What changed in this filing

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Item 1A. Risk Factors

2022-04-01 compared with 2021-03-31 · 116 added, 103 removed, 168 unchanged (57% of the section changed)

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In fiscal 2022, CNH Industrial supplied approximately 76% of the new equipment sold in our Agriculture segment, 66% of the new equipment sold in our Construction segment, and 70% of the new equipment sold in our International segment, and supplied a significant portion of our parts inventory.

In addition to being our primary supplier, CNH Industrial provides us with the following important inputs for our business:

The success of our stores, and our business as a whole, is dependent on CNH Industrial in several key respects.

First, we rely on CNH Industrial for new equipment inventory.

Our ability to maintain or grow market share is dependent on CNH Industrial’s ability to design, manufacture, and allocate to our stores at the right time high quality and desirable products that compare favorably to those of our principal competitors in terms of price, quality, functionality, features, connected and digital solutions, and autonomy.

Supply chain issues and labor shortages could diminish the manufacturing output of CNH Industrial's plants, resulting in our stores not receiving inventories in the expected quantities and timelines necessary to satisfy customer demand.

Any failure of CNH Industrial to offer competitive products, or delays in bringing strategic new products to market, could have a material adverse effect on our business, results of operations and financial condition.

Second, CNH Industrial supports our business by providing financial assistance and marketing support including the following:

• Floorplan payable financing for the purchase of a substantial portion of our equipment inventory;

• 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 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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• Promotional and marketing activities on national, regional and local levels.

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 terminate or change our CNH Industrial Dealer Agreements.

Our financial performance is dependent on CNH Industrial's continued commitment to these offerings, at a level that allows us to be competitive in our markets.

Third, CNH Industrial provides product warranties and, in some cases, extended warranties to our customers.

Our stores perform warranty work for equipment under these product warranties, and we direct bill CNH Industrial as opposed to invoicing the store customer.

At any particular time, we have significant receivables from CNH Industrial for warranty work performed.

CNH Industrial’s commitment to its product warranties is important to both our market share success and our parts and service revenue.

CNH Industrial may be adversely impacted by economic downturns, industry declines, natural disasters, labor strikes or similar disruptions, financial performance and liquidity concerns, supply shortages or rising raw materials costs, failed strategic initiatives, or other adverse events.

Our business, results of operations, and financial condition could be materially adversely affected as a result of any event that has a material adverse effect on CNH Industrial.

Furthermore, 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.

The terms of our CNH Industrial dealer agreements subject us to restrictions that may adversely impact our business including our ability to acquire additional stores.

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.

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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.

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.

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

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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.

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.

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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.

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.

The nature of the agricultural industry is such that a downturn in equipment demand can occur suddenly, resulting in negative impact on dealers including declining revenues, reduced profit margins, excess new and used equipment inventories, and increased floorplan interest expenses.

Risks Related to Economic Conditions Affecting our Customers' Demand for our Products and Services

Our agriculture equipment sales are significantly affected by net farm income, which is influenced by factors which we have no control.

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

Net farm income is influenced by factors such as:

• the price of agricultural commodities and the ability to competitively export agricultural commodities;

• the profitability of agricultural enterprises, farmers’ income and their capitalization;

• the demand for food products;

▪ the availability of stocks from previous harvests;

• agricultural policies, including aid and subsidies to agricultural enterprises provided by governments, policies impacting commodity prices or limiting the export or import of commodities, and alternative fuel mandates.

In addition to macroeconomic drivers of net farm income, local growing conditions also influence farmers’ buying sentiment within the affected geography.

Therefore, droughts, excess rain, hail, and other unfavorable climatic conditions affecting certain geographic regions will adversely impact the local farmers’ buying sentiment.

The nature of the agricultural industry is such that a downturn in equipment demand can occur suddenly, resulting in negative impact on dealers in the form of declining revenues, reduced profit margins, excess new and used equipment inventories, and increased floorplan interest expenses.

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 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.

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.

Demand for our parts and repair services, 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.

Our construction equipment sales are affected by several market factors over which we have no control.

