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TABLE OF CONTENTS

Table of Contents

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 10-Q


ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                            

Commission File Number: 333-182411

CNH CAPITAL LLC
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
      39-1937630
(I.R.S. Employer
Identification Number)

5729 Washington Avenue
Racine, Wisconsin

(Address of principal
executive offices)

 

(262) 636-6011
(Registrant's telephone number,
including area code)

 

53406
(Zip code)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. o Yes    ý No

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes    o No

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes    ý No

        As of September 30, 2012, all of the limited liability company interests of the registrant were held by an affiliate of the registrant.

        The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with certain reduced disclosures as permitted by those instructions.

   


Table of Contents


TABLE OF CONTENTS

 
  PAGE  

PART I—Financial Information

       

Item 1. Financial Statements

   
1
 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)

    1  

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)

    2  

Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (Unaudited)

    3  

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)

    5  

Consolidated Statements of Changes in Stockholder's Equity for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)

    6  

Condensed Notes to Consolidated Financial Statements (Unaudited)

    7  

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    37  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      *

Item 4. Controls and Procedures

    45  

PART II—Other Information

       

Item 1. Legal Proceedings

   
46
 

Item 1A. Risk Factors

    46  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      *

Item 3. Defaults Upon Senior Securities

      *

Item 4. Mine Safety Disclosures

    54  

Item 5. Other Information

    55  

Item 6. Exhibits

    56  

*
This item has been omitted pursuant to the reduced disclosure format as set forth in General Instruction (H)(2) of Form 10-Q.

Table of Contents


PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements


CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(In thousands)

(Unaudited)

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2012   2011   2012   2011  

REVENUES:

                         

Interest income on retail and other notes and finance leases

  $ 61,716   $ 59,134   $ 178,572   $ 176,813  

Interest and other income from affiliates

    97,921     94,807     290,971     284,697  

Servicing fee income

    207     349     801     1,320  

Rental income on operating leases

    33,674     34,375     99,666     103,829  

Other income

    17,541     18,634     50,877     54,145  
                   

Total revenues

    211,059     207,299     620,887     620,804  
                   

EXPENSES:

                         

Interest expense:

                         

Interest expense to third parties

    52,102     53,695     163,293     167,208  

Interest expense to affiliates

    9,412     10,113     27,111     35,906  
                   

Total interest expense

    61,514     63,808     190,404     203,114  
                   

Operating expenses:

                         

Fees charged by affiliates

    14,912     14,863     47,195     45,549  

Provision for credit losses

    12,080     8,184     15,818     13,443  

Depreciation of equipment on operating leases

    27,021     27,684     80,415     84,631  

Other expenses

    8,158     9,644     26,185     27,567  
                   

Total operating expenses

    62,171     60,375     169,613     171,190  
                   

Total expenses

    123,685     124,183     360,017     374,304  
                   

INCOME BEFORE TAXES

    87,374     83,116     260,870     246,500  

Income tax provision

    30,423     30,259     91,784     89,763  
                   

NET INCOME

    56,951     52,857     169,086     156,737  

Net income attributed to noncontrolling interest

    (474 )   (295 )   (1,226 )   (1,100 )
                   

NET INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 56,477   $ 52,562   $ 167,860   $ 155,637  
                   

   

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

1


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(In thousands)

(Unaudited)

 
  Three Months Ended September 30,   Nine Months Ended September 30,  
 
  2012   2011   2012   2011  

NET INCOME

  $ 56,951   $ 52,857   $ 169,086   $ 156,737  

Other comprehensive (loss) income:

                         

Foreign currency translation adjustment

    25,696     (36,305 )   24,692     (22,209 )

Defined benefit pension plans:

                         

Pension liability adjustment (net of tax expense of $58, $48, $172 and $173, respectively)                         

    93     78     283     256  

Unrealized gains on retained interests:

                         

Unrealized gains on retained interests (net of tax benefit of $232, $626, $811 and $1,408, respectively)

    (381 )   (1,017 )   (1,338 )   (2,120 )

Derivative financial instruments:

                         

Losses reclassified to earnings (net of tax expense of $546, $1,958, $1,864 and $5,635, respectively)

    1,124     2,020     3,519     8,855  

Losses (gains) deferred (net of tax benefit (expense) of ($4), $3,908, $113 and $6,955, respectively)

    16     (6,538 )   (247 )   (12,063 )
                   

Other comprehensive (loss) income

    26,548     (41,762 )   26,909     (27,281 )
                   

COMPREHENSIVE INCOME

    83,499     11,095     195,995     129,456  

Less: comprehensive income attributable to noncontrolling interest

    (474 )   (295 )   (1,226 )   (1,100 )
                   

COMPREHENSIVE INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 83,025   $ 10,800   $ 194,769   $ 128,356  
                   

   

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

2


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(In thousands)

(Unaudited)

 
  September 30,
2012
  December 31,
2011
 

ASSETS

             

Cash and cash equivalents

 
$

292,922
 
$

594,093
 

Restricted cash

    675,138     767,359  

Receivables, less allowance for credit losses of $98,351 and $106,673, respectively

    11,086,786     9,386,549  

Retained interests in securitized receivables

    8,373     17,289  

Affiliated accounts and notes receivable

    15,951     193,917  

Equipment on operating leases, net

    738,517     647,617  

Equipment held for sale

    20,184     32,131  

Goodwill

    118,213     116,830  

Other intangible assets, net

    2,650     3,259  

Other assets

    67,090     142,107  
           

TOTAL

  $ 13,025,824   $ 11,901,151  
           

LIABILITIES AND STOCKHOLDER'S EQUITY

             

LIABILITIES:

             

Short-term debt (including current maturities of long-term debt)

  $ 4,794,087   $ 4,796,035  

Accounts payable and other accrued liabilities

    421,436     450,828  

Affiliated debt

    1,147,864     819,270  

Long-term debt

    5,215,730     4,587,773  
           

Total liabilities

    11,579,117     10,653,906  
           

STOCKHOLDER'S EQUITY:

             

Member's capital

         

Paid-in capital

    839,754     836,721  

Accumulated other comprehensive income

    55,625     28,716  

Retained earnings

    494,779     326,919  
           

Total CNH Capital LLC stockholder's equity

    1,390,158     1,192,356  

Noncontrolling interest

    56,549     54,889  
           

Total stockholder's equity

    1,446,707     1,247,245  
           

TOTAL

  $ 13,025,824   $ 11,901,151  
           

   

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

3


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CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(In thousands)

(Unaudited)

        The following table presents certain assets and liabilities of consolidated variable interest entities ("VIEs"), which are included in the consolidated balance sheets above. The assets in the table include only those assets that can be used to settle obligations of consolidated VIEs. The liabilities in the table include third-party liabilities of the consolidated VIEs, for which creditors do not have recourse to the general credit of CNH Capital LLC.

 
  September 30,
2012
  December 31,
2011
 

Restricted cash

  $ 675,038   $ 738,478  

Receivables, less allowance for credit losses of $58,744 and $39,309, respectively

    8,398,137     7,823,615  

Equipment on operating leases, net

    104,179     94,018  
           

TOTAL

  $ 9,177,354   $ 8,656,111  
           

Short-term debt (including current maturities of long-term debt)

 
$

4,631,998
 
$

4,583,407
 

Long-term debt

    4,313,369     3,634,629  
           

TOTAL

  $ 8,945,367   $ 8,218,036  
           

   

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(In thousands)

(Unaudited)

 
  2012   2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

             

Net income

  $ 169,086   $ 156,737  

Adjustments to reconcile net income to net cash from operating activities:                        

             

Depreciation on property and equipment and equipment on operating leases

    80,462     84,731  

Amortization on intangibles

    763     848  

Provision for credit losses

    15,818     13,443  

Deferred income tax expense

    21,729     44,286  

Changes in components of working capital:

             

Decrease in affiliated accounts and notes receivables

    178,433     23,055  

Decrease in other assets and equipment held for sale

    92,094     138,678  

Decrease in accounts payable and other accrued liabilities

    (47,859 )   (52,898 )
           

Net cash from operating activities

    510,526     408,880  
           

CASH FLOWS FROM INVESTING ACTIVITIES:

             

Cost of receivables acquired

    (13,864,075 )   (12,797,675 )

Collections of receivables

    12,237,921     11,739,395  

Decrease in restricted cash

    97,290     79,387  

Purchase of equipment on operating leases

    (308,195 )   (250,818 )

Proceeds from disposal of equipment on operating leases

    144,988     157,244  

Purchase of software

    (151 )   (203 )

Expenditures for property and equipment

        (33 )

Proceeds from disposal of property and equipment

        93  
           

Net cash used in investing activities

    (1,692,222 )   (1,072,610 )
           

CASH FLOWS FROM FINANCING ACTIVITIES:

             

Proceeds from issuance of affiliated debt

    1,527,174     493,484  

Payment of affiliated debt

    (1,202,403 )   (866,971 )

