BURR RIDGE, IL. -- In the first quarter of 2009, CNH's financial results were impacted by negative global economic conditions. CNH's North American sales of higher horsepower agricultural tractors and combine harvesters remained strong while the global construction equipment market continued to deteriorate.



First quarter performance was also adversely effected by a strong U.S. dollar, weak markets in the international region and ABS transactions. CNH's first quarter 2009 diluted loss per share, after tax, was $(0.53) compared with earnings of $0.47 in the first quarter of 2008. Results include restructuring charges, after tax, of $1 million in the quarter, compared with $13 million in the prior year. CNH's first quarter 2009 diluted loss per share before restructuring, after tax, was $(0.53) compared with earnings of $0.53 in the first quarter of 2008.



CNH also announced that it will invest approximately $250 million over the next 12 months to reduce costs and improve operating efficiency.



"CNH acted quickly to address fast changing and difficult market conditions in the first quarter of 2009," said Harold Boyanovsky, CNH President and Chief Executive Officer. "We continued to reduce construction equipment production schedules around the world and slowed output of selected agricultural equipment products in response to market difficulties in the CIS and Latin American regions. Although this decision had a negative impact on earnings in the quarter it was the correct decision in the current market conditions. At the same time, we built inventory for specific agricultural segments to meet second quarter demand. Overall, the increase of inventories was $400 million lower than in the first quarter of 2008. We anticipated a turbulent 2009 and expected the first quarter to be particularly challenging, and that certainly was the case.



"The global economic environment continued to weigh heavily on the capital equipment markets and industry sales of both construction and agricultural equipment. This was the third consecutive quarter in which CNH's construction equipment net sales have fallen and the underlying economic conditions have continued to decline in the month of April. Agricultural equipment net sales in the international region markets declined in the quarter, as did lower horsepower tractor sales in North America. Agricultural equipment net sales in Western Europe were up in constant currency, in the quarter, although the rate of growth has declined significantly from previous quarters.



"CNH continued actions to mitigate declining industry sales volumes by reducing or shutting down production in all affected businesses, reducing headcount and eliminating costs. The magnitude and speed of industry declines leads us to believe that such actions are not sufficient. Accordingly, we are today announcing a $250 million global industrial consolidation and reorganization plan to further adjust cost and operating levels. In addition, as a result of the unprecedented decline in the global construction equipment market, we have undertaken a thorough review of the positioning of our CE brands. Based on preliminary findings, actions will be introduced, starting in the second quarter of 2009, designed to streamline the business, reinforce the product architectures and significantly reduce the costs associated with the management of the networks; while improving our brand value and customer support."



First Quarter 2009 Brand Activities



Despite economic conditions, CNH continued to focus on providing its customers with industry leading products.



Case IH Agriculture expanded its Magnum tractor range in North America, while the international region saw the introduction of the Quantum N and V specialty tractors, enlarging the narrow and vineyard offerings.



New Holland Agriculture launched the 167 to 225 HP T7000 Auto Command range in Europe designed for cash crop farmers and contractors. It features the new in-house manufactured CVT transmission to optimize engine speeds and operating costs. New Holland Latin America introduced the T4030 75 HP standard tractor, ideal for mid-sized farms, as well as family agriculture.



Case Construction introduced 7 new models of its B Series excavators with increased fuel efficiency and lower noise levels.



New Holland Construction focused on the non-residential construction area, integrating its current product offering with configurations specific to infrastructure and demolition, as well as waste management applications.



First Quarter 2009 Operating Review - Equipment Operations



In Agricultural Equipment, North American industry retail unit sales of large 4-wheel drive tractors, combines, self-propelled sprayers and row crop planters grew in the first quarter, while sales of two-wheel drive tractors declined. Western European industry retail unit sales were somewhat stronger while Latin American and Rest of World industry sales declined. Overall, CNH's Agricultural Equipment Net Sales declined (12%) for the quarter compared with the first quarter of 2008 largely as a result of the stronger U.S. dollar. On a constant currency basis, Agricultural Equipment Net Sales declined 2% for the quarter.



CNH's Gross Profit declined, as mix improvements and pricing actions were offset by the industry weakness in global Construction Equipment and Agricultural Equipment in Latin American and Rest of World markets, CNH's dealer inventory reduction actions, the negative impacts of exchange rate changes and increases in material costs. This resulted in a 39% decrease in CNH's Gross Profit in the quarter compared with the first quarter of 2008. Agricultural Equipment's Gross Margin declined 1.8 percentage points compared with the first quarter of 2008, while Construction Equipment's Gross Margin declined 13.1 percentage points, for a net 3.2 percentage point decline in Equipment Operations Gross Margin relative to the comparable period in the prior year.



