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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-80775-01
Case Credit Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
76-0394710
(I.R.S. Employer Identification No.)
233 Lake Ave., Racine, WI 53403
(Address of principal executive offices including Zip Code)
Registrant's telephone number, including area code: (262) 636-6011
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.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, par value $5.00 per share: 200 shares outstanding as of March
30, 2000, all of which are owned by CNH Capital Corporation.
The registrant meets the conditions set forth in General Instruction
I(1)(a) and (b) of Form 10-K and is therefore filing this form with the
reduced disclosure format permitted by General Instruction I of Form 10-K.
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TABLE OF CONTENTS
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PART I
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Item 1. Business....................................................... 4
Item 2. Properties..................................................... 6
Item 3. Legal Proceedings.............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............ 7*
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................ 8
Item 6. Selected Financial Data........................................ 8*
Item 7. Management's Analysis of Results of Operations................. 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 9
Item 8. Financial Statements and Supplementary Data.................... 11
Index to Financial Statements of Case Credit Corporation and
Consolidated Subsidiaries...................................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 35
PART III
Item 10. Directors and Executive Officers of the Registrant............. 35*
Item 11. Executive Compensation......................................... 35*
Item 12. Security Ownership of Certain Beneficial Owners and Management. 35*
Item 13. Certain Relationships and Related Transactions................. 35*
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K.............................................................. 35
Financial Statements Included in Item 8........................ 35
Index to Financial Statements and Schedule Included in Item 14. 35
Schedules Omitted as Not Required or Inapplicable.............. 35
Exhibits....................................................... 35
Reports on Form 8-K............................................ 35
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* No response to this item is included herein for the reason that it is
inapplicable, is not required pursuant to General Instruction I of Form 10-
K, or the answer to such item is negative.
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* * * * *
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
The information included in this report contains certain forward-looking
statements and involves risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements.
Case Credit's outlook is predominantly based on its interpretation of what
it considers key economic assumptions. Crop production and commodity prices
are strongly affected by weather and can fluctuate significantly. Housing
starts and other construction activity are sensitive to interest rates and
government spending. Some of the other significant factors for Case Credit
include general economic and capital market conditions, the cyclical nature of
its business, currency exchange movements, Case Credit's and its customers'
access to credit, political uncertainty and civil unrest in various areas of
the world, pricing, product initiatives and other actions taken by
competitors, disruptions in production capacity, excess inventory levels, the
effect of changes in laws and regulations (including government subsidies and
international trade regulations), technological difficulties, changes in
environmental laws, and employee and labor relations. Additionally, CNH Global
N.V.'s achievement of the anticipated benefits of the merger of New Holland
and Case, including the realization of expected annual operating synergies,
depends upon, among other things, its ability to integrate effectively the
operations and employees of New Holland and Case, and to execute its multi-
branding strategy. Further information concerning factors that could
significantly impact expected results is included in Management's Analysis of
Results of Operations.
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PART I.
Item 1. Business.
General
Case Credit Corporation is a subsidiary of CNH Capital Corporation ("CNH
Capital"), formerly Case Capital. CNH Capital, a wholly owned subsidiary of
Case Corporation ("Case"), provides broad-based financial services for the
global marketplace. Case is a wholly owned subsidiary of CNH Global N.V.
("CNH"). Through New Holland Holdings N.V., a wholly-owned subsidiary of Fiat
S.p.A. ("Fiat"). Fiat owns approximately 71% of CNH's outstanding common
shares. As a result, Fiat controls all matters submitted to a vote of CNH's
shareholders, including approval of annual dividends, election and removal of
its directors and approval of extraordinary business combinations.
On November 12, 1999, New Holland N.V. acquired Case for $4.6 billion in
cash, including related costs and expenses. Of the total purchase price, $674
million was allocated to Case Credit. Effective with the closing of the
merger, New Holland N.V. changed its name to CNH Global N.V.
Case Credit Corporation, its wholly owned operating subsidiaries, Case
Credit Ltd. (Canada) and Case Credit Australia Pty Ltd and Case Credit
Corporation's joint ventures, Case Credit Europe S.A.S. and UzCaseagroleasing
(collectively, "Case Credit") provide and administer financing for the retail
purchase or lease of new and used Case and other agricultural and construction
equipment. Case Credit offers various types of retail financing to end-use
customers to facilitate the sale or lease of Case products in the United
States, Canada, Australia, Europe, and Uzbekistan. Case Credit's business
principally involves purchasing retail installment sales contracts from Case
dealers. In addition, Case Credit facilitates and finances the sale of
insurance products to retail customers, provides financing for Case dealers
and Case rental equipment yards, and also provides other retail financing
programs in North America. In North America, customers use Case Credit's
private-label credit card to purchase parts, service, rentals, implements and
attachments from Case dealers. Case Credit also provides financing options to
Case's dealers for a variety of purposes including inventory, working capital,
real estate acquisitions, construction and remodeling, business acquisitions,
dealer systems, and service and maintenance equipment.
Case Credit's business is dependent on the ability of Case and its dealers
to generate sales and leasing activity, the willingness of customers to enter
into financing transactions with Case Credit and the availability of funds to
Case Credit to finance such transactions. Numerous factors affect the ability
of Case and its dealers to sell agricultural and construction equipment and
thereby generate retail receivables, including:
. the general level of activity in the agricultural and construction
industries;
. the rate of North American agricultural production and demand;
. weather conditions;
. commodity prices;
. consumer confidence;
. government subsidies for the agricultural sector;
. prevailing levels of construction (especially housing starts); and
. levels of total industry capacity and equipment inventory.
In addition, changes in market interest rates, which in turn are related to
general economic and capital market conditions, demand for credit, inflation,
governmental policies and other factors, affect Case's business.
Case Credit obtains funding for its operations from a variety of sources
including the issuance of commercial paper, medium-term notes and public debt;
the issuance of securities in asset-backed securitization, or ABS,
transactions; bank revolving credit facilities, earnings retained in the
business, and advances and equity
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capital from Case. Case Credit sells substantial amounts of retail receivables
in ABS transactions that typically involve the sale of a pool of retail
installment sales contracts to limited-purpose business trusts or similar
securitization entities. Case Credit remains as servicer of these receivables,
for which it is typically paid a servicing fee.
Case Credit continues to expand its financing business by providing retail
and dealer financing in new geographic regions and for a broader range of
equipment, and by offering new financing products to Case dealers, end-use
customers and to others. Case Credit established Soris Financial ("Soris") as
a brand name to serve Case Credit's diversified client base in the
agricultural, construction, industrial mobile and other equipment industries.
Soris offers a broad range of retail and wholesale financing products,
including equipment and commercial loans and leases for North American
manufacturers, dealers, distributors, and their customers. Soris also
facilitates and finances the sale of insurance products to retail customers.
Case Credit Corporation was incorporated in Delaware on January 26, 1993.
The principal offices of Case Credit are located at 233 Lake Avenue, Racine,
Wisconsin, 53403.
Business of Case Corporation
Case is a leading worldwide designer, manufacturer, marketer and
distributor of farm equipment and light- to medium-sized construction
equipment, and offers a broad array of financial products and services through
CNH Capital, Case's financial services business. Case's market position is
particularly significant in several product categories including
loader/backhoes, skid steer loaders, large, high-horsepower farm tractors and
self-propelled combines.
In 1999, Case's sales of farm and construction equipment represented 91% of
total revenues, and financing operations accounted for 9% of total revenues.
In 1999, Case's sales of farm equipment represented 56% of revenues from
equipment sales, and sales of construction equipment represented 44% of
revenues from equipment sales.
Relationship with Case Corporation
CNH Capital owns all of Case Credit's common stock. CNH Capital is a wholly
owned subsidiary of Case. Case provides CNH Capital with certain operational
and financial support. This support constitutes an integral part of the
conduct of Case Credit's business.
Employee Benefits, Intercompany Services and Tax Sharing
Case Credit and Case have entered into agreements relating to, among other
things, various employee benefit plans covering Case Credit's staff that Case
administers and Case Credit's reimbursement of Case and CNH Capital for its
staff and corporate services expenses. Case Credit has also entered into tax
sharing arrangements with Case.
Special Marketing Programs
In conjunction with Case, Case dealers and other manufacturers and their
dealers, Case Credit periodically offers below-market interest rate and waived
interest rate financing to customers as part of its marketing strategy. When
Case Credit acquires retail installment sales contracts and finance leases
subject to below-market interest rate and waived interest rate financing,
Case, Case dealers and other manufacturers compensate Case Credit for the
difference between market interest rates and the amounts received by Case
Credit. Case Credit refers to these amounts, collectively, as "financing
subsidies." These participating manufacturers, rather than Case Credit,
currently bear the full cost of these financing subsidies. Case Credit and
these manufacturers settle any outstanding financing subsidies monthly. Case
Credit recognizes financing subsidies as income by Case Credit
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over the term of the related financing contracts. If Case Credit subsequently
sells any of these contracts, Case Credit recognizes the related financing
subsidy on that contract as part of the gain on retail notes sold.
Dividends
Case Credit did not pay dividends in 1999, 1998 or 1997.
Support Agreement
Case Credit and Case have entered into a Support Agreement. The Support
Agreement provides, among other things, that Case will remain, directly or
indirectly, the sole owner of all of the voting stock of Case Credit. The
Support Agreement also provides that Case will make quarterly payments to Case
Credit to the extent necessary to ensure that Case Credit's consolidated pre-
tax earnings available for fixed charges equal at least 1.10 times Case
Credit's fixed charges in all periods composed of four consecutive fiscal
quarters. The Support Agreement provides that Case does not directly or
indirectly guarantee any indebtedness, liability or other obligation of Case
Credit. Either Case or Case Credit may modify or amend the Support Agreement,
and the parties may also terminate the Support Agreement upon 30 days' prior
written notice. The Support Agreement further provides that the parties must
send a copy of any modification, amendment or notice of termination to Moody's
Investors Service, Inc., Standard & Poor's Ratings Group, and any other
nationally recognized statistical rating organizations then rating the debt of
Case Credit. Any such amendment or termination will become effective if:
(1) Moody's and S&P confirm in writing that their ratings on Case Credit
debt then rated or capable of being rated by them would not be downgraded
or withdrawn as a result of such modification, amendment or termination,
(2) the modification, amendment or notice of termination provides that
the Support Agreement will continue in effect with respect to debt of Case
Credit outstanding on the effective date of that modification, amendment or
termination, or
(3) the holders of at least a majority of the aggregate unpaid principal
amount of all outstanding debt of Case Credit with an original maturity in
excess of 270 days consent in writing, so long as the holders of debt of
Case Credit having an original maturity of 270 days or less shall continue
to have the benefit of the Support Agreement until the maturity of such
debt.
Under the terms of the Support Agreement, no portion of any debt is
"outstanding" if that debt has been, or is deemed to have been, discharged and
not outstanding in accordance with the indenture or other governing instrument
defining the rights of the holders of that debt.