Proceeds from issuance of long-term debt

    3,286,301     2,649,338  

Payment of long-term debt

    (3,215,636 )   (1,843,814 )

Increase in revolving credit facilities

    485,089     42,590  
           

Net cash from financing activities

    880,525     474,627  
           

DECREASE IN CASH AND CASH EQUIVALENTS

    (301,171 )   (189,103 )

CASH AND CASH EQUIVALENTS:

             

Beginning of period

    594,093     420,792  
           

End of period

  $ 292,922   $ 231,689  
           

CASH PAID DURING THE PERIOD FOR INTEREST

  $ 186,086   $ 205,546  
           

CASH PAID DURING THE PERIOD FOR TAXES

  $ 74,861   $ 44,507  
           

   

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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CNH CAPITAL LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(In thousands)

(Unaudited)

 
  Company Stockholder    
   
 
 
  Member's
Capital
  Paid-in
Capital
  Accumulated
Other
Comprehensive
Income (Loss)
  Retained
Earnings
  Non-
Controlling
Interest
  Total  

BALANCE—January 1, 2011

  $   $ 836,721   $ 45,642   $ 211,873   $ 53,401   $ 1,147,637  

Net income

   
   
   
   
155,637
   
1,100
   
156,737
 

Foreign currency translation adjustment

            (22,209 )           (22,209 )

Pension liability adjustment, net of tax

            256             256  

Unrealized gain on retained interests, net of tax

            (2,120 )           (2,120 )

Derivative financial instruments:

                                     

Losses reclassified to earnings, net of tax

            8,855             8,855  

Losses deferred, net of tax

            (12,063 )           (12,063 )
                           

BALANCE—September 30, 2011

  $   $ 836,721   $ 18,361   $ 367,510   $ 54,501   $ 1,277,093  
                           

BALANCE—January 1, 2012

 
$

 
$

836,721
 
$

28,716
 
$

326,919
 
$

54,889
 
$

1,247,245
 

Net income

   
   
   
   
167,860
   
1,226
   
169,086
 

Preferred stock issuance

                    434     434  

Foreign currency translation adjustment

            24,692             24,692  

Stock compensation

        3,033                 3,033  

Pension liability adjustment, net of tax

            283             283  

Unrealized gain on retained interests, net of tax

            (1,338 )           (1,338 )

Derivative financial instruments:

                                     

Losses reclassified to earnings, net of tax

            3,519             3,519  

Losses deferred, net of tax

            (247 )           (247 )
                           

BALANCE—September 30, 2012

  $   $ 839,754   $ 55,625   $ 494,779   $ 56,549   $ 1,446,707  
                           

See the accompanying Condensed Notes to Consolidated Financial Statements (Unaudited).

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

        The accompanying consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of (a) the consolidated net income for the three and nine months ended September 30, 2012 and 2011, (b) the consolidated comprehensive income for the three and nine months ended September 30, 2012 and 2011, (c) the consolidated financial position as of September 30, 2012 and December 31, 2011, (d) the consolidated changes in stockholder's equity for the nine months ended September 30, 2012 and 2011 and (e) the consolidated cash flows for the nine months ended September 30, 2012 and 2011.

        The December 31, 2011 financial position data included herein was derived from the audited financial statements for the year ended December 31, 2011, but does not include all disclosures required by generally accepted accounting principles in the United States of America ("U.S. GAAP").

        CNH Capital LLC and its wholly-owned operating subsidiaries, including New Holland Credit Company, LLC and CNH Capital America LLC, and its majority-owned operating subsidiary CNH Capital Canada Ltd. (collectively, "CNH Capital" or the "Company"), are each a wholly-owned subsidiary of CNH America LLC ("CNH America"), which is an indirect wholly-owned subsidiary of CNH Global N.V. ("CNH"). CNH manufactures agricultural and construction equipment. CNH Capital provides financial services for CNH America and CNH Canada Ltd. (collectively, "CNH North America") customers primarily located in the United States and Canada.

        As of September 30, 2012, Fiat Industrial S.p.A. ("Fiat Industrial," and together with its subsidiaries, the "Fiat Industrial Group") owned approximately 88% of CNH's outstanding common shares through its wholly-owned subsidiary, Fiat Netherlands Holding B.V. ("Fiat Netherlands").

        On May 30, 2012, the Board of Directors of CNH Global received a proposal (the "Proposal") from Fiat Industrial to enter into a combination transaction. The Board of Directors of CNH Global appointed a special committee of unconflicted directors to evaluate the Proposal in consultation with independent financial and legal advisors retained by the special committee. Following such evaluation, the special committee announced on October 15, 2012 that, based on information made available to it, as well as the opinions of its financial advisors, the special committee had unanimously concluded the Proposal was inadequate and would not be in the best interests of CNH Global and CNH Global's shareholders and that the special committee had unanimously determined not to recommend the Proposal. In that same announcement, the special committee stated that it remains available to evaluate any alternatives to the Proposal should Fiat Industrial elect to advance any such alternatives. A Fiat Industrial announcement of that same date provided that its advisors had been asked to meet with the advisors to the special committee to explore whether the parties can reach agreement on revised terms for a merger transaction on a basis broadly consistent with the Proposal and that Fiat Industrial desires to move forward with a transaction promptly.

        The Company has prepared the accompanying consolidated financial statements in accordance with U.S. GAAP. The consolidated financial statements include the Company and its consolidated subsidiaries. The consolidated financial statements are expressed in U.S. dollars. The consolidated financial statements include the accounts of the Company's subsidiaries in which the Company has a controlling financial interest and reflect the noncontrolling interests of the minority owners of the subsidiaries that are not fully owned for the periods presented, as applicable. A controlling financial interest may exist based on

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 1: BASIS OF PRESENTATION (Continued)

ownership of a majority of the voting interest of a subsidiary, or based on the Company's determination that it is the primary beneficiary of a variable interest entity ("VIE"). The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the economic performance of the entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. The Company assesses whether it is the primary beneficiary on an ongoing basis, as prescribed by the accounting guidance on the consolidation of VIEs. The consolidated status of the VIEs with which the Company is involved may change as a result of such reassessments.

        The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and reported amounts of revenues and expenses. Significant estimates in these consolidated financial statements include the residual values of equipment on operating leases, allowance for credit losses, and tax contingencies. Actual results could differ from those estimates.

        These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the annual report for the year ended December 31, 2011. Interim results are not necessarily indicative of those expected for the entire year.

        Effective July 1, 2012, CNH Capital LLC sold its equity interests in CNH Capital Insurance Agency, Inc. and CNH Capital Canada Insurance Agency Ltd. and entered into a five-year master services agreement allowing the counterparty to use the CNH Capital name during that period. CNH Capital LLC received approximately $35,000 in connection with the sale, primarily representing a prepayment on the master services agreement. As part of this transaction, CNH Capital LLC transferred $26,009 in restricted cash and unearned finance charges to the counterparty.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

        There were no new accounting standards adopted during the nine months ended September 30, 2012.

NOTE 3: ACCUMULATED OTHER COMPREHENSIVE INCOME

        Comprehensive income and its components are presented in the consolidated statements of comprehensive income. The components of accumulated other comprehensive income as of September 30, 2012 and December 31, 2011 are as follows:

 
  September 30,
2012
  December 31,
2011
 

Cumulative foreign currency translation adjustment

  $ 68,528   $ 43,836  

Pension liability adjustment net of taxes of $3,095 and $3,267, respectively

    (5,111 )   (5,394 )

Unrealized gains on retained interests net of taxes of $1,148 and $1,959, respectively

    1,896     3,234  

Unrealized loss on derivative financial instruments net of taxes of $5,206 and $6,957, respectively

    (9,688 )   (12,960 )
           

Total

  $ 55,625   $ 28,716  
           

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES

        A summary of receivables included in the consolidated balance sheets as of September 30, 2012 and December 31, 2011 is as follows:

 
  September 30,
2012
  December 31,
2011
 

Wholesale receivables

  $ 59,166   $ 87,600  

Retail receivables

    628,760     731,807  

Finance leases

    60,303     53,391  

Restricted receivables

    10,343,322     8,566,514  

Other notes

    93,586     82,098  
           

Gross receivables

    11,185,137     9,521,410  

Less:

             

Unearned finance charges

        (28,188 )

Allowance for credit losses

    (98,351 )   (106,673 )
           

Total receivables, net

  $ 11,086,786   $ 9,386,549  
           

Restricted Receivables and Securitization

        As part of its overall funding strategy, the Company periodically transfers certain financial receivables into VIEs that are special purpose entities ("SPEs") as part of its asset-backed securitization programs.

        SPEs utilized in the securitization programs differ from other entities included in the Company's consolidated financial statements because the assets they hold are legally isolated from the Company's assets. For bankruptcy analysis purposes, the Company has sold the receivables to the SPEs in a true sale and the SPEs are separate legal entities. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs' creditors. The SPEs have ownership of cash balances that also have restrictions for the benefit of SPEs' investors. The Company's interests in the SPEs' receivables are subordinate to the interests of third-party investors. None of the receivables that are directly or indirectly sold or transferred in any of these transactions are available to pay the Company's creditors.

