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  • First Quarter Diluted EPS of $0.40 up 122% from 2006
  • Equipment Operations first quarter gross margin up 2 percentage points
  • Full year 2007 outlook stronger, with an expected range of diluted EPS, net of restructuring, of $2.15 to $2.30
LAKE FOREST, Illinois (April 23, 2007) – CNH Global N.V. (NYSE:CNH) today reported first quarter 2007 net income of $95 million, up 121 percent compared to net income of $43 million in the first quarter of 2006. Results included restructuring charges, net of tax, of $10 million in the first quarter of 2007, compared with $3 million in the first quarter of 2006. Net income excluding restructuring charges, net of tax, was $105 million, up 128 percent compared to $46 million in the prior year. First quarter diluted earnings per share were $0.40, compared with $0.18 per share in 2006. Before restructuring, net of tax, first quarter diluted earnings were $0.44 per share, compared with $0.20 per share in 2006.
"Our Equipment Operations gross margin rose 2 percentage points compared with the first quarter last year. It is a good start towards achieving the aggressive targets we have for 2007," said Harold Boyanovsky, CNH President and Chief Executive Officer. "Our brands are performing better and attracting more customers. This year's first quarter delivered a significant performance improvement, bringing us closer to our 2010 objectives. We are reaffirming our full year industrial operating margin target of between 7.6% and 8.4%."
Highlights for the first quarter include:
  • Industry and company retail unit volumes showed particular strength in higher horsepower agricultural tractors and combines, driven by increased demand from cash crop farmers in North America and the market recovery in Brazil.
  • Construction Equipment industry retail unit sales outside of North America were particularly strong, compensating for weaker industry unit sales in North America.
  • Continued improvement in product value positioning with customers enabled increased pricing compared with the first quarter last year.
  • Positive impacts of exchange rate changes offset economic-related cost increases, contributing to another quarter of positive net price recovery for both Agricultural and Construction Equipment operations.
  • Net Debt of Equipment Operations, at the end of March, 2007 was $6 million, down from $263 million at year-end 2006.
  • Research and development spending increased 7% compared with the same period in 2006. At 2.8% of net sales of equipment, the same as in the first quarter 2006, this reflects CNH's continuing higher level of investments in product innovation and quality.
  • CNH acquired Kobelco-Case Machinery (Shanghai) Co. Ltd. which manages the Case Construction brand distribution network in China.
EQUIPMENT OPERATIONS – First Quarter Financial Results
Net sales of equipment, comprising the company's agricultural and construction equipment businesses, were $3.2 billion for 2007, compared to $3.0 billion for the same period in 2006. Net of currency variations, net sales increased 6%.
Agricultural Equipment Net Sales
  • Agricultural equipment net sales increased 9% to $2.1 billion, compared with the prior year.  Excluding currency variations, net sales were up 5%.
  • Net sales, excluding currency variations, were up 43% in Latin America, 11% in Rest-of-World markets and 10% in Western Europe, but down 6% in North America.
  • Sales increased due to favorable exchange rate changes, better volume and mix and higher pricing.
Construction Equipment Net Sales
  • Construction equipment net sales increased 11% to $1.1 billion, compared to the prior year.  Net sales were up 6% excluding currency variations.
  • Net sales increased 29% in Western Europe, 19% in Latin America and 62% in Rest-of-World markets, and declined 16% in North America, excluding currency variations.
  • Net sales increased due to favorable exchange rate changes, better volume and mix and higher pricing. 
Gross Margin
Equipment Operations gross margin (defined as net sales of equipment less cost of goods sold) for agricultural and construction equipment increased by 23% to $601 million, compared to the first quarter of 2006. As a percent of net sales, gross margin increased 2.0 percentage points to 18.5%.
  • Agricultural equipment gross margin increased in both dollars and as a percent of net sales compared to the prior year.  Higher volume and mix and positive net price recovery were the primary contributors to the improvement.
  • Construction equipment gross margin also increased both in dollars and as a percent of net sales.  Positive net price recovery and manufacturing efficiency improvements were the principal contributors.