The calculation of pre-tax earnings available for fixed charges under the
Support Agreement differs from the calculation of the ratio of earnings to
fixed charges mandated under the rules and regulations of the Securities and
Exchange Commission. Under the Support Agreement, the definition of "earnings"
includes all cash extraordinary, non-recurring items of income or expense
(other than cash debt defeasance costs). Under the Securities and Exchange
Commission's rules and regulations, the definition of "earnings" does not
include these items. Through the date of this report, Case has not been
required to make any payment to meet its commitments under the Support
Agreement.
Item 2. Properties.
Case Credit does not own any real estate. Its principal executive offices
are located at 233 Lake Avenue, Racine, WI 53403.
As of December 31, 1999, Case Credit had additional offices in or near
Memphis, Tennessee; Dallas, Texas; Minneapolis, Minnesota; Lincolnshire, IL;
Columbus, Ohio; Toronto, Ontario; Seattle, WA; Tashkent, Uzbekistan; and St.
Mary's, Australia.
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Item 3. Legal Proceedings.
Case Credit 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
Case Credit's financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Information for this Item 4 is not required pursuant to General Instruction
I(2) of Form 10-K.
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Part II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
As of December 31, 1999, all of the Company's common stock was owned by CNH
Capital and was not publicly traded. CNH Capital is a wholly owned subsidiary
of Case Corporation. Case Corporation is a wholly owned subsidiary of CNH
Global N.V. Through New Holland Holdings N.V., a wholly-owned subsidiary of
Fiat S.p.A. ("Fiat"). Fiat owns approximately 71% of CNH's outstanding common
shares. As a result, Fiat controls all matters submitted to a vote of CNH's
shareholders, including approval of annual dividends, election and removal of
its directors and approval of extraordinary business combinations.
The Company did not pay dividends in 1999, 1998 or 1997.
Item 6. Selected Financial Data.
Information for this Item 6 is not required pursuant to General Instruction
I(2) of Form 10-K.
Item 7. Management's Analysis of Results of Operations.
Presentation and Results of Operations
On November 12, 1999, New Holland N.V. acquired Case for $4.6 billion in
cash, including related costs and expenses. Of the total purchase price, $674
million was allocated to Case Credit. This acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets and
liabilities of Case Credit based upon their respective estimated fair values,
including identifiable intangibles, with the remainder allocated to goodwill.
The allocation of purchase price resulted in goodwill of approximately $129
million, which is amortized on a straight-line basis over 20 years. For
detailed discussion of the effects of purchase accounting on other balance
sheet categories, see Note 3--"Merger." The effects of adjustments, other than
goodwill, will be amortized to the consolidated statements of income over a
period estimated to be from one to eight years.
The amounts presented below for 1999 include amounts for the post-
acquisition period November 12 through December 31, 1999 and for the pre-
acquisition period prior to November 12, 1999.
1999 Compared to 1998
Net Income
Case Credit recorded net income of $61 million in 1999, as compared to net
income of $85 million in 1998. The $24 million decrease in net income is due
to amortization expense resulting from purchase accounting adjustments related
to the merger, lower margins on receivables and lower gains on asset-backed
securitizations due to a rising interest rate environment and increased
provision for credit losses. These amounts were partially offset by income
resulting from increased levels of on-balance-sheet receivables.
Revenues
Case Credit reported total revenues of $439 million for 1999, an increase
of $62 million or 16% over the $377 million of revenues reported for 1998.
Finance income earned on retail and other notes and finance leases increased
to $174 million in 1999, as compared to $140 million for the same period in
1998, primarily due to increased levels of on-balance-sheet receivables.
Operating lease revenues increased $38 million to $102 million for 1999,
reflecting the growth in Case Credit's operating lease portfolio. The
increases were partially offset by reduced gains on asset-backed-
securitizations.
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Expenses
Operating expenses for Case Credit increased $52 million to a total of $155
million in 1999, as compared to $103 million in 1998. This increase primarily
resulted from a $26 million increase in depreciation expense for equipment on
operating leases relating to Case Credit's larger operating lease portfolio,
and a $15 million increase in Case Credit's provision for credit losses as a
result of the significant growth in Case Credit's on-balance-sheet
receivables, the downturn in the agricultural market, and the impact of
portfolio diversification into markets which historically have higher loss
rates than Case Credit's core agricultural and construction equipment
businesses.
Case Credit's interest expense for 1999 was $188 million, up $45 million
from the $143 million reported in 1998. The increased interest expense
resulted primarily from higher average debt levels during 1999, primarily due
to the growth in Case Credit's on balance sheet receivables and increased
equipment on operating leases.
Serviced Portfolio
As of December 31, 1999, Case Credit's serviced portfolio increased 11%
over the same period last year to $7.5 billion. Gross receivables acquired in
1999 were $4.3 billion versus $4.4 billion in 1998. Case Credit retained
approximately $458 million of additional retail and other notes and finance
leases as compared to December 31, 1998, consistent with the Company's asset-
management strategy. Case Credit's portfolio losses increased to $58 million
in 1999 as compared to $15 million in 1998. This increase is attributable to
the increased portfolio, the downturn in the agricultural market, and the
portfolio diversification into markets which historically have higher loss
rates than Case Credit's core agricultural and construction equipment
business.
Case Credit sold $2.1 billion of retail notes in 1999 and 1998, to limited-
purpose business trusts organized by Case in the United States and Canada.
These trusts were formed for the purpose of purchasing receivables from Case
Credit and the receivables were used as collateral for the issuance of asset-
backed securities to outside investors. The proceeds from the sale of the
retail notes were used to repay indebtedness and to finance additional
receivables.
In March 2000, a limited-purpose business trust organized by CNH Capital
issued $1,137 million of asset-backed securities to outside investors, of
which $427 million was prefunded and will be sold to the trusts as receivables
are generated. These receivables were sourced from both New Holland N.V. and
Case Credit originations. The proceeds from this securitization will be used
to repay outstanding debt and to fund CNH Capital's growing portfolio of
receivables.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Risk Management
Case Credit is exposed to market risk from changes in interest rates. Case
Credit monitors its exposure in this risk and manages the underlying exposure
through the use of financial instruments, including swaps and forward rate
agreements. These instruments aim to stabilize funding costs by managing the
exposure created by the differing maturities and interest rate structures of
Case Credit's financial assets and liabilities. Case Credit does not hold or
issue derivative or other financial instruments for speculative or trading
purposes.
Case Credit uses a model to monitor interest rate risk and to achieve a
predetermined level of matching between the interest rate structure of its
financial assets and liabilities. Fixed-rate financial instruments, including
receivables, debt, asset-backed-securities ("ABS") certificates and other
investments, are segregated from floating-rate instruments in evaluating the
potential impact of changes in applicable interest rates. The potential change
in fair market value of financial instruments including derivative instruments
held at December 31, 1999 and 1998, resulting from a hypothetical,
instantaneous 10% change in the interest rate applicable to such financial
instruments would be approximately $3 million and $2 million, respectively,
based on the discounted values of their related cash flows.
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The above sensitivity analyses are based on the assumption of a 10%
movement of the interest rates applicable to each homogeneous category of
financial assets and liabilities. A homogeneous category is defined according
to the currency in which financial assets and liabilities are denominated and
assumes the same interest rate movement within each homogeneous category. As a
result, Case Credit's inherent rate risk sensitivity model may overstate the
impact of interest rate fluctuations for such financial instruments, as
consistently unfavorable movements of all interest rates are unlikely.
Commodity Price and Foreign Currency Risk Management
Commodity prices impact Case Corporation's sales, which may have an impact
on Case Credit's originations. Commodity risk is managed through
diversification, including Case Credit's Soris Financial brand to service Case
Credit's diverse client base in the agricultural, construction, industrial
mobile and other equipment industries. It is not possible to determine the
impact of commodity prices on earnings, cash flows, or fair values on Case
Credit's portfolio.
Case Credit is subject to foreign currency risk in Canada, Australia, and
Europe as the investments in these countries are impacted by currency
fluctuations. The currency fluctuations result in non-cash gains and losses
that do not impact net income, but instead are recorded as adjustments to
"Accumulated other comprehensive income" in the accompanying Consolidated
Balance Sheets. At December 31, 1999, Case Credit performed a sensitivity
analysis on it's significant foreign operations that have foreign currency
exchange risk. Case Credit calculated that the fair value impact would be $12
million and $8 million at December 31, 1999 and 1998, as a result of a 10%
change in the foreign currency exchange rate.
Year 2000
As used in this "Year 2000" disclosure, the "Company," or "Case" refers to
Case Corporation and its consolidated subsidiaries, including Case Credit
Corporation.
The Year 2000 issue refers to the risk that systems, products and equipment
having date-sensitive components will not recognize the year 2000, resulting
in potential system failures or miscalculations that could cause disruption of
operations.
Case has implemented those procedures that it deemed necessary to safeguard
it from computer-related issues associated with adverse effects as a result of
improperly recognizing the millennial date change. As a result of Case's Year
2000 preparation efforts, Case experienced no significant Year 2000-related
failures to date. Case plans to continue monitoring its systems, and Case has
contingency plans available in the event that a Year 2000 failure should
occur. These contingency plans were designed to mitigate the impact on Case if
its Year 2000 compliance efforts were not successful. As Case Industrial and
Case Credit share many technology resources and internal-use systems, all the
remediation costs to address Year 2000 issues are borne by Case Industrial.
As of December 31, 1999, Case has incurred, in the aggregate, approximately
$38 million of costs for Year 2000 remediation, including approximately $17
million in 1999. These costs were expensed as incurred and include
approximately $36 million in the aggregate, including $14 million in 1999, for
Case's Year 2000 remediation expenses that were incurred prior to the merger.
Case's cost estimates do not include the cost of implementing contingency
plans and also do not include any potential litigation or warranty costs
related to Year 2000 issues if Case's remediation efforts are not successful.
Case anticipates that remaining Year 2000 remediation costs will be minimal.