Equipment Operations Operating Profit declined 85 percent in the quarter compared with the first quarter of 2008 driven by the decline in Gross Profit.



Agricultural Equipment's Operating Margin declined by 2.9 percentage points, reflecting the Gross Margin decline, further impacted by R&D and SG&A costs, which declined in dollars but increased as a percentage of net sales. Construction Equipment's Operating Margin declined in the quarter also reflecting the Gross Margin decline and R&D and SG&A costs which declined in dollars but increased as a percentage of net sales.



2009 Equipment Operations Market Outlook



The unprecedented scope and depth of the world financial crisis continues to impact the global economy and the capital equipment markets. Although there are some signs that indicate that the rate of decline may be moderating, economic recovery appears to be at least nine months away.



Although we anticipate that full year global agricultural fundamentals will remain solid, we believe worldwide industry retail unit sales will continue to be impacted by challenging financial and credit conditions in most regions and that increasing financial uncertainty may cause farmers to further delay or defer purchasing new equipment. We anticipate that cash grain commodity prices will remain at higher levels than in 2007 and farm production input cost pressures will ease. In addition, we expect that global wheat and coarse grain production will exceed consumption resulting in higher corn, soybean and wheat stocks-to-use ratios. We expect that U.S. Net Farm Cash Income will be at near-record levels. For the full year, we now expect worldwide industry retail unit sales of Over-40 horsepower tractors to be down 10 percent to 15 percent and industry retail unit sales of combines to be down 25 percent to 30 percent. We expect continued weakness in the Under-40 horsepower tractor segment in North America with full year industry retail unit sales down approximately 25 percent, due in large part to the ongoing weakness in the residential construction and housing markets.



For the second quarter of 2009, CNH expects global agricultural equipment industry retail unit sales to reflect increasing levels of farmer uncertainty related to economic conditions, tight financial and credit conditions in certain markets and adverse weather impacts which could also delay planting activities in some areas. Consequently, in the second quarter, we expect worldwide industry retail unit sales of Over-40 horsepower tractors to decline by 20 percent and industry retail unit sales of combines to be down 25 percent to 30 percent. In the second quarter, we expect the Under-40 horsepower tractor segment in North America to be down 25 percent to 30 percent.



2009 CNH Outlook



CNH expects Equipment Operations Net Sales for full year 2009 to be down 15 percent to 25 percent from 2008, as some first-half strength in North American high horsepower tractors and combines is offset by declines in all other agricultural equipment markets, further weakness in construction equipment sales and effects of translating foreign sales into the stronger U.S. dollar. To compensate for lower levels of market demand and to reduce inventory levels, CNH is continuing to adjust production in its plants to align with market demand.



CNH is managing its Financial Services' portfolios to deal with financial market volatility. The Company expects Financial Services' ongoing emphasis on strict underwriting controls and disciplined receivables management to result in continued solid performance of its receivables portfolio.



These expectations are based, among other things, on the ability of the Financial Services business to secure funding. CNH expects to participate in TALF eligible transactions and other financing transactions in the second quarter. CNH continues to explore other sources of funding, either directly or by way of third party financing provided directly to its customers. The impact of utilizing these sources of funding may be an increase in interest expense and potential losses on the sale of receivables. Currently, CNH expects the profitability of Financial Services to be limited, but does not expect this to have a negative impact on Equipment Operations Sales.



The estimated $250 million of consolidation and reorganization actions, announced today, to further adjust cost and operating levels, have been developed to right-size CNH's structure in light of the current economic situation and expectations, while preserving flexibility to take advantage of growth opportunities as market conditions allow. These plans include further personnel reductions, cost reduction initiatives, re-organizations, and/or restructurings. The plans may affect all of the company's businesses as we seek to increase our ability to cost effectively manufacture quality products for our customers. In accordance with labor and other regulations throughout the world, the company will meet and discuss proposed actions with affected areas, as required, prior to finalizing any initiatives, and expects to announce further details in the coming months.



CNH Global N.V. is a world leader in the agricultural and construction equipment businesses. Supported by more than 11,300 dealers in 170 countries, CNH brings together the knowledge and heritage of its Case and New Holland brand families with the strength and resources of its worldwide commercial, industrial, product support and finance organizations. CNH Global N.V., whose stock is listed at the New York Stock Exchange, is a majority-owned subsidiary of Fiat S.p.A.



SOURCE: CNH.