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        The following table summarizes the restricted and off-book receivables and the related retained interests as of September 30, 2012 and December 31, 2011:

 
  Restricted Receivables   Off-Book Receivables   Retained Interests  
 
  September 30,
2012
  December 31,
2011
  September 30,
2012
  December 31,
2011
  September 30,
2012
  December 31,
2011
 

Wholesale receivables

  $ 3,848,662   $ 2,884,516   $   $   $   $  

Retail receivables

    6,247,563     5,454,279     60,171     108,476     8,373     17,289  

Finance lease receivables

    26,423     47,000                  

Commercial revolving account receivables

    220,674     180,719                  
                           

Total

  $ 10,343,322   $ 8,566,514   $ 60,171   $ 108,476   $ 8,373   $ 17,289  
                           

        With regard to the wholesale receivable securitization programs, the Company sells eligible receivables on a revolving basis to structured master trust facilities, which are limited-purpose, bankruptcy-remote SPEs. The Company's involvement with the securitization trusts includes servicing the wholesale receivables, retaining an undivided interest ("seller's interest") in the receivables and holding cash reserve accounts. The seller's interest in the trusts represents the Company's undivided interest in the receivables transferred to the trust. The Company maintains cash reserve accounts at predetermined amounts to provide security to investors in the event that cash collections from the receivables are not sufficient to remit principal and interest payments on the securities. The investors and the securitization trusts have no recourse beyond the Company's retained interests for failure of debtors to pay when due. The Company's retained interests are subordinate to investors' interests.

        Within the U.S. retail asset securitization programs, qualifying retail finance receivables are sold to limited-purpose, bankruptcy-remote SPEs. In turn, these SPEs establish separate trusts to which the receivables are transferred in exchange for proceeds from asset-backed securities issued by the trusts. In Canada, the receivables are transferred directly to the trusts. The Company receives compensation for servicing the receivables transferred and earns other related ongoing income customary with the securitization programs. The Company also may retain all or a portion of subordinated interests in the trusts.

        Three private retail transactions totaling $60,171 and $108,476 were not included in the Company's consolidated balance sheets as of September 30, 2012 and December 31, 2011, respectively.

        The Company, through a trust, securitized originated commercial revolving account receivables. The committed asset-backed facility had an original two-year term which expired October 15, 2012, at which point all debt was paid in full.

Allowance for Credit Losses

        The allowance for credit losses is established to cover probable losses for receivables owned by the Company and consists of two components, depending on whether the receivable has been individually identified as being impaired. The first component of the allowance for credit losses covers all or a portion

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

of receivables specifically reviewed by management for which the Company has determined it will not collect all of the contractual principal and interest. Receivables are individually reviewed for impairment based on, among other items, amounts outstanding, amounts past due, collateral value, days past due and prior collection history. These receivables are subject to impairment measurement at the loan level based either on the present value of expected future cash flows discounted at the receivables' effective interest rate or the fair value of the collateral for collateral-dependent receivables and receivables for which foreclosure is deemed to be probable. When the values are lower than the carrying value of the receivables, impairment is recognized.

        The second component of the allowance for credit losses covers all receivables that are not yet individually identifiable. The allowance for these receivables is based on aggregated portfolio evaluations, generally by financial product. The allowance for retail credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquencies. The allowance for wholesale credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and dealer risk ratings. The loss forecast models are updated on a quarterly basis and incorporate information reflecting the current economic environment.

        Charge-offs of principal amounts of receivables outstanding are deducted from the allowance at the point when it is determined to be probable that all amounts due will not be collected.

        The Company's allowance for credit losses is segregated into three portfolio segments: retail, wholesale and other. A portfolio segment is the level at which the Company develops a systematic methodology for determining its allowance for credit losses. The retail segment includes retail and finance lease receivables. The wholesale segment includes wholesale financing to CNH North America dealers, and the other portfolio includes the Company's commercial revolving accounts.

        Further, the Company evaluates its portfolio segments by class of receivable: United States and Canada. Typically, the Company's receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk. These classes align with management reporting.

        Allowance for credit losses activity for the three months ended September 30, 2012 is as follows:

 
  Retail   Wholesale   Other   Total  

Allowance for credit losses:

                         

Beginning balance

 
$

67,463
 
$

11,444
 
$

10,179
 
$

89,086
 

Charge-offs

    (3,067 )   (98 )   (1,852 )   (5,017 )

Recoveries

    1,063     64     894     2,021  

Provision

    6,765     3,596     1,719     12,080  

Foreign currency translation and other

    68     69     44     181  
                   

Ending balance

  $ 72,292   $ 15,075   $ 10,984   $ 98,351  
                   

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        Allowance for credit losses activity for the nine months ended September 30, 2012 is as follows:

 
  Retail   Wholesale   Other   Total  

Allowance for credit losses:

                         

Beginning balance

 
$

83,233
 
$

12,163
 
$

11,277
 
$

106,673
 

Charge-offs

    (24,456 )   (136 )   (6,220 )   (30,812 )

Recoveries

    3,942     166     2,396     6,504  

Provision

    9,524     2,808     3,486     15,818  

Foreign currency translation and other

    49     74     45     168  
                   

Ending balance

  $ 72,292   $ 15,075   $ 10,984   $ 98,351  
                   

Ending balance: individually evaluated for impairment

  $ 27,878   $ 11,259   $   $ 39,137  
                   

Ending balance: collectively evaluated for impairment

  $ 44,414   $ 3,816   $ 10,984   $ 59,214  
                   

Receivables:

                         

Ending balance

 
$

6,963,049
 
$

3,907,828
 
$

314,260
 
$

11,185,137
 
                   

Ending balance: individually evaluated for impairment

  $ 51,482   $ 81,935   $   $ 133,417  
                   

Ending balance: collectively evaluated for impairment

  $ 6,911,567   $ 3,825,893   $ 314,260   $ 11,051,720  
                   

        Allowance for credit losses activity for the three months ended September 30, 2011 is as follows:

 
  Retail   Wholesale   Other   Total  

Allowance for credit losses:

                         

Beginning balance

 
$

65,426
 
$

16,298
 
$

14,405
 
$

96,129
 

Charge-offs

    (6,261 )   (1,412 )   (2,399 )   (10,072 )

Recoveries

    1,522     39     775     2,336  

Provision

    5,934     821     1,429     8,184  

Foreign currency translation and other

    (597 )   (86 )   (59 )   (742 )
                   

Ending balance

  $ 66,024   $ 15,660   $ 14,151   $ 95,835  
                   

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        Allowance for credit losses activity for the nine months ended September 30, 2011 is as follows:

 
  Retail   Wholesale   Other   Total  

Allowance for credit losses:

                         

Beginning balance

 
$

73,123
 
$

31,148
 
$

14,459
 
$

118,730
 

Charge-offs

    (20,281 )   (11,594 )   (10,078 )   (41,953 )

Recoveries

    4,321     360     2,366     7,047  

Provision

    10,220     (4,215 )   7,438     13,443  

Foreign currency translation and other

    (1,359 )   (39 )   (34 )   (1,432 )
                   

Ending balance

  $ 66,024   $ 15,660   $ 14,151   $ 95,835  
                   

Ending balance: individually evaluated for impairment

  $ 40,453   $ 11,285   $ 113   $ 51,851  
                   

Ending balance: collectively evaluated for impairment

  $ 25,571   $ 4,375   $ 14,038   $ 43,984  
                   

Receivables:

                         

Ending balance

 
$

5,989,675
 
$

3,388,203
 
$

326,365
 
$

9,704,243
 
                   

Ending balance: individually evaluated for impairment

  $ 71,961   $ 54,761   $ 202   $ 126,924  
                   

Ending balance: collectively evaluated for impairment

  $ 5,917,714   $ 3,333,442   $ 326,163   $ 9,577,319  
                   

        Allowance for credit losses activity for the year ended December 31, 2011 is as follows:

 
  Retail   Wholesale   Other   Total  

Allowance for credit losses:

                         

Beginning balance

 
$

73,123
 
$

31,148
 
$

14,459
 
$

118,730
 

Charge-offs

    (27,770 )   (12,613 )   (12,770 )   (53,153 )

Recoveries

    5,850     447     3,431     9,728  

Provision

    33,353     (6,801 )   6,301     32,853  

Foreign currency translation and other

    (1,323 )   (18 )   (144 )   (1,485 )
                   

Ending balance

  $ 83,233   $ 12,163   $ 11,277   $ 106,673  
                   

Ending balance: individually evaluated for impairment

  $ 42,879   $ 10,101   $   $ 52,980  
                   

Ending balance: collectively evaluated for impairment

  $ 40,354   $ 2,062   $ 11,277   $ 53,693  
                   

Receivables:

                         

Ending balance

 
$

6,258,289
 
$

2,972,116
 
$

262,817
 
$

9,493,222
 
                   

Ending balance: individually evaluated for impairment

  $ 73,920   $ 56,444   $ 265   $ 130,629  
                   

Ending balance: collectively evaluated for impairment

  $ 6,184,369   $ 2,915,672   $ 262,552   $ 9,362,593  
                   

13


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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        As part of the ongoing monitoring of the credit quality of the wholesale portfolio, the Company utilizes an internal credit scoring model that assigns a risk grade for each dealer. The scoring model considers the strength of the dealer's financial statements, payment history and audit performance. The Company updates its dealers' ratings and considers the ratings in the quarterly credit allowance analysis. A description of the general characteristics of the dealer's risk grades is as follows:

    Grades A and B—Includes receivables to dealers that have significant capital strength, moderate leverage, stable earnings and growth, and excellent payment performance.