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

The construction equipment market is influenced by factors such as:

• public infrastructure spending;

• new residential and non-residential construction;

• capital spending in oil and gas, forestry, agricultural and mining.

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.

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

Projected interest rate hikes will increase financing costs of our customers, which may make equipment purchases less affordable for customers and, as a result, our revenue and profitability may decrease.

Risks Related to the Competitive Conditions of the Equipment Distribution Industry

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

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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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.

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Our industry is highly competitive .

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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.

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

In addition, to the extent CNH Industrial's equipment manufacturer competitors (such as Deere, Caterpillar, Komatsu, Volvo, and AGCO) provide their dealers with more innovative or higher quality products, lower cost products, better customer financing, or have more effective marketing programs, or the CNH Industrial reputation is 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 Related to Supply Chain

Following the business interruptions caused by COVID-19, our suppliers have experienced continuing supply chain disruptions, including country of origin production and port delays.

Additionally, trucker, dockworker, and labor shortages, a surge of consumer demand, and other factors have led to industry-wide delays and inflationary trends.

Our suppliers' challenges directly affect us through price increases, and disruptions and delays on delivery of certain products, which may cause us to lose business.

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.

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

In fiscal 2022, total International segment revenues were 18.6% of our consolidated total revenue.

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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;

• 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.

Previous periods of political tension and economic instability in Ukraine caused liquidity problems for our customers, which negatively impacted their purchasing decisions for our products and services, limited our ability to maintain working capital loans or increased the cost of maintaining such loans, and as a result of imposed currency exchange controls, restricted our ability to manage our cash held in Ukraine and our investment in our Ukrainian business.

Our operations in Ukraine are subject to the risks of further devaluation of the local currency, increased interest rates and increased inflation.

• geopolitical or economic instability in the regions in which we operate, including the impact of the Russian invasion of Ukraine.

The Russian-Ukraine conflict has presented significant challenges and risks for our Ukraine operations.

The Russian military occupation of Ukraine has significantly disrupted our Ukrainian operations and resulted in the shut-down of our 10 Ukrainian stores for a period of time, some of which have reopened.

The outcome of the Russian military operation remains unclear and we cannot predict when or if our stores and business operations will reopen.

The military conflict and related political instability may make it impossible for us to effectively operate our Ukraine dealerships, which may result in our decision to cease operations in Ukraine.

This would result in asset write-offs and a loss in revenues and profits.

See additional information in Note 1 to the Consolidated Financial Statements at Item 8.

Even if we are able to continue operations, we expect that the military conflict will significantly impact our customers' liquidity and their purchasing decisions for our

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products and services.

If no crops are planted or the upcoming growing season is negatively impacted, it will limit our ability to maintain working capital loans or increase the cost of maintaining such loans, and as a result of imposed currency exchange controls and other restrictions, restrict our ability to manage our cash held in Ukraine and our investment in our Ukrainian business.

Additional risks related to our operations in Ukraine, likely made more acute by the impact of the military conflict, include further devaluation of the local currency, increased interest rates and increased inflation.

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

Financial Risks

Risks Related to Financial Matters

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.

Our equipment inventory has traditionally represented a significant portion 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.

Our orders for the purchase 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, weather disruptions to the agricultural growing regions, 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.

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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.

We may not be able to obtain this additional or alternative financing on commercially reasonable terms or at all.

To the extent that this financing cannot be obtained on commercially reasonable terms or at all, our growth and results of operations would be adversely affected.

Our level of indebtedness could limit our financial and operational flexibility.

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• pay dividends or repurchase stock;

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• issue equity instruments.

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.

Our credit facilities with CNH Industrial Capital, DLL Finance, and certain of our real estate lenders 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 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.

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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.

In July 2017, the U.K.

Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit rates for calculation of LIBOR after 2021.

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

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.

Any new benchmark rate will likely not replicate LIBOR exactly.

Any changes to benchmark rates may have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows.

We are in the process of implementing a new enterprise resource planning (“ERP”) system, and problems with the design or implementation of this ERP system could interfere with our business and operations.

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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.

We have and may continue to experience 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.

If we are unable to successfully implement the new ERP system as planned, our financial position, results of operations and cash flows could be negatively impacted.

