What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-04-07 · 123 added, 103 removed, 148 unchanged (60% of the section changed)

Risks related to our Reliance on CNH Industrial

We are substantially dependent upon CNH Industrial, our primary supplier of equipment and parts inventory.

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• Retail financing used by many of our customers to purchase CNH Industrial equipment from us;

Reimbursement for warranty work performed by us pursuant to CNH’s product warranties;

• Reimbursement for warranty work performed by us pursuant to CNH Industrial’s product warranties;

• Incentive programs and discount programs offered from time to time that enable us to price our products more competitively;

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Our financial performance and future success are highly dependent on the overall reputation, brand and success of CNH Industrial in the agricultural and construction equipment manufacturing industries, including its ability to maintain a competitive position in product innovation, product quality, and product pricing, and its ability to continue to provide financing to both us and our retail customers and warranty reimbursements for service work that we perform.

CNH Industrial may change or terminate our CNH Industrial Dealer Agreements.

CNH Industrial may terminate or change our CNH Industrial Dealer Agreements.

We have entered into CNH Industrial Dealer Agreements under which we sell CNH Industrial’s branded agricultural and construction equipment, along with after-market parts and repair services.

Subject to applicable state statutes that may govern the dealer-manufacturer legal relationship, CNH Industrial may terminate our CNH Industrial Dealer Agreements immediately in certain circumstances, following written notice and cure periods for certain breaches of the agreement, and for

any reason under the Case Construction agreement following 120 days prior written notice.

If CNH Industrial were to terminate all or any of its CNH Industrial Dealer Agreements with us, our business would be severely harmed.

Furthermore, CNH Industrial may unilaterally change its operating practices under the terms of its CNH Industrial Dealer Agreements with us to, among other things, change or authorize additional dealers in our sales and service areas, change its distribution system to the detriment of its dealers like us, limit our product offerings, and change pricing or delivery terms.

If CNH Industrial were to change the terms of our CNH Industrial Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed.

Furthermore, CNH Industrial may unilaterally change its operating practices under the terms of the CNH Industrial Dealer Agreements to, among other things, change or authorize additional dealers in our sales and service areas, change its distribution system to the detriment of its dealers like us, limit our product offerings, and change pricing or delivery terms.

CNH Industrial were to change the terms of our CNH Industrial Dealer Agreements or its operating practices in a manner that adversely affects us, our business and results of operations would be harmed.

Our CNH Industrial Dealer Agreements impose obligations and restrictions on us.

Under our CNH Industrial Dealer Agreements, we are obligated to actively promote the sale of CNH Industrial equipment within our designated geographic areas of responsibility, fulfill the product warranty obligations of CNH Industrial (subject to CNH Industrial’s payment to us of the agreed upon reimbursement), maintain adequate facilities and workforce to service the needs of our customers, and maintain equipment and parts inventories at the level deemed necessary by CNH Industrial to meet sales goals as stated in the annual business plan mutually agreed upon by us and CNH Industrial, maintain adequate working capital, and maintain stores only in authorized locations.

Our CNH Industrial Dealer Agreements do not provide us with exclusive dealerships in any territory (except in our European territories), and CNH Industrial could elect to authorize additional dealers in our market areas in the future, subject to state dealer protection laws.

Consent of CNH Industrial is required for certain material changes in our ownership, governance or business structure, including the acquisition by any person or group of persons of 30% or more of our outstanding stock or 20% or more of our outstanding stock if the person or group is a competitor of CNH Industrial.

This requirement may have the effect of discouraging a sale or other change in control of the Company, including transactions that our stockholders might otherwise deem to be in their best interests.

The acquisition of additional CNH Industrial geographic areas of responsibility and store locations in our Agriculture, Construction and International segments requires the consent of CNH Industrial under our CNH Industrial Dealer Agreements, subject to contrary state dealer protection laws.

CNH Industrial may decide to decline, in its sole discretion, to consent to any acquisition of an additional CNH Industrial store location we may pursue.