    Grade C—Includes receivables to dealers with moderate credit risk. Dealers of this grade are differentiated from higher grades on a basis of leverage or payment performance.

    Grade D—Includes receivables to dealers with moderate credit risk. These dealers may require higher monitoring due to weaker financial strength or payment performance.

        A breakdown of the wholesale portfolio by its credit quality indicators as of September 30, 2012 and December 31, 2011 is as follows:

 
  September 30,
2012
  December 31,
2011
 

A

  $ 2,378,678   $ 1,662,920  

B

    1,117,692     897,914  

C

    270,211     287,793  

D

    141,247     123,489  
           

Total

  $ 3,907,828   $ 2,972,116  
           

        Utilizing an internal credit scoring model, which considers customers' attributes, prior credit history and each retail transaction's attributes, the Company assigns a credit quality rating to each retail customer, by specific transaction, as part of the retail underwriting process. This rating is used in setting the interest rate on the transaction. The credit quality rating is not updated after the transaction is finalized. A description of the general characteristics of the customers' risk grades is as follows:

    Titanium—Customers from whom the Company expects no collection or loss activity.

    Platinum—Customers from whom the Company expects minimal, if any, collection or loss activity.

    Gold, Silver, Bronze—Customers defined as those with the potential for collection or loss activity.

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        A breakdown of the retail portfolio by the customer's risk grade at the time of origination as of September 30, 2012 and December 31, 2011 is as follows:

 
  September 30,
2012
  December 31,
2011
 

Titanium

  $ 3,715,869   $ 3,195,785  

Platinum

    1,956,881     1,837,604  

Gold

    1,084,300     999,950  

Silver

    186,932     197,108  

Bronze

    19,067     27,842  
           

Total

  $ 6,963,049   $ 6,258,289  
           

        The following tables present information at the level at which management assesses and monitors its credit risk. Receivables are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Delinquency is reported on receivables greater than 30 days past due. The aging of receivables as of September 30, 2012 and December 31, 2011 is as follows:

 
  September 30, 2012  
 
  30 - 59
Days
Past Due
  60 - 89
Days
Past Due
  Greater
Than
90 Days
  Total
Past Due
  Current   Total
Receivables
  Recorded
Investment
> 90 Days
and
Accruing
 

Retail

                                           

United States

  $ 22,336   $ 7,021   $ 28,042   $ 57,399   $ 5,675,427   $ 5,732,826   $ 3,636  

Canada

  $ 2,572   $ 481   $ 183   $ 3,236   $ 1,226,987   $ 1,230,223   $ 19  

Wholesale

                                           

United States

  $ 1,137   $ 32   $ 1,130   $ 2,299   $ 3,064,380   $ 3,066,679   $ 439  

Canada

  $ 202   $ 3   $ 25   $ 230   $ 840,919   $ 841,149   $ 2  

Total

                                           

Retail

  $ 24,908   $ 7,502   $ 28,225   $ 60,635   $ 6,902,414   $ 6,963,049   $ 3,655  

Wholesale

  $ 1,339   $ 35   $ 1,155   $ 2,529   $ 3,905,299   $ 3,907,828   $ 441  

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

 
  December 31, 2011  
 
  30 - 59
Days
Past Due
  60 - 89
Days
Past Due
  Greater
Than
90 Days
  Total
Past Due
  Current   Total
Receivables
  Recorded
Investment
> 90 Days
and
Accruing
 

Retail

                                           

United States

  $ 21,547   $ 6,100   $ 30,720   $ 58,367   $ 5,162,963   $ 5,221,330   $ 3,257  

Canada

  $ 3,550   $ 975   $ 753   $ 5,278   $ 1,031,681   $ 1,036,959   $ 77  

Wholesale

                                           

United States

  $ 1,232   $ 1,967   $ 818   $ 4,017   $ 2,266,517   $ 2,270,534   $ 362  

Canada

  $ 57   $ 14   $ 287   $ 358   $ 701,224   $ 701,582   $ 56  

Total

                                           

Retail

  $ 25,097   $ 7,075   $ 31,473   $ 63,645   $ 6,194,644   $ 6,258,289   $ 3,334  

Wholesale

  $ 1,289   $ 1,981   $ 1,105   $ 4,375   $ 2,967,741   $ 2,972,116   $ 418  

        Impaired receivables are receivables for which the Company has determined it will not collect all the principal and interest payments as per the terms of the contract. As of September 30, 2012 and December 31, 2011, the Company's recorded investment in impaired receivables individually evaluated for impairment and the related unpaid principal balances and allowances are as follows:

 
  September 30, 2012   December 31, 2011  
 
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
 

With no related allowance recorded

                                     

Retail

                                     

United States

  $ 4,408   $ 4,300   $   $ 6,805   $ 6,791   $  

Canada

  $   $   $   $ 303   $ 303   $  

Wholesale

                                     

United States

  $   $   $   $   $   $  

Canada

  $   $   $   $   $   $  

With an allowance recorded

                                     

Retail

                                     

United States

  $ 47,074   $ 42,101   $ 27,878   $ 66,747   $ 61,300   $ 42,861  

Canada

  $   $   $   $ 65   $ 65   $ 18  

Wholesale

                                     

United States

  $ 76,304   $ 75,621   $ 9,450   $ 55,167   $ 53,168   $ 9,690  

Canada

  $ 5,631   $ 5,549   $ 1,809   $ 1,277   $ 1,247   $ 411  

Total

                                     

Retail

  $ 51,482   $ 46,401   $ 27,878   $ 73,920   $ 68,459   $ 42,879  

Wholesale

  $ 81,935   $ 81,170   $ 11,259   $ 56,444   $ 54,415   $ 10,101  

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        For the three months ended September 30, 2012 and 2011, the Company's average recorded investment in impaired receivables individually evaluated for impairment (based on a four-month average) and the related interest income recognized are as follows:

 
  2012   2011  
 
  Average
Recorded
Investment
  Interest
Income
Recognized
  Average
Recorded
Investment
  Interest
Income
Recognized
 

With no related allowance recorded

                         

Retail

                         

United States

  $ 4,585   $ 147   $ 3,960   $ 152  

Canada

  $   $   $ 1,975   $ 25  

Wholesale

                         

United States

  $   $   $   $  

Canada

  $   $   $   $  

With an allowance recorded

                         

Retail

                         

United States

  $ 49,005   $ 485   $ 67,853   $ 881  

Canada

  $   $   $ 343   $  

Wholesale

                         

United States

  $ 73,473   $ 528   $ 56,588   $ 486  

Canada

  $ 5,655   $ 23   $ 167   $ 6  

Total

                         

Retail

  $ 53,590   $ 632   $ 74,131   $ 1,058  

Wholesale

  $ 79,128   $ 551   $ 56,755   $ 492  

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CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

        For the nine months ended September 30, 2012 and 2011, the Company's average recorded investment in impaired receivables individually evaluated for impairment (based on a ten-month average) and the related interest income recognized are as follows:

 
  2012   2011  
 
  Average
Recorded
Investment
  Interest
Income
Recognized
  Average
Recorded
Investment
  Interest
Income
Recognized
 

With no related allowance recorded

                         

Retail

                         

United States

  $ 4,433   $ 411   $ 4,212   $ 441  

Canada

  $   $   $ 2,065   $ 78  

Wholesale

                         

United States

  $   $   $   $  

Canada

  $   $   $   $  

With an allowance recorded

                         

Retail

                         

United States

  $ 49,558   $ 1,464   $ 65,338   $ 1,798  

Canada

  $   $   $ 346   $ 9  

Wholesale

                         

United States

  $ 66,461   $ 1,381   $ 58,258   $ 1,548  

Canada

  $ 6,257   $ 188   $ 190   $ 17  

Total

                         

Retail

  $ 53,991   $ 1,875   $ 71,961   $ 2,326  

Wholesale

  $ 72,718   $ 1,569   $ 58,448   $ 1,565  

        Recognition of income is generally suspended when management determines that collection of future finance income is not probable or when an account becomes 120 days delinquent, whichever occurs first. Interest accrual is resumed if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at that time. The receivables on nonaccrual status as of September 30, 2012 and December 31, 2011 are as follows:

 
  September 30, 2012   December 31, 2011  
 
  Retail   Wholesale   Total   Retail   Wholesale   Total  

United States

  $ 38,150   $ 75,621   $ 113,771   $ 54,798   $ 53,168   $ 107,966  

Canada

  $ 164   $ 5,549   $ 5,713   $ 676   $ 1,247   $ 1,923  

Troubled Debt Restructurings

        A restructuring of a receivable constitutes a troubled debt restructuring ("TDR") when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. As a collateral-based lender, the Company typically will repossess collateral in lieu of restructuring receivables. As such, for retail receivables, concessions are typically provided based on bankruptcy court proceedings.