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Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS OF CASE CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
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Report of independent public accountants.................................. 12
Consolidated Statements of income for the periods January 1, 1999 through
November 11, 1999 and November 12, 1999 through December 31, 1999 and for
the years ended December 31, 1998 and 1997............................... 13
Consolidated Balance sheets as of December 31, 1999 and 1998.............. 14
Consolidated Statements of cash flows for the periods January 1, 1999
through November 11, 1999 and November 12, 1999 through December 31, 1999
and for the years ended December 31, 1998 and 1997....................... 15
Consolidated Statements of changes in stockholder's equity for the periods
January 1, 1999 through November 11, 1999 and November 12, 1999 through
December 31, 1999 and for the years ended December 31, 1998 and 1997..... 16
Notes to financial statements............................................. 17
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of Case Credit Corporation:
We have audited the accompanying consolidated balance sheets of Case Credit
Corporation (a Delaware corporation) and subsidiaries, as of December 31, 1999
and 1998, and the related consolidated statements of income, cash flows, and
stockholder's equity, for the periods January 1, 1999 through November 11,
1999 and November 12, 1999 through December 31, 1999 and for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Case Credit Corporation
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the periods January 1, 1999 through
November 11, 1999 and November 12, 1999 through December 31, 1999 and for the
years ended December 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 24, 2000
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CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions)
<TABLE>
<CAPTION>
Post-acquisition
basis of Pre-acquisition basis of
accounting accounting
---------------- ------------------------
Years ended
November 12 to January 1 to December
December 31, November 11, 31,
1999 1999 1998 1997
---------------- ------------ ----- -----
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Revenues:
Finance income earned on retail and
other notes and finance leases.... $23 $151 $ 140 $ 103
Interest income from Case
Corporation....................... 3 37 30 19
Net gain on retail notes sold...... 1 50 82 71
Securitization and servicing fee
income............................ 6 43 46 42
Lease income on operating leases... 16 86 64 33
Other income....................... 1 22 15 4
--- ---- ----- -----
Total revenues................... 50 389 377 272
Expenses:
Interest expense................... 25 162 143 98
On payables to affiliates.......... -- 1 -- --
--- ---- ----- -----
Interest expense................. 25 163 143 98
Operating expenses:
Fees charged by Case Corporation... 2 31 24 18
Administrative and operating
expenses.......................... 4 15 18 11
Provision for credit losses........ 1 28 14 --
Goodwill amortization.............. 1 -- -- --
Depreciation of equipment on
operating leases.................. 12 59 43 22
Other.............................. (1) 3 4 1
--- ---- ----- -----
Total operating expenses......... 19 136 103 52
--- ---- ----- -----
Total expenses................... 44 299 246 150
=== ==== ===== =====
Income before taxes.................. 6 90 131 122
Income tax provision................. 3 32 46 40
--- ---- ----- -----
Net income........................... $ 3 $ 58 $ 85 $ 82
=== ==== ===== =====
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Income.
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CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
<TABLE>
<CAPTION>
Post- Pre-
acquisition basis acquisition basis
of accounting of accounting
----------------- -----------------
ASSETS December 31, 1999 December 31, 1998
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Cash and cash equivalents.................................................................. $ 67 $ 35
Retail and other notes and finance leases.................................................. 2,674 2,216
Due from Trusts............................................................................ 231 289
------ ------
Total receivables...................................................................... 2,905 2,505
Allowance for credit losses................................................................ (31) (29)
------ ------
Total receivables--net................................................................. 2,874 2,476
Affiliated receivables..................................................................... 58 51
Equipment on operating leases, at cost..................................................... 529 531
Accumulated depreciation................................................................... (12) (63)
------ ------
Net equipment on operating leases...................................................... 517 468
Property and equipment, at cost............................................................ 5 5
Accumulated depreciation................................................................... -- (2)
------ ------
Net property and equipment............................................................. 5 3
Goodwill, net.............................................................................. 128 --
Other assets............................................................................... 331 227
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Total.................................................................................. $3,980 $3,260
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<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
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Short-term debt............................................................................ $ 643 $ 550
Accounts payable and other accrued liabilities............................................. 201 124
Affiliated payables........................................................................ 14 --
Deposits withheld from dealers............................................................. 16 17
Long-term debt............................................................................. 2,424 2,108
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Total liabilities...................................................................... 3,298 2,799
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Minority Interest.......................................................................... 1 2
Stockholder's equity:
Common Stock, $5 par value, 200 shares authorized, issued and outstanding................ -- --
Paid-in capital.......................................................................... 674 269
Accumulated other comprehensive income................................................... 4 (24)
Retained earnings........................................................................ 3 214
------ ------
Total stockholder's equity............................................................. 681 459
------ ------
Total.................................................................................. $3,980 $3,260
- --------------------------------------------------
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
14
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Post-acquisition
basis of Pre-acquisition basis of
accounting accounting
---------------- -----------------------------
November 12 to January 1 to Years ended
December 31, November 11, December 31,
1999 1999 1998 1997
---------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Operating activities:
Net income..................... $ 3 $ 58 $ 85 $ 82
Adjustments to reconcile net
income to net cash provided by
operating activities:
Purchase accounting
amortization................ 7 -- -- --
Depreciation and
amortization................ 14 62 45 24
Provision for credit losses.. 1 28 14 --
Deferred income tax expense.. 2 9 24 18
Net gain on retail notes
sold........................ (1) (50) (82) (71)
Unremitted equity method
earnings from joint
ventures.................... -- (1) -- --
Changes in components of
working capital:
(Increase) in other assets. (6) (11) (19) (4)
Increase (decrease) in
accounts payables and
other accrued liabilities. 46 58 (6) 22
Other, net................. (2) 2 (7) (6)
----- ------- ------- -------
Net cash provided by
operating activities.... 64 155 54 65
===== ======= ======= =======
Investing activities:
Cost of receivables acquired... (489) (2,732) (3,209) (2,791)
Proceeds from sales of
receivables................... 349 1,693 1,975 1,749
Collections of receivables..... 187 639 820 489
Purchase of equipment on
operating leases (net of
disposals).................... (16) (135) (333) (100)
Increase in investments and
other assets.................. (1) (113) (142) (27)
Investments in joint ventures.. -- -- -- (16)
Expenditures for property and
equipment..................... -- (1) (1) ( 1)
----- ------- ------- -------
Net cash provided by
investing activities.... 30 (649) (890) (697)
----- ------- ------- -------
Financing activities:
Proceeds from issuance of long-
term debt..................... -- 617 1,070 150
Increase (decrease) in
revolving credit facilities... (62) (123) (291) 487
Capital contributions from Case
Corporation................... -- -- 25 45
----- ------- ------- -------
Net cash (used) provided
by financing activities. (62) 494 804 682
----- ------- ------- -------
Increase (decrease) in cash and
cash equivalents.............. 32 0 (32) 50
Cash and cash equivalents,
beginning of period........... 35 35 67 17
----- ------- ------- -------
Cash and cash equivalents, end
of period..................... $ 67 $ 35 $ 35 $ 67
===== ======= ======= =======
Cash paid during the period for
interest...................... $ 16 $ 159 $ 126 $ 101
===== ======= ======= =======
Cash paid during the period for
taxes......................... $ 6 $ 19 $ 26 $ 44
===== ======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of
these Statements of Cash Flows.
15
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in millions)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Comprehensive Retained
Stock Capital Income Earnings Total
------ ------- ------------- -------- -----
Pre-acquisition basis of accounting
- -----------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996......... $ -- $ 199 $ (6) $ 47 $ 240
Comprehensive income:
Net income....................... -- -- -- 82 82
Translation adjustment........... -- -- (10) -- (10)
Capital contribution from Case
Corp............................ -- 45 -- -- 45
----- ----- ---- ----- -----
Balance, December 31, 1997......... $ -- $ 244 $(16) $ 129 $ 357
===== ===== ==== ===== =====
Comprehensive income:
Net income....................... -- -- -- 85 85
Capital contribution from Case
Corp............................ -- 25 -- -- 25
Translation adjustment........... -- -- (8) -- (8)
----- ----- ---- ----- -----
Balance, December 31, 1998......... $ -- $ 269 $(24) $ 214 $ 459
===== ===== ==== ===== =====
Comprehensive income:
Net income....................... -- -- -- 58 58
Translation adjustment........... -- -- 3 -- 3
----- ----- ---- ----- -----
Balance, November 11, 1999......... $ -- $ 269 $(21) $ 272 $ 520
===== ===== ==== ===== =====
<CAPTION>
Post-acquisition basis of
accounting
- -------------------------
<S> <C> <C> <C> <C> <C>
Balance at November 11, 1999....... $ -- $ 269 $(21) $ 272 $ 520
Elimination of retained earnings
and cumulative translation
adjustment........................ (269) 21 (272) (520)
Purchase price allocation.......... -- 674 -- -- 674
Comprehensive income:
Net income....................... -- -- -- 3 3
Translation adjustment........... -- -- 4 -- 4
----- ----- ---- ----- -----
Balance, December 31, 1999......... $ -- $ 674 $ 4 $ 3 $ 681
===== ===== ==== ===== =====
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Changes in Stockholder's Equity.
16
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1: Nature of Operations
Case Credit Corporation is a subsidiary of CNH Capital Corporation ("CNH
Capital"), formerly Case Capital. CNH Capital, a wholly owned subsidiary of
Case Corporation ("Case"), provides broad-based financial services for the
global marketplace. Case Corporation is a wholly owned subsidiary of CNH
Global N.V. ("CNH"). Through New Holland Holdings N.V., Fiat owns
approximately 71% of CNH's outstanding common shares. As a result, Fiat
controls all matters submitted to a vote of CNH's shareholders, including
approval of annual dividends, election and removal of its directors and
approval of extraordinary business combinations.
Case Credit Corporation, its wholly owned operating subsidiaries, Case
Credit Ltd. (Canada) and Case Credit Australia Pty Ltd, and Case Credit
Corporation's joint ventures, Case Credit Europe S.A.S. and UzCaseagroleasing
(collectively, "Case Credit" or the "Company") provide and administer
financing for the retail purchase or lease of new and used Case and other
agricultural and construction equipment. Case Credit offers various types of
retail financing to end-use customers to facilitate the sale or lease of Case
products in the United States, Canada, Australia, Europe and Uzbekistan. The
Company's business principally involves purchasing retail installment sales
contracts from Case dealers. In addition, the Company facilitates and finances
the sale of insurance products to retail customers, provides financing for
Case dealers and Case rental equipment yards, and also provides other retail
financing programs in North America. In North America, Case Credit's private-
label credit card is used by customers to purchase parts, service, rentals,
implements and attachments from Case dealers. Case Credit also provides
financing options to dealers for a variety of purposes, including inventory,
working capital, real estate acquisitions, construction and remodeling,
business acquisitions, dealer systems, and service and maintenance equipment.
Note 2: Summary of Significant Accounting Policies
Principles of Consolidation and Presentation
The accompanying financial statements reflect the consolidated results of
Case Credit Corporation and its consolidated subsidiaries and joint ventures.
All significant intercompany transactions have been eliminated in
consolidation.
All references to balance sheet items for 1999 are on a post-acquisition
basis. All items prior to 1999 are on a pre-acquisition basis. Income
statement items for 1999 include both pre-acquisition totals and post-
acquisition totals including the impacts of purchase accounting items.
Certain reclassifications have been made to conform prior years' financial
statements to the 1999 presentation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated into U.S.
dollars using year-end exchange rates. Revenues and expenses are translated at
average rates during the year. Adjustments resulting from this translation are
deferred and included in "Accumulated other comprehensive income" in the
accompanying Consolidated Balance Sheets. "Cumulative translation adjustment"
in the accompanying Consolidated Statements of Changes in Stockholder's Equity
was closed into the "paid-in capital" in the accompanying Consolidated
Statements of Changes in Stockholder's Equity at the date of the merger.
17
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Purchase Accounting Amortization
Amortization of purchase accounting adjustments, excluding goodwill, is
recognized over the remaining term of the related asset or liability account
based on the weighted average change during the month for each asset class.
The remaining terms range from 3 to 95 months as of December 31, 1999.
