0000018230 ~~us-gaap:IntersegmentEliminationMember~~ cat:~~OtherReconcilingItemsMember 2018-07-01 2018-09-30 0000018230 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember~~FinanceReceivableMember cat:~~SmallerCompanyMember 2018-12-31~~CustomerMember cat:MiningMember 2019-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2019~~March 31, 2020

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

For the transition period from to

Commission File Number: 1-768

CATERPILLAR INC.

(Exact name of registrant as specified in its charter)



Delaware				37-0602744
(State or other jurisdiction of incorporation)				(IRS Employer I.D. No.)
510 Lake Cook Road,	Suite 100,	Deerfield,	Illinois	60015
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (224) 551-4000

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock ($1.00 par value)	CAT	New York Stock Exchange	¹
9 3/8% Debentures due March 15, 2021	CAT21	New York Stock Exchange
8% Debentures due February 15, 2023	CAT23	New York Stock Exchange
5.3% Debentures due September 15, 2035	CAT35	New York Stock Exchange

¹ In addition to the New York Stock Exchange, Caterpillar common stock is also listed on stock exchanges in France and Switzerland.

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

At ~~September 30, 2019, 552,658,387~~March 31, 2020, 541,951,509 shares of common stock of the registrant were outstanding.

Table of Contents



Part I. Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6751
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9674
Item 4.	Controls and Procedures	9674

Part II. Other Information
Item 1.	Legal Proceedings	9775
Item 1A.	Risk Factors	* 75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9776
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	9877

* Item omitted because no answer is called for or item is not applicable.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Caterpillar Inc.

Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)


	Three Months Ended September 30				Three Months Ended March 31
	2019		2018		2020		2019
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	11,974	$	12,763	$	9,914	$	12,724
Revenues of Financial Products	784		747		721		742
Total sales and revenues	12,758		13,510		10,635		13,466

Operating costs:
Cost of goods sold	8,569		9,022		7,266		9,003
Selling, general and administrative expenses	1,251		1,299		1,121		1,319
Research and development expenses	431		479		356		435
Interest expense of Financial Products	189		185		175		190
Other operating (income) expenses	298		390		313		312
Total operating costs	10,738		11,375		9,231		11,259

Operating profit	2,020		2,135		1,404		2,207

Interest expense excluding Financial Products	103		102		113		103
Other income (expense)	88		102		222		160

Consolidated profit before taxes	2,005		2,135		1,513		2,264

Provision (benefit) for income taxes	518		415		425		387
Profit of consolidated companies	1,487		1,720		1,088		1,877

Equity in profit (loss) of unconsolidated affiliated companies	7		7		5		7

Profit of consolidated and affiliated companies	1,494		1,727		1,093		1,884

Less: Profit (loss) attributable to noncontrolling interests	—		—		1		3

Profit ¹	$	1,494	$	1,727	$	1,092	$	1,881

Profit per common share	$	2.69	$	2.92	$	2.00	$	3.29

Profit per common share – diluted ²	$	2.66	$	2.88	$	1.98	$	3.25

Weighted-average common shares outstanding (millions)
– Basic	556.3		592.1		546.8		572.4
– Diluted²	561.2		599.4		551.1		578.8

¹ Profit attributable to common shareholders.

² Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

See accompanying notes to Consolidated Financial Statements.

Caterpillar Inc.

Consolidated Statement of Comprehensive Income

(Unaudited)

(Dollars in millions)


	Three Months Ended September 30						Three Months Ended March 31
	2019			2018			2020			2019

Profit of consolidated and affiliated companies	$	1,494		$	1,727		$	1,093		$	1,884
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax (provision)/benefit of: 2019 - $(21); 2018 - $(3)	(263		)	(65		)
Foreign currency translation, net of tax (provision)/benefit of: 2020- $(10); 2019 - $(4)							(360		)	(22		)

Pension and other postretirement benefits:
Amortization of prior service (credit) cost, net of tax (provision)/benefit of: 2019 - $2; 2018 - $2	(8		)	(7		)
Amortization of prior service (credit) cost, net of tax (provision)/benefit of: 2020 - $2; 2019 - $3;							(7		)	(7		)

Derivative financial instruments:
Gains (losses) deferred, net of tax (provision)/benefit of: 2019 - $(16); 2018 - $(9)	59			32
(Gains) losses reclassified to earnings, net of tax (provision)/benefit of: 2019 - $20; 2018 - $8	(76		)	(31		)
Gains (losses) deferred, net of tax (provision)/benefit of: 2020 - 3 ; 2019 - $(3)							(5		)	10
(Gains) losses reclassified to earnings, net of tax (provision)/benefit of: 2020 - $15 $; 2019 - $2							(55		)	(9		)

Available-for-sale securities:
Gains (losses) deferred, net of tax (provision)/benefit of: 2019 - $(2); 2018 - $0	4			(1		)
Gains (losses) deferred, net of tax (provision)/benefit of: 2020 - $4; 2019 - $(6)							(18		)	15
(Gains) losses reclassified to earnings, net of tax (provision)/benefit of: 2020 - $0; 2019 - $0							—			1

Total other comprehensive income (loss), net of tax	(284		)	(72		)	(445		)	(12		)
Comprehensive income	1,210			1,655			648			1,872
Less: comprehensive income attributable to the noncontrolling interests	—			—			1			3
Comprehensive income attributable to shareholders	$	1,210		$	1,655		$	647		$	1,869

See accompanying notes to Consolidated Financial Statements.

~~Caterpillar Inc.~~

~~Consolidated Statement of Results of Operations~~

~~(Unaudited)~~

~~(Dollars in millions except per share data)~~

Nine Months Ended September 30
2019 2018
Sales and revenues:
Sales of Machinery, Energy & Transportation $ 38,369
$ 38,192
Revenues of Financial Products 2,287
2,188
Total sales and revenues 40,656
40,380

Operating costs:

Cost of goods sold 27,513
27,010
Selling, general and administrative expenses 3,879
4,015
Research and development expenses 1,307
1,384
Interest expense of Financial Products 571
533
Other operating (income) expenses 946
1,028
Total operating costs 34,216
33,970

Operating profit 6,440
6,410

Interest expense excluding Financial Products 309
305
Other income (expense) 316
350

Consolidated profit before taxes 6,447
6,455

Provision (benefit) for income taxes 1,470
1,377
Profit of consolidated companies 4,977
5,078

Equity in profit (loss) of unconsolidated affiliated companies 20
21

Profit of consolidated and affiliated companies 4,997
5,099

Less: Profit (loss) attributable to noncontrolling interests 2
—

Profit ¹
$ 4,995
$ 5,099

Profit per common share $ 8.84
$ 8.57

Profit per common share – diluted ²
$ 8.75
$ 8.45

Weighted-average common shares outstanding (millions)
– Basic 565.2
595.3
– Diluted²
570.8
603.8

¹ ~~Profit attributable to common shareholders.~~

² ~~Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.~~

~~See accompanying notes to Consolidated Financial Statements.~~

~~Caterpillar Inc~~.

~~Consolidated Statement of Comprehensive Income~~

~~(Unaudited)~~

~~(Dollars in millions)~~

Nine Months Ended September 30
2019 2018

Profit of consolidated and affiliated companies $ 4,997
$ 5,099
Other comprehensive income (loss), net of tax:
   Foreign currency translation, net of tax (provision)/benefit of: 2019 - $(19); 2018 - $(18) (186 ) (292 )

   Pension and other postretirement benefits:
        Current year prior service credit (cost), net of tax (provision)/benefit of: 2019 - $0; 2018 - $1 —
(2 )
        Amortization of prior service (credit) cost, net of tax (provision)/benefit of: 2019 - $8; 2018 - $5 (22 ) (21 )

   Derivative financial instruments:
        Gains (losses) deferred, net of tax (provision)/benefit of: 2019 - $(15); 2018 - $(23) 53
73
        (Gains) losses reclassified to earnings, net of tax (provision)/benefit of: 2019 - $23; 2018 - $32 (86 ) (109 )

   Available-for-sale securities:
        Gains (losses) deferred, net of tax (provision)/benefit of: 2019 - $(10); 2018 - $3 34
(14 )

Total other comprehensive income (loss), net of tax (207 ) (365 )
Comprehensive income 4,790
4,734
Less: comprehensive income attributable to the noncontrolling interests 2
—
Comprehensive income attributable to shareholders $ 4,788
$ 4,734

~~See accompanying notes to Consolidated Financial Statements.~~

Caterpillar Inc.

Consolidated Statement of Financial Position

(Unaudited)

(Dollars in millions)


	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and short-term investments	$	7,906		$	7,857		$	7,123		$	8,284
Receivables – trade and other	8,275			8,802			7,834			8,568
Receivables – finance	9,192			8,650			9,120			9,336
Prepaid expenses and other current assets	1,607			1,765			1,761			1,739
Inventories	12,180			11,529			11,748			11,266
Total current assets	39,160			38,603			37,586			39,193

Property, plant and equipment – net	12,842			13,574			12,488			12,904
Long-term receivables – trade and other	1,193			1,161			1,196			1,193
Long-term receivables – finance	12,412			13,286			12,021			12,651
Noncurrent deferred and refundable income taxes	1,372			1,439			1,426			1,411
Intangible assets	1,630			1,897			1,478			1,565
Goodwill	6,142			6,217			6,140			6,196
Other assets	3,242			2,332			3,559			3,340
Total assets	$	77,993		$	78,509		$	75,894		$	78,453

Liabilities
Current liabilities:
Short-term borrowings:
Machinery, Energy & Transportation	$	—		$	—		$	—		$	5
Financial Products	4,268			5,723			4,789			5,161
Accounts payable	6,141			7,051			5,769			5,957
Accrued expenses	3,727			3,573			3,776			3,750
Accrued wages, salaries and employee benefits	1,518			2,384			878			1,629
Customer advances	1,309			1,243			1,295			1,187
Dividends payable	—			495			—			567
Other current liabilities	2,188			1,919			2,074			2,155
Long-term debt due within one year:
Machinery, Energy & Transportation	25			10			143			16
Financial Products	8,025			5,820			7,792			6,194
Total current liabilities	27,201			28,218			26,516			26,621

Long-term debt due after one year:
Machinery, Energy & Transportation	9,134			8,005			8,998			9,141
Financial Products	16,454			16,995			15,371			17,140
Liability for postemployment benefits	5,900			7,455			6,333			6,599
Other liabilities	4,311			3,756			4,437			4,323
Total liabilities	63,000			64,429			61,655			63,824
Commitments and contingencies (Notes 11 and 14)
Shareholders’ equity
Common stock of $1.00 par value:
Authorized shares: 2,000,000,000 Issued shares: (9/30/19 and 12/31/18 – 814,894,624) at paid-in amount	5,951			5,827
Treasury stock (9/30/19 – 262,236,237 shares; 12/31/18 – 239,351,886 shares) at cost	(23,693		)	(20,531		)
Authorized shares: 2,000,000,000 Issued shares: (3/31/20 and 12/31/19 – 814,894,624) at paid-in amount							6,046			5,935
Treasury stock (3/31/20 – 272,943,115 shares; 12/31/19 – 264,812,014 shares) at cost							(25,341		)	(24,217		)
Profit employed in the business	34,477			30,427			35,504			34,437
Accumulated other comprehensive income (loss)	(1,783		)	(1,684		)	(2,012		)	(1,567		)
Noncontrolling interests	41			41			42			41
Total shareholders’ equity	14,993			14,080			14,239			14,629
Total liabilities and shareholders’ equity	$	77,993		$	78,509		$	75,894		$	78,453

See accompanying notes to Consolidated Financial Statements.

Caterpillar Inc.

Consolidated Statement of Changes in Shareholders’ Equity

(Unaudited)

(Dollars in millions)



	Common stock			Treasury stock			Profit employed in the business			Accumulated other comprehensive income (loss)			Noncontrolling interests			Total
Three Months Ended March 31, 2019
Balance at December 31, 2018	$	5,827		$	(20,531	)	$	30,427		$	(1,684	)	$	41		$	14,080
Adjustments to adopt new accounting guidance
Lease accounting	—			—			235			—			—			235
Reclassification of certain tax effects from accumulated other comprehensive income	—			—			(108		)	108			—			—
Balance at January 1, 2019	5,827			(20,531		)	30,554			(1,576		)	41			14,315
Profit of consolidated and affiliated companies	—			—			1,881			—			3			1,884
Foreign currency translation, net of tax	—			—			—			(22		)	—			(22		)
Pension and other postretirement benefits, net of tax	—			—			—			(7		)	—			(7		)
Derivative financial instruments, net of tax	—			—			—			1			—			1
Available-for-sale securities, net of tax	—			—			—			16			—			16
Distribution to noncontrolling interests	—			—			—			—			(1		)	(1		)
Common shares issued from treasury stock for stock-based compensation: 1,859,065	(73		)	68			—			—			—			(5		)
Stock-based compensation expense	45			—			—			—			—			45
Common shares repurchased: 5,699,525 ¹	—			(751		)	—			—			—			(751		)
Other	5			—			—			—			(2		)	3
Balance at March 31, 2019	$	5,804		$	(21,214	)	$	32,435		$	(1,588	)	$	41		$	15,478

Three Months Ended March 31, 2020
Balance at December 31, 2019	$	5,935		$	(24,217	)	$	34,437		$	(1,567	)	$	41		$	14,629
Adjustments to adopt new accounting guidance ²
Credit losses	—			—			(25		)	—			—			(25		)
Balance at January 1, 2020	5,935			(24,217		)	34,412			(1,567		)	41			14,604
Profit of consolidated and affiliated companies	—			—			1,092			—			1			1,093
Foreign currency translation, net of tax	—			—			—			(360		)	—			(360		)
Pension and other postretirement benefits, net of tax	—			—			—			(7		)	—			(7		)
Derivative financial instruments, net of tax	—			—			—			(60		)	—			(60		)
Available-for-sale securities, net of tax	—			—			—			(18		)	—			(18		)
Common shares issued from treasury stock for stock-based compensation: 1,197,083	(62		)	39			—			—			—			(23		)
Stock-based compensation expense	47			—			—			—			—			47
Common shares repurchased: 9,328,184 ¹	—			(1,163		)	—			—			—			(1,163		)
Other	126			—			—			—			—			126
Balance at March 31, 2020	$	6,046		$	(25,341	)	$	35,504		$	(2,012	)	$	42		$	14,239

Common
stock

Treasury
stock

Profit
employed
in the
business

Accumulated
other
comprehensive
income (loss)

Noncontrolling
interests
Total
Three Months Ended September 30, 2018
Balance at June 30, 2018 $ 5,746
$ (18,028 ) $ 28,657
$ (1,496 ) $ 63
$ 14,942
Profit of consolidated and affiliated companies —
—
1,727
—
—
1,727
Foreign currency translation, net of tax —
—
—
(65 ) —
(65 )
Pension and other postretirement benefits, net of tax —
—
—
(7 ) —
(7 )
Derivative financial instruments, net of tax —
—
—
1
—
1
Available-for-sale securities, net of tax —
—
—
(1 ) —
(1 )
Change in ownership from noncontrolling interests (27 ) —
—
—
(13 ) (40 )
Common shares issued from treasury stock for stock-based compensation: 555,936 7
29
—
—
—
36
Stock-based compensation expense 52
—
—
—
—
52
Common shares repurchased: 4,774,613 ¹
—
(682 ) —
—
—
(682 )
Other (63 ) —
—
—
(10 ) (73 )
Balance at September 30, 2018 $ 5,715
$ (18,681 ) $ 30,384
$ (1,568 ) $ 40
$ 15,890

Three Months Ended September 30, 2019

Balance at June 30, 2019 $ 5,822
$ (22,467 ) $ 32,981
$ (1,499 ) $ 41
$ 14,878
Profit of consolidated and affiliated companies —
—
1,494
—
—
1,494
Foreign currency translation, net of tax —
—
—
(263 ) —
(263 )
Pension and other postretirement benefits, net of tax —
—
—
(8 ) —
(8 )
Derivative financial instruments, net of tax —
—
—
(17 ) —
(17 )
Available-for-sale securities, net of tax —
—
—
4
—
4
Common shares issued from treasury stock for stock-based compensation: 404,606 —
20
—
—
—
20
Stock-based compensation expense 57
—
—
—
—
57
Common shares repurchased: 10,335,410 ¹
—
(1,246 ) —
—
—
(1,246 )
Other 72
—
2
—
—
74
Balance at September 30, 2019 $ 5,951
$ (23,693 ) $ 34,477
$ (1,783 ) $ 41
$ 14,993

¹ See Note 12 for additional information.