Industrial Operating Margin
Equipment Operations industrial operating margin (defined as net sales of equipment, less cost of goods sold, SG&A and R&D costs) increased 42% to $219 million, or 6.8% of net sales, compared to $154 million or 5.2% of net sales in the first quarter of 2006. The higher gross margin noted above drove the improvement. SG&A costs increased for brand support at trade shows and equipment fairs for our dealers throughout the world, sales incentive and variable compensation programs and exchange rate variations. Investments in R&D also increased, to enhance product innovation and improve product quality, maintaining the 2.8% of net sales level of the first quarter last year.
FINANCIAL SERVICES – First Quarter Financial Results
Financial Services operations reported a 25% increase in net income, to $65 million, reflecting increased asset backed securities transaction gains and higher receivables balances, primarily in Latin America and Europe.
Equipment Operations Net Debt (defined as total debt less cash and cash equivalents, deposits in Fiat affiliates cash management pools and intersegment notes receivables) was $6 million on March 31, 2007, compared to $263 million on December 31, 2006 and $621 million on March 31, 2006.
In the quarter, net debt decreased by $257 million. Operating activities, primarily from earnings and changes in other assets and liabilities, generated $330 million of cash in the quarter. Working Capital (defined as accounts and notes receivable, excluding inter-segment notes receivable, plus inventories less accounts payables), net of currency variations, decreased by $64 million in the quarter compared to an increase of $81 million in the prior year, an improvement of $145 million. Capital expenditures, in the quarter, were $39 million.
At incurred currency rates, working capital on March 31, 2007 was $2,076 million, down $34 million from $2,110 million at December 31, 2006.
Financial Services Net Debt increased by $509 million to $4,977 million on March 31, 2007 from $4,468 million at December 31, 2006, driven primarily by additional transfers of receivables from Equipment Operations and higher levels of retail receivables.

  • New Holland Agricultural Equipment launched two important tractor lines in the 100 to 210 engine horsepower range, the T6000 Series and T7000 Series tractors, which run on B20 biodiesel fuels. Also, in January, fully integrated factory installed SuperSuite™ deluxe cabs became available on New Holland's 40 and 45 horsepower Boomer™ compact tractors.  New Holland received the "Eye on Biodiesel" award for innovation at the National Biodiesel Board Conference in San Antonio, Texas. In Latin America, New Holland launched its CR 9060 TwinRotor™  combine in Argentina and started production in Brazil of the TT3840 tractor, a 55 horsepower addition to its line of simple and reliable utility tractors in an affordable package.
  • Case IH Agricultural Equipment began shipping the new Puma™  Series tractors (135 to 180 PTO horsepower) as well as its new Axial-Flow® 7010 Class 7 Combine Harvester. Case IH's line of STX Steiger® 4 wheel drive tractors earned a 2007 FinOvation award from Farm Industry News magazine.
  • New Holland Construction Equipment launched new Tier 3 products in Latin America during the quarter, including E215 and E330 crawler excavators, new skid steer loaders and backhoe loaders and, in Europe, an upgraded Tier 3 E245 crawler excavator.
  • Case Construction Equipment launched its new Tier 3 CX B Series of full sized hydraulic excavators offering a 20% improvement in fuel efficiency, a 25% improvement in productivity (measured in cubic yards of material per gallon of fuel) and noise levels inside the cab that set new standards of quietness for the industry at 68.6 decibels (dBa). Its E Series wheel loaders, first launched in the fourth quarter of 2006 (models 721E & 821E), have become available in additional models – the 921E and 721E XT.  
U.S. farm income in 2007 should remain at 2006 levels, bolstered by the increased demand for corn for fuel ethanol. The North American market performed better than expected in the first quarter, for both over and under 40 horsepower tractors and for combines. For the full year, CNH expects North American industry retail sales of over-40 horsepower tractors to be flat to up slightly, compared with 2006, while sales of under-40 horsepower tractors are expected to be lower than in 2006. Industry retail unit sales of combines in North America should be up.
