Good day, ladies and gentlemen and welcome to today's CNH Industrial's 2017 Third Quarter Results Conference Call. For your information, today's conference is being recorded. After the speaker's remarks, there will be a question-and-answer session. At this time, I will turn the call over to your host, Mr. Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, George. Good afternoon and morning everyone. We would like to welcome you to the CNH Industrial Third Quarter 2017 Results Webcast Conference Call. CNH Industrial Group's CEO, Rich Tobin and Max Chiara, Group CFO will host today's call. They will use the material you should have downloaded from our website, www.cnhindustrial.com. After introductory remarks, we would be available to answer the question you may have. Before moving ahead, let me just remind you that any forward-looking statement we might be making during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the presentation material. I will now turn the call over to Mr. Rich Tobin.

Thank you, Federico. Good afternoon and good morning, everybody. Our third quarter results were largely in line with what you have projected earlier in the year with demand increases in all four of our businesses leading to revenue growth of 12% in the quarter in constant currency. Stronger end-markets and results from previous period, actions on our cost structure and manufacturing footprint are delivering promising results. As a result of the increased demand, we are able to increase our comparable production with the corresponding benefit to Industrial Activities' operating margin. Overall, we are encouraged with the development of our end-markets and our performance in terms of market share, price realization, discipline cost and inventory management; all of which have been achieved while delivering an improved comparable cash flow of performance for the quarter. A few highlights before we move into the overall results. We achieved an adjusted net income of $148 million in the third quarter with a corresponding adjusted diluted EPS of $0.11 per share, both more than double of last year. This was accomplished with a solid performance across all segments on increased activity levels resulting in an operating profit, up more than 40% at 5.5% margin, while we continue to improve our interested expense and adjusted effective tax rate as previously anticipated. Last week, Fitch Ratings upgraded both CNH Industrial N.V. and our financial arm, CNH Industrial Capital LLC, to investment grade which is now the second rating agency to upgrade us to investment grade in the past six months. This is a promising development that allows us to be eligible for the main investment grade indices in the U.S. market. We will go further into this later in the call. As a result of our year-to-date operating performance coupled with updated foreign exchange assumptions has led us to raise our 2017 guidance for Industrial Activities' net sales to $25 billion to $25.5 billion and adjusted diluted EPS to between $0.44 to $0.46 a share, while slightly increasing the net industrial debt guidance to $1.5 billion to $1.7 billion as a result of the strengthening euro to the U.S. dollar and the translation impact on outstanding loan balances. Finally, before we move on to the balance of the presentation, we had another strong quarter in terms of product awards and related accomplishments. At the Farm Progress Show, we unveiled our New Holland methane concept tractor and launched the new Daily Blue Power family with new sustainable range for limited delivery in urban areas. Additionally, our Benson, Minnesota plant achieved the bronze designation in world-class manufacturing. And once again, for the seventh consecutive year, we achieved the title of industry leader in the Dow Jones Sustainability Index. I will hand it over to Max for the financial interview, and I'll come back with further segment results. Max?

Thank you, Rich, and good morning, good afternoon, everyone. I'm on slide 5 now with Q3 financial highlights. In the quarter, we achieved industrial net sales of $6.3 billion with an increase of 16% versus last year. With solid contributions from all segment, of which 4% was currency-related. That translated into an operating margin of 5.5%, up 100 basis points versus last year with positive performance in Agricultural Equipment, Construction Equipment, and Powertrain. Adjusted net income was up 120% year-on-year to $148 million with an adjusted diluted EPS of $0.11 per share. As beyond our improved operating performance, we continue to pull-through benefits in our interest expense as well as adjusted tax rate. As a reminder, you can find the reconciliation from net income to adjusted net income in the appendix of the presentation, but at high level in the quarter, we booked a pre-tax restructuring charge of $53 million in relation to our Efficiency Program, of which $47 million including $14 million non-cash was specifically related to a capacity realignment action in our firefighting business, which will generate savings of approximately $20 million on a run rate basis by 2019. We also had a charge of $39 million in relation to the repurchase of our Notes with an interest expense savings of a similar amount over the remaining life of the two bonds part of the tender. Net industrial debt was $2.6 billion at the end of September, up $0.5 billion compared to June 2017 due to the typical seasonal increase in net working capital. Available liquidity including undrawn committed facilities was at $7.9 billion, down $0.4 billion versus June 2017. Moving on to slide 6, Industrial Activities' net sales. Let's review the total change at constant currency. In total, net sales were up $650 plus million at constant…