~~See accompanying notes to Consolidated Financial Statements.~~

~~Caterpillar Inc.~~

~~Consolidated Statement of Changes in Shareholders’ Equity~~

~~(Unaudited)~~

~~(Dollars in millions)~~

Common
stock

Treasury
stock

Profit
employed
in the
business

Accumulated
other
comprehensive
income (loss)

Noncontrolling
interests
Total
Nine Months Ended September 30, 2018
Balance at December 31, 2017 $ 5,593
$ (17,005 ) $ 26,301
$ (1,192 ) $ 69
$ 13,766
Adjustments to adopt new accounting guidance
Revenue recognition —
—
(12 ) —
—
(12 )
Tax accounting for intra-entity asset transfers —
—
(35 ) —
—
(35 )
Recognition and measurement of financial assets and liabilities —
—
11
(11 ) —
—
Balance at January 1, 2018 5,593
(17,005 ) 26,265
(1,203 ) 69
13,719
Profit of consolidated and affiliated companies —
—
5,099
—
—
5,099
Foreign currency translation, net of tax —
—
—
(292 ) —
(292 )
Pension and other postretirement benefits, net of tax —
—
—
(23 ) —
(23 )
Derivative financial instruments, net of tax —
—
—
(36 ) —
(36 )
Available-for-sale securities, net of tax —
—
—
(14 ) —
(14 )
Change in ownership from noncontrolling interests (25 ) —
—
—
(18 ) (43 )
Dividends declared ¹
—
—
(980 ) —
—
(980 )
Distribution to noncontrolling interests —
—
—
—
(1 ) (1 )
Common shares issued from treasury stock for stock-based compensation: 5,284,974 36
256
—
—
—
292
Stock-based compensation expense 164
—
—
—
—
164
Common shares repurchased: 12,804,035 ²
—
(1,932 ) —
—
—
(1,932 )
Other (53 ) —
—
—
(10 ) (63 )
Balance at September 30, 2018 $ 5,715
$ (18,681 ) �� $ 30,384
$ (1,568 ) $ 40
$ 15,890

Nine Months Ended September 30, 2019

Balance at December 31, 2018 $ 5,827
$ (20,531 ) $ 30,427
$ (1,684 ) $ 41
$ 14,080
Adjustments to adopt new accounting guidance³

Lease accounting —
—
235
—
—
235
Reclassification of certain tax effects from accumulated other comprehensive income —
—
(108 ) 108
—
—
Balance at January 1, 2019 5,827
(20,531 ) 30,554
(1,576 ) 41
14,315
Profit of consolidated and affiliated companies —
—
4,995
—
2
4,997
Foreign currency translation, net of tax —
—
—
(186 ) —
(186 )
Pension and other postretirement benefits, net of tax —
—
—
(22 ) —
(22 )
Derivative financial instruments, net of tax —
—
—
(33 ) —
(33 )
Available-for-sale securities, net of tax —
—
—
34
—
34
Dividends declared ¹
—
—
(1,074 ) —
—
(1,074 )
Distribution to noncontrolling interests —
—
—
—
(2 ) (2 )
Common shares issued from treasury stock for stock-based compensation: 2,907,710 (62 ) 121
—
—
—
59
Stock-based compensation expense 170
—
—
—
—
170
Common shares repurchased: 25,792,061 ²
—
(3,283 ) —
—
—
(3,283 )
Other 16
—
2
—
—
18
Balance at September 30, 2019 $ 5,951
$ (23,693 ) $ 34,477
$ (1,783 ) $ 41
$ 14,993

¹~~Dividends per share of common stock of $1.89 and $1.64 were declared in the nine months ended September 30, 2019 and 2018, respectively.~~

² ~~See Note 12 for additional information.~~

³ See Note 2 for additional information.

See accompanying notes to Consolidated Financial Statements.

Caterpillar Inc.

Consolidated Statement of Cash Flow

(Unaudited)

(Millions of dollars)


	Nine Months Ended September 30						Three Months Ended March 31
	2019			2018			2020			2019
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	4,997		$	5,099		$	1,093		$	1,884
Adjustments for non-cash items:
Depreciation and amortization	1,933			2,065			614			641
Gain on remeasurement of a non-U.S. pension obligation							(254		)	—
Provision (benefit) for deferred income taxes							20			(11		)
Other	627			630			534			88
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	427			(725		)	500			(150		)
Inventories	(676		)	(1,822		)	(541		)	(813		)
Accounts payable	(669		)	496			90			355
Accrued expenses	114			(32		)	(97		)	135
Accrued wages, salaries and employee benefits	(858		)	(418		)	(722		)	(1,185		)
Customer advances	169			59			116			105
Other assets – net	3			394			(50		)	(7		)
Other liabilities – net	(1,589		)	(1,271		)	(173		)	79
Net cash provided by (used for) operating activities	4,478			4,475			1,130			1,121

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(723		)	(921		)	(305		)	(278		)
Expenditures for equipment leased to others	(1,133		)	(1,208		)	(243		)	(269		)
Proceeds from disposals of leased assets and property, plant and equipment	812			732			216			209
Additions to finance receivables	(9,453		)	(9,092		)	(2,953		)	(2,615		)
Collections of finance receivables	9,144			8,032			3,153			2,818
Proceeds from sale of finance receivables	183			416			31			44
Investments and acquisitions (net of cash acquired)	(6		)	(357		)	(35		)	(2		)
Proceeds from sale of businesses and investments (net of cash sold)	3			14
Proceeds from sale of securities	281			363			68			57
Investments in securities	(425		)	(417		)	(180		)	(107		)
Other – net	(37		)	24			35			(38		)
Net cash provided by (used for) investing activities	(1,354		)	(2,414		)	(213		)	(181		)

Cash flow from financing activities:
Dividends paid	(1,564		)	(1,444		)	(567		)	(494		)
Common stock issued, including treasury shares reissued	59			292			(23		)	(5		)
Common shares repurchased	(3,283		)	(2,000		)	(1,043		)	(751		)
Proceeds from debt issued (original maturities greater than three months):
Machinery, Energy & Transportation	1,479			47			15			—
Financial Products	7,348			7,026			2,126			2,665
Payments on debt (original maturities greater than three months):
Machinery, Energy & Transportation	(8		)	(6		)	(6		)	(2		)
Financial Products	(6,054		)	(5,636		)	(2,460		)	(2,565		)
Short-term borrowings – net (original maturities three months or less)	(1,006		)	(465		)	(40		)	(522		)
Other – net	(2		)	(32		)	(1		)	(1		)
Net cash provided by (used for) financing activities	(3,031		)	(2,218		)	(1,999		)	(1,675		)
Effect of exchange rate changes on cash	(47		)	(117		)	(80		)	3
Increase (decrease) in cash and short-term investments and restricted cash	46			(274		)	(1,162		)	(732		)
Cash and short-term investments and restricted cash at beginning of period	7,890			8,320			8,292			7,890
Cash and short-term investments and restricted cash at end of period	$	7,936		$	8,046		$	7,130		$	7,158

All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.

See accompanying notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	A. Nature of operations

Information in our financial statements and related commentary are presented in the following categories:

Machinery, Energy & Transportation (ME&T) – Represents the aggregate total of Construction Industries, Resource Industries, Energy & Transportation and the All Other operating segment and related corporate items and eliminations.

Financial Products – Primarily includes the company’s Financial Products Segment. This category includes Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings Inc. (Insurance Services) and their respective subsidiaries.

B. Basis of presentation

In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, (b) the consolidated comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, (c) the consolidated financial position at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, (d) the consolidated changes in shareholders’ equity for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 and (e) the consolidated cash flow for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019. The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our company’s annual report on Form 10-K for the year ended December 31, ~~2018~~2019 (~~2018~~2019 Form 10-K).

The December 31, ~~2018~~2019 financial position data included herein is derived from the audited consolidated financial statements included in the ~~2018~~2019 Form 10-K but does not include all disclosures required by U.S. GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.

Unconsolidated Variable Interest Entities (VIEs)

We have affiliates, suppliers and dealers that are VIEs of which we are not the primary beneficiary. Although we have provided financial support, we do not have the power to direct the activities that most significantly impact the economic performance of each entity. Our maximum exposure to loss from these VIEs for which we are not the primary beneficiary was ~~$138~~$134 million and ~~$131~~$133 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

~~In addition,~~ Cat Financial has end-user customers that are VIEs of which we are not the primary beneficiary. Although we have provided financial support to these entities and therefore have a variable interest, we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to loss from our involvement with these VIEs is limited to the credit risk inherently present in the financial support that we have provided. These risks are evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses.

2. New accounting guidance

A. Adoption of new accounting standards

~~Lease accounting~~Credit losses (Accounting Standards Update (ASU) ~~2016-02)~~2016-13) –In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued ~~accounting guidance that revises the accounting for leases. Under the~~ new guidance, lessees are required to recognize a right-of-use asset and a lease liability for substantially all leases. The new guidance will continue to classify leases as either financing or operating, with classification affecting the pattern of expense recognition. The accounting applied by a lessor under the new guidance will be substantially equivalent to current lease accounting guidance. The new guidance was effective January 1, 2019 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2019. The prior period comparative information has not been recasted and continues to be reported under the accounting guidance in effect for those periods.

The new guidance provides a number of optional practical expedients in transition. We elected the “package of practical expedients,” which allows us not to reassess under the new guidance our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides practical expedients for an entity’s ongoing lessee accounting. For certain property and information technology equipment leases, we have elected to separate payments for lease components from non-lease components. For all other leases, we have elected not to separate lease and non-lease components. We have elected the short-term lease recognition exemption for all leases that qualify, which means we will not recognize right-of-use assets or lease liabilities for these leases with a term of twelve months or less.

The most significant effects of adoption relate to the recognition of right-of-use assets and lease liabilities on our balance sheet for operating leases and providing new disclosures about our leasing activities. In addition, we derecognized existing assets and debt obligations for a sale-leaseback transaction that qualified for sale accounting under the new guidance. The gain associated with this change in accounting was recognized through opening retained earnings as of January 1, 2019. The adoption did not have a material impact on our results of operations.

In March 2019, the FASB issued Leases - Codification improvements (ASU 2019-01) which amended the new leasing guidance. Under these amendments, lessors that are not manufacturers or dealers will use their cost, less any discounts that may apply, as the fair value of the underlying asset, and lessors within the scope of Financial Services-Depository and Lending guidance will present all principal payments received under leases within investment activities on the statement of cash flows. We adopted the new guidance effective January 1, 2019, and the adoption did not have a material impact to our financial statements.

~~See Note 10 for additional information.~~

~~The cumulative effect of initially applying the new lease guidance to our consolidated financial statements on January 1, 2019 was as follows:~~

Consolidated Statement of Financial Position
(Millions of dollars) Balance as of December 31, 2018 Cumulative Impact from Adopting New Lease Guidance Balance as of January 1, 2019
Assets
Prepaid expenses and other current assets $ 1,765
$ (17 ) $ 1,748
Property, plant and equipment - net $ 13,574
$ (26 ) $ 13,548
Noncurrent deferred and refundable income taxes $ 1,439
$ (77 ) $ 1,362
Other assets $ 2,332
$ 713
$ 3,045

Liabilities
Accrued expenses $ 3,573
$ (27 ) $ 3,546
Other current liabilities $ 1,919
$ 209
$ 2,128
Long-term debt due after one year
Machinery, Energy & Transportation $ 8,005
$ (362 ) $ 7,643
Other liabilities $ 3,756
$ 538
$ 4,294

Shareholders’ equity

Profit employed in the business $ 30,427
$ 235
$ 30,662

~~We adopted the following ASUs effective January 1, 2019, none of which had a material impact on our financial statements:~~



~~ASU~~	~~Description~~
~~2017-08~~	~~Premium amortization on purchased callable debt securities~~
~~2017-12~~	~~Derivatives and hedging - Targeted improvements~~
~~2018-02~~	~~Reclassification of certain tax effects from accumulated other comprehensive income~~

~~B. Accounting standards issued but not yet adopted~~

~~Credit losses~~ ~~(ASU 2016-13)~~ – ~~In June 2016, the FASB issued~~ accounting guidance to introduce a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance ~~will apply~~applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance ~~will~~ also ~~apply~~applies to debt securities and other financial assets measured at fair value through other comprehensive income. ~~We will adopt the~~The new guidance was effective January 1, 2020 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2020. ~~An implementation team is continuing~~Prior period comparative information has not been recast and continues to ~~work on~~be reported under the ~~design of new processes and controls as well as assessing the effects of the new guidance. While we are still evaluating the impact of the new~~accounting guidance ~~we do~~in effect for those periods. The adoption did not ~~expect~~have a material impact toon our financial statements.

We adopted the following ASUs effective January 1, 2020, none of which had a material impact on our financial statements:



ASU	Description
2018-13	Fair value measurement
2018-15	Internal-use software
2018-19	Codification improvements - Credit losses
2019-04	Codification improvements - Credit losses, Derivatives & hedging, and Financial instruments
2019-05	Financial instruments - Credit losses
2019-11	Codification improvements - Credit losses
2019-12	Simplifying accounting for income taxes
2020-02	Financial instruments - Credit losses
2020-03	Codification improvements - Financial instruments

B. Accounting standards issued but not yet adopted

We consider the applicability and impact of all ASUs. The ASUs ~~not listed above~~ were assessed and either determined to be not applicable or not expected to have a material impact on our financial statements.