Under our CNH Industrial Dealer Agreements, we are obligated to actively promote the sale of CNH Industrial equipment within our designated geographic areas of responsibility, fulfill the product warranty obligations of CNH Industrial (subject to CNH Industrial’s payment to us of the agreed upon reimbursement), maintain adequate facilities and workforce to service the needs of our customers, maintain equipment and parts inventories at the level deemed necessary by CNH Industrial to meet sales goals as stated in the annual business plan mutually agreed upon by us and CNH Industrial, maintain adequate working capital, and maintain stores only in authorized locations.

This requirement may have the effect of discouraging a sale or other change in control of the Company, including transactions that may be in the best interests of our stockholders.

CNH Industrial may decline, in its sole discretion, to consent to any acquisition of an additional CNH Industrial store location we may pursue.

If CNH Industrial is unwilling to consent to any future proposed acquisition of additional dealerships, our ability to execute on our acquisition strategy and to grow our business may be impaired.

We cannot assume that CNH Industrial will consent to any acquisition of stores or dealerships that we may desire to make in the future.

Our CNH Industrial Dealer Agreements require us to operate any material business activities not related to sales of CNH Industrial products or services to customers in agricultural, construction, industrial or similar markets separately from our CNH Industrial dealership business.

Our CNH Industrial Dealer Agreement for Case Construction equipment prohibits us from carrying other suppliers' products (new equipment and parts) at our Case Construction stores that are competitive with CNH Industrial's products.

These restrictions may discourage or prevent us from pursuing business activities that we believe are in the best interests of our stockholders.

Our agricultural equipment, parts and service sales are affected by numerous market factors outside of our control.

In addition, our CNH Industrial Dealer Agreement for Case Construction equipment prohibits us from carrying other suppliers' products (new equipment and parts) at our Case Construction stores that are competitive with CNH Industrial's products.

These restrictions may discourage or prevent us from pursuing activities that we believe will grow our business.

Risks related to Economic and Market Conditions

Our agricultural equipment, parts and service sales are significantly affected by "net farm income," over which we have no control.

Farmers' capital expenditures often follow a cyclical pattern, with increased capital investments typically occurring during boom cycles spurred by high net farm income and strong farmer balance sheets.

The USDA has forecasted net farm income, a broad measure of farm profitability, to be $93.6 billion for calendar year 2019, which is approximately 18.1% above the average for the five-year period ended December 31, 2019.

Net farm income is subject to numerous external factors that are beyond the control of the individual farmer such as commodity prices, import tariffs and other trade regulations including developments in U.S.-China trade relations, input costs, production yields, animal diseases and crop pests, federal crop insurance and subsidy programs.

Net farm income is subject to numerous external factors that are beyond the control of the individual farmer including commodity prices, crop yields, crop input costs, and federal crop insurance and subsidy programs.

Net farm income also impacts farmland values, which causes overall farm wealth to increase or decrease, impacting farmers’ sentiment to make investments in equipment.

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These downturns may be prolonged, and during these periods, our revenues and profitability could be harmed.

Demand for our parts and service, although not as cyclical as equipment purchases, also can be negatively affected in agricultural downturns and in regions affected by adverse weather or growing conditions which result in fewer acres planted or harvested.

Demand for our parts and service, although not as cyclical as equipment purchases, also can be negatively affected in agricultural industry downturns and in regions affected by adverse weather or growing conditions which result in fewer acres planted or harvested.

International and domestic trade laws, regulations and policies (including those that restrict global trade) and government farm programs can significantly affect net farm income and commodity prices and the demand for agricultural equipment.

The USDA has forecasted net farm income, a broad measure of farm profitability, to be $121.1 billion for calendar year 2020, which is expected to be one of the three most-profitable years over the past 50 years.

Direct government aid of $46.3 billion accounted for approximately 38% of net farm income.

Government aid included traditional farm program payments, trade compensation (to alleviate the impact of tariffs on commodity prices), and payments under the CARES Act.

Changes in government farm programs and policies, including direct payment and other subsidies, could significantly affect our farm customers and influence their demand for the equipment we sell.