Thanks, Max. Agricultural Equipment net sales increased 12% and EMEA sales were up due to improved volume for combines and low horsepower tractors and the favorable net price realization. We also saw a continuation of the positive trajectory and end-market demand in APAC and LATAM, primarily Argentina. NAFTA was flat whereby row crop is stabilized with good results and combine harvesters and crop production equipment being offset by hay and forage product demand declines. Operating profit for the quarter is $208 million, a 34% increase in the third quarter of 2016. Operating margin increased 1.2 percentage points to 7.8% as a result of favorable wholesale and production volume and product mix, positive net price realization more than offsetting raw material cost increases and improved quality costs. As mentioned earlier, we are increasing our investment in R&D in our Precision Ag programs leading to an increased R&D expense of 16% quarter-to-quarter. In terms of units stats, we overproduced tractors and combines compared to retail sales in the quarter but continued to under produce high horsepower tractors in NAFTA as anticipated. So moving on to slide 16, considering the channel inventory stats from the development of the NAFTA market in terms of demand, that it's our hope that we can retire this slide in Q4, since we've been having it out here now since 2015-ish because of the progress that we've made in terms of channel reduction. So, NAFTA row crop production was 14% lower than last year, leading to an underproduction compared to retail sales and 9% on high horsepower tractors and 16% overproduction in combines on increased demand and inventory balances. We continue to manage our channel inventory down, maintaining a position that's 20% lower than one year ago as a result of destocking actions in high horsepower tractors and…

Thank you, Mr. Tobin. Now, we are ready to start the Q&A. George, please take the first question.

Thank you, Mr. Donati. Ladies and gentleman just once again Today's first question is coming from Mr. Joe O'Dea calling from Vertical Research Partners. Please go ahead, sir.

Hi, good morning. First on NAFTA production in Ag and particularly in high horsepower. I think a quarter ago; you were talking about waiting until you had a little bit more visibility into the end of the year on when to end underproduction in high horsepower tractors. Just any updated thoughts there, your comfort level with channel inventories? And related just what we're seeing in a little bit of a split between overproduction in combines underproduction and high horsepower tractors, any kind of comments on what we're seeing there?

Sure. I mean, I think I'll refer you back to the slide that shows used to new sales in NAFTA. We've thought that NAFTA in combine harvesters has been in balance since; let's call it, beginning to mid-2016. So the fact that we're overproducing now is a reflection that we believe that the inventory has been in balance for approximately 18 months. So, now it just comes back to projecting retail demand and then with seasonality of when we're producing – of producing to that demand. The stats look good for high horsepower tractor. We'll see. I think that we're feeling better about the ability to produce in line with retail in 2018, but I think that we'd like to see what kind of clearing that we get in the fourth quarter to really update that figure.

Appreciate it. And then on some of the moves with the debt and the ratings, any help just as we think about moving forward taking into consideration some of the retirements now being eligible for investment grade indices, just what that means from an interest expense quarterly run rate moving forward?

I'll go ahead and let Max answer that one.

So, Joe, you can basically calculate yourself looking at the distribution of our maturities. As a result of the reduced price that we are experiencing now in the market after the investment grade announcement, we would suggest to hold on until we can come out with the 2018 guidance as we need to see how the exchange rate settles, and we can probably give you a hard number for 2018.

Anything just on the normal spread?

Yeah, on the spreads. Joe, I think the bottom line is it allows us to issue a longer dated paper, right, in the U.S. – in both in euro and in dollar. So our expectation is that the duration table, it's going to be retired and extend pretty much of what you've seen through this past year.

Perfect. Thank you.

Thank you much, sir. We'll now go to Palash Somani calling in from JPMorgan. Please go ahead.

Hi, guys. This is Palash Somani on for Ann Duignan of JPMorgan. My first question is now that CNHI is rated investment grade, are you guys exploring any spinoffs or feel (25:05) of any of your current businesses?

It's a bit premature since we've just got our second rating upgrade. Look, I really have no comment about that. I don't think there's much of a relation between reaching investment grade and that general corporate activity. What else you got, Palash?

Okay. Could you also update us on your early other program for spring equipment and for combines into 2018?