3.	Sales and revenue contract information

Trade receivables represent amounts due from dealers and end users for the sale of our products. In addition, Cat Financial provides wholesale inventory financing for a dealer’s purchase of inventory. Wholesale inventory receivables are included in Receivables – trade and other and Long-term receivables – trade and other in the Consolidated Statement of Financial Position. Trade receivables from dealers and end users were ~~$7,156~~$7,645 million, $7,648 million and $7,743 million as of ~~September 30,~~March 31, 2020, December 31, 2019 and December 31, 2018, respectively, and are recognized in Receivables – trade and other in the Consolidated Statement of Financial Position. Long-term trade receivables from dealers and end users were ~~$670~~$663 million, $693 million and $674 million as of ~~September 30,~~March 31, 2020, December 31, 2019 and December 31, 2018, respectively, and are recognized in Long-term receivables – trade and other in the Consolidated Statement of Financial Position.

We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments as a contract liability in Customer advances and Other liabilities in the Consolidated Statement of Financial Position. ~~Long-term customer advances recognized in Other Liabilities in the Consolidated Statement of Financial Position~~Contract liabilities were ~~$519~~$1,757 million, $1,654 million and ~~$437~~$1,680 million as of ~~September 30,~~March 31, 2020, December 31, 2019 and December 31, 2018, respectively. We reduce the contract liability when revenue is recognized. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, we recognized $368 million of revenue that was recorded as a contract liability at the beginning of 2020. During the three months ended March 31, 2019, we recognized ~~$101~~$507 million ~~and $976 million, respectively,~~ of revenue that was recorded as a contract liability at the beginning of 2019.

As of ~~September 30, 2019,~~March 31, 2020, we have entered into contracts with dealers and end users for which sales have not been recognized as we have not satisfied our performance obligations and transferred control of the products. The dollar amount of unsatisfied performance obligations for contracts with an original duration greater than one year is ~~$6.1~~$6.4 billion, of which ~~$2.4~~$2.6 billion is expected to be completed and revenue recognized in the twelve months following ~~September 30, 2019.~~March 31, 2020. We have elected the practical expedient not to disclose unsatisfied performance obligations with an original contract duration of one year or less. Contracts with an original duration of one year or less are primarily sales to dealers for machinery, engines and replacement parts.

See Note 16 for further disaggregated sales and revenues information.

4. Stock-based compensation

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award. Our stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs).

Upon separation from service, if a participant is 55 years of age or older with more than five years of service, the participant meets the criteria for a “Long Service Separation.” For PRSU awards granted prior to 2019, only a prorated number of shares may vest at the end of the performance period based upon achievement of the performance target, with the proration based upon the number of months of continuous employment during the three-year performance period. Award terms for the 2019 PRSU grant allow for continued vesting upon achievement of the performance target specified in the award document for employees who meet the criteria for a “Long Service Separation” and fulfill a requisite service period of six months. Compensation expense for the 2019 PRSU grant with respect to employees who have met the criteria for a “Long Service Separation” is recognized over the period from the grant date to the end of the six-month requisite service period. For employees who become eligible for a “Long Service Separation” subsequent to the end date of the six-month requisite service period and prior to the completion of the vesting period, compensation expense is recognized over the period from the grant date to the date eligibility is achieved.

We recognized pretax stock-based compensation expense of ~~$57~~$47 million and ~~$170~~$45 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $52 million and $164 million for the three and nine months ended September 30, 2018,~~ respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively:



	Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018					Three Months Ended March 31, 2020					Three Months Ended March 31, 2019
	Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price		Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price		Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price		Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price
Stock options	1,499,524	$	40.98	$	138.35	1,605,220	$	46.11	$	150.90	1,913,888	$	25.98	$	127.60	1,499,524	$	40.98	$	138.35
RSUs	657,389	$	138.35	$	138.35	722,521	$	150.64	$	150.64	705,287	$	127.60	$	127.60	657,389	$	138.35	$	138.35
PRSUs	342,097	$	138.35	$	138.35	344,866	$	150.93	$	150.93	371,641	$	127.60	$	127.60	342,097	$	138.35	$	138.35

The following table provides the assumptions used in determining the fair value of the stock-based awards for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively:



	Grant Year		Grant Year
	2019	2018	2020	2019
Weighted-average dividend yield	2.56%	2.70%	2.47%	2.56%
Weighted-average volatility	29.1%	30.2%	25.7%	29.1%
Range of volatilities	25.1-38.7%	21.5-33.0%	24.5-29.7%	25.1-38.7%
Range of risk-free interest rates	2.48-2.68%	2.02-2.87%	1.21-1.39%	2.48-2.68%
Weighted-average expected lives	7 years	8 years	8 years	7 years

As of ~~September 30, 2019~~March 31, 2020, the total remaining unrecognized compensation expense related to nonvested stock-based compensation awards was ~~$201~~$300 million, which will be amortized over the weighted-average remaining requisite service periods of approximately ~~1.6~~1.8 years.

5. Derivative financial instruments and risk management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts and commodity forward and option contracts. Our derivative activities are subject to the management, direction and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are presented to the Audit Committee of the Board of Directors at least annually.

All derivatives are recognized on the Consolidated Statement of Financial Position at their fair value. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow (cash flow hedge) or (3) an undesignated instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk, are recorded in current earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in Accumulated other comprehensive income (loss) (AOCI), to the extent effective, on the Consolidated Statement of Financial Position until they are reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of undesignated derivative instruments are reported in current earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged on the Consolidated Statement of Cash Flow. Cash flows from undesignated derivative financial instruments are included in the investing category on the Consolidated Statement of Cash Flow.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or pricing strategies of non-U.S.-based competitors. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.

Our ~~Machinery, Energy & Transportation~~ME&T operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to five years. As of ~~September 30, 2019,~~March 31, 2020, the maximum term of these outstanding contracts was approximately 5160 months.

We generally designate as cash flow hedges at inception of the contract any Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, Euro, Indian rupee, Japanese yen, Mexican peso, Singapore dollar or Thailand baht forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. Designation is performed on a specific exposure basis to support hedge accounting. The remainder of ~~Machinery, Energy & Transportation~~ME&T foreign currency contracts are undesignated.

As of ~~September 30, 2019, $10~~March 31, 2020, $44 million of deferred net losses, net of tax, included in equity (AOCI in the Consolidated Statement of Financial Position), are expected to be reclassified to current earnings ~~(Other income (expense) in the Consolidated Statement of Results of Operations)~~ over the next twelve months when earnings are affected by the hedged transactions. The actual amount recorded in ~~Other income (expense)~~current earnings will vary based on exchange rates at the time the hedged transactions impact earnings.

In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions and future transactions denominated in foreign currencies. Our policy allows the use of foreign currency forward, option and cross currency contracts to offset the risk of currency mismatch between our assets and liabilities and exchange rate risk associated with future transactions denominated in foreign currencies. Our foreign currency forward and option contracts are primarily undesignated. We designate fixed-to-fixed cross currency contracts as cash flow hedges to protect against movements in exchange rates on foreign currency fixed-rate assets and liabilities.

Interest Rate Risk

Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to interest rate changes.

Our ~~Machinery, Energy & Transportation~~ME&T operations generally use fixed-rate debt as a source of funding. Our objective is to minimize the cost of borrowed funds. Our policy allows us to enter into fixed-to-floating interest rate contracts and forward rate agreements to meet that objective. We designate fixed-to-floating interest rate contracts as fair value hedges at inception of the contract, and we designate certain forward rate agreements as cash flow hedges at inception of the contract.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating ~~rate)~~rate and duration) of Cat Financial’s debt portfolio with the interest rate profile of our receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.

Our policy allows us to use fixed-to-floating, floating-to-fixed and floating-to-floating interest rate contracts to meet the match-funding objective. We designate fixed-to-floating interest rate contracts as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate. We designate most floating-to-fixed interest rate contracts as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.

We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at both ~~Machinery, Energy & Transportation~~ME&T and Financial Products. The gains or losses associated with these contracts at the time of liquidation are amortized into earnings over the original term of the previously designated hedged item.

Commodity Price Risk

Commodity price movements create a degree of risk by affecting the price we must pay for certain raw ~~material.~~materials. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.

Our ~~Machinery, Energy & Transportation~~ME&T operations purchase base and precious metals embedded in the components we purchase from suppliers. Our suppliers pass on to us price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.

Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:



(Millions of dollars)	Consolidated Statement of Financial	Asset (Liability) Fair Value						Consolidated Statement of Financial	Asset (Liability) Fair Value
	Position Location	September 30, 2019			December 31, 2018			Position Location	March 31, 2020			December 31, 2019
Designated derivatives
Foreign exchange contracts
Machinery, Energy & Transportation	Receivables – trade and other	$	23		$	16		Receivables – trade and other	$	56		$	18
Machinery, Energy & Transportation	Long-term receivables – trade and other	1			—			Long-term receivables – trade and other	9			9
Machinery, Energy & Transportation	Accrued expenses	(35		)	(26		)	Accrued expenses	(114		)	(20		)
Machinery, Energy & Transportation	Other liabilities	—			(9		)	Other liabilities	(28		)	—
Financial Products	Receivables – trade and other	59			53			Receivables – trade and other	70			54
Financial Products	Long-term receivables – trade and other	59			35			Long-term receivables – trade and other	82			13
Financial Products	Accrued expenses	(6		)	(9		)	Accrued expenses	(1		)	(3		)
Interest rate contracts
Financial Products	Receivables – trade and other	—			1
Machinery, Energy & Transportation								Receivables – trade and other	6			—
Machinery, Energy & Transportation								Accrued expenses	(10		)	—
Financial Products	Long-term receivables – trade and other	7			3			Long-term receivables – trade and other	61			5
Financial Products	Accrued expenses	(61		)	(40		)	Accrued expenses	(31		)	(25		)
		$	47		$	24			$	100		$	51
Undesignated derivatives
Foreign exchange contracts
Machinery, Energy & Transportation	Receivables – trade and other	$	2		$	2		Receivables – trade and other	$	2		$	1
Machinery, Energy & Transportation	Accrued expenses	(1		)	(21		)	Accrued expenses	(7		)	—
Financial Products	Receivables – trade and other	22			15			Receivables – trade and other	75			7
Financial Products	Long-term receivables – trade and other	6			5			Long-term receivables – trade and other	13			5
Financial Products	Accrued expenses	(14		)	(14		)	Accrued expenses	(28		)	(22		)
Commodity contracts
Machinery, Energy & Transportation	Receivables – trade and other	2			1			Receivables – trade and other	1			4
Machinery, Energy & Transportation	Accrued expenses	(9		)	(31		)	Accrued expenses	(35		)	(1		)
		$	8		$	(43	)		$	21		$	(6	)

The total notional amounts of the derivative instruments ~~are~~were as follows:



(Millions of dollars)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019

Machinery, Energy & Transportation	$	2,177	$	1,834	$	4,784	$	2,563
Financial Products	$	8,639	$	10,210	$	10,580	$	8,931

The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties. The amounts exchanged by the parties are calculated by reference to the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates, interest rates or commodity prices.

The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows:



Cash Flow Hedges
	Three Months Ended September 30, 2019									Three Months Ended March 31, 2020
				Recognized in Earnings									Recognized in Earnings
(Millions of dollars)	Amount of Gains (Losses) Recognized in AOCI			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI			Amount of the line items in the Consolidated Statement of Results of Operations containing hedging gains (losses)		Amount of Gains (Losses) Recognized in AOCI			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI			Amount of the line items in the Consolidated Statement of Results of Operations
Foreign exchange contracts
Machinery, Energy & Transportation	$	(13	)							$	(90	)	Sales of Machinery, Energy & Transportation	$	5		$	9,914
				Sales of Machinery, Energy & Transportation	$	3		$	11,974				Cost of goods sold	(11		)	7,266
Financial Products	100									101			Interest expense of Financial Products	11			175
				Interest expense of Financial Products	9			$	189				Other income (expense)	71			222
				Other income (expense)	89			$	88
Interest rate contracts
Machinery, Energy & Transportation	—			Interest expense excluding Financial Products	(2		)	$	103	(4		)	Interest expense excluding Financial Products	(1		)	113
Financial Products	(12		)	Interest expense of Financial Products	(3		)	$	189	(15		)	Interest expense of Financial Products	(5		)	175
	$	75			$	96				$	(8	)		$	70


	Three Months Ended September 30, 2018									Three Months Ended March 31, 2019
				Recognized in Earnings									Recognized in Earnings
	Amount of Gains (Losses) Recognized in AOCI (Effective Portion)			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI			Recognized in Earnings (Ineffective Portion)		Amount of Gains (Losses) Recognized in AOCI			Classification of Gains (Losses)	Amount of Gains (Losses) Reclassified from AOCI			Amount of the line items in the Consolidated Statement of Results of Operations
Foreign exchange contracts
Machinery, Energy & Transportation	$	(15	)	Other income (expense)	$	(17	)	$	—	$	17		Sales of Machinery, Energy & Transportation	$	1		$	12,724
													Cost of goods sold	(3		)	9,003
Financial Products	53			Other income (expense)	51			—		22			Interest expense of Financial Products	7			190
				Interest expense of Financial Products	5			—					Other income (expense)	6			160
Interest rate contracts
Machinery, Energy & Transportation										—			Interest expense excluding Financial Products	(1		)	103
Financial Products	3			Interest expense of Financial Products	—			—		(26		)	Interest expense of Financial Products	1			190
	$	41			$	39		$	—	$	13			$	11

Cash Flow Hedges
Nine Months Ended September 30, 2019
Recognized in Earnings
(Millions of dollars)
Amount of Gains
(Losses) Recognized
in AOCI
Classification of
Gains (Losses) Amount of Gains
(Losses) Reclassified
from AOCI Amount of the line items in the Consolidated Statement of Results of Operations containing hedging gains (losses)
Foreign exchange contracts

Machinery, Energy & Transportation $ 8

Sales of Machinery, Energy & Transportation $ 4
$ 38,369
Cost of goods sold (4 ) $ 27,513
Financial Products 132

Interest expense of Financial Products 23
$ 571
Other income (expense) 91
$ 316
Interest rate contracts
Machinery, Energy & Transportation —
Interest expense excluding Financial Products (3 ) $ 309
Financial Products (72 ) Interest expense of Financial Products (2 ) $ 571
$ 68
$ 109

Nine Months Ended September 30, 2018
Recognized in Earnings

Amount of Gains
(Losses) Recognized
in AOCI
(Effective Portion)
Classification of
Gains (Losses) Amount of Gains
(Losses) Reclassified
from AOCI Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
Machinery, Energy & Transportation $ (55 ) Other income (expense) $ (12 ) $ —
Financial Products 143
Other income (expense) 141
—
Interest expense of Financial Products 13
—
Interest rate contracts

Machinery, Energy & Transportation —
Interest expense excluding Financial Products (2 ) —
Financial Products 8
Interest expense of Financial Products 1
—
$ 96
$ 141
$ —

The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows:



(Millions of dollars)	Classification of Gains (Losses)	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Classification of Gains (Losses)	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Foreign exchange contracts
Machinery, Energy & Transportation	Other income (expense)	$	(1	)	$	(5	)	Other income (expense)	$	(3	)	$	6
Financial Products	Other income (expense)	15			13			Other income (expense)	108			(29		)
Commodity contracts
Machinery, Energy & Transportation	Other income (expense)	(6		)	(5		)	Other income (expense)	(46		)	23
		$	8		$	3			$	59		$	—

	Classification of Gains (Losses)	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018
Foreign exchange contracts
Machinery, Energy & Transportation	Other income (expense)	$	12		$	(43	)
Financial Products	Other income (expense)	(24		)	29
Commodity contracts
Machinery, Energy & Transportation	Other income (expense)	10			(5		)
		$	(2	)	$	(19	)

We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within ~~Machinery, Energy & Transportation~~ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event.