Changing worldwide demand for farm outputs to meet the world’s growing food and bio-energy demands, driven in part by government policies and a growing world population, are likely to result in fluctuating agricultural commodity prices, which directly affect sales of farm equipment

Trade restrictions, trade agreements, and imposition of tariffs, including past and uncertain developments in U.S.-China trade relations, could negatively impact the global trade of our farm customers’ crops resulting in lower commodity prices and a reduction in demand for the equipment we sell.

Our construction equipment, parts and service sales are affected by numerous market factors outside of our control.

Our construction equipment customers primarily operate in the natural resource development, construction, transportation, agriculture, manufacturing, industrial processing and utilities industries, which industries generally are capital intensive and cyclical in nature.

Many of our construction equipment customers are directly and indirectly affected by

fluctuations in commodity prices in the agriculture, forestry, metals and minerals, petroleum and natural gas industries.

Prolonged periods of low oil prices, natural gas prices and other commodity prices may cause reduced activity in these sectors which may result in decreased demand for our products and services by our customers operating in these industries.

Our construction equipment customers primarily operate in the natural resource development, construction, transportation, agriculture, manufacturing, industrial processing and utilities industries.

These industries generally are capital intensive and cyclical in nature.

Many of our construction equipment customers are directly and indirectly affected by fluctuations in commodity prices in the agriculture, forestry, metals and minerals, petroleum and natural gas industries.

Prolonged periods of low oil prices, natural gas prices and other commodity prices may result in decreased demand for our products and services by our customers operating in these industries.

Construction contractors' demand for our construction equipment, parts and repair services is affected by economic conditions at both a global and a local level.

Economic conditions that negatively affect the construction industry, such as the tightening of credit standards which affect the ability of consumers or businesses to obtain financing for construction projects, could reduce our customers' demand for our construction equipment.

The construction industry in many of our geographical areas has experienced periodic, and sometimes prolonged, economic down cycles, which negatively impacts sales of construction equipment in those markets.

During these downturns our revenues and profitability could be harmed.

Actual or threatened epidemics, pandemics, outbreaks, or other public health crises could result in disruptions in our supply chain, decreased customer demand, lower oil and other commodity prices and volatility in the stock market and the global economy, which could materially and adversely impact our business, results of operations and financial condition.

Actual or threatened epidemics, pandemics, outbreaks, or other public health crises could materially and adversely impact or disrupt our operations, adversely affect the local economies where we operate and negatively impact our customers’ spending in the impacted regions or depending upon the severity, globally, which could materially and adversely impact our business, results of operations and financial condition.

For example, since December 2019, a strain of novel coronavirus (“COVID-19”) surfaced in China and has spread into the United States, Europe and several other parts of the world, resulting in certain supply chain disruptions, volatilities in the stock market, lower oil and other commodity prices due to diminished demand, economic challenges for ethanol producers, and lockdown on international travels, all of which could adversely impact the global economy and result in decreased demand from our customers.

There is significant uncertainty around the breadth and duration of the business disruptions related to COVID-19, as well as its impact on the U.S.

Moreover, an epidemic, pandemic, outbreak or other public health crisis, such as COVID-19, could adversely affect our ability to adequately staff and manage our business.

The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain, rapidly changing and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

Our customers’ ability to obtain affordable financing is an important factor in their purchasing decisions, and directly affects our business.

The ability to obtain affordable financing is an important part of a customer's decision to purchase agricultural or construction equipment.

As net farm income and farm wealth have decreased in recent years, the borrowing capacity of our farmer customers may have also decreased.

Moreover, in a tighter credit environment, agricultural lenders may discourage their farmer customers from making non-essential capital expenditures.

Interest rate increases may make equipment purchases less affordable for customers and, as a result, our revenue and profitability may decrease.

We are unable to anticipate the timing and impact of interest rate adjustments.

Changes in governmental policies may reduce demand for agricultural and construction equipment and cause our revenue to decline.

Changes in federal, state, and international agricultural policies could adversely affect sales of agricultural equipment.

