CNH closes 2009 with strong cash flow

BURR RIDGE, IL. - CNH Global (NYSE:CNH - News) today announced 2009 financial results. Net Sales declined 26% to $12,783 million for the full year as the industry faced a global slowdown. In the face of this decline, the Company put in place tight cost controls which delivered an Operating Profit of $373 million from Equipment Operations for the full year, which was down 75% from the same period in 2008. The volume decline combined with the drive to reduce inventories were the primary factors in the decrease in Operating Profit from Equipment Operations. Net Loss Attributable to CNH, Before Restructuring, After Tax, came to ($0.48) per share compared to net income of $3.59 per share for the full year 2008, and $0.20 for the fourth quarter before restructuring, after tax, compared with $0.49 for the same period a year earlier, on a fully diluted basis.

CNH drove down costs in 2009, including an 18% reduction in SG&A expenses for Equipment Operations. The company reduced its overall work force by 13% and cut other operating costs. The company continued to invest in products, although R&D expenditures were reduced by 6% as the company was able to leverage engine technology from Fiat's FPT Powertrain Technologies and advanced design technology to cut development time and costs.

Equipment Operations generated $1.1 billion in cash from operating activities over the year. CNH exceeded its working capital reduction target for the full year, delivering $1.2 billion in cash flows through strict management of working capital, centered around a $1.4 billion reduction of inventory. CNH Equipment Operations improved its net cash position by $953 million, ending the year with a net cash position of $530 million, compared to a net debt position of $423 million at the same time a year earlier. "In the face of the global economic slowdown, we set a clear target focusing on cash flow. We put in place clear action plans, and today's results clearly demonstrate disciplined execution of those plans," said Harold Boyanovsky, CNH President and CEO. "As we begin 2010, we will continue our focus on working capital management and tight cost controls to ensure we can take full advantage of the economic recovery, when it comes, to rebuild our profit margin and retain our ability to generate cash."

As credit markets improved, CNH Capital successfully completed 15 financing transactions in the fourth quarter totaling $4.5 billion, which generated $1.1 billion of incremental cash. CNH Capital demonstrated that, even in the current environment, it has the ability to fund its operations, and do so on terms which allow it to be competitive in the wholesale and retail financing markets.

The Net Loss Attributable to CNH was $(190) million in 2009 compared with net income of $825 million in 2008. These results include after tax restructuring charges of $75 million compared to $28 million in 2008. Diluted Net Loss Per Share Attributable to CNH Common Shareholders, Before Restructuring, After Tax, was $(0.48) for 2009, compared with net income of $3.59 in 2008. The Diluted Net Loss Per Share Attributable to CNH Common Shareholders was $(0.80) for 2009, compared with net income of $3.47 in 2008.

CNH's 2010 outlook is for global agriculture markets to decline approximately 5%-10%. CNH's outlook also calls for construction equipment markets globally to increase approximately 5%-10% during 2010.

FOURTH QUARTER BRAND ACTIVITIES

Case IH Agriculture released the new Magnum continuously variable transmission (CVT) 180, 190, 210 and 225 for the North American market. The range features CVT, the multi-control Armrest and includes a 225 HP model. Updates of the Puma 125, 140 and 155 were launched with new A-pillar instrumentation and new hood styling, while the 155 model powers up to a maximum of 192 HP. The Maxxum 110-140 was also updated to include the multi-control Armrest, new A-pillar instrumentation and hood styling. The brand also entered the all-terrain-vehicle (ATV) market with the launch of its Case IH Scout and Scout XL.

New Holland Agriculture launched its new T6000 Range & Power Command tractor with increased power compared to the previous model, including a 165 HP engine with 200 HP maximum boost power. This gives the T6090 the best power-to-weight ratio in the segment. New Holland also introduced the new Workmaster 45/55 series in North America which includes a four-wheel-drive model and forward/reverse synchronized shuttle. The Boomer range added the 3000 Series CAB with EasyDrive CVT for a comfortable car-like drive and reduced noise levels. It also features the largest cab in its class.