Collateral is generally not required of the counterparties or of our company under the master netting agreements. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, no cash collateral was received or pledged under the master netting agreements.

The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event is as follows:



September 30, 2019							Gross Amounts Not Offset in the Statement of Financial Position
March 31, 2020																				Gross Amounts Not Offset in the Statement of Financial Position
(Millions of dollars)	Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amount of Assets Presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount of Assets		Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amount of Assets Presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount of Assets
Derivatives
Machinery, Energy & Transportation	$	28	$	—	$	28	$	(25	)	$	—	$	3	$	74	$	—	$	74	$	(74	)	$	—	$	—
Financial Products	153		—		153		(39		)	—		114		301		—		301		(47		)	—		254
Total	$	181	$	—	$	181	$	(64	)	$	—	$	117	$	375	$	—	$	375	$	(121	)	$	—	$	254


September 30, 2019									Gross Amounts Not Offset in the Statement of Financial Position
March 31, 2020																								Gross Amounts Not Offset in the Statement of Financial Position
(Millions of dollars)	Gross Amount of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position		Net Amount of Liabilities Presented in the Statement of Financial Position			Financial Instruments		Cash Collateral Pledged		Net Amount of Liabilities			Gross Amount of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position		Net Amount of Liabilities Presented in the Statement of Financial Position			Financial Instruments		Cash Collateral Pledged		Net Amount of Liabilities
Derivatives
Machinery, Energy & Transportation	$	(45	)	$	—	$	(45	)	$	25	$	—	$	(20	)	$	(194	)	$	—	$	(194	)	$	74	$	—	$	(120	)
Financial Products	(81		)	—		(81		)	39		—		(42		)	(60		)	—		(60		)	47		—		(13		)
Total	$	(126	)	$	—	$	(126	)	$	64	$	—	$	(62	)	$	(254	)	$	—	$	(254	)	$	121	$	—	$	(133	)


December 31, 2018							Gross Amounts Not Offset in the Statement of Financial Position
December 31, 2019																				Gross Amounts Not Offset in the Statement of Financial Position
(Millions of dollars)	Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amount of Assets Presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount of Assets		Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amount of Assets Presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount of Assets
Derivatives
Machinery, Energy & Transportation	$	19	$	—	$	19	$	(19	)	$	—	$	—	$	32	$	—	$	32	$	(13	)	$	—	$	19
Financial Products	112		—		112		(34		)	—		78		84		—		84		(21		)	—		63
Total	$	131	$	—	$	131	$	(53	)	$	—	$	78	$	116	$	—	$	116	$	(34	)	$	—	$	82


December 31, 2018									Gross Amounts Not Offset in the Statement of Financial Position
December 31, 2019																								Gross Amounts Not Offset in the Statement of Financial Position
(Millions of dollars)	Gross Amount of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position		Net Amount of Liabilities Presented in the Statement of Financial Position			Financial Instruments		Cash Collateral Pledged		Net Amount of Liabilities			Gross Amount of Recognized Liabilities			Gross Amounts Offset in the Statement of Financial Position		Net Amount of Liabilities Presented in the Statement of Financial Position			Financial Instruments		Cash Collateral Pledged		Net Amount of Liabilities
Derivatives
Machinery, Energy & Transportation	$	(87	)	$	—	$	(87	)	$	19	$	—	$	(68	)	$	(21	)	$	—	$	(21	)	$	13	$	—	$	(8	)
Financial Products	(63		)	—		(63		)	34		—		(29		)	(50		)	—		(50		)	21		—		(29		)
Total	$	(150	)	$	—	$	(150	)	$	53	$	—	$	(97	)	$	(71	)	$	—	$	(71	)	$	34	$	—	$	(37	)

6. Inventories

Inventories (principally using the last-in, first-out (LIFO) method) are comprised of the following:



(Millions of dollars)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Raw materials	$	4,424	$	4,477	$	4,264	$	4,263
Work-in-process	1,335		1,259		1,227		1,147
Finished goods	6,177		5,562		6,010		5,598
Supplies	244		231		247		258
Total inventories	$	12,180	$	11,529	$	11,748	$	11,266

During the third quarter of 2019, changes were made to the classification of inventories primarily related to purchased parts between Raw materials, Work-in-process and Finished goods. The prior year amounts have been retrospectively adjusted to conform to the current-year classification.

7. Intangible assets and goodwill

A. Intangible assets

Intangible assets are comprised of the following:



		September 30, 2019								March 31, 2020
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,426	$	(1,352	)	$	1,074	15	$	2,402	$	(1,421	)	$	981
Intellectual property	12	1,500		(1,015		)	485		12	1,488		(1,050		)	438
Other	13	190		(119		)	71		13	186		(127		)	59
Total finite-lived intangible assets	14	$	4,116	$	(2,486	)	$	1,630	14	$	4,076	$	(2,598	)	$	1,478


		December 31, 2018								December 31, 2019
	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,463	$	(1,249	)	$	1,214	15	$	2,450	$	(1,406	)	$	1,044
Intellectual property	11	1,557		(965		)	592		12	1,510		(1,055		)	455
Other	13	199		(108		)	91		13	191		(125		)	66
Total finite-lived intangible assets	14	$	4,219	$	(2,322	)	$	1,897	14	$	4,151	$	(2,586	)	$	1,565

Amortization expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 was ~~$81~~$80 million and ~~$244 million, respectively. Amortization expense for the three and nine months ended September 30, 2018 was~~ $82 ~~million and $248~~ million, respectively. Amortization expense related to intangible assets is expected to be:

(Millions of dollars)

Remaining Three Months of 2019 2020 2021 2022 2023 Thereafter
$80 $307 $289 $271 $214 $469



(Millions of dollars)

Remaining Nine Months of 2020	2021	2022	2023	2024	Thereafter
$226	$288	$271	$214	$157	$322

B. Goodwill

NaN goodwill was impaired during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 or ~~2018~~2019.

The changes in carrying amount of goodwill by reportable segment for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 were as follows:



(Millions of dollars)	December 31, 2018			Other Adjustments ¹			September 30, 2019			December 31, 2019			Other Adjustments ¹			March 31, 2020
Construction Industries
Goodwill	$	304		$	2		$	306		$	306		$	(1	)	$	305
Impairments	(22		)	—			(22		)	(22		)	—			(22		)
Net goodwill	282			2			284			284			(1		)	283
Resource Industries
Goodwill	4,172			(50		)	4,122			4,156			(38		)	4,118
Impairments	(1,175		)	—			(1,175		)	(1,175		)	—			(1,175		)
Net goodwill	2,997			(50		)	2,947			2,981			(38		)	2,943
Energy & Transportation
Goodwill	2,882			(28		)	2,854			2,875			(17		)	2,858
All Other ²
Goodwill	56			1			57			56			—			56
Consolidated total
Goodwill	7,414			(75		)	7,339			7,393			(56		)	7,337
Impairments	(1,197		)	—			(1,197		)	(1,197		)	—			(1,197		)
Net goodwill	$	6,217		$	(75	)	$	6,142		$	6,196		$	(56	)	$	6,140

¹Other adjustments are comprised primarily of foreign currency translation.

²Includes All Other operating segment (See Note 16).

8. Investments in debt and equity securities

We have investments in certain debt and equity securities, primarily at Insurance Services, which are recorded at fair value and are primarily included in Other assets in the Consolidated Statement of Financial Position.

Debt securities have been classified as available-for-sale, and the unrealized gains and losses arising from the revaluation of these debt securities are included, net of applicable deferred income taxes, in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position). The unrealized gains and losses arising from the revaluation of the equity securities are included in Other income (expense) in the Consolidated Statement of Results of Operations. Realized gains and losses on sales of investments are generally determined using the specific identification method for debt and equity securities and are included in Other income (expense) in the Consolidated Statement of Results of Operations.

The cost basis and fair value of debt securities with unrealized gains and losses included in equity (Accumulated other comprehensive income (loss) in the Consolidated Statement of Financial Position) were as follows:


	September 30, 2019						December 31, 2018							March 31, 2020							December 31, 2019
(Millions of dollars)	Cost Basis		Unrealized Pretax Net Gains (Losses)		Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)			Fair Value		Cost Basis		Unrealized Pretax Net Gains (Losses)		Fair Value
Government debt
U.S. treasury bonds	$	9	$	—	$	9	$	9	$	—		$	9	$	9	$	—		$	9	$	9	$	—	$	9
Other U.S. and non-U.S. government bonds	47		1		48		42		—			42		46		1			47		54		—		54

Corporate bonds
Corporate bonds	823		17		840		735		(15		)	720		880		(9		)	871		836		20		856
Asset-backed securities	53		—		53		63		—			63		87		(1		)	86		62		—		62

Mortgage-backed debt securities
U.S. governmental agency	326		5		331		301		(4		)	297		365		13			378		327		4		331
Residential	6		—		6		7		—			7		6		(1		)	5		6		—		6
Commercial	40		1		41		14		(1		)	13		53		—			53		46		1		47
Total debt securities	$	1,304	$	24	$	1,328	$	1,171	$	(20	)	$	1,151	$	1,446	$	3		$	1,449	$	1,340	$	25	$	1,365


Available-for-sale investments in an unrealized loss position that are not other-than-temporarily impaired:
Available-for-sale investments in an unrealized loss position:													Available-for-sale investments in an unrealized loss position:

	September 30, 2019												March 31, 2020
	Less than 12 months¹				12 months or more ¹				Total				Less than 12 months¹				12 months or more ¹				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	33	$	1	$	29	$	1	$	62	$	2	$	375	$	20	$	42	$	1	$	417	$	21
Asset-backed securities													$	46	$	2	$	2	$	—	$	48	$	2
Total	$	33	$	1	$	29	$	1	$	62	$	2	$	421	$	22	$	44	$	1	$	465	$	23

December 31, 2018

Less than 12 months ¹

12 months or more ¹
Total
(Millions of dollars)
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
Corporate bonds
Corporate bonds $ 280
$ 3
$ 391
$ 11
$ 671
$ 14
Asset-backed securities 6
—
38
1
44
1
Mortgage-backed debt securities

U.S. governmental agency 52
—
223
5
275
5
Commercial —
—
14
1
14
1
Total $ 338
$ 3
$ 666
$ 18
$ 1,004
$ 21

¹ Indicates the length of time that individual securities have been in a continuous unrealized loss position.



	December 31, 2019
	Less than 12 months ¹				12 months or more ¹				Total
(Millions of dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds
Corporate bonds	$	58	$	1	$	50	$	—	$	108	$	1
Total	$	58	$	1	$	50	$	—	$	108	$	1

¹ Indicates the length of time that individual securities have been in a continuous unrealized loss position.

Corporate Bonds. The unrealized losses on our investments in corporate bonds relate to changes in interest rates and credit-related yield spreads since time of purchase. We do not intend to sell the investments, and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis. ~~We do not consider these investments to be other-than-temporarily impaired as of September 30, 2019.~~

The cost basis and fair value of the available-for-sale debt securities at ~~September 30, 2019,~~March 31, 2020, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.


	September 30, 2019				March 31, 2020
(Millions of dollars)	Cost Basis		Fair Value		Cost Basis		Fair Value
Due in one year or less	$	74	$	73	$	97	$	97
Due after one year through five years	703		716		683		680
Due after five years through ten years	137		142		189		184
Due after ten years	18		19		53		52
U.S. governmental agency mortgage-backed securities	326		331		365		378
Residential mortgage-backed securities	6		6		6		5
Commercial mortgage-backed securities	40		41		53		53
Total debt securities – available-for-sale	$	1,304	$	1,328	$	1,446	$	1,449


Sales of available-for-sale securities:
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended March 31
(Millions of dollars)	2019		2018		2019		2018		2020		2019
Proceeds from the sale of available-for-sale securities	$	92	$	41	$	237	$	181	$	58	$	47
Gross gains from the sale of available-for-sale securities	$	—	$	—	$	1	$	—
Gross losses from the sale of available-for-sale securities	$	—	$	—	$	1	$	—	$	—	$	1

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, the net unrealized gains (losses) for equity securities held at ~~September 30,~~March 31, 2020 and 2019 were $2$(54) million and ~~$54 million, respectively. For the three and nine months ended September 30, 2018, the net unrealized gains (losses) for equity securities held at September 30, 2018 were $18 million and $20~~$38 million, respectively.

9. Postretirement benefits

A. Pension and postretirement benefit costs


	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits						U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
(Millions of dollars)	September 30						September 30						September 30						March 31						March 31						March 31
	2019			2018			2019			2018			2019			2018			2020			2019			2020			2019			2020			2019
For the three months ended:
Components of net periodic benefit cost:
Service cost	$	29		$	31		$	20		$	22		$	19		$	22		$	—		$	29		$	14		$	21		$	23		$	20
Interest cost	150			134			23			25			34			31			121			150			19			23			26			34
Expected return on plan assets	(180		)	(202		)	(37		)	(55		)	(4		)	(9		)	(198		)	(181		)	(35		)	(37		)	(3		)	(5		)
Amortization of prior service cost (credit)	—			—			—			—			(10		)	(9		)	—			—			—			—			(9		)	(10		)
Net periodic benefit cost (benefit) ¹	$	(1	)	$	(37	)	$	6		$	(8	)	$	39		$	35
Gain on remeasurement of a non-U.S. pension obligation ¹																			—			—			(254		)	—			—			—
Net periodic benefit cost (benefit) ²																			$	(77	)	$	(2	)	$	(256	)	$	7		$	37		$	39

For the nine months ended:
Components of net periodic benefit cost:
Service cost	$	86		$	94		$	61		$	67		$	60		$	64
Interest cost	450			401			70			74			102			93
Expected return on plan assets	(540		)	(607		)	(112		)	(167		)	(14		)	(25		)
Amortization of prior service cost (credit)	—			—			—			—			(30		)	(26		)
Net periodic benefit cost (benefit) ¹	$	(4	)	$	(112	)	$	19		$	(26	)	$	118		$	106


¹	Total lump-sum transfers out of a non-U.S. pension plan exceeded the service and interest cost for 2020, which required us to follow settlement accounting and remeasure the plan's obligation as of March 31, 2020.