Recognition of Finance and Interest Income
Retail and Other Notes, Finance Leases and Operating Leases--The Company
records finance income earned on retail and other notes and finance leases
using the effective interest method. A portion of the earned finance income
arises from sales programs offered by Case and other manufacturers on which
finance charges are waived or low-rate financing programs are offered. When
the Company acquires retail installment sales contracts and finance leases
subject to below-market interest rate and waived interest rate financing, the
Company is compensated for the difference between market rates and the amounts
received by the Company. Case Credit receives compensation from Case and other
manufacturers in an amount equal to the difference between the competitive
interest rate and the amount paid by the customer. This amount is initially
recognized as an unearned finance charge and is recognized as interest income
over the term of the retail notes and finance leases. The amounts received
from Case for below-market interest rate and waived interest rate financing
are included in "Interest income from Case Corporation" in the accompanying
Consolidated Statements of Income, and amounted to $21 million, $20 million
and $19 million in 1999, 1998 and 1997, respectively.
Purchase accounting adjustments due to the merger resulted in a $33 million
increase in receivables, which is primarily included in "Retail and other
notes and finance leases" in the accompanying Consolidated Balance Sheets.
Amortization of the related purchase accounting adjustments resulted in a
decrease to income of approximately $6 million for the period November 12,
1999 through December 31, 1999 and is included in "Retail and other notes and
finance lease income" in the accompanying Consolidated Statements of Income.
The remaining purchase accounting adjustments as of December 31, 1999 total
$27 million and will be primarily recognized as a decrease to "Retail and
other notes and finance lease income" in the accompanying Consolidated
Statements of Income over the next 3 to 40 months.
For selected operating leases, the Company is also compensated from Case
for the difference between the market rental rates and the amount paid by the
customer. The amounts received were $7 million and $4 million in 1999 and 1998
respectively, and are included in "Interest income from Case Corporation." The
Company is also compensated for the funding of various receivables on behalf
of Case. The amount earned was $12 million and $6 million in 1999 and 1998
respectively, and is included in "Interest income from Case Corporation."
Compensation received for below-market interest rates and waived interest rate
financing from other manufacturers is included in "Finance income earned on
retail and other notes and finance leases" in the accompanying Consolidated
Statements of Income. When the receivables are sold, the unrecognized portion
of the unearned finance charges is included in the calculation of the net gain
on retail notes sold. The Company included in its gain calculations income
from Case amounting to $55 million, $62 million and $63 million in 1999, 1998
and 1997, respectively, as part of the sale of retail notes. These amounts are
included in "Net gain on retail notes sold" in the accompanying Consolidated
Statements of Income.
Purchase accounting adjustments due to the merger resulted in a $34 million
net decrease in "Equipment on operating leases, at cost" in the accompanying
Consolidated Balance Sheets. Amortization of the related purchase accounting
adjustments resulted in a reduction of depreciation expense of approximately
$1 million for the period November 12, 1999 through December 31, 1999 which is
included in "Depreciation of equipment on operating leases" in the
accompanying Consolidated Statements of Income. The remaining purchase
accounting adjustments as of December 31, 1999 total $33 million which will be
recognized as a decrease in "Depreciation of equipment on operating leases" in
the accompanying Consolidated Statements of Income over the next 22 to 26
months.
18
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Recognition of income on loans is generally suspended when an account
becomes 120 days delinquent or when management determines that collection of
future income is not probable. Income accrual is resumed if the receivable
becomes contractually current and collection doubts are removed. Previously
suspended income is recognized at that time. The amount of loans and related
finance charges for which income recognition has been suspended is not
material.
Case Credit offers retail and other notes with interest rates that float
with the prime rate, plus an applicable margin. At December 31, 1999 and 1998,
these notes amount to $296 million and $325 million, respectively.
Goodwill
Goodwill represents the excess of the purchase price allocated to Case
Credit plus the liabilities assumed over the fair value of the tangible and
identifiable intangible assets purchased. Goodwill is amortized on a straight-
line basis over 20 years. Case Credit continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful life
of goodwill may warrant revision or that the remaining balance of goodwill may
not be recoverable. When factors indicate that goodwill should be evaluated
for possible impairment, Case Credit uses an estimate of the undiscounted cash
flows over the remaining life of the goodwill in measuring whether the
goodwill is recoverable.
At December 31, 1999, goodwill, net of $1 million accumulated amortization,
totaled $128 million. Amortization expense totaled $1 million for the year
ended December 31, 1999. There was no goodwill in 1998 or 1997.
Receivables Sold and Serviced
Retail notes receivable have been securitized and sold to limited-purpose
business trusts ("Trusts") with recourse up to specified amounts. For sales
occurring during 1999 and 1998, receivables, net of retained interests, are
removed from the balance sheet, and a gain or loss on sale is recognized in
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities."
Prior to the third quarter of 1999, no servicing asset or liability has
been recorded under the provisions of SFAS No. 125 by the Company as
management believed that the servicing fee income received is fair
compensation for the services provided. Based upon an evaluation that the
Company's servicing fee income now exceeds the fair market value of the
services provided, the Company began recording a servicing asset. The
servicing asset equaled $8 million, which approximates the fair market value,
as of December 31, 1999 and is included in "Due from trusts" in the
accompanying Consolidated Balance Sheets. The fair market value of the
servicing asset was determined by discounting future cash flows and using
current prepayment assumptions. This asset is being amortized over the period
in which Case Credit collects the related servicing fees. Amortization was not
significant in 1999 and is included in "Securitization and service fee income"
in the accompanying Consolidated Statement of Income. The income recognition
of the servicing asset was $8 million for 1999 and is included in "Net gain on
retail notes sold" and is included in the accompanying Consolidated Statement
of Income.
Case Credit stratifies its servicing assets based on geographic location
and original term. As a result, Case Credit has two categories of servicing
assets as of December 31, 1999. One category consists of serviced assets
located in the United States with 3 to 5 year original terms, which amounted
to $7 million as of December 31, 1999. The other category consists of serviced
assets located in Canada with 3 to 5 year original terms, which amounted to $1
million as of December 31, 1999.
Case Credit is required to remit the cash collected on the serviced
portfolio to the Trusts within two business days. At December 31, 1999 and
1998, $25 million and $20 million, respectively, of unremitted cash payable to
19
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
the Trusts is included in "Accounts payable and other accrued liabilities" in
the accompanying Consolidated Balance Sheets.
Accounting Pronouncements
Effective January 1, 1999, the Company adopted Statement of Position
("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities." The
Company's accounting for the costs of start-up activities is consistent with
the guidelines established in the SOP and, as a result, the adoption of this
statement had no effect on the Company's financial position or results of
operations.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
required adoption of this statement was extended to January 1, 2001, by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133--an Amendment of FASB
Statement No. 133," although earlier application is permitted. The Company is
currently evaluating the impact of adopting SFAS No. 133.
Cash and Cash Equivalents
Cash equivalents are comprised of all highly liquid investments with an
original maturity of three months or less.
Deposits Withheld from Dealers
These deposits represent amounts withheld from dealers relating to retail
sales financed using retail and other notes and finance leases. Any subsequent
losses on retail and other notes or finance leases that were acquired with
limited recourse are charged against the amounts withheld from the dealer. To
the extent that a loss on a retail or other note or finance lease exceeds the
dealers' reserves, the amount is charged against the Company's allowance for
credit losses. Annually, the balance of each dealer's withholding account, in
excess of minimum levels, is remitted to the dealer.
Derivatives
The Company uses derivative financial instruments to manage its interest
rate exposures. Case Credit does not hold or issue such instruments for
trading purposes. As these instruments are accounted for as a hedge of
existing assets or liabilities, unrealized fair market value gains and losses
are not recognized at the balance sheet date. Hedge accounting is applied if
the changes in the fair market value of the derivative instruments are highly
correlated to changes in the fair market value of the hedged assets or
liabilities. Amounts to be received or paid under these instruments are
recognized in the results of operations as interest expense or are recorded as
part of the gain on sale of receivables, as appropriate, in the periods to
which they relate.
Reference is made to Note 11, "Financial Instruments," for further
information regarding the Company's use of derivative financial instruments.
Note 3: Merger
On November 12, 1999, New Holland N.V. acquired Case for $4.6 billion in
cash, including related costs and expenses. Of the total purchase price, $674
million was allocated to Case Credit. Effective with the closing of the
merger, New Holland N.V. changed its name to CNH Global N.V. ("CNH").
This acquisition was accounted for as a purchase and, accordingly, the
purchase price was allocated to the assets and liabilities of Case Credit
based upon their respective estimated fair values, including identifiable
intangibles, with the remainder allocated to goodwill. The purchase price
allocation resulted in goodwill of approximately $129 million, which is being
amortized on a straight-line basis over 20 years. The historical
20
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
shareholders' equity of the Company was eliminated in the Company's
Consolidated Balance Sheets. The fair value adjustments to the historical
balance sheet and the resulting goodwill were as follows (in millions):
<TABLE>
<CAPTION>
Purchase Price Allocation
-------------------------
<S> <C>
Net assets at historical cost, including liabilities assumed of
$3,345............................................................ $520
Fair value adjustments:
Accounts and notes receivable.................................... 33
Equipment on operating leases.................................... (34)
Discount on medium-term note..................................... 27
Deferred income taxes............................................ (16)
Other............................................................ 15
Goodwill........................................................... 129
----
Total purchase price allocated................................. $674
====
</TABLE>
Case Credit has prepared the following unaudited pro forma income statements
to illustrate the estimated effects of the acquisition of Case by New Holland
as if this transaction had occurred as of the beginning of each of the years
presented. The pro forma data reflects the impact of the fair market value
adjustments to the Case Credit assets and liabilities acquired. These
adjustments are being amortized over the periods estimated to be benefited and
primarily include reduced depreciation of equipment on operating leases, the
amortization of the fair value adjustments for acquired receivables, discount
on notes payable, and goodwill.
<TABLE>
<CAPTION>
Years Ended
December
31,
(unaudited)
(in
millions)
-----------
1999 1998
----- -----
<S> <C> <C>
Revenues:
Finance income earned on retail and other notes and finance
leases.................................................... $ 150 $ 115
Interest income from Case Corporation...................... 40 30
Net gain on retail notes sold.............................. 53 77
Securitization and servicing fee income.................... 49 46
Lease income on operating leases........................... 102 64
Other income............................................... 23 15
----- -----
Total revenues........................................... 417 347
Expenses:
Interest expense........................................... 197 155
On payables to affiliates.................................. 1 --
----- -----
Interest expense......................................... 198 155
Operating expenses:
Fees charged by Case Corporation........................... 33 24
Administrative and operating expenses...................... 19 18
Provision for credit losses................................ 29 14
Goodwill amortization...................................... 6 6
Depreciation of equipment on operating leases.............. 62 35
Other...................................................... 3 3
----- -----
Total operating expenses................................. 152 100
----- -----
Total expenses........................................... 350 255
----- -----
Income before taxes.......................................... 67 92
Income tax provision......................................... 26 33
----- -----
Net income................................................... $ 41 $ 59
===== =====
</TABLE>
21
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Case Credit has presented this unaudited pro forma financial data for
illustrative purposes only. This pro forma data is based on a preliminary
allocation of the purchase price and is not necessarily indicative of (i) the
results of operations that would have occurred had the transaction been
effective as of the beginning of each of the years presented, or (ii) the
results of operations that Case Credit will attain in the future. In addition,
the pro forma financial data does not reflect any synergies or cost savings
that may occur as a result of the merger.