18


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 4: RECEIVABLES (Continued)

For wholesale receivables, concessions granted may include extended contract maturities, inclusion of interest-only periods, modification of a contractual interest rate to a below market interest rate, extended skip payment periods and waiving of interest and principal.

        TDRs are reviewed along with other receivables as part of management's ongoing evaluation of the adequacy of the allowance for credit losses. The allowance for credit losses attributable to TDRs is based on the most probable source of repayment, which is normally the liquidation of collateral. In determining collateral value, the Company estimates the current fair market value of the equipment collateral and considers credit enhancements such as additional collateral and third-party guarantees.

        Before removing a receivable from TDR classification, a review of the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations under the loans based on a credit review, the TDR classification is not removed from the receivable.

        As of September 30, 2012, the Company had approximately 1,100 retail and finance lease receivable contracts of which the pre-modification value was $37,350 and the post-modification value was $34,833. The court has determined the concession in 632 of these cases. The pre-modification value of these contracts was $11,568 and the post-modification value was $9,853. As of September 30, 2011, the Company had approximately 1,500 retail and finance lease receivable contracts of which the pre-modification value was $39,780 and the post-modification value was $37,555. The court has determined the concession in 625 of these cases. The pre-modification value of these contracts was $9,007 and the post-modification value was $7,920. As the outcome of the bankruptcy cases is determined by the court based on available assets, subsequent defaults are unusual and were not material for retail and finance lease receivable contracts that were modified in a TDR during the previous 12 months ended September 30, 2012 and 2011.

        As of September 30, 2012, the Company had five wholesale agreements with a pre- and post-modification balance of approximately $21,623 and $20,274, respectively. As of September 30, 2011, the Company had five wholesale agreements with a pre- and post- modification balance both of approximately $21,000. The wholesale TDRs that subsequently defaulted were immaterial for the three and nine months ended September 30, 2012 and 2011.

NOTE 5: DEBT

        On July 16, 2012, the $583,250 Series 2009-1 Asset-Backed Notes were redeemed as scheduled.

        On July 23, 2012, the Company renewed and increased by $400,000 one of the U.S. wholesale committed asset-backed facilities, with a maturity date of April 22, 2013.

        On September 26, 2012, the Company, through a bankruptcy-remote trust, issued $752,148 of amortizing, asset-backed notes secured by U.S. retail loan contracts.

        On September 27, 2012, the Company, through a bankruptcy-remote trust, sold C$450,000 ($458,728) of amortizing, asset-backed notes secured by Canadian retail loan contracts.

        On September 27, 2012, the Company renewed its $1.2 billion U.S. Retail asset-backed committed facility which matures September 27, 2014.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 6: INCOME TAXES

        The effective tax rates for the three months ended September 30, 2012 and 2011 were 34.8% and 36.4%, respectively. The effective tax rate was 35.2% for the nine-month period ended September 30, 2012, compared to 36.4% for the same period in 2011. The lower rate in 2012 was due primarily to the geographic mix of earnings.

        The Company's provision for income taxes is based on an estimated tax rate for the year applied to the year-to-date federal, state and foreign income. The Company's provision for income taxes for the nine months ended September 30, 2012 reflects an estimated annual effective tax rate of 35.8% compared to 36.9% for the full year 2011. The decrease from the full-year 2011 effective tax rate is primarily due to changes in the geographic mix of pre-tax profits within North America. The 2012 estimated annual tax rate is expected to be slightly higher than the U.S. federal corporate income tax rate of 35% primarily due to profits in tax jurisdictions with higher rates, in addition to unfavorable changes in certain state income tax legislation.

NOTE 7: FINANCIAL INSTRUMENTS

        The Company may elect to measure many financial instruments and certain other items at fair value. This fair value option must be applied on an instrument-by-instrument basis with changes in fair value reported in earnings. The election can be made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once made. The Company did not elect the fair value measurement option for eligible items.

Fair-Value Hierarchy

        U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:

    Level 1—Quoted prices for identical instruments in active markets.

    Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

    Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

        This hierarchy requires the use of observable market data when available.

Determination of Fair Value

        When available, the Company uses quoted market prices to determine fair value and classifies such items in Level 1. In some cases where a market price is not available, the Company will make use of observable market-based inputs to calculate fair value, in which case the items are classified in Level 2.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 7: FINANCIAL INSTRUMENTS (Continued)

        If quoted or observable market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters such as interest rates, currency rates, or yield curves. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

        The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models and the key inputs to those models, as well as any significant assumptions.

Derivatives

        The Company utilizes derivative instruments to mitigate its exposure to interest rate and foreign currency exposures. Derivatives used as hedges are effective at reducing the risk associated with the exposure being hedged and are designated as a hedge at the inception of the derivative contract. The Company does not hold or issue derivative or other financial instruments for speculative purposes. The credit risk for the interest rate hedges is reduced through diversification among counterparties, utilizing mandatory termination clauses and collateral support agreements. Derivative instruments are generally classified in Level 2 or 3 of the fair value hierarchy. The cash flows underlying all derivative contracts were recorded in operating activities in the consolidated statements of cash flows.

Interest Rate Derivatives

        The Company has entered into interest rate derivatives in order to manage interest rate exposures arising in the normal course of business. Interest rate derivatives that have been designated in cash flow hedging relationships are being used by the Company to mitigate the risk of rising interest rates related to the current short-term debt and anticipated issuance of fixed-rate debt in future periods. Gains and losses on these instruments, to the extent that the hedge relationship has been effective, are deferred in accumulated other comprehensive income (loss) and recognized in interest expense over the period in which the Company recognizes interest expense on the related debt. Ineffectiveness recognized related to these hedging relationships was not significant for the three and nine months ended September 30, 2012 and 2011. These amounts are recorded in "Other expenses" in the consolidated statements of income. The maximum length of time over which the Company is hedging its interest rate exposure through the use of derivative instruments designated in cash flow hedge relationships is 55 months. The after-tax losses deferred in accumulated other comprehensive income that will be recognized in interest expense over the next 12 months are approximately $3,976.

        The Company also enters into offsetting interest rate derivatives with substantially similar economic terms that are not designated as hedging instruments to mitigate interest rate risk related to the Company's committed asset-backed facilities. These facilities require the Company to enter into interest rate derivatives. To ensure that these transactions do not result in the Company being exposed to this risk, the Company enters into a compensating position. Unrealized and realized gains and losses resulting from

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 7: FINANCIAL INSTRUMENTS (Continued)

fair value changes in these instruments are recognized directly in income and were insignificant for the three and nine months ended September 30, 2012 and 2011.

        Most of the Company's interest rate derivatives are considered Level 2. The fair market value of these derivatives is calculated using market data input for forecasted benchmark interest rates and can be compared to actively traded derivatives. The future notional amount of some of the Company's interest rate derivatives is not known in advance. These derivatives are considered Level 3 derivatives. The fair market value of these derivatives is calculated using market data input and a forecasted future notional balance. The total notional amount of the Company's interest rate derivatives was approximately $3,714,822 and $1,602,710 at September 30, 2012 and December 31, 2011, respectively. The ten-month average notional amounts as of September 30, 2012 and 2011 were $3,195,415 and $4,804,355.

Foreign Exchange Contracts

        The Company uses forwards to hedge certain assets and liabilities denominated in foreign currencies. Such derivatives are considered economic hedges and are not designated as hedging instruments. The changes in the fair value of these instruments are recognized directly as income in "Other expenses" and are expected to offset the foreign exchange gains or losses on the exposures being managed.

        All of the Company's foreign exchange derivatives are considered Level 2 as the fair value is calculated using market data input and can be compared to actively traded derivatives.