Government programs and subsidies that reduce economic volatility, incentivize agricultural equipment purchases, and enhance farm income positively influence farmers' demand for agricultural equipment.

To the extent that future funding or farm programs available to individual farmers are reduced, or, in the case of the U.S.

Federal government's market facilitation program, this program is not renewed, these changes could reduce demand for agricultural equipment and we could experience a decline in revenue.

Government sponsored conservation programs could remove acres from agricultural production, reducing demand for our products and services.

Changes in government spending on infrastructure projects could adversely affect the demand for construction equipment and we could experience a decline in revenue.

The ability to export agricultural products is critical to our agriculture customers.

As a result, tariffs and other government trade agreements, policies or regulations impacting or limiting the export or import of agricultural commodities, such as China's import tariffs, could have a material adverse effect on the international flow of agricultural and other commodities, which may cause a decrease in the demand for agricultural equipment.

Furthermore, the U.S.

federal government has initiated tariffs, such as the current steel tariff, on certain foreign goods, including raw materials, commodities, and products manufactured outside the United States that are used in our manufacturers’ production processes.

These tariffs could in turn increase our cost of sales as a result of price increases implemented by our domestic suppliers, which we may not be able to pass on to our customers.

The equipment distribution market is subject to supply-demand imbalances arising from factors over which we have no control.

The construction industry in many of our geographical areas has experienced periodic, and sometimes prolonged, economic down cycles.

During these downturns our revenues and profitability could be adversely impacted.

The equipment distribution market is subject to supply-demand imbalances arising from factors over which we have no control, which can affect our profit margins on equipment sales.

Over-production of equipment by one or more manufacturers, or a sudden reduction in demand for equipment, can dramatically disrupt the equipment market and cause downward pressure on our equipment profit margins.

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Similarly, rental house companies engage in regular sales of rental fleet units, which can further disrupt the supply-demand balance.

However, we have no control over or ability to significantly influence any of the foregoing inputs into the equipment distribution markets, but expect that we will be subject to the negative impact, including downward pressure on equipment profit margins, resulting from any supply-demand imbalances arising therefrom.

Our financial performance is dependent on our ability to effectively manage our inventory.

Our agricultural and construction equipment dealership network requires substantial inventories of equipment and parts to be maintained at each store and company-wide to facilitate sales to customers on a timely basis.

Our equipment inventory has traditionally represented 50% or more of our total assets.

We need to maintain a proper balance of new and used equipment to assure satisfactory inventory turnover and to minimize floorplan financing costs.

Our purchases of new equipment and parts are based primarily on projected demand.

If actual sales are materially less than our forecasts, for example, because of the unexpected effects on consumer demand caused by COVID-19, we would experience an over-supply of new equipment inventory.

An over-supply of new equipment inventory will generally cause downward pressure on our product sale prices and margins, decrease our inventory turns, and increase our floorplan financing expenses.

Our used equipment is generally acquired as “trade-ins” from customers in connection with equipment sales to those customers.

Equipment inventories are stated at the lower of cost or market value.

Adjustments to market value of inventory are recognized as a cost of sales, negatively impacting earnings, in the periods in which they occur.

Our estimates of market value for our used equipment, as determined at the time of the trade-in, may prove to be inaccurate, given the potential for sudden change in market conditions and other factors beyond our control.

Changes from our normal retail marketing channel to more aggressive marketing channels for specific pieces or categories of equipment inventory, particularly as equipment inventory ages, will generally result in lower sales prices.

Pricing and sales of used equipment can be significantly affected by the limited market for certain types of used equipment.

Our international operations expose us to additional risks.

We have no control over or ability to significantly influence any of the foregoing factors affecting the equipment distribution markets.

We will be subject, however, to the negative impact, including downward pressure on equipment profit margins, resulting from any supply- demand imbalances arising from those factors.

Our industry is highly competitive .

The agricultural and construction equipment distribution (including parts and service) and rental industries are highly competitive and fragmented, with large numbers of companies operating on a regional or local basis.

Historically, our competitors have competed aggressively on the basis of pricing or inventory availability, resulting in decreased margins on our sales to the extent we choose to match our competitors' pricing.