Again, it's a bit early to start projecting 2018. I think the trajectory for combine harvesters is good closing out 2017. So I think that barring a change in commodity prices that we would expect that trajectory to continue. On the tractor side, I think – that if you listened to the answer of the question I said before, it's we need to see where we are in terms of channel inventory, but we don't have any expectation for any decline in demand in 2018 relative to where farmer net income is projected.

Okay. Thanks. I'll get in line.

Thank you so much, Mr. Somani. We'll now go to Mr. Martino De Ambroggi calling in from Equita. Please go ahead.

Yeah. Thank you. Good morning, good afternoon, everybody. The first question is on the Ag business. In Q3, it showed an incremental margin of 18%, which is below what you mentioned as a normalized level of 25%, 30% assuming that the top line grew quite significantly. So if you could elaborate on the reason why the incremental margin was not in the range you guided, and maybe it's just a matter of currency, but I don't know? The second is on the Commercial Vehicles business. You showed a negative price effect in Q3. So (a) what we should expect for the rest of the year in terms of profitability and pricing in particular, and (b) I remember at the beginning of the year, you mentioned that you expected improvement in each and every division at operating level, is it still the case for the CV business?

All right, let's go to the Ag question. There's really no FX in it and the incremental margin numbers that we've been using historically is weighted to the decline or the increase in NAFTA. So you had a quarter with virtually no revenue increase in NAFTA. So, other than mix, there's no impact on incremental margins quarter-to-quarter because of that effect, so that's why it's 18% rather than the 25% that we had talked about in the past when the NAFTA market was declining. In terms of CV, the negative pricing is a bit of mix. As we mentioned in the commentary, we had heavy weighting towards the large fleet deals in heavy segment and more vans rather than cab-over in light commercial vehicles. We're still trying to price for a lot of the Euro 6 content. Do we expect it to be better in the fourth quarter? I think that our expectation is that it will be better in the fourth quarter. Can they? It's a matter of execution and foreign exchange or whether year-over-year Commercial Vehicles will be better for the full year. My expectation is yes, but we need to execute in the fourth quarter.

Okay. Thank you. If I may just as follow-up on buyback of shares. Now, you're investment grade for two rating agencies, should we expect an acceleration in buyback?

I don't think you're going to see anything more than we have announced in terms of the authorization for 2017 and we'll update the position for 2018 at the end of the year.

Okay. Thank you.

Thank you very much, Mr. De Ambroggi. Today's final question is coming from Mr. Ross Gilardi, calling here from Bank of America. Please go ahead, sir.

Yeah. Hi, good morning. Good afternoon, guys.

Hi, Ross.

What is your guidance assumed from margins year-on-year in Ag in the fourth quarter?

We don't give you segmental assumptions, Ross. I think, overall, we'd expect to see the same trajectory of improvement that we saw year-to-date of that.

Okay. That's helpful. And just a little bit more on high horsepower tractors. Demand hit your end-market forecast in the fourth quarter, are your inventories where they need to be at the end of the year and are you able to produce more on 2018 versus 2017 for NAFTA high horse?

No, I think that they're still higher than what we'd want them to be. We think that the metrics for the clearing is good, but overall I would not expected NAFTA to increase production for high horsepower tractors in Q4. We'd allow the position to clear. We can catch up in Q1 next year, if needed be.

Oh, I'm sorry, Richard, that was more a question like if your – if demand hits your end-market forecast in your fourth quarter, are your inventories would need to be produced more 2018 versus 2017?

Oh, I hope so. But right now I think if we could get it balanced for 2018, we'd be pleased with that after the last four years, but I think it's a little too early to tell because we expect a significant amount of activity in Q4 on the used based on the numbers that we see in terms of the clearing.

Okay, thanks. And then what was the – you mentioned your order book up 50%; there's just a lot of earnings calls today and there was a lot of detail provided. So what was that number pertaining to? Was that...?

Construction.

Global construction is up 50%. Okay. Got you. Thanks.

Yeah.

Thank you very much, Mr. Gilardi. Ladies and gentlemen that will conclude the question-and-answer session. I'll now like to turn the call back over to Mr. Federico Donati for any additional or closing remarks.

Thank you George. We would like to thank everyone for attending today's call with us. Have a good day.

That will conclude today's conference. Thank you for your participation. Ladies and gentlemen, you may now disconnect.