Note 4: Receivables
A summary of receivables is as follows (in millions):
<TABLE>
<CAPTION>
Post- Pre-
acquisition acquisition
basis of basis of
accounting accounting
------------ ------------
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Retail and other notes.......................... $2,410 $1,959
Finance leases.................................. 531 511
Due from Trusts................................. 231 289
------ ------
Gross receivables............................. 3,172 2,759
Less--Unearned finance charges.................. (267) (254)
Less--Allowance for credit losses............... (31) (29)
------ ------
Total receivables, net........................ $2,874 $2,476
====== ======
</TABLE>
Retail and Other Notes and Finance Leases
The terms of retail and other notes and finance leases generally range from
two to six years and allow for prepayment at any time without penalty. The
average effective yield on retail and other notes and finance leases held by
the Company was approximately 9.0% and 9.1% at December 31, 1999 and 1998,
respectively.
Purchase accounting adjustments, net of amortization, included in "Retail
and other notes and finance leases" in the accompanying Consolidated Balance
Sheets as of December 31, 1999 were $27 million as described in Note 2.
Maturities of retail and other notes and finance leases as of December 31,
1999, are as follows (in millions):
<TABLE>
<S> <C>
Years ending December 31,
2000............................................................ $1,251
2001............................................................ 707
2002............................................................ 434
2003............................................................ 304
2004............................................................ 180
2005 and thereafter............................................. 65
------
Total retail and other notes and finance leases--gross........ 2,941
Less--Unearned finance charges.................................. (267)
------
Total retail and other notes and finance leases, net of
unearned finance charges..................................... $2,674
======
</TABLE>
22
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The allowance for credit losses is established to cover probable losses for
receivables owned by the Company. Changes in the allowance for credit losses
are as follows (in millions):
<TABLE>
<CAPTION>
Post-acquisition
basis of
accounting Pre-acquisition basis of accounting
---------------- --------------------------------------
November 12 to January 1 to Year ended Year ended
December 31, November 11, December 31, December 31,
1999 1999 1998 1997
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, beginning of
period................. $ 40 $ 29 $22 $23
Provision for credit
losses................. 1 28 14 --
Write-offs, net of
recoveries............. (10) (17) (7) (1)
---- ---- --- ---
Balance, end of period.. $ 31 $ 40 $29 $22
==== ==== === ===
</TABLE>
The preceding table reflects the Company's provision for credit losses, but
does not include losses charged to dealers or those absorbed by the Trusts.
Total losses incurred on the Company's serviced portfolio were $58 million,
$15 million and $8 million in 1999, 1998, and 1997, respectively.
Case Credit sold $2.1 billion of retail notes (net of unearned finance
charges) in 1999 and 1998 to Trusts in the United States and Canada. The
Trusts were formed for the purpose of purchasing Case Credit receivables and
the receivables were used as collateral for the issuance of asset-backed
securitization ("ABS") transactions to outside investors. The proceeds
received from the sales of notes were reduced by $61 million and $56 million
in 1999 and 1998, respectively, pursuant to recourse provisions in the sale
agreements. These reductions in cash proceeds are held in escrow by the Trusts
to provide security in the event of uncollectible notes and are released to
the Company when the notes are collected. Escrow amounts held by the Trusts of
$155 million and $170 million at December 31, 1999 and 1998, respectively, are
recorded in "Due from Trusts" in the accompanying Consolidated Balance Sheets.
Case Credit has established reserves for the estimated losses on amounts held
in escrow, and these reserves are also included in "Due from Trusts" in the
accompanying Consolidated Balance Sheets. A security interest in the equipment
financed by the retail notes is maintained such that in the event of non-
performance, the related equipment can be repossessed to minimize losses. As
these Trusts are controlled by third parties and meet minimum equity
capitalization standards, the assets of the Trust are not included in the
consolidated financial statements of the Company.
Case Credit's portfolio of managed receivables, including receivables owned
and receivables serviced for others, has grown from $6.8 billion at December
31, 1998, to $7.5 billion at December 31, 1999. Case Credit's serviced
portfolio at December 31, 1999, included $6.7 billion of managed receivables
(net of unearned finance charges), including retail and other notes amounting
to $3.3 billion (net of unearned finance charges) that were owned by Trusts in
the United States and Canada. At December 31, 1998, Case Credit's serviced
portfolio included $6.0 billion of managed receivables (net of unearned
finance charges), including retail and other notes amounting to $3.1 billion
(net of unearned finance charges) that were owned by Trusts in the United
States and Canada.
At December 31, 1999 and 1998, approximately $206 million and $69 million,
respectively, of retail notes receivable (net of unearned finance charges)
have been pledged as collateral under the Company's, $750 million, U.S. asset-
backed commercial paper liquidity facility.
Retail and other notes receivable and serviced receivables have significant
concentrations of credit risk in the farm and construction business sectors.
On a geographic basis, there is not a disproportionate concentration of credit
in any area of the United States, Canada or Australia.
23
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 5: Property, Plant and Equipment
Property, plant and equipment are stated at cost prior to the merger.
Property, plant and equipment consist of leasehold improvements, furniture and
fixtures and construction in progress. Depreciation is provided on a straight-
line basis over the estimated useful lives of the respective assets. Useful
lives range from 5 to 14 years for leasehold improvements, 3 to 10 years for
furniture and fixtures. Expenditures for maintenance and repairs are charged
to expense as incurred.
Purchase accounting adjustments related to the merger resulted in a fair
market value write-up of approximately $1 million to Property, plant and
equipment at the date of the merger. This write-up will be amortized over the
weighted average remaining life of each asset class. Amortization of the
adjustment was immaterial for the period November 12, 1999 through December
31, 1999. The related $2 million balance in "Accumulated depreciation" at the
date of the merger was eliminated and is included in "Property and equipment,
at cost" in the accompanying Consolidated Balance Sheets.
Note 6: Equipment on Operating Leases
A summary of equipment on operating leases, is as follows (in millions):
<TABLE>
<CAPTION>
Post-acquisition
basis of Pre-acquisition basis of
accounting accounting
---------------- ------------------------
December 31, December 31,
1999 1998
---------------- ------------------------
<S> <C> <C>
Equipment on operating leases.. $529 $531
Accumulated depreciation....... (12) (63)
---- ----
Net equipment on operating
leases...................... $517 $468
==== ====
</TABLE>
Lease payments owed to Case Credit for equipment under non-cancelable
operating leases as of December 31, 1999, are as follows (in millions):
<TABLE>
<S> <C>
2000................................. $93
2001................................. 55
2002................................. 27
2003................................. 13
2004................................. 3
2005 and thereafter.................. 0
</TABLE>
Case Credit purchases equipment from dealers that is leased to retail
customers under operating leases. Income from operating leases is recognized
over the term of the lease. The Company's investment in operating leases is
based on estimated residual values of the leased equipment, which are
calculated at the lease inception date. Realization of the residual values is
dependent on the Company's future ability to market the equipment under the
then prevailing market conditions. Although realization is not assured,
management believes that it is more likely than not that the estimated
residual values will be realized. Case Corporation guarantees a portion of the
residual values on some of Case Credit's operating leases. On these leases, if
the guaranteed residual value is not realized, Case Credit will receive a
payment from Case Corporation for a portion of the recognized loss. Payments
received from Case Corporation for such losses were not significant in any of
the periods presented.
Each item of equipment under operating lease is depreciated on a straight-
line basis over a period of time consistent with the lease term. Depreciation
expense totaled $59 million for the period January 1 through
24
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
November 11, 1999 and $12 million for the period November 12 through December
31, 1999. Depreciation expense was $43 million and $22 million for the years
ended December 31, 1998 and 1997, respectively. Expenditures for maintenance
and repairs are the responsibility of the lessee.
Purchase accounting adjustments, net of amortization, included in
"Equipment on operating leases" in the accompanying Consolidated Balance
Sheets as of December 31, 1999 were $33 million as described in Note 2.
Note 7: Other Assets
The components of other assets as of December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
Post-acquisition basis of Pre-acquisition basis of
accounting accounting
------------------------- ------------------------
December 31, December 31,
1999 1998
------------------------- ------------------------
<S> <C> <C>
Certificates of deposit. $170 $ 98
ABS certificates........ 113 72
Deferred taxes.......... 22 20
Investment in joint
venture................ 16 15
Other current assets.... 10 22
---- ----
Total................. $331 $227
==== ====
</TABLE>
Certificates of deposits support retail receivables related to purchases of
agricultural equipment by Brazilian customers from Case Corporation. These
U.S. dollar indexed certificates are reflected at historical cost on the
balance sheet and have maturities that range between three months and six
years and bear interest rates between 8.75% and 10.00%. The receivables
underlying the certificates of deposit are guaranteed by Case Corporation.
ABS certificates are stated at historical cost on the balance sheet and
bear interest rates between 5.75% and 7.05%. These certificates are classified
as held to maturity securities. Interest income is included in "Securitization
and servicing fee income" in the accompanying Consolidated Statements of
Income.
The joint venture is accounted for under the equity method of accounting.
Income is included in "Other income" in the accompanying Consolidated
Statements of Income.
Purchase accounting adjustments due to the merger resulted in a $36 million
net decrease in "Other assets" in the accompanying Consolidated Balance
Sheets. Amortization of the related purchase accounting adjustments resulted
in income of approximately $5 million for the period November 12, 1999 through
December 31, 1999, which is primarily included in "Finance income earned on
retail and other notes and finance lease" in the accompanying Consolidated
Statements of Income. The remaining purchase accounting adjustments as of
December 31, 1999 total $31 million, which will be primarily recognized as an
increase to "Finance income earned on retail and other notes and finance
leases" in the Consolidated Statements of Income over the next 2 to 38 months.
Note 8: Short-Term Debt
The Company has various lines of credit and liquidity facilities that
include borrowings under both committed credit facilities and uncommitted
lines of credit and similar arrangements. The Company also has the ability to
issue commercial paper in the United States, Canada and Australia. Under the
terms of the Company's commercial paper programs, the principal amount of the
commercial paper outstanding, combined with the
25
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
amounts outstanding under the applicable revolving credit facility mentioned
below, cannot exceed the total amount available under the revolving credit
facility.
In August 1999, Case Credit renewed its existing three-year, $750 million
U.S. commercial paper liquidity facility (the "Liquidity Facility") and
extended its maturity to August 2000. Case Credit established the following
credit facilities in August 1996: a five-year, $1.2 billion revolving credit
facility and a five-year, C$500 million revolving credit facility.
In October 1997, Case Credit's Australian subsidiary, Case Credit Australia
Pty Ltd, established a A$400 million revolving credit facility comprised of a
five-year, A$300 million revolving credit facility and a 364-day, A$100
million revolving credit facility.
A summary of short-term debt is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
Post- Pre-
acquisition acquisition
basis of basis of
accounting accounting
------------ ------------
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Credit agreements (a)........................... $ 0 $ 88
Commercial paper................................ 459 389
Commercial paper liquidity facility............. 184 73
---- ----
Total short-term debt......................... $643 $550
==== ====
</TABLE>
- --------
(a) The credit agreements include borrowings under both committed credit
facilities and uncommitted lines of credit and similar arrangements.