New Holland Agriculture strengthened its position in international markets with new releases including an extended range of orchard tractors. The TDF series serves countries with specific needs such as those with orchards, olive groves, wide vineyards and full-field horticulture. In India, to serve the rapidly growing low horsepower segment, New Holland introduced three models of its TT range tractor with power from 35 to 50 HP, in 2-wheel and 4-wheel drive models.

NET SALES

Agricultural Equipment's Net Sales declined by 11% in the fourth quarter compared with the same period a year earlier and 17% for the full year compared with 2008. The primary driver for the decrease was lower volumes in all regions which outweighed positive pricing and foreign exchange impacts. For the full year, worldwide agricultural industry unit sales declined 7% compared to the record year of 2008. Combines were down 19% and tractors down 7% as the global economy slowed and global credit conditions generally tightened.

CNH market share for combines in the fourth quarter was up in every region except Rest of World. For the full year, in the global market for combine harvesters, CNH share increased in Latin America, was stable in Rest of World and in Western Europe and decreased in North America (with gains in the higher end segment). In the fourth quarter, market share for CNH tractors was flat in every region except Latin America. In the over 40 HP tractor segment in North America, however, CNH outperformed the market and gained market share. For the full year, North America, Western Europe and Latin America were flat, while the Rest of World was down.

Construction Equipment's Net Sales declined 16% in the quarter, and 53% for the full year compared with 2008. For the full year, weakness continued in the construction equipment industry which was down 38% worldwide in 2009 with the light equipment industry down 45% and the heavy industry down 30%. CNH market share was flat in North America and declined in all other regions with the exception of Latin America, where it increased. The company continued to cut inventories, under-producing retail sales by 51% for the full year. Construction Equipment continued to focus on parts and service operations supporting dealers and customers through the economic slowdown.

GROSS PROFIT

Equipment Operations' Gross Profit in the fourth quarter was $523 million, down 29% from the same period in 2008. Gross Margin was 16.3% in the fourth quarter of 2009 compared with 15.1% in the third quarter of 2009, and 20.0% in the fourth quarter of 2008. CNH continued to achieve positive pricing in the quarter, but not enough to offset lower sales volume. For the full year 2009, Equipment Operations' Gross Profit was $1,921 million or 15.0% of sales, compared with $3,312 million or 19.1% of sales for the full year 2008.

OPERATING PROFIT

Operating Profit for Equipment Operations was $101 million, or 3.1% of Net Sales, in the fourth quarter, compared with $299 million, or 8.2% of Net Sales, in the fourth quarter of 2008. For the full year, Equipment Operations reported $373 million in Operating Profit which was 2.9% of Net Sales. Agricultural Equipment Operating Margin remained steady from the third to the fourth quarter at 6.4%. Construction Equipment Operating Margin improved 6.2 percentage points to (11.2%) from third quarter to the fourth quarter, consistent with the industry view that the decline in the construction market could be moderating.

The company executed strict cost controls throughout the year. The salaried and agency workforce was reduced 13% for the full year, SG&A expenses were reduced $24 million or 7% in the fourth quarter compared to the same period of 2008, and $253 million or 18% for the full year. R&D expenditures were $13 million higher compared with the fourth quarter of 2008 and $24 million lower for the full year, reflecting cost savings as the company leveraged synergies through FPT Powertrain Technologies on costs for Tier IV engine development. Additionally, logistics costs decreased as the new parts and service depots opened in Sorocaba, Brazil and Portland, Oregon, utilizing the latest technology to increase efficiency and speed the order to delivery process.

FINANCIAL SERVICES NET INCOME

For the fourth quarter, Financial Services' Net Income Before Restructuring, After Tax, was $96 million, compared to $54 million in the respective period a year earlier. Results were higher for the quarter mostly due to increased ABS gains and partially offset by lower net interest margins and lower average levels of on-book receivables.

For the year, Net Income Before Restructuring, After Tax, was $177 million, down from $245 million from a year ago. Net income was lower for the full year primarily due to a higher provision for credit losses, lower net interest margins, and lower average levels of on-book receivables, partially offset by higher gains from ABS transactions. Year to date provisions for credit losses increased from $98 million in 2008 to $169 million in 2009, due to the downturn in the U.S. and European construction equipment markets and additional reserves recorded for Brazil's retail agricultural equipment portfolio. The quality of the North American agricultural equipment portfolio remained high.