To the extent we choose not to match or remain within a reasonable competitive distance from our competitors' pricing, we may lose sales and market share.

In addition, to the extent CNH Industrial's competitors (such as Deere, Caterpillar, Komatsu, Volvo, and AGCO) provide their dealers with more innovative or higher quality products, better customer financing, or have more effective marketing programs, or the CNH Industrial reputation or brand are tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be adversely affected.

In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and we expect that this competitive pressure will continue to increase in the future.

Over the past few years, right-to-repair legislation has been introduced in state legislatures in certain of the states in which we do business;

however, this legislation has not yet been enacted into law in any of those states..

Right-to-repair legislation generally would require the manufacturers of products to provide the purchaser and/or independent repair technicians with documents, diagnostic software, and other information that would allow the equipment to be repaired without having it returned to the dealer for repair.

It is difficult to predict whether right to repair legislation will be enacted in any of the states where we do business or, if enacted, the scope and substantive details of the legislation.

If enacted, right-to-repair legislation could have a negative impact on our parts and service business.

Risks Related to the COVID Pandemic

The COVID pandemic has resulted in additional risks that could adversely impact our business, results of operations and financial condition .

In late 2019, a strain of novel coronavirus (“COVID-19”) surfaced in China and has spread to the United States, Europe and around the world, resulting in supply chain disruptions, volatilities in the stock market, lower oil and other commodity prices due to diminished demand, economic challenges for ethanol producers, and lockdown on international travel,

all of which has adversely impacted the global economy and resulted in decreased demand from some of our customers.

There is significant uncertainty around the breadth and duration of the business disruptions related to COVID-19, as well as its impact on the U.S.

Moreover, any epidemic, pandemic, outbreak or other public health crisis, such as COVID-19, could adversely affect our ability to adequately staff and manage our business.

The future impact of COVID-19 on our business and, our results of operations and financial condition will depend on future developments which are highly uncertain and cannot be predicted.

Risks of International Operations

Our international operations expose us to risks and uncertainties.

We currently operate dealership locations in Bulgaria, Germany, Romania, Serbia and Ukraine.

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As of January 31, 2021, total International segment assets were 21.7% of our consolidated total assets.

Our operations in international markets subject us to risks related to the differing legal, political, social and regulatory environments and economic conditions in the countries in which we operate.

Risks inherent in our international operations include:

Our operations in international markets subject us to risks and uncertainties arising from the differing legal, political, social and regulatory environments and economic conditions in the countries in which we operate.

These risks include:

• difficulties in implementing our business model in foreign markets;

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states, do not include specific dealer protection laws and, therefore, we may be more susceptible to actions of suppliers that are adverse to our interests such as termination of our dealer agreements for any reason or installing additional dealers in our designated territories;

geo-political or economic instability.

• geopolitical or economic instability.

Any escalation of political tensions or economic instability in Ukraine, including as a result of heightened tensions between Ukraine and the Russian Federation, could create significant disruption in our Ukrainian operations and may have an adverse effect on our business operations in Ukraine.

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These factors, in addition to others that we have not anticipated, may negatively impact our financial condition and results of operations.

Floorplan financing for our equipment inventory may not be available on favorable terms, which would adversely affect our growth and results of operations.

Financial Risks

Our financial performance is dependent on our ability to effectively manage our inventory.

Our dealership network requires substantial inventories of equipment and parts to be maintained at each store and company-wide to facilitate sales to customers on a timely basis.

Our equipment inventory has traditionally represented 50% or more of our total assets.

We need to maintain a proper balance of new and used equipment to assure satisfactory inventory turnover and to minimize floorplan financing costs.

Our purchases of new equipment and parts are based primarily on projected demand.

If actual sales are materially less than our forecasts, for example because of a significant drop in net farm income or a construction industry recession, we would experience an over-supply of new equipment inventory.

An over-supply of new equipment inventory will generally cause downward pressure on our product sale prices and margins, decrease our inventory turns, and increase our floorplan financing expenses.