For the full year, we now expect industry retail unit sales of agricultural tractors outside of North America to be flat to up slightly, compared with 2006, while combines sales should be up, based on first quarter European and Latin American agricultural equipment markets which both performed better than expected; tractor industry sales were up in both markets and sales of sugar cane harvesters and combines also were up in Latin America. 
In total, we expect the worldwide agricultural tractor industry unit retail sales to be flat to up as much as 5% compared with 2006 while combine sales could be up about 10%. (Details by region and major products for the estimated first quarter results and full year projections are included in the attachment.)
For the full year, we expect North American industry retail unit sales of both heavy and light construction equipment to be down compared with 2006. North American construction industry sales of both heavy and light equipment declined more than expected in the first quarter, as housing starts and activity levels continued to decline. 
For the year, we expect both heavy and light construction equipment industry retail unit sales outside of North America to be up, more than offsetting the decline in North America.  Construction industry sales of both heavy and light equipment outside of North America were significantly stronger than expected in the first quarter, as construction activity levels continued to increase. 
In total, we expect worldwide industry retail unit sales of both heavy and light construction equipment to be up about 5%. (Details by region and major products for the estimated first quarter results and full year projections are included in the attachment.)
Based on these agricultural and construction equipment market outlooks and the initiatives undertaken in the last two years designed to properly position our four main brands, CNH anticipates that 2007 diluted earnings per share, before restructuring, net of tax, should be in the range of $2.15 to 2.30, compared with $1.53 for the full year 2006.
Restructuring costs, net of tax, in 2007 are expected to be about $60 million primarily related to previously announced actions.
CNH Global N.V. is a world leader in the agricultural and construction equipment businesses.  Supported by about 11,500 dealers in 160 countries, CNH brings together the knowledge and heritage of its Case and New Holland brand families with the strength and resources of its worldwide commercial, industrial, product support and finance organizations.  CNH Global N.V., whose stock is listed at the New York Stock Exchange (NYSE:CNH), is a majority-owned subsidiary of Fiat S.p.A. (FIA.MI).  More information about CNH and its Case and New Holland products can be found online at
CNH management will hold a conference call later today to review its first quarter 2007 results.  The conference call Webcast will begin at approximately 7:30 a.m. U.S. Central Time; 8:30 a.m. U.S. Eastern Time.  This call can be accessed through the investor information section of the company's Web site at and is being carried by CCBN.
Forward-looking statements. This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release, including statements regarding our competitive strengths, business strategy, future financial position, budgets, projected costs and plans and objectives of management, are forward-looking statements. These statements may include terminology such as "may," "will," "expect," "could," "should," "intend," "estimate," "anticipate," "believe," "outlook," "continue," "remain," "on track," "goal," or similar terminology.
Our outlook is predominantly based on our interpretation of what we consider key economic assumptions and involves risks and uncertainties that could cause actual results to differ. 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 us include general economic and capital market conditions, the cyclical nature of our business, customer buying patterns and preferences, foreign currency exchange rate movements, our hedging practices, our and our customers' access to credit, actions by rating agencies concerning the ratings of our debt securities and asset backed securities and the ratings of Fiat S.p.A., risks related to our relationship with Fiat S.p.A., political uncertainty and civil unrest or war 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), the results of legal proceedings, technological difficulties, results of our research and development activities, changes in environmental laws, employee and labor relations, pension and health care costs, relations with and the financial strength of dealers, the cost and availability of supplies from our suppliers, raw material costs and availability, energy prices, real estate values, animal diseases, crop pests, harvest yields, government farm programs and consumer confidence, housing starts and construction activity, concerns related to modified organisms and fuel and fertilizer costs. Additionally, our achievement of the anticipated benefits of our margin improvement initiatives depends upon, among other things, industry volumes as well as our ability to effectively rationalize our operations and to execute our brand strategy. Further information concerning factors that could significantly affect expected results is included in our Form 20-F for the year ended December 31, 2006.
We can give no assurance that the expectations reflected in our forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in these forward-looking statements. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the factors we disclose that could cause our actual results to differ materially from our expectations. We undertake no obligation to update or revise publicly any forward-looking statements.