Financial Statement Impact of the Company's Derivatives

        The fair values of the Company's derivatives as of September 30, 2012 and December 31, 2011 in the consolidated balance sheets are recorded as follows:

 
  September 30,
2012
  December 31,
2011
 

Derivatives Designated as Hedging Instruments:

             

Other assets:

             

Interest rate derivatives

  $   $ 80  

Accounts payable and other accrued liabilities:

             

Interest rate derivatives

  $   $ 19  

Derivatives Not Designated as Hedging Instruments:

             

Other assets:

             

Interest rate derivatives

  $ 3,864   $ 3,518  

Accounts payable and other accrued liabilities:

             

Interest rate derivatives

  $ 3,864   $ 3,585  

Foreign exchange contracts

    32      
           

Total

  $ 3,896   $ 3,585  
           

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 7: FINANCIAL INSTRUMENTS (Continued)

        The location on the consolidated statements of income and impact of the Company's derivatives for the three and nine months ended September 30, 2012 and 2011 are as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2012   2011   2012   2011  

Cash Flow Hedges

                         

Recognized in accumulated other comprehensive income (effective portion)

                         

Interest rate derivatives

  $ 39   $ (10,498 ) $ (326 ) $ (19,067 )

Reclassified from accumulated other comprehensive income (effective portion)

                         

Interest rate derivatives—Interest expense to third parties

    (1,648 )   (3,953 )   (5,367 )   (14,295 )

Recognized directly in income (ineffective portion)

                         

Interest rate derivatives—Other expenses

    (2 )   (77 )   20     (245 )

Not Designated as Hedges

                         

Interest rate derivatives—Other expenses

 
$

 
$

(83

)

$

(48

)

$

(720

)

Foreign exchange contracts—Other expenses

    32         32      

Retained Interests

        For transactions that are considered sales and are off-book, the Company carries retained interests at estimated fair value, which is determined by discounting the projected cash flows over the expected life of the assets sold in connection with such transactions using prepayment, default, loss and interest rate assumptions. The Company recognizes declines in the value of its retained interests, and resulting charges to income or equity, when the fair value is less than the carrying value. The portion of the decline, from discount rates exceeding those in the initial transaction is charged to equity. All other credit-related declines are charged to income. Retained interests in securitized assets are classified in Level 3 of the fair value hierarchy. Assumptions used to determine fair values of retained interests are based on internal evaluations that include constant prepayment rates, annual credit loss rates and discount rates. Although the Company believes its methodology is reasonable, actual results could differ from its expectations. As of September 30, 2012 and December 31, 2011, retained interests in securitized assets are $8,373 and $17,289, respectively.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 7: FINANCIAL INSTRUMENTS (Continued)

Items Measured at Fair Value on a Recurring Basis

        The following tables present for each of the fair-value hierarchy levels the Company's assets and liabilities that are measured at fair value on a recurring basis at September 30, 2012 and December 31, 2011:

 
  Level 2   Level 3   Total  
 
  September 30,
2012
  December 31,
2011
  September 30,
2012
  December 31,
2011
  September 30,
2012
  December 31,
2011
 

Assets

                                     

Interest rate derivatives

  $ 3,864   $ 3,438   $   $ 160   $ 3,864   $ 3,598  

Retained interests

            8,373     17,289     8,373     17,289  
                           

Total assets

  $ 3,864   $ 3,438   $ 8,373   $ 17,449   $ 12,237   $ 20,887  
                           

Liabilities

                                     

Interest rate derivatives

  $ 3,864   $ 3,459   $   $ 145   $ 3,864   $ 3,604  

Foreign exchange contracts

    32                 32      
                           

Total liabilities

  $ 3,896   $ 3,459   $   $ 145   $ 3,896   $ 3,604  
                           

        There were no transfers between Level 1 and Level 2 hierarchy levels.

        The following table presents the changes in the Level 3 fair-value category for the nine months ended September 30, 2012 and 2011:

 
  Retained
Interests
  Derivative
Financial
Instruments
 

Balance at January 1, 2011

  $ 37,914   $ (5,375 )

Total gains or losses (realized/unrealized):

             

Included in earnings

    1,763     4,930  

Included in other comprehensive (loss) income

    (616 )    

Settlements

    (22,115 )    
           

Balance at September 30, 2011

  $ 16,946   $ (445 )
           

Balance at January 1, 2012

  $ 17,289   $ 15  

Total gains or losses (realized/unrealized):

             

Included in earnings

    912     65  

Included in other comprehensive (loss) income

    830     (80 )

Settlements

    (10,658 )    
           

Balance at September 30, 2012

  $ 8,373   $  
           

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 7: FINANCIAL INSTRUMENTS (Continued)

Fair Value of Financial Instruments

        The carrying amount of cash and cash equivalents, restricted cash, floating-rate affiliated accounts and notes receivable, accounts payable and other accrued liabilities, floating-rate short-term debt, floating-rate affiliated debt and floating-rate long-term debt was assumed to approximate its fair value.

Financial Instruments Not Carried at Fair Value

        The carrying amount and estimated fair value of assets and liabilities considered financial instruments as of September 30, 2012 and December 31, 2011 are as follows:

 
  September 30, 2012   December 31, 2011  
 
  Carrying
Amount
  Estimated
Fair Value*
  Carrying
Amount
  Estimated
Fair Value*
 

Receivables

  $ 11,086,786   $ 11,178,924   $ 9,386,549   $ 9,710,124  

Affiliated debt

  $ 1,147,864   $ 1,147,864   $ 819,270   $ 823,028  

Long-term debt

  $ 5,215,730   $ 5,334,273   $ 4,587,773   $ 4,648,139  

*
Under the fair value hierarchy, all measurements are Level 2.

Financial Assets

        The fair value of receivables was generally determined by discounting the estimated future payments using a discount rate which includes an estimate for credit risk.

Financial Liabilities

        The fair values of fixed-rate debt were based on current market quotes for identical or similar borrowings and credit risk.

NOTE 8: SEGMENT AND GEOGRAPHICAL INFORMATION

        The Company's segment data is based on disclosure requirements of accounting guidance on segment reporting, which requires financial information be reported on the basis that is used internally for measuring segment performance. The Company's reportable segments are strategic business units that are organized around differences in geographic areas. Each segment is managed separately as they require different knowledge of regulatory environments and marketing strategies. The operating segments offer primarily the same services within each of the respective segments.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 8: SEGMENT AND GEOGRAPHICAL INFORMATION (Continued)

        A summary of the Company's reportable segment information is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2012   2011   2012   2011  

Revenues

                         

United States

  $ 163,361   $ 158,757   $ 479,132   $ 476,411  

Canada

    49,015     48,542     143,530     144,393  

Eliminations

    (1,317 )       (1,775 )    
                   

Total

  $ 211,059   $ 207,299   $ 620,887   $ 620,804  
                   

Interest expense

                         

United States

  $ 48,990   $ 49,299   $ 150,937   $ 155,893  

Canada

    13,841     14,509     41,242     47,221  

Eliminations

    (1,317 )       (1,775 )    
                   

Total

  $ 61,514   $ 63,808   $ 190,404   $ 203,114  
                   

Segment profit

                         

United States

  $ 41,839   $ 37,309   $ 123,048   $ 113,975  

Canada

    15,112     15,548     46,038     42,900  

Eliminations

                (138 )
                   

Total

  $ 56,951   $ 52,857   $ 169,086   $ 156,737  
                   

Depreciation and amortization

                         

United States

  $ 18,824   $ 19,328   $ 56,667   $ 60,575  

Canada

    8,442     8,681     24,558     25,004  
                   

Total

  $ 27,266   $ 28,009   $ 81,225   $ 85,579  
                   

Expenditures for equipment on operating leases and for non-lease assets

                         

United States

  $ 100,607   $ 42,731   $ 231,908   $ 177,925  

Canada

    24,755     19,298     76,287     72,893  
                   

Total

  $ 125,362   $ 62,029   $ 308,195   $ 250,818  
                   

Provision for credit losses

                         

United States

  $ 9,169   $ 7,735   $ 12,735   $ 12,895  

Canada

    2,911     449     3,083     548  
                   

Total

  $ 12,080   $ 8,184   $ 15,818   $ 13,443  
                   

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 8: SEGMENT AND GEOGRAPHICAL INFORMATION (Continued)


 
  As of
September 30,
2012
  As of
December 31,
2011
 

Segment assets

             

United States

  $ 10,653,656   $ 9,654,594  

Canada

    2,594,918     2,358,198  

Eliminations

    (222,750 )   (111,641 )
           

Total

  $ 13,025,824   $ 11,901,151  
           

Managed portfolio

             

United States

  $ 9,132,370   $ 7,827,253  

Canada

    2,112,938     1,774,445  
           

Total

  $ 11,245,308   $ 9,601,698  
           

NOTE 9: RELATED-PARTY TRANSACTIONS

        The Company receives compensation from CNH North America for retail installment sales contracts and finance leases that were created under certain low-rate financing programs and interest waiver programs offered to customers by CNH North America. The amount recognized from CNH North America for below-market interest rate financing is included in "Interest and other income from affiliates" in the accompanying consolidated statements of income, and was $50,882 and $51,851 for the three months ended September 30, 2012 and 2011, respectively, and $155,856 and $164,967 for the nine months ended September 30, 2012 and 2011, respectively.

        For selected operating leases, CNH North America compensates the Company for the difference between the market rental rates and the amount paid by the customer and is included in "Interest and other income from affiliates" in the accompanying consolidated statements of income. For the three months ended September 30, 2012 and 2011, the amount recognized from CNH North America for these operating leases is $7,591 and $6,453, respectively, and for the nine months ended September 30, 2012 and 2011, the amount recognized from CNH North America for these operating leases is $22,053 and $18,791, respectively.