Our used equipment is generally acquired as trade-ins from customers in connection with equipment sales to those customers.

Equipment inventories are stated at the lower of cost or net realizable value.

Adjustments to market value of inventory are recognized as a cost of sales, negatively impacting earnings, in the periods in which they occur.

Our estimates of net realizable value for our used equipment, as determined at the time of the trade-in, may prove to be inaccurate, given the potential for sudden changes in market conditions and other factors beyond our control.

Moving from our normal retail marketing channel to more aggressive marketing channels for specific pieces or categories of equipment inventory, particularly as equipment inventory ages, will generally result in lower sales prices.

Pricing and other terms of sale of used equipment can be significantly adversely affected by the limited market for certain types of used equipment.

Floorplan financing for our equipment inventory may not be available on favorable terms or at all, which would adversely affect our results of operations and ability to make acquisitions..

We generally purchase our equipment with the assistance of floorplan payable financing programs through CNH Industrial Capital and our other credit facilities.

In addition, we have relied on our floorplan financing to provide capital for dealership acquisitions.

In the event that our available financing sources are insufficient to satisfy our future requirements, we would be required to obtain financing from other sources.

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For example, it could:

increase our vulnerability to general adverse economic and industry conditions;

• increase our vulnerability to adverse economic and industry conditions;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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We expect to use cash flow from operations and borrowings under our credit facilities to fund our operations, debt service and capital expenditures.

However, our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which may be beyond our control.

However, our cash flow and ability to borrow depends on our future performance, which will be affected by financial, business, economic and other factors, many of which may be beyond our control.

The credit agreements governing our indebtedness restrict our ability to engage in certain corporate and financial transactions, and require us to satisfy financial covenants.

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• merge, consolidate, or make certain acquisitions;

transfer and sell assets;

• transfer and sell assets, or divest of dealership stores;

• pay dividends or repurchase stock;

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Our credit facilities with CNH Industrial Capital and DLL Finance require us to satisfy a net leverage ratio and fixed charge coverage ratio on an ongoing basis, measured at the end of each fiscal quarter.

Under the Bank Syndicate Credit Facility, if our excess availability (i.e., borrowing base capacity less outstanding loan balance and certain reserves) falls below a certain threshold, we become subject to a minimum fixed charge coverage ratio.

Under the Bank Syndicate Agreement, if our excess availability (i.e., borrowing base capacity less outstanding loan balance and certain reserves) falls below a certain threshold, we become subject to a minimum fixed charge coverage ratio.

Our ability to borrow under these credit agreements depends upon compliance with these financial covenants.

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Factors that impact interest rates include governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international instability impacting domestic and foreign financial markets.

Any increases in interest rates could have a material adverse effect on our financial conditions and results of operations.

Changes affecting the availability of the London Interbank Offered Rate (“LIBOR”) may have consequences for the Company that cannot yet reasonably be predicted.

The Company has outstanding credit facilities, including the Bank Syndicate Credit Facility and the Company’s credit facility with DLL Finance, with variable interest rates based on LIBOR.

Any increases in interest rates could have an adverse effect on our results of operations.

Changes affecting the availability of the London Interbank Offered Rate (“LIBOR”) may have consequences for us that cannot yet be predicted.

The Company has outstanding credit facilities, including its credit facilities with the Bank Syndicate and DLL Finance, with variable interest rates based on LIBOR.

The LIBOR benchmark has been subject of national, international, and other regulatory guidance and proposals for reform.

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These reforms may cause LIBOR to perform differently than in the past and LIBOR may ultimately cease to exist after 2021.

Alternative benchmark rate(s) may replace LIBOR and could affect the Company’s credit facilities.

Alternative benchmark rates may replace LIBOR and could affect the Company’s credit facilities.

At this time, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates.

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We are engaged in the implementation of a new ERP system.

The ERP system is designed to accurately maintain the Company’s books and records and provide information to the Company’s management team important to the operation of our business.

The Company’s ERP transition has required, and will continue to require, the investment of significant human and financial resources.

We may not be able to successfully implement the ERP transition without experiencing delays, increased costs and other difficulties.