During the fourth quarter, Financial Services closed 15 funding transactions totaling $4.5 billion globally. Of these transactions, 11 were in North America and generated $1.1 billion of incremental cash.

For the year, Financial Services closed funding transactions totaling $10.3 billion, with credit market conditions improving as the year progressed. Financial Services will continue to access a combination of the ABS and private bank markets, as well as factoring programs, to finance its ongoing business and further diversify its funding sources.

Financial Services reduced its on-book portfolio by 17% from December 31, 2008. This reduction, along with the incremental cash generated from financing transactions, enabled Financial Services to reduce intersegment debt by $531 million and debt to Fiat affiliates by $1.2 billion during the year.

NET INCOME

Fourth quarter 2009 Net Income Attributable to CNH was $28 million, compared to $114 million in the fourth quarter of 2008. Results include Restructuring, After Tax, of $19 million in the fourth quarter of 2009, compared with $3 million in the same period in the prior year. Net Income Attributable to CNH, Before Restructuring, After Tax, was $47 million, compared with $117 million in the prior year.

For the full year, the Net Loss Attributable to CNH was $(190) million, compared to net income of $825 million in 2008. The Net Loss includes a loss of $(46) million in Equipment Operations' unconsolidated subsidiaries, a decline of $86 million compared with a profit of $40 million in the prior year, reflecting primarily the results of the company's unconsolidated construction equipment joint ventures. Results include Restructuring, After Tax, of $75 million in 2009, compared with $28 million in 2008. The Net Loss Attributable to CNH, Before Restructuring, After Tax, was $(115) million, compared to net income of $853 million the prior year. For 2009, the Company incurred a $92 million consolidated tax expense, which includes $131 million of tax charges due to the geographic mix of earnings.

CASH FLOW AND NET DEBT

CNH Equipment Operations ended the year with a net cash position of $530 million. This was a $953 million improvement and the main driver was the dramatic decrease in Working Capital. Accounts Receivables decreased by $794 million while Inventories were reduced $1,360 million over the course of the year. Accounts Payable decreased $920 million during the year, bringing the cash flow generated from working capital to $1,234 million. Net Cash Used by Investing Activities totaled ($240) million for the full year.

Net Debt for Equipment Operations was reduced in the fourth quarter by $713 million as the company generated $783 million in Cash from Operating Activities and spent $89 million in Net Cash Used by Investing Activities.

Financial Services' Net Debt decreased by $1.7 billion during the quarter to $6.4 billion at

December 31, 2009. Compared with December 31, 2008, Financial Services' Net Debt decreased by $1.8 billion from $8.2 billion.

Consolidated Net Debt at year-end totaled $5.9 billion, down $2.4 billion from the end of the third quarter, and down $2.8 billion from year-end 2008. Consolidated Total Debt with Fiat affiliates less Deposits in Fiat affiliates cash management pools totaled $638 million at year-end, down from $2.4 billion at September 30, 2009 and down $2.5 billion from $3.2 billion at December 31, 2008.

MARKET OUTLOOK

CNH outlook anticipates that global Agriculture Equipment markets will decline 5-10% in 2010. The CNH outlook for the global Construction Equipment markets is for an increase of approximately 5-10% in 2010.

2010 CNH Outlook

"In 2010 we will continue our focus on tight cash management and cost control. We expect to generate cash from improved operating results and our ongoing focus on working capital management, " Boyanovsky said. "Given the lack of visibility of macro conditions, we will continue to exercise discipline in areas over which we have control."

ABOUT CNH GLOBAL:

CNH Global N.V. is a world leader in the agricultural and construction equipment businesses. Supported by 11,300 dealers in 170 countries, CNH brings together the knowledge and heritage of its Case and New Holland brand families with the strength and resources of its worldwide commercial, industrial, product support and finance organizations. CNH Global N.V., whose stock is listed at the New York Stock Exchange (NYSE:CNH), is a majority-owned subsidiary of Fiat S.p.A. (FIA.MI). More information about CNH and its Case and New Holland products can be found online at www.cnh.com.

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