        Similarly, for selected wholesale receivables, CNH North America compensates the Company for the difference between market rates and the amount paid by the dealer and is included in "Interest and other income from affiliates." For the three months ended September 30, 2012 and 2011, the amount recognized by CNH North America for these wholesale receivables is $38,873 and $27,705, respectively, and for the nine months ended September 30, 2012 and 2011, the amount recognized by CNH North America for these wholesale receivables is $110,319 and $90,262, respectively.

        Accounts payable and other accrued liabilities of $83,656 and $24,221, respectively, as of September 30, 2012 and December 31, 2011, were payable to related parties.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 10: COMMITMENTS AND CONTINGENCIES

Legal Matters

        The Company is party to various litigation matters and claims arising from its operations. Management believes that the outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company's financial position or results of operations.

Guarantees

        The Company provides payment guarantees on the financial debt of various CNH European affiliates for approximately $291,206. The guarantees are in effect for the term of the underlying funding facilities, which have various maturities through 2017.

Commitments

        At September 30, 2012, the Company has various agreements to extend credit for the following managed portfolios:

 
  Total
Credit Limit
  Utilized   Unfunded
Commitment
 

Commercial revolving accounts

  $ 3,777,225   $ 310,689   $ 3,466,536  

Wholesale and dealer financing

  $ 5,285,100   $ 3,840,444   $ 1,444,656  

        The commercial revolving accounts are issued by the Company to retail customers for purchases of parts and services at CNH North America equipment dealers.

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

        CNH Capital America LLC and New Holland Credit Company, LLC, which are wholly-owned subsidiaries of CNH Capital LLC (the "Guarantor Entities"), guarantee certain indebtedness of CNH Capital LLC. As the guarantees are full, unconditional, and joint and several and as the Guarantor Entities are wholly-owned by CNH Capital LLC, the Company has included the following condensed consolidating financial information as of September 30, 2012 and December 31, 2011 and for the three and nine months

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

ended September 30, 2012 and 2011. The condensed consolidating financial information reflects investments in consolidated subsidiaries under the equity method of accounting.

 
  Condensed Statements of Comprehensive Income for the
Three Months Ended September 30, 2012
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

REVENUES:

                               

Interest income on retail and other notes and finance leases

  $   $ 2,650   $ 59,066   $   $ 61,716  

Interest and other income from affiliates

        46,382     88,636     (37,097 )   97,921  

Servicing fee income

        21,185     29     (21,007 )   207  

Rental income on operating leases

        20,314     13,360         33,674  

Other income

        8,823     8,718         17,541  
                       

Total revenues

        99,354     169,809     (58,104 )   211,059  
                       

EXPENSES:

                               

Interest expense:

                               

Interest expense to third parties

    10,860     1,294     39,948         52,102  

Interest expense to affiliates

    83     37,314     9,112     (37,097 )   9,412  
                       

Total interest expense

    10,943     38,608     49,060     (37,097 )   61,514  
                       

Operating expenses:

                               

Fees charged by affiliates

        12,239     23,680     (21,007 )   14,912  

Provision for credit losses

        3,735     8,345         12,080  

Depreciation of equipment on operating leases

        15,963     11,058         27,021  

Other expenses (income)

        6,521     1,637         8,158  
                       

Total operating expenses

        38,458     44,720     (21,007 )   62,171  
                       

Total expenses

    10,943     77,066     93,780     (58,104 )   123,685  
                       

(Loss) income before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method

    (10,943 )   22,288     76,029         87,374  

Income tax (benefit) provision

   
(4,287

)
 
9,152
   
25,558
   
   
30,423
 

Equity in income of consolidated subsidiaries accounted for under the equity method

    63,133     49,997         (113,130 )    
                       

NET INCOME

    56,477     63,133     50,471     (113,130 )   56,951  

Net income attributed to noncontrolling interest

   
   
   
(474

)
 
   
(474

)
                       

NET INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 56,477   $ 63,133   $ 49,997   $ (113,130 ) $ 56,477  
                       

COMPREHENSIVE INCOME

  $ 83,025   $ 89,681   $ 72,498   $ (161,705 ) $ 83,499  

Comprehensive income attributed to noncontrolling interest

   
   
   
(474

)
 
   
(474

)
                       

COMPREHENSIVE INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 83,025   $ 89,681   $ 72,024   $ (161,705 ) $ 83,025  
                       

29


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Statements of Comprehensive Income for the
Nine Months Ended September 30, 2012
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

REVENUES:

                               

Interest income on retail and other notes and finance leases

  $   $ 9,402   $ 169,170   $   $ 178,572  

Interest and other income from affiliates

        130,291     263,369     (102,689 )   290,971  

Servicing fee income

        60,198     125     (59,522 )   801  

Rental income on operating leases

        62,402     37,264         99,666  

Other income

        22,590     28,287         50,877  
                       

Total revenues

        284,883     498,215     (162,211 )   620,887  
                       

EXPENSES:

                               

Interest expense:

                               

Interest expense to third parties

    31,468     4,705     127,120         163,293  

Interest expense to affiliates

    228     102,682     26,890     (102,689 )   27,111  
                       

Total interest expense

    31,696     107,387     154,010     (102,689 )   190,404  
                       

Operating expenses:

                               

Fees charged by affiliates

        38,515     68,202     (59,522 )   47,195  

(Benefit) provision for credit losses

        (10,294 )   26,112         15,818  

Depreciation of equipment on operating leases

        49,636     30,779         80,415  

Other expenses (income)

        21,688     4,497         26,185  
                       

Total operating expenses

        99,545     129,590     (59,522 )   169,613  
                       

Total expenses

    31,696     206,932     283,600     (162,211 )   360,017  
                       

(Loss) income before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method

    (31,696 )   77,951     214,615         260,870  

Income tax (benefit) provision

   
(12,420

)
 
30,913
   
73,291
   
   
91,784
 

Equity in income of consolidated subsidiaries accounted for under the equity method

    187,136     140,098         (327,234 )    
                       

NET INCOME

    167,860     187,136     141,324     (327,234 )   169,086  

Net income attributed to noncontrolling interest

   
   
   
(1,226

)
 
   
(1,226

)
                       

NET INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 167,860   $ 187,136   $ 140,098   $ (327,234 ) $ 167,860  
                       

COMPREHENSIVE INCOME

  $ 194,769   $ 214,045   $ 163,693   $ (376,512 ) $ 195,995  

Comprehensive income attributed to noncontrolling interest

   
   
   
(1,226

)
 
   
(1,226

)
                       

COMPREHENSIVE INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 194,769   $ 214,045   $ 162,467   $ (376,512 ) $ 194,769  
                       

30


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Balance Sheets as of September 30, 2012  
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

ASSETS

                               

Cash and cash equivalents

 
$

 
$

170,923
 
$

121,999
 
$

 
$

292,922
 

Restricted cash

        100     675,038         675,138  

Receivables, less allowance for credit losses

        695,718     10,391,068         11,086,786  

Retained interests in securitized receivables

        5,583     7,106     (4,316 )   8,373  

Affiliated accounts and notes receivable

    629,003     1,909,687     1,214,870     (3,737,609 )   15,951  

Equipment on operating leases, net

        429,141     309,376         738,517  

Equipment held for sale

        15,102     5,082         20,184  

Investments in consolidated subsidiaries accounted for under the equity method

    1,420,509     1,700,202         (3,120,711 )    

Goodwill and intangible assets

        84,212     36,651         120,863  

Other assets

    16,107     5,538     45,445         67,090  
                       

TOTAL

  $ 2,065,619   $ 5,016,206   $ 12,806,635   $ (6,862,636 ) $ 13,025,824  
                       

LIABILITIES AND STOCKHOLDER'S EQUITY

                               

LIABILITIES:

                               

Short-term debt, including current maturities of long-term debt

  $   $ 118,603   $ 4,675,484   $   $ 4,794,087  

Accounts payable and other accrued liabilities

    15,730     2,243,707     1,123,575     (2,961,576 )   421,436  

Affiliated debt

    9,731     1,051,123     867,359     (780,349 )   1,147,864  

Long-term debt

    650,000     182,264     4,383,466         5,215,730  
                       

Total liabilities

    675,461     3,595,697     11,049,884     (3,741,925 )   11,579,117  

STOCKHOLDER'S EQUITY

   
1,390,158
   
1,420,509
   
1,756,751
   
(3,120,711

)
 
1,446,707
 
                       

TOTAL

  $ 2,065,619   $ 5,016,206   $ 12,806,635   $ (6,862,636 ) $ 13,025,824  
                       

31


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 2012
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

CASH FLOWS FROM OPERATING ACTIVITIES:

                               

Net cash (used in) from operating activities

  $ (278 ) $ (580,853 ) $ 1,034,918   $ 56,739   $ 510,526  
                       

CASH FLOWS FROM INVESTING ACTIVITIES:

                               

Cost of receivables acquired

        (11,104,286 )   (12,802,889 )   10,043,100     (13,864,075 )

Collections of receivables

        11,251,988     11,028,995     (10,043,062 )   12,237,921  

Decrease in restricted cash

            97,290         97,290  

Purchase of equipment on operating leases, net

        (101,483 )   (61,724 )       (163,207 )

Other investing activities

        (151 )           (151 )
                       

Net cash from (used in) investing activities

        46,068     (1,738,328 )   38     (1,692,222 )
                       

CASH FLOWS FROM FINANCING ACTIVITIES:

                               

Intercompany activity

    278     448,164     (66,894 )   (56,777 )   324,771  

Net (decrease) increase in indebtedness

        (48,664 )   604,418         555,754  
                       

Net cash from financing activities

    278     399,500     537,524     (56,777 )   880,525  
                       

DECREASE IN CASH AND CASH EQUIVALENTS

        (135,285 )   (165,886 )       (301,171 )

CASH AND CASH EQUIVALENTS:

                               

Beginning of period

        306,208     287,885         594,093  
                       

End of period

  $   $ 170,923   $ 121,999   $   $ 292,922  
                       

32


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)

 
  Condensed Statements of Comprehensive Income for the Three Months
Ended September 30, 2011
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

REVENUES:

                               

Interest income on retail and other notes and finance leases

  $   $ 4,041   $ 55,093   $   $ 59,134  

Interest and other income from affiliates

        40,244     85,848     (31,285 )   94,807  

Servicing fee income

        18,600     97     (18,348 )   349  

Rental income on operating leases

        22,859     11,516         34,375  

Other income

        7,626     11,008         18,634  
                       

Total revenues

        93,370     163,562     (49,633 )   207,299  
                       

EXPENSES:

                               

Interest expense:

                               

Interest expense to third parties

    1,273     1,430     50,992         53,695  

Interest expense to affiliates

    53     33,766     7,579     (31,285 )   10,113  
                       

Total interest expense

    1,326     35,196     58,571     (31,285 )   63,808  
                       

Operating expenses:

                               

Fees charged by affiliates

        11,784     21,427     (18,348 )   14,863  

Provision for credit losses

        3,663     4,521         8,184  

Depreciation of equipment on operating leases

        18,127     9,557         27,684  

Other expenses

        5,915     3,729         9,644  
                       

Total operating expenses

        39,489     39,234     (18,348 )   60,375  
                       

Total expenses

    1,326     74,685     97,805     (49,633 )   124,183  
                       

(Loss) income before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method

    (1,326 )   18,685     65,757         83,116  

Income tax (benefit) provision

    (528 )   6,397     24,390         30,259  

Equity in income of consolidated subsidiaries accounted for under the equity method

    53,360     41,072         (94,432 )    
                       

NET INCOME

    52,562     53,360     41,367     (94,432 )   52,857  

Net income attributed to noncontrolling interest

            (295 )       (295 )
                       

NET INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 52,562   $ 53,360   $ 41,072   $ (94,432 ) $ 52,562  
                       

COMPREHENSIVE INCOME

  $ 10,800   $ 11,598   $ 547   $ (11,850 ) $ 11,095  

Comprehensive income attributed to noncontrolling interest

            (295 )       (295 )
                       

COMPREHENSIVE INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 10,800   $ 11,598   $ 252   $ (11,850 ) $ 10,800  
                       

33


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Statements of Comprehensive Income for the Nine Months
Ended September 30, 2011
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

REVENUES:

                               

Interest income on retail and other notes and finance leases

  $   $ 13,554   $ 163,259   $   $ 176,813  

Interest and other income from affiliates

        111,554     258,969     (85,826 )   284,697  

Servicing fee income

        53,356     441     (52,477 )   1,320  

Rental income on operating leases

        64,062     39,767         103,829  

Other income

        22,018     32,127         54,145  
                       

Total revenues

        264,544     494,563     (138,303 )   620,804  
                       

EXPENSES:

                               

Interest expense:

                               

Interest expense to third parties

    1,273     (7,824 )   173,759         167,208  

Interest expense to affiliates

    131     98,164     23,437     (85,826 )   35,906  
                       

Total interest expense

    1,404     90,340     197,196     (85,826 )   203,114  
                       

Operating expenses:

                               

Fees charged by affiliates

        36,286     61,740     (52,477 )   45,549  

Provision (benefit) for credit losses

        8,987     4,456         13,443  

Depreciation of equipment on operating leases

        50,966     33,665         84,631  

Other expenses

        22,701     4,866         27,567  
                       

Total operating expenses

        118,940     104,727     (52,477 )   171,190  
                       

Total expenses

    1,404     209,280     301,923     (138,303 )   374,304  
                       

(Loss) income before income taxes and equity in income of consolidated subsidiaries accounted for under the equity method

    (1,404 )   55,264     192,640         246,500  

Income tax (benefit) provision

    (559 )   18,060     72,262         89,763  

Equity in income of consolidated subsidiaries accounted for under the equity method

    156,482     119,278         (275,760 )    
                       

NET INCOME

    155,637     156,482     120,378     (275,760 )   156,737  

Net income attributed to noncontrolling interest

            (1,100 )       (1,100 )
                       

NET INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 155,637   $ 156,482   $ 119,278   $ (275,760 ) $ 155,637  
                       

COMPREHENSIVE INCOME

  $ 128,356   $ 129,201   $ 94,863   $ (222,964 ) $ 129,456  

Comprehensive income attributed to noncontrolling interest

            (1,100 )       (1,100 )
                       

COMPREHENSIVE INCOME ATTRIBUTABLE TO CNH CAPITAL LLC

  $ 128,356   $ 129,201   $ 93,763   $ (222,964 ) $ 128,356  
                       

34


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Balance Sheets as of December 31, 2011  
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

ASSETS

                               

Cash and cash equivalents

 
$

 
$

306,208
 
$

287,885
 
$

 
$

594,093
 

Restricted cash

        100     767,259         767,359  

Receivables, less allowance for credit losses

        834,392     8,552,157         9,386,549  

Retained interests in securitized receivables

        6,464     15,103     (4,278 )   17,289  

Affiliated accounts and notes receivable

    641,566     1,184,507     1,436,347     (3,068,503 )   193,917  

Equipment on operating leases, net

        377,294     270,323         647,617  

Equipment held for sale

        27,106     5,025         32,131  

Investments in consolidated subsidiaries accounted for under the equity method

    1,203,432     1,567,061         (2,770,493 )    

Goodwill and intangible assets

        84,720     35,369         120,089  

Other assets

    13,588     33,283     95,236         142,107  
                       

TOTAL

  $ 1,858,586   $ 4,421,135   $ 11,464,704   $ (5,843,274 ) $ 11,901,151  
                       

LIABILITIES AND STOCKHOLDER'S EQUITY

                               

LIABILITIES:

                               

Short-term debt, including current maturities of long-term debt

  $   $ 160,200   $ 4,635,835   $   $ 4,796,035  

Accounts payable and other accrued liabilities

    6,777     2,265,212     528,047     (2,349,208 )   450,828  

Affiliated debt

    9,453     602,960     930,430     (723,573 )   819,270  

Long-term debt

    650,000     189,331     3,748,442         4,587,773  
                       

Total liabilities

    666,230     3,217,703     9,842,754     (3,072,781 )   10,653,906  

STOCKHOLDER'S EQUITY

    1,192,356     1,203,432     1,621,950     (2,770,493 )   1,247,245  
                       

TOTAL

  $ 1,858,586   $ 4,421,135   $ 11,464,704   $ (5,843,274 ) $ 11,901,151  
                       

35


Table of Contents


CNH CAPITAL LLC AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands)

(Unaudited)

NOTE 11: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)


 
  Condensed Statements of Cash Flows for the Nine Months Ended
September 30, 2011
 
 
  CNH
Capital LLC
  Guarantor
Entities
  All Other
Subsidiaries
  Eliminations   Consolidated  

CASH FLOWS FROM OPERATING ACTIVITIES:

                               

Net cash (used in) from operating activities

  $ (153,125 ) $ 94,757   $ 449,131   $ 18,117   $ 408,880  
                       

CASH FLOWS FROM INVESTING ACTIVITIES:

                               

Cost of receivables acquired

        (10,204,270 )   (11,365,186 )   8,771,781     (12,797,675 )

Collections of receivables

        10,381,039     10,129,970     (8,771,614 )   11,739,395  

Decrease in restricted cash

            79,387         79,387  

Purchase of equipment on operating leases, net

        (91,559 )   (2,015 )       (93,574 )

Other investing activities

        (143 )           (143 )
                       

Net cash from (used in) investing activities

        85,067     (1,157,844 )   167     (1,072,610 )
                       

CASH FLOWS FROM FINANCING ACTIVITIES:

                               

Intercompany activity

    3,125     (314,056 )   (44,272 )   (18,284 )   (373,487 )

Net increase in indebtedness

    150,000     91,134     606,980         848,114  
                       

Net cash from (used in) financing activities

    153,125