The ERP system is designed to accurately maintain our books and records and provide information to management important to the operation of our business.

Our ERP transition has required, and will continue to require, the investment of significant human and financial resources.

We expect to continue to experience delays and challenges as we work toward the completion of the ERP conversion.

Beyond cost and scheduling, potential flaws in the implementation of an ERP system may pose risks to the Company’s ability to operate successfully and efficiently, including timely and accurate SEC filings.

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In addition, the fourth quarter typically is a significant period for equipment sales in the U.S.

because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects.

because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the

increase in availability of farmers’ funds from completed harvests and construction customers' funds from completed projects.

Also, numerous external factors such as credit markets, commodity prices, weather conditions, and other circumstances may disrupt normal purchasing practices and customers’ sentiment, further contributing to the seasonal fluctuations.

We are exposed to customer credit risks.

We extend credit to our customers for parts and service work, rental charges, and also for some equipment sales in our domestic and international operations.

If we are unable to manage these credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected.

Delinquencies and credit losses generally would be expected to increase if there was a worsening of economic conditions.

Our customers’ ability to obtain affordable financing is an important factor in their purchasing decisions, and directly affects our business .

The ability to obtain affordable financing is an important part of a customer's decision to purchase agricultural or construction equipment.

Interest rate increases may make equipment purchases less affordable for customers and, as a result, our revenue and profitability may decrease.

Climate and Weather Risks

Weather conditions may negatively impact the agricultural and construction equipment markets and affect our financial results.

Weather conditions, particularly severe floods and droughts, can have a significant adverse effect on growing conditions and on regional agricultural and construction markets.

Adverse weather conditions may result in fewer acres being planted or harvested by farmers and reduced crop yields on those acres that are planted.

Accordingly, our financial condition and results of operations may be adversely affected by adverse weather conditions.

Adverse weather conditions may result in fewer acres being planted or harvested by farmers and reduced crop yields on those acres that are planted, and in delays or cancellations of construction projects.

This in turn could result in lower demand for our agricultural and construction equipment and services and adversely affect our results of operation.

Many sources report that severe weather events can be expected to become more frequent as a result of global climate change.

New or more stringent greenhouse gas emission standards designed to address climate change could increase costs of the equipment we purchase from our suppliers and increase our customers’ costs of operations.

There is global scientific consensus that emissions of greenhouse gases (GHG) continue to alter the composition of Earth’s atmosphere in ways that are affecting and are expected to continue to affect the global climate.

These considerations may lead to new international, national, regional or local legislative or regulatory responses.

Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as companies in many business sectors are continuing to look for ways to reduce GHG emissions.

The regulation of GHG emissions from the equipment we sell could result in additional manufacturing costs to our suppliers who, in turn, will likely pass along those costs to us.

We may not be successful in passing along the equipment price increases to our customers, which could impact our results of operation.

To the extent that we attempt to pass along price increases to our customers, the costs of equipment increases which likely will negatively affect their purchasing decisions.

Moreover, the GHG regulations could increase other input costs for our customers, such as fuel and fertilizer, and compliance-related costs could also impact customer operations.

These economic impacts could negatively impact our customers’ purchasing decisions.

Because the impact of any future GHG legislative, regulatory or product standard requirements is dependent on the timing and design of mandates or standards, we are unable to predict its potential impact at this time.

Risks related to our Rental Business

Our rental operations subject us to risks including increased maintenance costs as our rental fleet ages, increased costs of new replacement equipment we use in our fleet, and losses upon disposition of rental fleet units.

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• general economic conditions.

Any significant decline in the selling prices for used rental equipment, or increased costs resulting from our rental operations, could have a material adverse effect on our results of operation and cash flow.

Our industry is highly competitive.

To the extent we choose not to match or remain within a reasonable competitive distance from our competitors' pricing, we may lose sales volume and market share.