²	The service cost component is included in Operating costs in the Consolidated Statement of Results of Operations. All other components are included in Other income (expense) in the Consolidated Statement of Results of Operations.

We made ~~$1,573 million and $1,771~~$98 million of contributions to our pension and other postretirement plans during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020~~, respectively. The 2019 contributions include a $1.5 billion discretionary U.S. pension plan contribution made in September 2019.~~. We currently anticipate full-year ~~2019~~2020 contributions of approximately ~~$1,830~~$280 million.

B. Defined contribution benefit costs

Total company costs related to our defined contribution plans were as follows:

Three Months Ended September 30 Nine Months Ended September 30
(Millions of dollars) 2019 2018 2019 2018
U.S. Plans $ 68
$ 97
$ 298
$ 247
Non-U.S. Plans 22
21
64
64
$ 90
$ 118
$ 362
$ 311




	Three Months Ended March 31
(Millions of dollars)	2020		2019
U.S. Plans	$	19	$	137
Non-U.S. Plans	23		21
	$	42	$	158

The decrease in the U.S. defined contribution benefit costs for the three months ended March 31, 2020 is primarily due to the fair value adjustments related to our non-qualified deferred compensation plans.

10. Leases

~~A. Lessee arrangements~~

We lease certain property, information technology equipment, warehouse equipment, vehicles and other equipment through operating leases. We recognize a lease liability and corresponding right-of-use asset based on the present value of lease payments. To determine the present value of lease payments for most of our leases, we use our incremental borrowing rate based on information available on the lease commencement date. For certain property and information technology equipment leases, we have elected to separate payments for lease components from non-lease components. For all other leases, we have elected not to separate payments for lease and non-lease components. Our lease agreements may include options to extend or terminate the lease. When it is reasonably certain that we will exercise that option, we have included the option in the recognition of right-of-use assets and lease liabilities. We have elected not to recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less.

~~Our finance leases are not significant and therefore are not included in the following disclosures.~~

~~The components of lease costs were as follows:~~

(Millions of dollars)
Three Months Ended September 30 Nine Months Ended September 30
2019
Operating lease cost $ 59
$ 177
Short-term lease cost $ 11
$ 43

Operating lease right-of-use assets are recognized in Other assets in the Consolidated Statement of Financial Position. The operating lease liabilities are recognized in Other current liabilities and Other liabilities.

~~Supplemental information related to leases was as follows:~~

(Millions of dollars)
September 30, 2019 January 1, 2019
Operating Leases
Other assets $ 632
$ 713
Other current liabilities $ 178
$ 209
Other liabilities $ 462
$ 511

Weighted average remaining lease term
Operating leases 7 years
7 years

Weighted average discount rates
Operating leases 2 % 2 %

Maturities of operating lease liabilities at September 30, 2019 and minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year at December 31, 2018 were as follows:

(Millions of dollars) September 30, 2019
Amounts Due In
Remaining three months of 2019 $ 47
2020 165
2021 124
2022 77
2023 59
Thereafter 205
Total lease payments 677
Less: Imputed interest (37 )
Total $ 640

December 31, 2018
Amounts Due In
2019 $ 205
2020 154
2021 111
2022 67
2023 50
Thereafter 185
Total $ 772

~~Supplemental cash flow information related to leases was as follows:~~

(Millions of dollars)
Nine Months Ended September 30
2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 170
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 87

~~B. Lessor arrangements~~

We lease Caterpillar machinery, engines and other equipment to customers and dealers around the world, primarily through Cat Financial. Cat Financial leases to customers primarily through sales-type (non-tax) leases, where the lessee for tax purposes is considered to be the owner of the equipment during the term of the lease. Cat Financial also offers tax leases that are classified as either operating or direct finance leases for financial accounting purposes, depending on the characteristics of the lease. For tax purposes, Cat Financial is considered the owner of the equipment. Our lease agreements may include options for the lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or fair market value.

The residual values for Cat Financial’s leased assets, which are an estimate of the market value of leased equipment at the end of the lease term, are based on an analysis of historical wholesale market sales prices, projected forward on a level trend line without consideration for inflation or possible future pricing action. At the inception of the lease, residual values are estimated with consideration of the following critical factors: market size and demand, any known significant market/product trends, total expected hours of usage, machine configuration, application, location, model changes, quantities, past remarketing experience, third-party residual guarantees and contractual customer purchase options. Many of these factors are gathered in an application survey that is completed prior to quotation. The lease agreement also clearly defines applicable return conditions and remedies for non-compliance, to ensure that the leased equipment will be in good operating condition upon return. Model changes and updates, as well as market strength and product acceptance, are monitored and adjustments are made to residual values in accordance with the significance of any such changes. Cat Financial’s sales staff work closely with customers and dealers to manage the sale of lease returns and the recovery of residual exposure.

During the term of our operating leases, we evaluate the carrying value of our equipment on a regular basis taking into consideration expected residual values at lease termination. Adjustments to depreciation expense reflecting revised estimates of expected residual values at the end of the lease terms are recorded prospectively on a straight-line basis. For finance leases, residual value adjustments are recognized through a reduction of finance revenue.

~~Contractual maturities of financelease receivables (sales-type and direct finance leases) were as follows:~~

(Millions of dollars) September 30, 2019
Amounts Due In
Retail
Leases ¹

Wholesale Leases ²
Total
Remaining three months of 2019 $ 889
$ 30
$ 919
2020 2,798
59
2,857
2021 1,733
43
1,776
2022 857
27
884
2023 366
17
383
Thereafter 176
25
201
Total 6,819
201
7,020
Guaranteed residual value 375
49
424
Unguaranteed residual value 793
37
830
Less: Unearned income (650 ) (34 ) (684 )
Total $ 7,337
$ 253
$ 7,590

December 31, 2018
Amounts Due In
Retail
Leases ¹

Wholesale Leases ²
Total
2019 $ 2,981
$ 70
$ 3,051
2020 2,026
48
2,074
2021 1,073
30
1,103
2022 453
16
469
2023 166
6
172
Thereafter 56
3
59
Total 6,755
173
6,928
Guaranteed residual value 392
66
458
Unguaranteed residual value 822
35
857
Less: Unearned income (628 ) (16 ) (644 )
Total $ 7,341
$ 258
$ 7,599

¹ Included in Receivables - finance and Long-term receivables - finance on the Consolidated Statement of Financial Position.
² Included in Receivables - trade and other and Long-term receivables - trade and other in the Consolidated Statement of Financial Position. Wholesale lease receivables are receivables of Cat Financial that arise when Cat Financial provides financing for a dealer’s lease of inventory.

Our finance lease receivables generally may be repaid or refinanced without penalty prior to contractual maturity. Accordingly, this presentation should not be regarded as a forecast of future cash collections.

~~The carrying amount of equipment leased to others, included in Property, plant and equipment - net in the Consolidated Statement of Financial Position, under operating leases was as follows:~~

(Millions of dollars)
September 30, 2019 December 31, 2018
Equipment leased to others - at original cost $ 6,313
$ 6,015
Less: Accumulated depreciation (2,021 ) (1,744 )
Equipment leased to others - net $ 4,292
$ 4,271

~~Payments due for operating leases at September 30, 2019 and scheduled minimum rental payments for operating leases at December 31, 2018 were as follows:~~

(Millions of dollars)

September 30, 2019

Remaining Three Months of 2019 2020 2021 2022 2023 Thereafter Total
$276 $827 $486 $250 $117 $111 $2,067

December 31, 2018

2019 2020 2021 2022 2023 Thereafter Total
$896 $574 $314 $158 $71 $69 $2,082

Revenues from finance and operating leases, primarily included in Revenues of Financial Products on the Consolidated Statement of Results of Operations, were as follows:



(Millions of dollars)
	Three Months Ended September 30		Nine Months Ended September 30		Three Months Ended March 31
	2019				2020		2019
Finance lease revenue	$	136	$	390	$	125	$	119
Operating lease revenue	317		941		303		316
Total	$	453	$	1,331	$	428	$	435

Revenues are presented net of sales and other related taxes.

11. Guarantees and product warranty

Caterpillar dealer performance guarantees

We have provided an indemnity to a third-party insurance company for potential losses related to performance bonds issued on behalf of Caterpillar dealers. The bonds have varying terms and are issued to insure governmental agencies against nonperformance by certain dealers. We also provided guarantees to ~~third parties~~third-parties related to the performance of contractual obligations by certain Caterpillar dealers. These guarantees have varying terms and cover potential financial losses incurred by the third parties resulting from the dealers’ nonperformance.

In 2016, we provided a guarantee to an end user related to the performance of contractual obligations by a Caterpillar dealer. Under the guarantee, which expires in 2025, non-performance by the Caterpillar dealer could require Caterpillar to satisfy the contractual obligations by providing goods, services or financial compensation to the end user up to an annual designated cap.

~~Customer loan guarantees~~

We provide loan guarantees to third-party lenders for financing associated with machinery purchased by customers. These guarantees have varying terms and are secured by the machinery. In addition, Cat Financial participates in standby letters of credit issued to third parties on behalf of their customers. These standby letters of credit have varying terms and beneficiaries and are secured by customer assets.

Supplier consortium performance ~~guarantees~~guarantee

We have provided ~~guarantees~~a guarantee to ~~a customer in Brazil and~~ a customer in Europe related to the performance of contractual obligations by a supplier ~~consortiums~~consortium to which one of our Caterpillar subsidiaries ~~are members.~~is a member. The ~~guarantees cover~~guarantee covers potential damages incurred by the ~~customers~~customer resulting from the supplier ~~consortiums’~~consortium's non-performance. The damages are capped except for failure of the ~~consortiums~~consortium to meet certain obligations outlined in the contract in the normal course of business. The guarantee ~~for the customer in Europe~~ will expire when the supplier consortium performs all of its contractual obligations, which ~~are~~is expected to be completed in 2022. ~~The agreement with the customer in Brazil was terminated during the second quarter of 2019. No payments were made under the guarantee.~~

~~Third-party logistics business lease guarantees~~

We have provided guarantees to third-party lessors for certain properties leased by a third-party logistics business, formerly Caterpillar Logistics Services LLC, in which we sold our equity interest in 2015. The guarantees are for the possibility that the third-party logistics business would default on real estate lease payments. The guarantees were granted at lease inception and generally will expire at the end of the lease terms.

We have dealer performance guarantees and third-party performance guarantees that do not limit potential payment to end users related to indemnities and other commercial contractual obligations. In addition, we have entered into contracts involving industry standard indemnifications that do not limit potential payment. For these unlimited guarantees, we are unable to estimate a maximum potential amount of future payments that could result from claims made.

No significant loss has been experienced or is anticipated under any of these guarantees. At ~~September 30, 2019~~both March 31, 2020 and December 31, ~~2018~~2019, the related recorded liability was ~~$6 million and $8 million, respectively.~~$5 million. The maximum potential amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees are as follows:


(Millions of dollars)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Caterpillar dealer performance guarantees	$	1,275	$	1,244	$	1,151	$	1,150
Customer loan guarantees	11		31
Supplier consortium performance guarantees	239		527
Third party logistics business lease guarantees	54		60
Supplier consortium performance guarantee					238		238
Other guarantees	130		116		209		221
Total guarantees	$	1,709	$	1,978	$	1,598	$	1,609

Cat Financial provides guarantees to repurchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity. The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers. This SPC issues commercial paper and uses the proceeds to fund its loan program. Cat Financial has a loan purchase agreement with the SPC that obligates Cat Financial to purchase certain loans that are not paid at maturity. Cat Financial receives a fee for providing this guarantee, which provides a source of liquidity for the SPC. Cat Financial is the primary beneficiary of the SPC as its guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC’s economic performance and the obligation to absorb losses, and therefore Cat Financial has consolidated the financial statements of the SPC. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, the SPC’s assets of ~~$1,387~~$1,475 million and $~~1,149~~1,453 million, respectively, were primarily comprised of loans to dealers, and the SPC’s liabilities of ~~$1,386~~$1,473 million and $~~1,148~~1,452 million, respectively, were primarily comprised of commercial paper. The assets of the SPC are not available to pay Cat Financial’s creditors. Cat Financial may be obligated to perform under the guarantee if the SPC experiences losses. No loss has been experienced or is anticipated under this loan purchase agreement.

Our product warranty liability is determined by applying historical claim rate experience to the current field population and dealer inventory. Generally, historical claim rates are based on actual warranty experience for each product by machine model/engine size by customer or dealer location (inside or outside North America). Specific rates are developed for each product shipment month and are updated monthly based on actual warranty claim experience.


(Millions of dollars)	2019			2020
Warranty liability, January 1	$	1,391		$	1,541
Reduction in liability (payments)	(667		)	(227		)
Increase in liability (new warranties)	759			219
Warranty liability, September 30	$	1,483
Warranty liability, March 31				$	1,533

(Millions of dollars) 2018
Warranty liability, January 1 $ 1,419
Reduction in liability (payments) (783 )
Increase in liability (new warranties) 755
Warranty liability, December 31 $ 1,391



(Millions of dollars)	2019
Warranty liability, January 1	$	1,391
Reduction in liability (payments)	(903		)
Increase in liability (new warranties)	1,053
Warranty liability, December 31	$	1,541

12. Profit per share



Computations of profit per share:	Computations of profit per share:	Three Months Ended September 30				Nine Months Ended September 30				Computations of profit per share:	Three Months Ended March 31
(Dollars in millions except per share data)	(Dollars in millions except per share data)	2019		2018		2019		2018		(Dollars in millions except per share data)	2020		2019
Profit for the period (A) ¹	Profit for the period (A) ¹	$	1,494	$	1,727	$	4,995	$	5,099	Profit for the period (A) ¹	$	1,092	$	1,881
Determination of shares (in millions):	Determination of shares (in millions):									Determination of shares (in millions):
Weighted-average number of common shares outstanding (B)	Weighted-average number of common shares outstanding (B)	556.3		592.1		565.2		595.3		Weighted-average number of common shares outstanding (B)	546.8		572.4
Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	4.9		7.3		5.6		8.5		Shares issuable on exercise of stock awards, net of shares assumed to be purchased out of proceeds at average market price	4.3		6.4
Average common shares outstanding for fully diluted computation (C)²	Average common shares outstanding for fully diluted computation (C)²	561.2		599.4		570.8		603.8		Average common shares outstanding for fully diluted computation (C)²	551.1		578.8
Profit per share of common stock:	Profit per share of common stock:									Profit per share of common stock:
Assuming no dilution (A/B)	Assuming no dilution (A/B)	$	2.69	$	2.92	$	8.84	$	8.57	Assuming no dilution (A/B)	$	2.00	$	3.29
Assuming full dilution (A/C)²	Assuming full dilution (A/C)²	$	2.66	$	2.88	$	8.75	$	8.45	Assuming full dilution (A/C)²	$	1.98	$	3.25
Shares outstanding as of September 30 (in millions)						552.7		590.1
Shares outstanding as of March 31 (in millions)										Shares outstanding as of March 31 (in millions)	542.0		571.7

¹Profit attributable to common shareholders.	¹Profit attributable to common shareholders.									¹Profit attributable to common shareholders.
²Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.	²Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.									²Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

~~Stock options to purchase 2,962,190 and 1,471,071 common shares were outstanding for~~For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, 4.9 million and ~~2018, respectively. These~~3.0 million outstanding stock options, respectively, were ~~not included in~~excluded from the computation of diluted earnings per share because the effect would have been ~~anti-dilutive.~~antidilutive.

In July 2018, the Board approved a share repurchase authorization (the 2018 Authorization) of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no ~~expiration (the 2018 Authorization).~~expiration. As of ~~September 30, 2019,~~March 31, 2020, approximately ~~$6.7~~$4.9 billion remained available under the 2018 Authorization.

~~For~~During the first three ~~and nine~~ months ~~ended September 30,~~of 2020 and 2019, we repurchased ~~10.3~~9.3 million and ~~25.8~~5.7 million shares of ~~our~~Caterpillar common stock, respectively, at an aggregate cost of ~~$1.3~~$1.2 billion and ~~$3.3~~$0.8 billion, respectively. These purchases were made through a combination of accelerated stock repurchase agreements with third-party financial institutions and open market transactions. For the three and nine months ended September 30, 2018, we repurchased 4.8 million and 12.8 million shares of our common stock, respectively, at an aggregate cost of $750 million and $2.0 billion, respectively.

13. Accumulated other comprehensive income (loss)

Comprehensive income and its components are presented in the Consolidated Statement of Comprehensive Income. Changes in Accumulated other comprehensive income (loss), net of tax, included in the Consolidated Statement of Changes in Shareholders’ Equity, consisted of the following:



(Millions of dollars)	Foreign currency translation			Pension and other postretirement benefits			Derivative financial instruments			Available-for-sale securities			Total			Foreign currency translation			Pension and other postretirement benefits			Derivative financial instruments			Available-for-sale securities			Total

Three Months Ended September 30, 2019
Balance at June 30, 2019	$	(1,426	)	$	17		$	(105	)	$	15		$	(1,499	)
Three Months Ended March 31, 2020
Balance at December 31, 2019																$	(1,487	)	$	(3	)	$	(97	)	$	20		$	(1,567	)
Other comprehensive income (loss) before reclassifications	(263		)	—			59			4			(200		)	(384		)	—			(5		)	(18		)	(407		)
Amounts reclassified from accumulated other comprehensive (income) loss	—			(8		)	(76		)	—			(84		)	24			(7		)	(55		)	—			(38		)
Other comprehensive income (loss)	(263		)	(8		)	(17		)	4			(284		)	(360		)	(7		)	(60		)	(18		)	(445		)
Balance at September 30, 2019	$	(1,689	)	$	9		$	(122	)	$	19		$	(1,783	)
Balance at March 31, 2020																$	(1,847	)	$	(10	)	$	(157	)	$	2		$	(2,012	)

Three Months Ended September 30, 2018
Balance at June 30, 2018	$	(1,432	)	$	30		$	(78	)	$	(16	)	$	(1,496	)
Three Months Ended March 31, 2019
Balance at December 31, 2018																$	(1,601	)	$	12		$	(80	)	$	(15	)	$	(1,684	)
Adjustment to adopt new accounting guidance related to reclassification of certain tax effects from accumulated other comprehensive income																98			19			(9		)	—			108
Balance at January 1, 2019																(1,503		)	31			(89		)	(15		)	(1,576		)
Other comprehensive income (loss) before reclassifications	(65		)	—			32			(1		)	(34		)	(22		)	—			10			15			3
Amounts reclassified from accumulated other comprehensive (income) loss	—			(7		)	(31		)	—			(38		)	—			(7		)	(9		)	1			(15		)
Other comprehensive income (loss)	(65		)	(7		)	1			(1		)	(72		)	(22		)	(7		)	1			16			(12		)
Balance at September 30, 2018	$	(1,497	)	$	23		$	(77	)	$	(17	)	$	(1,568	)
Balance at March 31, 2019																$	(1,525	)	$	24		$	(88	)	$	1		$	(1,588	)

(Millions of dollars) Foreign currency translation Pension and other postretirement benefits Derivative financial instruments Available-for-sale securities Total

Nine Months Ended September 30, 2019
Balance at December 31, 2018 $ (1,601 ) $ 12
$ (80 ) $ (15 ) $ (1,684 )
Adjustment to adopt new accounting guidance related to reclassification of certain tax effects from accumulated other comprehensive income ¹
98
19
(9 ) —
108
Balance at January 1, 2019 (1,503 ) 31
(89 ) (15 ) (1,576 )
Other comprehensive income (loss) before reclassifications (186 ) —
53
34
(99 )
Amounts reclassified from accumulated other comprehensive (income) loss —
(22 ) (86 ) —
(108 )
Other comprehensive income (loss) (186 ) (22 ) (33 ) 34
(207 )
Balance at September 30, 2019 $ (1,689 ) $ 9
$ (122 ) $ 19
$ (1,783 )

Nine Months Ended September 30, 2018
Balance at December 31, 2017 $ (1,205 ) $ 46
$ (41 ) $ 8
$ (1,192 )
Adjustment to adopt recognition and measurement of financial assets and liabilities guidance —
—
—
(11 ) (11 )
Balance at January 1, 2018 (1,205 ) 46
(41 ) (3 ) (1,203 )
Other comprehensive income (loss) before reclassifications (293 ) (2 ) 73
(14 ) (236 )
Amounts reclassified from accumulated other comprehensive (income) loss $ 1
$ (21 ) $ (109 ) $ —
$ (129 )
Other comprehensive income (loss) $ (292 ) $ (23 ) $ (36 ) $ (14 ) $ (365 )
Balance at September 30, 2018 $ (1,497 ) $ 23
$ (77 ) $ (17 ) $ (1,568 )
¹ See Note 2 for additional information.

The effect of the reclassifications out of Accumulated other comprehensive income (loss) on the Consolidated Statement of Results of Operations is as follows:



			Three Months Ended September 30								Three Months Ended March 31
(Millions of dollars)		Classification of income (expense)	2019			2018				Classification of income (expense)	2020			2019

Foreign currency translation
Gain (loss) on foreign currency translation										Other income (expense)	$	(24	)	$	—
Reclassifications net of tax									Reclassifications net of tax		$	(24	)	$	—

Pension and other postretirement benefits:
Amortization of prior service credit (cost)		Other income (expense)	$	10		$	9			Other income (expense)	$	9		$	10
Tax (provision) benefit	Tax (provision) benefit		(2		)	(2		)	Tax (provision) benefit		(2		)	(3		)
Reclassifications net of tax	Reclassifications net of tax		$	8		$	7		Reclassifications net of tax		$	7		$	7

Derivative financial instruments:
Foreign exchange contracts		Sales of Machinery, Energy & Transportation	$	3		$	—			Sales of Machinery, Energy & Transportation	$	5		$	1
Foreign exchange contracts		Other income (expense)	89			34				Cost of goods sold	(11		)	(3		)
Foreign exchange contracts		Interest expense of Financial Products	9			5				Other income (expense)	71			6
Foreign exchange contracts										Interest expense of Financial Products	11			7
Interest rate contracts		Interest expense excluding Financial Products	(2		)	—				Interest expense excluding Financial Products	(1		)	(1		)
Interest rate contracts		Interest expense of Financial Products	(3		)	—				Interest expense of Financial Products	(5		)	1
Reclassifications before tax	Reclassifications before tax		96			39			Reclassifications before tax		70			11
Tax (provision) benefit	Tax (provision) benefit		(20		)	(8		)	Tax (provision) benefit		(15		)	(2		)
Reclassifications net of tax	Reclassifications net of tax		$	76		$	31		Reclassifications net of tax		$	55		$	9

Available-for-sale securities:
Realized gain (loss)										Other income (expense)	$	—		$	(1	)
Reclassifications net of tax									Reclassifications net of tax		$	—		$	(1	)

Total reclassifications from Accumulated other comprehensive income (loss)	Total reclassifications from Accumulated other comprehensive income (loss)		$	84		$	38		Total reclassifications from Accumulated other comprehensive income (loss)		$	38		$	15

Nine Months Ended September 30
(Millions of dollars)
Classification of
income (expense)
2019 2018

Foreign currency translation
Gain (loss) on foreign currency translation Other income (expense) $ —
$ (1 )
Reclassifications net of tax $ —
$ (1 )

Pension and other postretirement benefits:
Amortization of prior service credit (cost) Other income (expense) $ 30
$ 26
Tax (provision) benefit (8 ) (5 )
Reclassifications net of tax $ 22
$ 21

Derivative financial instruments:
Foreign exchange contracts Sales of Machinery, Energy & Transportation $ 4
$ —
Foreign exchange contracts Cost of goods sold (4 ) —
Foreign exchange contracts Other income (expense) 91
129
Foreign exchange contracts Interest expense of Financial Products 23
13
Interest rate contracts Interest expense excluding Financial Products (3 ) (2 )
Interest rate contracts Interest expense of Financial Products (2 ) 1
Reclassifications before tax 109
141
Tax (provision) benefit (23 ) (32 )
Reclassifications net of tax $ 86
$ 109

Total reclassifications from Accumulated other comprehensive income (loss) $ 108
$ 129

14. Environmental and legal matters

The Company is regulated by federal, state and international environmental laws governing its use, transport and disposal of substances and control of emissions. In addition to governing our manufacturing and other operations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. We have made, and will continue to make, significant research and development and capital expenditures to comply with these emissions standards.

We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, the investigation, remediation, and operating and maintenance costs are accrued against our earnings. Costs are accrued based on consideration of currently available data and information with respect to each individual site, including available technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we accrue the minimum. Where multiple potentially responsible parties are involved, we consider our proportionate share of the probable costs. In formulating the estimate of probable costs, we do not consider amounts expected to be recovered from insurance companies or others. We reassess these accrued amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is included in Accrued expenses. We believe there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all the sites in the aggregate, will be required.

On January 27, 2020, the Brazilian Federal Environmental Agency (“IBAMA”) issued Caterpillar Brasil Ltda a notice of violation regarding allegations around the requirements for use of imported oils at the Piracicaba, Brazil facility. We have instituted processes to address the allegations. While we are still discussing resolution of these allegations with IBAMA, the initial notice from IBAMA included a proposed fine of approximately $370,000. We do not expect this fine or our response to address the allegations to have a material adverse effect on the Company's consolidated results of operations, financial position or liquidity.

On January 7, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requested documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries). The Company has received additional subpoenas relating to this investigation requesting additional documents and information relating to, among other things, the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. On March 2-3, 2017, agents with the Department of Commerce, the Federal Deposit Insurance Corporation and the Internal Revenue Service executed search and seizure warrants at 3 facilities of the Company in the Peoria, Illinois area, including its former corporate headquarters. The warrants identify, and agents seized, documents and information related to, among other things, the export of products from the United States, the movement of products between the United States and Switzerland, the relationship between Caterpillar Inc. and CSARL, and sales outside the United States. It is the Company’s understanding that the warrants, which concern both tax and export activities, are related to the ongoing grand jury investigation. The Company is continuing to cooperate with this investigation. The Company is unable to predict the outcome or reasonably estimate any potential loss; however, we currently believe that this matter will not have a material adverse effect on the Company’s consolidated results of operations, financial position or liquidity.

On March 20, 2014, Brazil’s Administrative Council for Economic Defense (CADE) published a Technical Opinion which named 18 companies and over 100 individuals as defendants, including 2 subsidiaries of Caterpillar Inc., MGE - Equipamentos e Serviços Ferroviários Ltda. (MGE) and Caterpillar Brasil Ltda (CBL). The publication of the Technical Opinion opened CADE’s official administrative investigation into allegations that the defendants participated in anticompetitive bid activity for the construction and maintenance of metro and train networks in Brazil. While companies cannot be held criminally liable for anticompetitive conduct in Brazil, criminal charges have been brought against 1 current employee of MGE and 2 former employees of MGE involving the same conduct alleged by CADE. On July 8, 2019, CADE found MGE, 1 of its current employees and 2 of its former employees liable for anticompetitive conduct. CBL was dismissed from the proceeding without any finding of liability. MGE intends to appeal CADE’s findings. We currently believe that this matter will not have a material adverse effect on the Company’s consolidated results of operations, financial position or liquidity.

In addition, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these unresolved actions involve disputes related to product design, manufacture and performance liability (including claimed asbestos exposure), contracts, employment issues, environmental matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal actions is not material. In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter. However, we believe there is no more than a remote chance that any liability arising from these matters would be material. Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

15. Income taxes

The provision for income taxes for the first ~~nine~~three months of ~~2019~~2020 reflected ana higher estimated annual tax rate of 2631 percent compared with 2426 percent for the first ~~nine~~three months of ~~2018,~~2019, excluding the discrete items discussed below. The increase in the ~~following paragraph. The increase was largely driven by~~estimated annual tax rate is primarily related to changes in the ~~application~~expected geographic mix of profits from a tax perspective for 2020, including the impact of U.S. tax ~~reform provisions to the~~on non-U.S. earnings ~~of certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end. These provisions did not apply to these subsidiaries in 2018.~~

Asas a result of ~~final regulations received in 2019 providing additional guidance~~U.S. tax reform.

In the first three months of 2020, a $43 million tax charge was recorded related to the ~~calculation~~$254 million remeasurement gain resulting from the settlement of a non-U.S. pension obligation. This gain and related tax were excluded from the ~~mandatory deemed repatriation of non-U.S. earnings due to U.S.~~estimated annual tax ~~reform, we recorded a discrete tax benefit of $178 million in~~rate as the ~~first nine months of 2019 to adjust unrecognized tax benefits.~~future period remeasurement impacts cannot currently be estimated. In addition, a discrete tax benefit of ~~$28~~$8 million was recorded in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$52~~$23 million ~~for~~in the first ~~nine~~three months of ~~2018,~~2019, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.

~~The provision for income taxes for~~ During the first ~~nine~~three months of ~~2018~~2019, a $178 million discrete tax benefit was also ~~included:~~

recorded to adjust previously unrecognized tax benefits as a ~~$154 million benefit to revise the estimated impact~~result of ~~the write-down~~receipt of ~~U.S. net deferred tax assets to reflect the reduction in the U.S. corporate tax rate from 35 percent to 21 percent. This benefit primarily~~additional guidance related to the ~~decision to make an additional discretionary pension contribution of $1.0 billion to U.S. pension plans in 2018 which was treated as deductible on the 2017 U.S. tax return.~~

~~a $59 million charge to correct for an error which resulted in an understatement~~calculation of the ~~valuation allowance offsetting deferred tax assets for prior years. Management has concluded that the error was not material to any period presented.~~

~~a $25 million benefit for the release~~mandatory deemed repatriation of ~~a valuation allowance against the deferred tax assets of a~~ non-U.S. ~~subsidiary.~~earnings.

On January 31, 2018, we received a Revenue Agent’s Report from the Internal Revenue Service (IRS) indicating the end of the field examination of our U.S. income tax returns for 2010 to 2012. In the audits of 2007 to 2012 including the impact of a loss carryback to 2005, the IRS has proposed to tax in the United States profits earned from certain parts transactions by Caterpillar SARL (CSARL), based on the IRS examination team’s application of the “substance-over-form” or “assignment-of-income” judicial doctrines. We are vigorously contesting the proposed increases to tax and penalties for these years of approximately $2.3 billion. We believe that the relevant transactions complied with applicable tax laws and did not violate judicial doctrines. We have filed U.S. income tax returns on this same basis for years after 2012. Based on the information currently available, we do not anticipate a significant change to our unrecognized tax benefits for this position within the next 12 months. We currently believe the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position, liquidity or results of operations.

16. Segment information


A.	Basis for segment information

Our Executive Office is comprised of a Chief Executive Officer (CEO), 4 Group Presidents, a Chief Financial Officer (CFO), a Chief Legal Officer, General Counsel &and Corporate Secretary and a Chief Human Resources Officer. The Group Presidents and CFO are accountable for a related set of end-to-end businesses that they manage. The Chief Legal Officer, General Counsel &and Corporate Secretary leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leads the Human Resources Organization. The CEO allocates resources and manages performance at the Group President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the Group President/CFO reporting structure.

NaN of our operating segments, Construction Industries, Resource Industries and Energy & Transportation are led by Group Presidents. NaN operating segment, Financial Products, is led by the CFO who also has responsibility for Corporate Services. Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment. NaN Group President leads 1 smaller operating segment that is included in the All Other operating segment. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment.


B.	Description of segments

We have 5 operating segments, of which 4 are reportable segments. Following is a brief description of our reportable segments and the business activities included in the All Other operating segment:

Construction Industries: A segment primarily responsible for supporting customers using machinery in infrastructure ~~forestry~~ and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; compactors; cold planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators; ~~forestry excavators; feller bunchers; harvesters; knuckleboom loaders;~~ motor graders; pipelayers; road reclaimers; ~~skidders;~~ skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders; utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts and work tools. Inter-segment sales are a source of revenue for this segment.

Resource Industries: A segment primarily responsible for supporting customers using machinery in mining, heavy construction, quarry and aggregates, waste and material handling applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales, and product support. The product portfolio includes large track-type tractors, large mining trucks, hard rock vehicles, longwall miners, electric rope shovels, draglines, hydraulic shovels, rotary drills, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors, soil compactors, ~~hard rock continuous mining systems,~~ select work tools, machinery components, electronics and control systems, and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics and autonomous machine capabilities. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing and research and development. Inter-segment sales are a source of revenue for this segment.

Energy & Transportation: A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related parts across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including ~~marine~~marine- and rail-related businesses. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales, and product support of the following product portfolio: turbine machinery and integrated systems and solutions and turbine-related services; reciprocating engine-powered generator sets; integrated systems used in the electric power generation industry; reciprocating engines and integrated systems and solutions for the marine and oil and gas industries; and reciprocating engines supplied to the industrial industry as well as Cat ~~machinery;~~machinery. Responsibilities also include the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies; the business strategy, product design, product management and development, manufacturing, remanufacturing, leasing and service of diesel-electric locomotives and components and other rail-related products and services; and product support of on-highway vocational trucks for North America. Inter-segment sales are a source of revenue for this segment.

Financial Products Segment: Provides financing alternatives to customers and dealers around the world for Caterpillar products, as well as financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of ~~our~~Caterpillar equipment. The segment also earns revenues from ~~Machinery, Energy & Transportation,~~ME&T, but the related costs are not allocated to operating segments.

All Other operating segment: Primarily includes activities such as: business ~~strategy,~~strategy; product management and ~~development,~~development; manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for ~~Cat~~Cat® products; parts distribution; integrated logistics ~~solutions,~~solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in ~~Japan,~~Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience. Results for the All Other operating segment are included as a reconciling item between reportable segments and consolidated external reporting.


C.	Segment measurement and reconciliations

There are several methodology differences between our segment reporting and our external reporting. The following is a list of the more significant methodology differences:

~~Machinery, Energy & Transportation~~

ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. Beginning in ~~2019, operating lease right-of-use~~2020, we revised how we allocate certain assets ~~are included in segment assets. In 2018,~~between segments. All prior period amounts have been recast to align with the present value of future lease payments for certain Machinery, Energy and Transportation operating leases was included in segment assets while the estimated financing component of the lease payments was excluded.current methodology. Liabilities other than accounts payable and customer advances are generally managed at the corporate level and are not included in segment operations. Financial Products Segment assets generally include all categories of assets.

Segment inventories and cost of sales are valued using a current cost methodology.

Goodwill allocated to segments is amortized using a fixed amount based on a ~~20 year~~20-year useful life. This methodology difference only impacts segment assets; no goodwill amortization expense is included in segment profit. In addition, only a portion of goodwill for certain acquisitions made in 2011 or later has been allocated to segments.

Currency exposures for ~~Machinery, Energy & Transportation~~ME&T are generally managed at the corporate level and the effects of changes in exchange rates on results of operations within the year are not included in segment profit. The net difference created in the translation of revenues and costs between exchange rates used for U.S. GAAP reporting and exchange rates used for segment reporting is reported as a methodology difference.

Stock-based compensation expense is not included in segment profit.

Postretirement benefit expenses are split; segments are generally responsible for service costs, with the remaining elements of net periodic benefit cost included as a methodology difference.

~~Machinery, Energy & Transportation~~ME&T segment profit is determined on a pretax basis and excludes interest expense and most other income/expense items. Financial Products Segment profit is determined on a pretax basis and includes other income/expense items.

Reconciling items are created based on accounting differences between segment reporting and our consolidated external reporting. Please refer to pages 4431 to 5235 for financial information regarding significant reconciling items. Most of our reconciling items are self-explanatory given the above explanations. For the reconciliation of profit, we have grouped the reconciling items as follows:


•	Corporate costs: These costs are related to corporate requirements primarily for compliance and legal functions for the benefit of the entire organization.

•

Restructuring costs: May include costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold. ~~Beginning in 2019, only~~Only certain restructuring costs are excluded from segment profit. A table, Reconciliation of Restructuring costs on page ~~49,~~33, has been included to illustrate how segment profit would have been impacted by the restructuring costs. See Note 20 for more information.


•	Methodology differences: See previous discussion of significant accounting differences between segment reporting and consolidated external reporting.


•	Timing: Timing differences in the recognition of costs between segment reporting and consolidated external reporting. For example, certain costs are reported on the cash basis for segment reporting and the accrual basis for consolidated external reporting.



Reportable Segments
Three Months Ended September 30
Three Months Ended March 31																Three Months Ended March 31
(Millions of dollars)
	2019															2020
	External sales and revenues			Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at September 30		Capital expenditures		External sales and revenues			Inter- segment sales and revenues			Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at March 31		Capital expenditures
Construction Industries	$	5,275		$	14	$	5,289	$	80	$	940	$	5,226	$	48	$	4,312		$	(6	)	$	4,306	$	61	$	640	$	4,793	$	20
Resource Industries	2,179			132		2,311		106		311		6,396		31		1,979			105			2,084		103		304		6,278		17
Energy & Transportation	4,562			890		5,452		158		1,021		8,779		150		3,618			731			4,349		146		602		8,577		87
Machinery, Energy & Transportation	12,016			1,036		13,052		344		2,272		20,401		229		9,909			830			10,739		310		1,546		19,648		124
Financial Products Segment	865		¹	—		865		209		218		35,993		388		814		¹	—			814		205		105		34,445		247
Total	$	12,881		$	1,036	$	13,917	$	553	$	2,490	$	56,394	$	617	$	10,723		$	830		$	11,553	$	515	$	1,651	$	54,093	$	371

	2018															2019
	External sales and revenues			Inter- segment sales and revenues		Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures		External sales and revenues			Inter- segment sales and revenues			Total sales and revenues		Depreciation and amortization		Segment profit		Segment assets at December 31		Capital expenditures
Construction Industries	$	5,654		$	29	$	5,683	$	93	$	1,058	$	4,902	$	58	$	5,852		$	21		$	5,873	$	73	$	1,085	$	4,601	$	28
Resource Industries	2,538			100		2,638		115		414		6,442		49		2,647			105			2,752		112		576		6,505		23
Energy & Transportation	4,577			978		5,555		159		973		8,386		161		4,233			977			5,210		152		838		8,548		98
Machinery, Energy & Transportation	12,769			1,107		13,876		367		2,445		19,730		268		12,732			1,103			13,835		337		2,499		19,654		149
Financial Products Segment	845		¹	—		845		212		201		36,002		298		850		¹	—			850		206		211		35,813		246
Total	$	13,614		$	1,107	$	14,721	$	579	$	2,646	$	55,732	$	566	$	13,582		$	1,103		$	14,685	$	543	$	2,710	$	55,467	$	395

¹ Includes revenues from Machinery, Energy & Transportation of ~~$131~~$105 million and ~~$122~~$131 million in the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Reportable Segments
Nine Months Ended September 30
(Millions of dollars)
2019

External
sales and
revenues

Inter-
segment
sales and
revenues

Total sales
and
revenues

Depreciation
and
amortization

Segment
profit
Segment
assets at
September 30
Capital
expenditures
Construction Industries $ 17,573
$ 56
$ 17,629
$ 241
$ 3,272
$ 5,226
$ 117
Resource Industries 7,537
344
7,881
315
1,368
6,396
91
Energy & Transportation 13,319
2,829
16,148
465
2,745
8,779
366
Machinery, Energy & Transportation 38,429
3,229
41,658
1,021
7,385
20,401
574
Financial Products Segment 2,588
¹
—
2,588
622
622
35,993
1,093
Total $ 41,017
$ 3,229
$ 44,246
$ 1,643
$ 8,007
$ 56,394
$ 1,667

2018

External
sales and
revenues

Inter-
segment
sales and
revenues

Total sales
and
revenues

Depreciation
and
amortization

Segment
profit

Segment
assets at
December 31

Capital
expenditures
Construction Industries $ 17,450
$ 82
$ 17,532
$ 272
$ 3,329
$ 4,902
$ 162
Resource Industries 7,177
296
7,473
346
1,203
6,442
111
Energy & Transportation 13,567
2,931
16,498
474
2,859
8,386
463
Machinery, Energy & Transportation 38,194
3,309
41,503
1,092
7,391
19,730
736
Financial Products Segment 2,467
¹
—
2,467
627
476
36,002
1,192
Total $ 40,661
$ 3,309
$ 43,970
$ 1,719
$ 7,867
$ 55,732
$ 1,928

¹ ~~Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine months ended September 30, 2019 and 2018, respectively.~~

For the three ~~and nine~~ months ending ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ sales and revenues by geographic region reconciled to consolidated sales and revenues were as follows:


Sales and Revenues by Geographic Region
(Millions of dollars)	North America			Latin America			EAME			Asia/ Pacific			External Sales and Revenues				North America			Latin America			EAME			Asia/ Pacific			External Sales and Revenues
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
Construction Industries	$	2,728		$	413		$	1,048		$	1,086		$	5,275			$	2,085		$	265		$	889		$	1,073		$	4,312
Resource Industries	789			349			396			645			2,179				696			320			395			568			1,979
Energy & Transportation	2,129			378			1,224			831			4,562				1,738			249			1,053			578			3,618
All Other operating segment	1			6			8			12			27				5			2			11			10			28
Corporate Items and Eliminations	(62		)	1			(7		)	(1		)	(69		)		(15		)	(2		)	(4		)	(2		)	(23		)
Machinery, Energy & Transportation Sales	5,585			1,147			2,669			2,573			11,974				4,509			834			2,344			2,227			9,914

Financial Products Segment	560			79			102			124			865			¹	525			70			102			117			814			¹
Corporate Items and Eliminations	(43		)	(15		)	(8		)	(15		)	(81		)		(54		)	(12		)	(9		)	(18		)	(93		)
Financial Products Revenues	517			64			94			109			784				471			58			93			99			721

Consolidated Sales and Revenues	$	6,102		$	1,211		$	2,763		$	2,682		$	12,758			$	4,980		$	892		$	2,437		$	2,326		$	10,635

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Construction Industries	$	2,646		$	369		$	1,109		$	1,530		$	5,654			$	2,965		$	319		$	1,006		$	1,562		$	5,852
Resource Industries	849			427			574			688			2,538				951			423			468			805			2,647
Energy & Transportation	2,309			330			1,180			758			4,577				2,151			332			1,032			718			4,233
All Other operating segment	15			—			4			18			37				8			—			11			18			37
Corporate Items and Eliminations	(40		)	1			(5		)	1			(43		)		(41		)	1			(3		)	(2		)	(45		)
Machinery, Energy & Transportation Sales	5,779			1,127			2,862			2,995			12,763				6,034			1,075			2,514			3,101			12,724

Financial Products Segment	559			68			101			117			845			¹	558			70			102			120			850			¹
Corporate Items and Eliminations	(62		)	(12		)	(6		)	(18		)	(98		)		(69		)	(11		)	(9		)	(19		)	(108		)
Financial Products Revenues	497			56			95			99			747				489			59			93			101			742

Consolidated Sales and Revenues	$	6,276		$	1,183		$	2,957		$	3,094		$	13,510			$	6,523		$	1,134		$	2,607		$	3,202		$	13,466

Sales and Revenues by Geographic Region
(Millions of dollars)
North
America

Latin
America
EAME
Asia/
Pacific
External Sales and Revenues
Nine Months Ended September 30, 2019

Construction Industries $ 9,206
$ 1,124
$ 3,162
$ 4,081
$ 17,573

Resource Industries 2,798
1,220
1,310
2,209
7,537

Energy & Transportation 6,577
1,035
3,416
2,291
13,319

All Other operating segment 23
7
23
45
98

Corporate Items and Eliminations (142 ) —
(15 ) (1 ) (158 )
Machinery, Energy & Transportation Sales 18,462
3,386
7,896
8,625
38,369