The weighted-average interest rates on total short-term debt outstanding at
December 31, 1999 and 1998, were 6.2% and 5.6%, respectively. At December 31,
1999, the unused portion of the combined committed credit facilities and the
commercial paper program was $1,021 million, and the unused portion of the
asset-backed commercial paper liquidity facility was $543 million. At December
31, 1998, the unused portion of the combined committed credit facilities and
the commercial paper program was $764 million, and the unused portion of the
asset-backed commercial paper liquidity facility was $691 million.
At the option of the Company, borrowings under the revolving credit
facilities bear interest at: (1) prime rate; (2) LIBOR, plus an applicable
margin; or (3) banker's bills of acceptance rates, plus an applicable margin.
Borrowings may be obtained in U.S. dollars and certain other foreign
currencies. Borrowings under the Liquidity Facility bear interest at
prevailing commercial paper rates at the date of the borrowing. Case Credit's
revolving credit facilities (other than the Liquidity Facility) contain
restrictive covenants that require that Case Credit maintain certain financial
conditions including a maximum ratio of debt to net worth and a minimum fixed-
charge coverage ratio. The revolving credit facilities (other than the
Liquidity Facility) also impose restrictions on certain indebtedness, liens on
Company assets and ownership of certain subsidiaries. Case Credit is in
compliance with all restrictive covenants as of December 31, 1999.
Due to the availability of financing under the Company's credit facilities
and the Company's intent to refinance short-term debt under these facilities,
Case Credit has classified $120 million, $230 million and $50 million of
borrowings under the commercial paper facilities of Case Credit Corporation,
Case Credit Australia Pty Ltd, and Case Credit Ltd., respectively, as long
term at December 31, 1999. In 1998, Case Credit classified $341 million, $105
million and $245 million of borrowings under the commercial paper facilities
of Case Credit Corporation, Case Credit Australia Pty Ltd and Case Credit
Ltd., respectively, as long-term debt.
26
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The credit facilities generally provide for facility fees on the total
commitment, whether used or unused, and also provide for annual agency fees to
the administrative agents for the facilities.
Note 9: Long-Term Debt
In 1999, Case Credit issued $375 million of floating-rate and fixed-rate,
medium-term notes in the United States. The floating-rate note has a maturity
of 12 months and bears interest based on three-month LIBOR; the fixed-rate
notes have maturities of two to three years and interest rates ranging from
5.85% to 6.15%. These note issuances were offered pursuant to the Case
Credit's shelf registration statements as filed with the Securities and
Exchange Commission in January 1999 and May 1998. The net proceeds from these
issuances were used to fund Case Credit's growth initiatives and for other
corporate purposes, including the repayment of short-term indebtedness.
During the first quarter of 1999, Case Credit's Canadian subsidiary, Case
Credit Ltd., issued C$200 million of its medium-term notes pursuant to a
short-form prospectus and prospectus supplement filed with the Canadian
Securities Administrators. These notes mature in June 2001 and bear interest
at 6.3%. The net proceeds from this issuance were used to fund Case Credit
Ltd.'s growth initiatives and for other corporate purposes, including the
repayment of short-term indebtedness.
Also during the first quarter, Case Credit Australia Pty. Ltd. issued A$175
million of its medium-term notes pursuant to its medium-term note program.
These notes have maturities that range from twenty-four to thirty months and
bear interest based on BBSW for the floating-rate notes, and 5.75% for the
fixed-rate notes. The net proceeds from this issuance were used to fund Case
Credit Australia Pty Ltd's growth initiatives and for other corporate
purposes, including the repayment of short-term indebtedness.
Purchase accounting related adjustments due to the merger totaled $27
million, which is included in "Long-term debt" in the accompanying
Consolidated Balance Sheets. Amortization of the related purchase accounting
adjustments resulted in expense of approximately $2 million for the period
November 12, 1999 through December 31, 1999, which is included in "Interest
expense" in the accompanying Consolidated Statements of Income. The remaining
purchase accounting adjustments as of December 31, 1999 total $25 million,
which will be recognized as an increase to "Interest expense" in the
accompanying Consolidated Statements of Income over the next 9 to 95 months.
27
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
A summary of long-term debt is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
Post- Pre-
acquisition acquisition
basis of basis of
accounting accounting
------------ ------------
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Case Credit Corporation
Notes, payable in 2000, floating interest rate
of 6.90% and 5.91%............................. $ 100 $ 100
Notes, payable in 2001, interest rate of 6.125%. 100 100
Notes, payable in 2003, interest rate of 6.125%. 200 200
Notes, payable in 2007, interest rate of 6.75%.. 150 150
Fixed-rate, medium-term notes, maturities
through 2002, weighted-average interest rate of
6.04% and 6.04%................................ 898 648
Floating-rate, medium-term notes, maturities
through 2001, weighted-average interest rate of
6.24% and 5.48%................................ 265 140
Long-term portion of borrowings under commercial
paper facilities, average interest rate of
6.42% and 6.00%................................ 40 341
Direct bid lines, interest rate of 4.90%........ 80 --
Case Credit Australia Pty Ltd
Fixed-rate, medium-term notes, maturities
through 2001, interest rate of 5.75%........... 81 --
Floating-rate, medium-term notes, maturities
through 2001, interest rate of 6.34%........... 33 --
Long-term portion of borrowings under commercial
paper facilities, average interest rate of
5.91% and 5.10%................................ 230 105
Case Credit Ltd. (Canada)
Fixed-rate, medium-term notes, maturities
through 2001, weighted-average interest rate of
6.26% and 6.20%................................ 224 82
Long-term portion of borrowings under commercial
paper facilities, average interest rate of 5.3%
and 5.4%....................................... 50 245
------ ------
Gross long-term debt.............................. $2,451 $2,111
Less unamortized discount......................... $ (27) $ (3)
------ ------
Net long-term debt................................ $2,424 $2,108
====== ======
</TABLE>
A summary of the minimum annual repayments of long-term debt as of December
31, 1999, is as follows (in millions):
<TABLE>
<S> <C>
2000.............................. $ 690
2001.............................. 951
2002.............................. 380
2003.............................. 200
2004.............................. --
2005 and thereafter............... 230
------
Total........................... $2,451
======
</TABLE>
28
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 10: Income Taxes
The income and expenses of Case Credit and its domestic subsidiaries are
included in the consolidated income tax return of Case. The Company's Canadian
subsidiaries file separate income tax returns. In addition, Case Credit's
Australian subsidiaries are permitted income tax relief with Case's Australian
subsidiaries. Provisions for income taxes for all periods are made as if Case
Credit filed a separate income tax return. Any liability incurred by Case
resulting from the inclusion of Case Credit in its income tax returns was
reimbursed to or paid by Case Credit or the appropriate subsidiary.
At December 31, 1999 and 1998, the Company has current taxes receivable of
$29 million and $25 million, respectively, which are included in "Affiliated
receivables" in the accompanying Consolidated Balance Sheets.
The sources of income before taxes were as follows (in millions):
<TABLE>
<CAPTION>
Post-
acquisition
basis of Pre-acquisition
accounting basis of accounting
--------------- ----------------------
Years
Ended
November 12, January 1 to December
to December 31, November 11, 31,
1999 1999 1998 1997
--------------- ------------ ---- ----
<S> <C> <C> <C> <C>
U.S. sources.......................... $10 $72 $112 $ 94
Foreign sources....................... (4) 18 19 28
--- --- ---- ----
Income before taxes................... $ 6 $90 $131 $122
=== === ==== ====
</TABLE>
The provision (benefit) for income taxes is as follows (in millions):
<TABLE>
<CAPTION>
Post-
acquisition
basis of Pre-acquisition
accounting basis of accounting
--------------- --------------------------
November 12, January 1 to Years Ended
to December 31, November 11, December 31,
1999 1999 1998 1997
--------------- ------------ ------ ------
<S> <C> <C> <C> <C>
Current:
United States.................. $ 1 $ 15 $ 13 $ 13
Foreign........................ -- 8 8 10
State.......................... -- -- 1 (1)
---- ---- ----- ------
Total current................ 1 23 22 22
==== ==== ===== ======
Deferred:
United States.................. 2 8 22 17
Foreign........................ -- -- 1 --
State.......................... 0 1 1 1
---- ---- ----- ------
Total deferred............... 2 9 24 18
---- ---- ----- ------
Total tax provision.......... $ 3 $ 32 $ 46 $ 40
==== ==== ===== ======
</TABLE>
29
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Following is a reconciliation of income taxes computed at the U.S. Federal
income tax rate to the tax provision reflected in the accompanying
Consolidated Statements of Income (in millions):
<TABLE>
<CAPTION>
Post-
acquisition
basis of Pre-acquisition
accounting basis of accounting
--------------- ---------------------------
November 12, January 1 to Years Ended
to December 31, November 11, December 31,
--------------- ------------ --------------
1999 1999 1998 1997
--------------- ------------ ------ ------
<S> <C> <C> <C> <C>
Tax provision at U.S. Federal
income tax rate............... $ 2 $ 32 $ 46 $ 43
State taxes, net of Federal
benefit....................... -- -- 1 --
Reduction in valuation
allowance..................... -- -- -- (2)
Other.......................... 1 -- (1) (1)
--- ---- ------ -----
Total tax provision.......... $ 3 $ 32 $ 46 $ 40
=== ==== ====== =====
</TABLE>
Case Credit has not recorded valuation allowances against deferred tax
assets in tax jurisdictions where Case and Case Credit have been profitable as
management believes it is more likely than not that such assets will be
realizable. Deferred tax assets and deferred tax liability are included in
"Other assets" and "Accounts payable and other accrued liabilities",
respectively, in the accompanying Consolidated Balance Sheets. The Company had
valuation allowances in certain tax jurisdictions where future profitability
was uncertain. In 1997, the remaining valuation allowances were reversed in
full.
The components of the net deferred tax assets/(liabilities) are as follows
(in millions):
<TABLE>
<CAPTION>
Post-acquisition Pre-acquisition
basis of basis of
accounting accounting
---------------- ---------------
December 31, December 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Deferred tax assets/(liabilities):
Allowance for credit losses............... $ 12 $ 12
Deferred gains on receivables............. (37) (34)
Accrued expenses.......................... 3 3
Leasing adjustments....................... 5 5
Depreciation.............................. (40) (18)
Purchasing Accounting Adjustment.......... (14) --
Other..................................... (3) (1)
---- ----
Net deferred tax liabilities............ $(74) $(33)
==== ====
</TABLE>
Note 11: Financial Instruments
Fair Market Value of Financial Instruments
The estimated fair market values of financial instruments that do not
approximate the carrying values in the financial statements are as follows (in
millions):
<TABLE>
<CAPTION>
Post-acquisition Pre-acquisition
basis of basis of
accounting accounting
------------------- ---------------
December 31,
December 31, 1999 1998
------------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- -------- -------- ------
<S> <C> <C> <C> <C>
Notes receivable..................... $ 2,874 $ 2,870 $2,476 $2,494
Long-term debt....................... 2,424 2,411 2,108 2,106
Derivatives.......................... (2) (7) -- --
</TABLE>
30
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The fair market value of notes receivable was based on discounting the
estimated future payments of fixed-rate receivables at prevailing market
rates. The fair value of the interest only strip component of the "Due from
Trusts" included in total receivables was based on loss, prepayment and
interest rate assumptions approximating those currently experienced by the
Company. The carrying amounts of floating-rate receivables, ABS certificates,
and certificates of deposit approximate their fair market value. The fair
value of fixed-rate, long-term debt was based on the market value of debt with
similar maturities and interest rates; the carrying amount of floating-rate,
long-term debt approximates its fair value. The carrying amount and fair value
of derivatives was not material at December 31, 1998.
Derivatives
The Company uses derivative financial instruments to manage its interest
rate exposures. Case Credit does not hold or issue such instruments for
trading purposes. The net amounts exchanged are calculated on the basis of the
notional amounts and other terms of the contracts, such as interest rates, and
only represent a small portion of the notional amounts. The credit risk under
these agreements is minimized through diversification among counterparties
with high credit ratings.
Depending on the item being hedged, gains and losses on derivative
financial instruments are either recognized in the results of operations as
they accrue or are deferred until the hedged transaction occurs. 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. Accordingly, changes in the market value of the derivative are
highly correlated with changes in the market value of the underlying hedged
item at the inception of the hedge and over the life of the hedge contract.
Interest Rate Swaps
Case Credit enters into interest rate swaps to stabilize funding costs by
minimizing the effect of potential interest rate increases on floating-rate
debt in a rising interest rate environment. Under these agreements, the
Company contracts with a counterparty to exchange the difference between a
fixed rate and a floating rate applied to the notional amount of the swap.
Swap contracts are principally between one to three years in duration. The
differential to be paid or received on interest rate swap agreements is
accrued as interest rates change and is recognized in net income as an
adjustment to interest expense.
Gains and losses resulting from terminated interest rate swap agreements
are deferred and recognized in net income over the shorter term of the
remaining contractual life of the swap agreement or the remaining term of the
debt underlying the swap agreement. If swap agreements are terminated due to
the underlying debt being extinguished, any resulting gain or loss is
recognized in net income as an adjustment to interest expense at the time of
the termination.
The weighted-average pay and receive rates for the swaps outstanding at
December 31, 1999, were 5.65% and 5.10%, respectively, at a notional amount of
approximately $1,125 million. The weighted-average pay and receive rates for
the swaps outstanding at December 31, 1998, were 5.55% and 5.10%,
respectively, at a notional amount of approximately $347 million.
Back-to-Back Interest Rate Caps
The Liquidity Facility requires a subsidiary of Case Credit to have
interest rate cap agreements in place. Due to the relatively high expense of
obtaining such an instrument, Case Credit sells an identical cap, concurrent
with the cap purchase, to the same counterparty. This effectively minimizes
the overall expense to Case Credit, meets the requirements of the Liquidity
Facility and eliminates any risk of financial loss on the purchased cap. The
defined term of the cap is approximately 48 months.
31
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Premiums paid for interest rate cap agreements purchased and sold are
included in "Other assets" and "Accounts payable and other accrued
liabilities," respectively, in the accompanying Consolidated Balance Sheets,
and are amortized to interest expense over the terms of the agreements.
Amounts receivable or payable under cap agreements are recognized in net
income as adjustments to interest expense over the term of the related debt.
If interest rate cap agreements are terminated due to the underlying debt
being extinguished, in conjunction with an ABS transaction, any resulting gain
or loss is recognized in net income as a component of "Net gain on retail
notes sold" at the time of the termination.
At December 31, 1999, Case Credit had a back-to-back cap at a rate of
7.00%, at a notional amount of approximately $255 million. At December 31,
1998, Case Credit had a back-to-back cap at a rate of 7.00%, at a notional
amount of approximately $55 million.
Treasury Rate Lock Agreements
A Treasury rate lock is a commitment to either purchase or sell the
designated financial instrument at a future date (the determination date) for
a specified price (the reference yield). The purpose of this instrument is to
protect fixed-rate debt from fluctuations in the yield of the Treasury Note
that forms the basis of pricing the debt. As of December 31, 1999, Case Credit
had entered into $200 million of Treasury rate locks based on one, two and
three-year Treasury Notes at a weighted-average yield of 6.11%. At December
31, 1998, Case Credit had Treasury Rate locks with a notional value of $125
million, based on two year Treasury Notes, at a weighted-average yield of
4.59%.
Case Credit accounts for these Treasury rate locks as hedges of the
anticipated issuance of fixed-rate securities to outside investors in ABS
transactions as changes in the fair market value of these instruments are
highly correlated to changes in the fair value of the securities to be issued.
Unrealized gains or losses are deferred until the Treasury rate locks are
terminated upon the issuance of the related securities at which time they are
recognized in net income as a component of the "Net gain on retail notes
sold". The unrealized gains on Treasury rate locks in place as of December 31,
1999 total $1 million and are being deferred until consummation of Case
Credit's anticipated ABS transaction in March, 2000.
Note 12: Related Party Transactions
Case Credit receives compensation from Case for retail lease contracts that
were created under certain low-rate financing programs and interest waiver
programs offered by Case. The amount of such compensation not yet paid by Case
as of December 31, 1999 and 1998, was $6 million and $10 million respectively,
and is included in "Affiliated receivables" in the accompanying Consolidated
Balance Sheets.
Operating expenses include charges from Case for administrative expenses
related to employees who perform specific functions for Case Credit. Such
charges amounted to $31 million for the period January 1, to November 11, 1999
and $2 million for the period November 12, to December 31, 1999, and $24
million and $18 million for the years ended December 31, 1998 and 1997,
respectively. Management believes that these charges reasonably reflect the
actual costs of services provided.
Note 13: 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
Case Credit's financial position or results of operations.
32
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Commitments
Commitments under capital and operating leases are not significant to the
financial statements. Total rental expense for operating leases was minimal
for the periods January 1 to November 11, 1999 and November 12 to December 31,
1999 and for the years ended December 31, 1998 and 1997.
Note 14: Segment and Geographical Information
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.
Each of Case Credit's segments provides financing for retail installment
sales contracts and leases. These financing arrangements are established in
conjunction with the purchase or lease of new and used Case farm and
construction equipment and other new and used products to end-use customers.
The North American segments also include commercial lending within the
equipment industry, multiple lines of insurance products and private-label
credit cards.
The accounting policies of the segments are described in Note 2, "Summary
of Significant Accounting Policies." Case Credit evaluates segment performance
based on segment profit, defined as segment net income. Transfers between
segments are accounted for at market value.
33
<PAGE>
CASE CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Concluded)
A summary of Case Credit's reportable segment and geographical information
is set forth in the following table (in millions):
<TABLE>
<CAPTION>
Post-acquisition
basis of Pre-acquisition basis of
accounting accounting
---------------- --------------------------
Years ended
November 12 to January 1 to December 31,
December 31, November 11, -------------
1999 1999 1998 1997
---------------- ------------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
United States..................... $ 44 $ 312 $ 315 $ 219
Canada............................ 4 48 42 36
Australia......................... 2 28 20 17
Other............................. -- 1 -- --
------ ------ ------ ------
Total........................... $ 50 $ 389 $ 377 $ 272
====== ====== ====== ======
Interest expense:
United States..................... $ 22 $ 124 $ 113 $ 75
Canada............................ 3 23 21 12
Australia......................... -- 16 9 11
------ ------ ------ ------
Total........................... $ 25 $ 163 $ 143 $ 98
====== ====== ====== ======
Segment profit:
United States..................... $ 7 $ 48 $ 75 $ 64
Canada............................ (1) 6 6 15
Australia......................... (3) 4 4 3
------ ------ ------ ------
Total........................... $ 3 $ 58 $ 85 $ 82
====== ====== ====== ======
Depreciation and amortization:
United States..................... $ 13 $ 58 $ 42 $ 22
Canada............................ 1 4 3 2
------ ------ ------ ------
Total........................... $ 14 $ 62 $ 45 $ 24
====== ====== ====== ======
Expenditures for additions to
long-lived assets*:
United States..................... $ 8 $ 134 $ 321 $ 92
Canada............................ 8 1 13 9
------ ------ ------ ------
Total........................... $ 16 $ 135 $ 334 $ 101
====== ====== ====== ======
Segment assets (at the end of the
period):
United States..................... $2,891 $2,857 $2,220 $1,733
Canada............................ 549 494 543 383
Australia......................... 536 510 488 225
Other............................. 4 4 9 21
------ ------ ------ ------
Total........................... $3,980 $3,865 $3,260 $2,362
====== ====== ====== ======
Long-lived assets* (at the end of
the period):
United States..................... $ 496 $ 507 $ 448 $ 169
Canada............................ 26 26 23 13
------ ------ ------ ------
Total........................... $ 522 $ 533 $ 471 $ 182
====== ====== ====== ======
</TABLE>
- --------
* Includes equipment on operating lease and property, plant, and equipment
34
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10, "Directors and Executive Officers of the Registrant," Item 11,
"Executive Compensation," Item 12, "Security Ownership of Certain Beneficial
Owners and Management," and Item 13, "Certain Relationships and Related
Transactions," are not required pursuant to General Instruction I (2) of Form
10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of Case Credit Corporation and
Consolidated Subsidiaries" set forth in Item 8, "Financial Statements and
Supplementary Data."
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE INCLUDED IN ITEM 14
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
<TABLE>
<S> <C>
Schedule I Condensed financial information of registrant
Schedule II Valuation and qualifying accounts
Schedule III Real estate and accumulated depreciation
Schedule IV Mortgage loans on real estate
Schedule V Supplemental Information Concerning Property Casualty
Insurance Operations
</TABLE>
EXHIBITS
A list of the exhibits included as part of this Form 10-K is set forth in
the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
REPORTS ON FORM 8-K
In a Current Report filed on 8-K dated November 15, 1999, CNH Global, N.V.
("CNH"), the indirect parent of Case Corporation, issued three press releases
announcing its Board of Directors, its senior management team and certain
details regarding CNH's future operations.
In a Current Report filed on 8-K dated November 12, 1999, Case Corporation
and New Holland announced that the merger of Case Corporation and New Holland
had been completed.
35
<PAGE>
In a Current Report filed on 8-K dated November 4, 1999, Case Corporation
announced that the United States Department of Justice had approved the Case-
New Holland merger, and that the anticipated closing date of the merger was
Friday, November 12, 1999.
In a Current Report filed on form 8-K dated October 28, 1999, Case
Corporation announced that the European Commission had approved the Case-New
Holland merger.
In a Current Report filed on Form 8-K dated October 26, 1999, Case Capital
Corporation announced its unaudited financial results for the quarter ended
September 30, 1999.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Case Credit Corporation
/s/ Andrew E. Graves
By: _________________________________
Andrew E. Graves
President and Chief Executive
Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Andrew E. Graves Principal Executive Officer and Director
___________________________________________
Andrew E. Graves
/s/ Robert A. Wegner Principal Financial and Accounting Officer
___________________________________________ and Director
Robert A. Wegner
/s/ Theodore R. French Director
___________________________________________
Theodore R. French
</TABLE>
Date: March 30, 2000
Supplemental Information To Be Furnished With Reports Filed Pursuant to
Section 15(d) Of The Act By Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of The Act.
No annual report to security holders covering the registrant's fiscal year
ended December 31, 1999, or any proxy material has been sent to the
registrant's security holders.
37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Exhibit Numbers
-------- ---------------------- ----------
<C> <S> <C>
3(a) Certificate of Incorporation of Case Credit
Corporation, dated January 26, 1993. (Filed as Exhibit
3(a) to the Company's Registration Statement No. 33-
80775, and incorporated herein by reference.)
3(b) By-Laws of Case Credit Corporation, adopted January 26,
1993. (Filed as Exhibit 3(b) to the Company's
Registration Statement No. 33-80775, and incorporated
herein by reference.)
4(a)(1) Indenture between Case Credit Corporation, Case
Corporation and The Bank of New York, dated as of
February 1, 1996. (Filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, and incorporated herein by
reference.)
4(a)(2) 6 1/8% Note due 2003 of Case Credit Corporation issued
pursuant to the Indenture, dated as of February 1,
1996, between Case Credit Corporation, Case Corporation
and The Bank of New York. (Filed as Exhibit 4.2 to the
Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, and
incorporated herein by reference.)
4(a)(3) Resolutions of the Board of Directors of Case Credit
Corporation authorizing the public offering of debt
securities of Case Credit Corporation in an aggregate
principal amount of up to $300,000,000. (Filed as
Exhibit 4(c) to the Company's Registration Statement
No. 33-80775, and incorporated herein by reference.)
4(a)(4) Resolutions of the Board of Directors of Case
Corporation authorizing the Support Agreement and/or
$300,000,000 Guarantee for Case Credit Corporation Debt
Offering. (Filed as Exhibit 4(d) to the Company's
Registration Statement No. 33-80775, and incorporated
herein by reference.)
4(b)(1) Indenture between Case Credit Corporation and The Bank
of New York, dated as of October 1, 1997. (Filed as
Exhibit 4(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.)
4(b)(2) Resolutions to the Board of Directors of Case Credit
Corporation authorizing the public offering of debt
securities of Case Credit Corporation in an aggregate
principal amount of up to $700,000,000. (Filed as
Exhibit 4(c) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, and
incorporated herein by reference.)
4(b)(3) Form of Medium-Term Note, Series A (Fixed Rate) due
from 9 months to 30 years from the date of issue.
(Filed as Exhibit 4.1 to the Form 8-K dated December
19, 1997, and incorporated herein by reference.)
4(b)(4) Form of Medium-Term Note, Series A (Floating Rate) due
from 9 months to 30 years from date of issue. (Filed as
Exhibit 4.2 to the Form 8-K dated December 19, 1997,
and incorporated herein by reference.)
4(b)(5) Action of Authorized Officers of Case Credit
Corporation, dated December 8, 1997, establishing the
Medium-Term Notes, Series A. (Filed as Exhibit 4.3 to
the Form 8-K dated December 19, 1997, and incorporated
herein by reference.)
4(b)(6) Officers' Certificate and Company Order of Case Credit
Corporation, dated December 8, 1997, related to the
Medium-Term Notes, Series A. (Filed as Exhibit 4.4 to
the Form 8-K dated December 19, 1997, and incorporated
herein by reference.)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Exhibit Numbers
-------- ---------------------- ----------
<C> <S> <C>
4(c)(1) Resolutions of the Board of Directors of Case Credit
Corporation authorizing the public offering of debt
securities of Case Credit Corporation in an aggregate
principal amount of up to $1,000,000,000. (Filed as
Exhibit 4(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, and
incorporated herein by reference.)
4(c)(2) Form of Medium-Term Note, Series B (Fixed Rate) due
from 9 months to 30 years from the date of issue.
(Filed as Exhibit 4(b) to the Company's Quarterly
Report on Form
10-Q for the quarter ended June 30, 1998, and
incorporated herein by reference.)
4(c)(3) Form of Medium-Term Note, Series B (Floating Rate) due
from 9 months to 30 years from the date of issue.
(Filed as Exhibit 4(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference.)
4(c)(4) Action of Authorized Officers of Case Credit
Corporation, dated July 27, 1998, establishing the
Medium-Term Notes, Series B. (Filed as Exhibit 4(d) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference.)
4(c)(5) Officers' Certificate and Company Order of Case Credit
Corporation, dated July 27, 1998, related to the
Medium-Term Notes, Series B. (Filed as Exhibit 4(e) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference.)
10(a) Support Agreement, dated January 10, 1996, between Case
Corporation and Case Credit Corporation. (Filed as
Exhibit 10(a) to the Company's Registration Statement
No. 33-80775, and incorporated herein by reference.)
10(b)(1) Revolving Credit and Guarantee Agreement, dated as of
August 23, 1996, among Case Credit Corporation, certain
Foreign Subsidiary Borrowers from time to time parties
thereto, the Lenders parties thereto, the Co-Agents and
Lead Managers named therein, and The Chase Manhattan
Bank, as Administrative Agent. (Filed as Exhibit 10(a)
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, and incorporated
herein by reference.)
10(b)(2) First Amendment, dated as of November 21, 1996, to the
Revolving Credit and Guarantee Agreement dated as of
August 23, 1996, among Case Credit Corporation, certain
Foreign Subsidiary Borrowers from time to time parties
thereto, the Lenders parties thereto, the Co-Agents and
Lead Managers named therein, and The Chase Manhattan
Bank, as Administrative Agent. (Filed as Exhibit 10(c)
to the Company's Annual Report for the year ended
December 31, 1996, and incorporated herein by
reference.)
10(b)(3) Second Amendment, dated as of August 25, 1997, to the
Revolving Credit and Guarantee Agreement, dated as of
August 23, 1996, among Case Credit Corporation, certain
foreign Subsidiaries from time to time parties thereto,
the Lenders parties thereto, the Co-Agents and Lead
Managers named therein, and The Chase Manhattan Bank,
as Administrative Agent. (Filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, and incorporated herein by
reference.)
10(c)(1) Revolving Credit Agreement, dated as of August 23,
1996, among Case Credit Ltd., the Lenders parties
thereto, the Canadian Imperial Bank of Commerce, as Co-
Agent, and The Bank of Nova Scotia, as Agent. (Filed as
Exhibit 10(b) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, and
incorporated herein by reference.)
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description of Exhibit Numbers
-------- ---------------------- ----------
<C> <S> <C>
10(c)(2) First Amendment, dated as of November 21, 1992, to the
Revolving Credit Agreement, dated as of August 23,
1996, among Case Credit Ltd., the Lenders parties
thereto, the Canadian Imperial Bank of Commerce, as Co-
Agent, and The Bank of Nova Scotia, as Administrative
Agent. (Filed as Exhibit 10(e) to the Company's Annual
Report for the year ended December 31, 1996, and
incorporated herein by reference.)
10(c)(3) Second Amendment, dated as of August 25, 1997, to the
Revolving Credit Agreement, dated as of August 23,
1996, among Case Credit Ltd., the Lenders parties
thereto, Canadian Imperial Bank of Commerce, as Co-
Agent, and The Bank of Nova Scotia, as Administrative
Agent. (Filed as Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by
reference.)
10(d)(1) Deed of Guarantee and Negative Pledge, dated October
17, 1997, executed by Case Credit Corporation pursuant
to which Case Credit Corporation guarantees certain
indebtedness of Case Credit Australia Pty Ltd. (Filed
as Exhibit 10(c) to the Company's Quarterly Report on
Form 10-Q for the Quarter ended September 30, 1997, and
incorporated herein by reference.)
10(d)(2) Bill Facility Agreement, dated October 17, 1997,
between Case Credit Australia Pty Ltd, the lenders
parties thereto, and National Australia Bank Ltd, as
Agent. (Filed as Exhibit 10(d) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by
reference.)
10(d)(3) Deed Poll, dated October 17, 1997, executed by Case
Credit Australia Pty Limited, pursuant to which Case
Credit Australia Pty Ltd may from time to time issue
medium-term notes. (Filed as Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, and incorporated herein by
reference.)
10(e)(1) Liquidity Agreement, dated as of June 23, 1994, among
Case Equipment Loan Trust 1994-B, the Lenders named
therein, the Co-Agents named therein, and Chemical
Bank, as U.S. Agent. (Filed as Exhibit 10(a)(3) of Case
Corporation's Registration Statement No. 33-82158, and
incorporated herein by reference.)
10(e)(2) Second Amendment and Consent, dated as of August 28,
1996, among Case Equipment Loan Trust 1994-B, the
Lenders parties thereto, the Co-Agents named therein
and The Chase Manhattan Bank, as Administrative Agent,
amending the Liquidity Agreement, dated as of June 23,
1994, as previously amended, among Case Equipment Loan
Trust 1994-B, the Lenders parties thereto, and The
Chase Manhattan Bank (f/k/a Chemical Bank), as
Administrative Agent. (Filed as Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference.)
12 Computation of Ratio of Earnings to Fixed Charges.
23 The consent of Arthur Andersen LLP, Independent Public
Accountants.
27 Financial Data Schedule.
</TABLE>
40
<PAGE>
EXHIBIT 12
CASE CREDIT CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
Post-
acquisition
basis of Pre-acquisition basis
accounting of accounting
-------------- -----------------------
Years
Ended
December
November 12 to January 1 to 31,
December 31, November 11, ----------
1999 1999 1998 1997
-------------- ------------ ---- ----
<S> <C> <C> <C> <C>
Net Income............................. $ 3 $ 58 $ 85 $ 82
Add:
Interest expense..................... 25 163 143 98
Amortization of capitalized debt
expense............................. 1 1 2 1
Income tax expense and other taxes on
income.............................. 3 32 46 40
---- ---- ---- ----
Earnings as defined................ $ 32 $254 $276 $221
==== ==== ==== ====
Interest expense....................... $ 25 $163 $143 $ 98
Amortization of capitalized debt
expense............................... 1 1 2 1
---- ---- ---- ----
Fixed charges as defined........... $ 26 $164 $145 $ 99
---- ---- ---- ----
Ratio of earnings to fixed charges..... 1.23x 1.55x 1.90x 2.23x
==== ==== ==== ====
</TABLE>
41
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation, in
this Form 10-K, of our report dated January 24, 2000 included in Registration
Statement File Nos. 333-52775 and 333-71443. It should be noted that we have
not audited any financial statements of the company subsequent to December 31,
1999 or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Company's 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 67
<SECURITIES> 0
<RECEIVABLES> 2,905
<ALLOWANCES> 31
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,980
<CURRENT-LIABILITIES> 0
<BONDS> 2,424
0
0
<COMMON> 0
<OTHER-SE> 681
<TOTAL-LIABILITY-AND-EQUITY> 3,980
<SALES> 0
<TOTAL-REVENUES> 439
<CGS> 0
<TOTAL-COSTS> 104
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 188
<INCOME-PRETAX> 96
<INCOME-TAX> 0
<INCOME-CONTINUING> 61
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