In addition, to the extent CNH Industrial's competitors (such as Deere, Caterpillar, Komatsu, Volvo, and AGCO) provide their dealers with more innovative or higher quality products, better customer financing, or have more effective marketing programs or the CNH Industrial reputation or brand are tarnished in the marketplace or with our customers, our ability to compete and our results of operations could be adversely affected.

In addition, e-commerce companies selling parts have negatively impacted dealers' parts sales and margins, and it is expected that this competitive pressure will only continue to increase in the future.

Any significant decline in the selling prices for used rental equipment, or increased costs resulting from our rental operations, could have an adverse effect on our results of operations and cash flows.

Risks of our Growth Strategy

If our acquisition plans are unsuccessful, we may not achieve our planned long-term revenue growth.

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CNH Industrial typically evaluates management, historical performance, and capitalization of a prospective acquirer in determining whether to consent to the sale of a CNH Industrial dealership.

There can be no assurance that CNH Industrial or our lenders will consent to any acquisitions of dealerships that we may propose.

We may not obtain the consent of CNH Industrial or our lenders for certain acquisitions we may propose.

Our acquisitions may not be successful.

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These risks include incurring significantly higher than anticipated capital expenditures and operating expenses;

failing to assimilate the operations and personnel of the acquired dealerships;

failing to integrate the operations and personnel of the acquired dealerships;

disrupting our ongoing business;

diluting the effectiveness of our management;

failing to maintain uniform

standards, controls and policies;

failing to maintain uniform standards, controls and policies;

and impairing relationships with employees and customers as a result of changes in management.

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Future acquisitions also may have a significant impact on our financial position and capital needs, and could cause substantial fluctuations in our quarterly and yearly results of operations.

Acquisitions could include significant goodwill and intangible assets, which may result in future impairment charges that would reduce our stated earnings.

We are exposed to customer credit risks.

We extend credit to our customers for parts and service work, rental charges, and also for some equipment sales in our domestic and international operations.

If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected.

Delinquencies and credit losses generally would be expected to increase if there was a worsening of economic conditions.

Acquisitions could include significant goodwill and intangible assets.

If the acquisitions giving rise to these intangible assets are unsuccessful, this may result in future impairment charges that would reduce our stated earnings.

Human Capital Risks

Our business success depends on attracting and retaining qualified personnel.

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The failure to attract and retain members of our management team and key employees will harm us.

Over the past several months, the equipment industry has experienced a shortage of qualified service technicians.

In recent years, the equipment industry has experienced a shortage of qualified service technicians.

If this trend worsens and we are not able to hire and retain qualified service technicians at acceptable levels, our ability to satisfy customers' service needs would be negatively impacted.

Moreover, the technician shortage may increase our service technician compensation expense, and reduce our gross margins on service work.

Labor organizing activities could negatively impact us.

Although none of our employees are covered by a collective bargaining agreement, there have been attempts to unionize our store personnel.

The unionization of all or a substantial portion of our workforce could result in work slowdowns or stoppages, could increase our overall costs, could reduce our operating margins and reduce the efficiency of our operations at the affected locations, could adversely affect our flexibility to run our business competitively, and could otherwise have an adverse effect on our business.

Liability Risks

Selling and renting agricultural and construction equipment, selling parts, and providing repair services subject us to liability risks that could adversely affect our financial condition and reputation.

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Our commercial liability insurance may not be adequate to cover significant product liability claims, or we may not be able to secure such insurance on economically reasonable terms.

An uninsured or partially insured claim for which indemnification from the manufacturer is not available could have a material adverse effect on our financial condition.

An uninsured or partially insured claim for which indemnification from the manufacturer is not available could have a material adverse effect on our financial condition or results of operations.

Furthermore, if any significant claims are made against us or against CNH Industrial or any of our other suppliers, our business may be adversely affected by any related negative publicity or any adverse impact on the reputation or brand of any of our suppliers, including CNH Industrial.

Labor organizing and other activities could negatively impact us.

Stock Price Volatility

Our common stock price has fluctuated significantly and may continue to do so in the future.

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These fluctuations, as well as general economic and market conditions, may adversely affect the market price of our common stock notwithstanding our actual operating performance.

Data Security Risks

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors