as LATAM (+0.6%) and CIS (+0.4%), suffered slowdowns in infrastructure development and increased political and economic volatility. Various factors are driving these global trends such as low interest rates, weak commodity prices and the sharp decline in crude oil prices, starting in the second half of 2014. Foreign currency fluctuations have also become as issue in some regions. For 2014, the FTSE 250 index registered a 0.9% increase, the S&P 500 was up 11.4% and the Dow Jones Industrial US was up 7.5%. 28 REPORT ON SHAREHOLDERS OPERATIONS MAJOR SHAREHOLDERS At December 31, 2014 the fully subscribed and paid in shares of CNH Industrial N.V. amount to 1,829,793,916 divided into 1,355,319,640 common shares and 474,474,276 special voting shares of €0.01 each. On the same date, on the basis of the information published on the Netherlands Authority for the Financial Markets’s website (Autoriteit Financiële Markten or AFM) and in reference to the up-to-date information on the files of CNH Industrial N.V., since they held 3% or more of the aggregate number of outstanding common and special voting shares, the following institutions were considered as the major shareholders of CNH Industrial N.V.: OUTSTANDING COMMON AND SPECIAL VOTING SHARES: EXOR S.p.A.