Moreover, if the ERP system does not effectively collect, store, process, and report relevant data for the operation of our business (whether due to equipment malfunction or constraints, software deficiencies, cybersecurity attack, and/or human error), our ability to effectively plan, forecast, and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.

Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows and the timeliness with which we report our internal and external operating results.

The agricultural and construction equipment industries are highly seasonal, which can cause significant fluctuations in our results of operations and cash flow.

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Construction equipment customers’ purchases of equipment and service work, as well as rental of equipment, are also seasonal in our stores located in colder climates where construction work slows significantly in the winter months.

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.

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

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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, 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

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operating results would be adversely affected.

Delinquencies and credit losses generally would be expected to increase if there was a worsening of economic conditions in any of our reporting segments.

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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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 Related to Governmental Regulation

Enactment of "right to repair" legislation could adversely affect the sales and profitability of our parts and service business.

Proposed state and federal legislation has been introduced that 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.

Moreover, recent versions of the proposed legislation require that the manufacturer sell certain spare parts to users and third-party repair shops at the same price as offered by the manufacturer to its authorized dealers.

To date, no form of legislation has passed in the states where we do business or at the federal level.

It is difficult to predict whether any form of this legislation will be enacted in any of the states where we do business or at the federal level.

If enacted, however, any such legislation could have negative impacts on our parts and service business as follows:

• Increased competition for repair services.

We would become subject to additional competition from independent repair shops and/or other equipment dealers’ repair shops, who would have greater access to manufacturer furnished diagnostic tools as necessary to perform repair and maintenance services on CNH Industrial branded equipment.

• Loss of parts sales .

If customers, third-party repair shops, and/or parts vendors are able to purchase parts directly from the manufacturer at the same price as available to us, then our parts business would be negatively impacted.

• Margin Compression on Parts and Service Revenue .

With the increased competition for repair service and parts sales, we would expect that this new competition would result in margin compression in our sales.

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.

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

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

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

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 increased costs of equipment will likely negatively affect their purchasing decisions.

Moreover, the GHG regulations could increase other input costs for our customers, such as fuel and fertilizer, and impose indirect compliance-related costs on our customers.

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

Risks of our Growth Strategy

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

employee attrition at the acquired business;

disrupting our ongoing business;

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

In addition, in recent years it has been unusually difficult to hire and retain employees, which we believe is primarily attributable to COVID-19 pandemic related factors and which in turn has created increased competition in labor markets.

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Difficulties in hiring and retaining employees and heightened competition for employees may impact our ability to serve customers, increase our costs, and impair our efficiency and effectiveness and our ability to pursue growth opportunities.

Labor organizing activities could negatively impact us.

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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.

Products sold, rented or serviced by us may expose us to potential liabilities for personal injury or property damage claims that arise from the use of such products.

Products sold, rented or serviced by us may expose us to potential liabilities for personal injury or property damage claims that arise from the use of those products.

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.

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The price at which our common stock trades may be volatile and could be subject to significant fluctuations in response to our operating results and financial condition as set forth in our earnings releases, guidance estimates released by agricultural or construction equipment manufacturers that serve the markets in which we operate, announcements by our competitors, analyst recommendations, our ability to meet or exceed analysts’ or investors’ expectations, fluctuations in the price of crop commodities and natural resources, the condition of the financial markets, and other factors.

Quarterly fluctuations resulting from the seasonality of our business may cause our results of operations and cash flows to underperform in relation to our quarterly modeling assumptions or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.

The Company’s stock price is dependent in part on the multiple of earnings that investors are willing to pay.

That multiple is in part dependent on investors’ perception of the Company’s future earnings growth prospects.

If investors’ perception of the Company’s earnings growth prospects change, the Company’s earnings multiple may decline, and its stock price could be adversely affected.

In addition, the stock market in recent years has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of companies.

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.

Quarterly fluctuations resulting from the seasonality of our business may cause our results of operations and cash flows to underperform in relation to the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.

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.

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

The efficient operation of our business is dependent on our information technology systems.

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We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.

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UNRESOLVED STAFF COMMENTS

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