Financial Products Segment 1,681
225
306
376
2,588
¹
Corporate Items and Eliminations (184 ) (37 ) (26 ) (54 ) (301 )
Financial Products Revenues 1,497
188
280
322
2,287

Consolidated Sales and Revenues $ 19,959
$ 3,574
$ 8,176
$ 8,947
$ 40,656

Nine Months Ended September 30, 2018

Construction Industries $ 8,005
$ 1,105
$ 3,347
$ 4,993
$ 17,450

Resource Industries 2,451
1,181
1,663
1,882
7,177

Energy & Transportation 7,116
897
3,425
2,129
13,567

All Other operating segment 47
1
12
55
115

Corporate Items and Eliminations (108 ) (1 ) (8 ) —
(117 )
Machinery, Energy & Transportation Sales 17,511
3,183
8,439

9,059

38,192

Financial Products Segment 1,608
213
303
343
2,467
¹
Corporate Items and Eliminations (168 ) (36 ) (18 ) (57 ) (279 )
Financial Products Revenues 1,440
177
285
286
2,188

Consolidated Sales and Revenues $ 18,951
$ 3,360
$ 8,724
$ 9,345
$ 40,380

¹ ~~Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine months ended September 30, 2019 and 2018, respectively.~~

For the three ~~and nine~~ months ending ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ Energy & Transportation segment sales by end user application were as follows:


Energy & Transportation External Sales
	Three Months Ended September 30				Three Months Ended March 31
(Millions of dollars)	2019		2018		2020		2019
Oil and gas	$	1,246	$	1,362	$	861	$	1,131
Power generation	1,123		1,102		854		1,036
Industrial	980		863		801		904
Transportation	1,213		1,250		1,102		1,162
Energy & Transportation External Sales	$	4,562	$	4,577	$	3,618	$	4,233


	Nine Months Ended September 30
	2019		2018
Oil and gas	$	3,682	$	4,044
Power generation	3,180		3,063
Industrial	2,841		2,738
Transportation	3,616		3,722
Energy & Transportation External Sales	$	13,319	$	13,567


Reconciliation of Consolidated profit before taxes:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products			Consolidated Total			Machinery, Energy & Transportation			Financial Products			Consolidated Total
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
Total profit from reportable segments	$	2,272		$	218		$	2,490		$	1,546		$	105		$	1,651
All Other operating segment	(21		)	—			(21		)	7			—			7
Cost centers	(9		)	—			(9		)	32			—			32
Corporate costs	(168		)	1			(167		)	(161		)	(6		)	(167		)
Timing	6			—			6			(27		)	—			(27		)
Restructuring costs	(20		)	—			(20		)	(28		)	—			(28		)
Methodology differences:
Inventory/cost of sales	25			—			25			20			—			20
Postretirement benefit expense	19			—			19			403			—			403
Stock-based compensation expense	(55		)	(2		)	(57		)	(45		)	(2		)	(47		)
Financing costs	(58		)	—			(58		)	(80		)	—			(80		)
Currency	(62		)	—			(62		)	(148		)	—			(148		)
Other income/expense methodology differences	(124		)	—			(124		)	(92		)	—			(92		)
Other methodology differences	(47		)	30			(17		)	(19		)	8			(11		)
Total consolidated profit before taxes	$	1,758		$	247		$	2,005		$	1,408		$	105		$	1,513

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Total profit from reportable segments	$	2,445		$	201		$	2,646		$	2,499		$	211		$	2,710
All Other operating segment	(10		)	—			(10		)	25			—			25
Cost centers	29			—			29			24			—			24
Corporate costs	(134		)	—			(134		)	(171		)	(5		)	(176		)
Timing	(18		)	—			(18		)	(66		)	—			(66		)
Restructuring costs	(96		)	(14		)	(110		)	(39		)	—			(39		)
Methodology differences:
Inventory/cost of sales	(20		)	—			(20		)	7			—			7
Postretirement benefit expense	58			—			58			(17		)	—			(17		)
Stock-based compensation expense	(50		)	(2		)	(52		)	(43		)	(2		)	(45		)
Financing costs	(56		)	—			(56		)	(64		)	—			(64		)
Currency	(96		)	—			(96		)	44			—			44
Other income/expense methodology differences	(88		)	—			(88		)	(129		)	—			(129		)
Other methodology differences	(19		)	5			(14		)	(12		)	2			(10		)
Total consolidated profit before taxes	$	1,945		$	190		$	2,135		$	2,058		$	206		$	2,264

Reconciliation of Consolidated profit before taxes:
(Millions of dollars)
Machinery,
Energy &
Transportation

Financial
Products

Consolidated
Total
Nine Months Ended September 30, 2019
Total profit from reportable segments $ 7,385
$ 622
$ 8,007
All Other operating segment 15
—
15
Cost centers 32
—
32
Corporate costs (487 ) (5 ) (492 )
Timing (118 ) —
(118 )
Restructuring costs (131 ) (31 ) (162 )
Methodology differences:

Inventory/cost of sales 24
—
24
Postretirement benefit expense 4
—
4
Stock-based compensation expense (164 ) (6 ) (170 )
Financing costs (173 ) —
(173 )
Currency (110 ) —
(110 )
Other income/expense methodology differences (374 ) —
(374 )
Other methodology differences (71 ) 35
(36 )
Total consolidated profit before taxes $ 5,832
$ 615
$ 6,447

Nine Months Ended September 30, 2018

Total profit from reportable segments $ 7,391
$ 476
$ 7,867
All Other operating segment 70
—
70
Cost centers 55
—
55
Corporate costs (480 ) —
(480 )
Timing (168 ) —
(168 )
Restructuring costs (278 ) (15 ) (293 )
Methodology differences:
Inventory/cost of sales 3
—
3
Postretirement benefit expense 227
—
227
Stock-based compensation expense (158 ) (6 ) (164 )
Financing costs (203 ) —
(203 )
Currency (145 ) —
(145 )
Other income/expense methodology differences (261 ) —
(261 )
Other methodology differences (61 ) 8
(53 )
Total consolidated profit before taxes $ 5,992
$ 463
$ 6,455

Reconciliation of Restructuring costs:

As noted above, certain restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. Had we included the amounts in the segments’ results, the profit would have been as shown below:


Reconciliation of Restructuring costs:
(Millions of dollars)	Segment profit			Restructuring costs			Segment profit with restructuring costs			Segment profit		Restructuring costs			Segment profit with restructuring costs
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
Construction Industries	$	940		$	—		$	940		$	640	$	2		$	642
Resource Industries	311			(11		)	300			304		29			333
Energy & Transportation	1,021			(7		)	1,014			602		(60		)	542
Financial Products Segment	218			—			218			105		—			105
All Other operating segment	(21		)	(2		)	(23		)	7		4			11
Total	$	2,469		$	(20	)	$	2,449		$	1,658	$	(25	)	$	1,633

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Construction Industries	$	1,058		$	(19	)	$	1,039		$	1,085	$	(9	)	$	1,076
Resource Industries	414			(53		)	361			576		(14		)	562
Energy & Transportation	973			(31		)	942			838		(11		)	827
Financial Products Segment	201			—			201			211		—			211
All Other operating segment	(10		)	(4		)	(14		)	25		(5		)	20
Total	$	2,636		$	(107	)	$	2,529		$	2,735	$	(39	)	$	2,696

Reconciliation of Restructuring costs:
(Millions of dollars) Segment
profit Restructuring costs Segment profit with
restructuring costs
Nine Months Ended September 30, 2019
Construction Industries $ 3,272
$ (54 ) $ 3,218
Resource Industries 1,368
(40 ) 1,328
Energy & Transportation 2,745
(59 ) 2,686
Financial Products Segment 622
—
622
All Other operating segment 15
(8 ) 7
Total $ 8,022
$ (161 ) $ 7,861

Nine Months Ended September 30, 2018
Construction Industries $ 3,329
$ (62 ) $ 3,267
Resource Industries 1,203
(149 ) 1,054
Energy & Transportation 2,859
(60 ) 2,799
Financial Products Segment 476
(1 ) 475
All Other operating segment 70
(13 ) 57
Total $ 7,937
$ (285 ) $ 7,652


Reconciliation of Assets:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total			Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
September 30, 2019
March 31, 2020
Total assets from reportable segments	$	20,401		$	35,993	$	—		$	56,394		$	19,648		$	34,445	$	—		$	54,093
All Other operating segment	1,321			—		—			1,321			1,717			—		—			1,717
Items not included in segment assets:
Cash and short-term investments	6,380			—		—			6,380			6,251			—		—			6,251
Intercompany receivables	919			—		(919		)	—			137			—		(137		)	—
Investment in Financial Products	3,968			—		(3,968		)	—			3,999			—		(3,999		)	—
Deferred income taxes	1,927			—		(673		)	1,254			1,975			—		(645		)	1,330
Goodwill and intangible assets	4,361			—		—			4,361			4,504			—		—			4,504
Property, plant and equipment – net and other assets	2,213			—		—			2,213			2,584			—		—			2,584
Inventory methodology differences	(2,415		)	—		—			(2,415		)	(2,554		)	—		—			(2,554		)
Liabilities included in segment assets	9,025			—		—			9,025			8,512			—		—			8,512
Other	(471		)	76		(145		)	(540		)	(522		)	119		(140		)	(543		)
Total assets	$	47,629		$	36,069	$	(5,705	)	$	77,993		$	46,251		$	34,564	$	(4,921	)	$	75,894

December 31, 2018
December 31, 2019
Total assets from reportable segments	$	19,730		$	36,002	$	—		$	55,732		$	19,654		$	35,813	$	—		$	55,467
All Other operating segment	1,279			—		—			1,279			1,728			—		—			1,728
Items not included in segment assets:
Cash and short-term investments	6,968			—		—			6,968			7,299			—		—			7,299
Intercompany receivables	1,633			—		(1,633		)	—			758			—		(758		)	—
Investment in Financial Products	3,672			—		(3,672		)	—			4,260			—		(4,260		)	—
Deferred income taxes	2,015			—		(692		)	1,323			2,002			—		(708		)	1,294
Goodwill and intangible assets	4,279			—		—			4,279			4,435			—		—			4,435
Property, plant and equipment – net and other assets	1,802			—		—			1,802			2,529			—		—			2,529
Inventory methodology differences	(2,503		)	—		—			(2,503		)	(2,426		)	—		—			(2,426		)
Liabilities included in segment assets	9,766			—		—			9,766			8,541			—		—			8,541
Other	(166		)	66		(37		)	(137		)	(343		)	134		(205		)	(414		)
Total assets	$	48,475		$	36,068	$	(6,034	)	$	78,509		$	48,437		$	35,947	$	(5,931	)	$	78,453


Reconciliations of Depreciation and amortization:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidated Total		Machinery, Energy & Transportation			Financial Products		Consolidated Total
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
Total depreciation and amortization from reportable segments	$	344		$	209	$	553	$	310		$	205	$	515
Items not included in segment depreciation and amortization:
All Other operating segment	53			—		53		62			—		62
Cost centers	35			—		35		33			—		33
Other	(4		)	8		4		(3		)	7		4
Total depreciation and amortization	$	428		$	217	$	645	$	402		$	212	$	614

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Total depreciation and amortization from reportable segments	$	367		$	212	$	579	$	337		$	206	$	543
Items not included in segment depreciation and amortization:
All Other operating segment	55			—		55		52			—		52
Cost centers	33			—		33		32			—		32
Other	22			9		31		3			11		14
Total depreciation and amortization	$	477		$	221	$	698	$	424		$	217	$	641

Reconciliations of Depreciation and amortization:
(Millions of dollars)
Machinery,
Energy &
Transportation
Financial
Products Consolidated
Total
Nine Months Ended September 30, 2019
Total depreciation and amortization from reportable segments $ 1,021
$ 622
$ 1,643
Items not included in segment depreciation and amortization: 0
0

All Other operating segment 158
—
158
Cost centers 100
—
100
Other 4
28
32
Total depreciation and amortization $ 1,283
$ 650
$ 1,933

Nine Months Ended September 30, 2018

Total depreciation and amortization from reportable segments $ 1,092
$ 627
$ 1,719
Items not included in segment depreciation and amortization:
All Other operating segment 170
—
170
Cost centers 96
—
96
Other 52
28
80
Total depreciation and amortization $ 1,410
$ 655
$ 2,065


Reconciliations of Capital expenditures:
(Millions of dollars)	Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total			Machinery, Energy & Transportation			Financial Products		Consolidating Adjustments			Consolidated Total
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
Total capital expenditures from reportable segments	$	229		$	388	$	—		$	617		$	124		$	247	$	—		$	371
Items not included in segment capital expenditures:
All Other operating segment	34			—		—			34			15			—		—			15
Cost centers	22			—		—			22			9			—		—			9
Timing	(21		)	—		—			(21		)	160			—		—			160
Other	(26		)	41		(36		)	(21		)	(6		)	3		(4		)	(7		)
Total capital expenditures	$	238		$	429	$	(36	)	$	631		$	302		$	250	$	(4	)	$	548

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
Total capital expenditures from reportable segments	$	268		$	298	$	—		$	566		$	149		$	246	$	—		$	395
Items not included in segment capital expenditures:
All Other operating segment	63			—		—			63			13			—		—			13
Cost centers	30			—		—			30			20			—		—			20
Timing	(5		)	—		—			(5		)	134			—		—			134
Other	(65		)	45		(33		)	(53		)	(19		)	5		(1		)	(15		)
Total capital expenditures	$	291		$	343	$	(33	)	$	601		$	297		$	251	$	(1	)	$	547

Reconciliations of Capital expenditures:
(Millions of dollars)
Machinery,
Energy &
Transportation

Financial
Products

Consolidating
Adjustments

Consolidated
Total
Nine Months Ended September 30, 2019

Total capital expenditures from reportable segments $ 574
$ 1,093
$ —
$ 1,667
Items not included in segment capital expenditures:

All Other operating segment 69
—
—
69
Cost centers 71
—
—
71
Timing 108
—
—
108
Other (92 ) 72
(39 ) (59 )
Total capital expenditures $ 730
$ 1,165
$ (39 ) $ 1,856

Nine Months Ended September 30, 2018

Total capital expenditures from reportable segments $ 736
$ 1,192
$ —
$ 1,928
Items not included in segment capital expenditures:

All Other operating segment 101
—
—
101
Cost centers 70
—
—
70
Timing 152
—
—
152
Other (214 ) 165
(73 ) (122 )
Total capital expenditures $ 845
$ 1,357
$ (73 ) $ 2,129

17. Cat Financial financing activities

Effective January 1, 2020, we implemented the new credit loss guidance using a modified retrospective approach. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods. See Note 2 for additional information.

Allowance for credit losses

The allowance for credit losses is an estimate of the losses inherent in Cat Financial’s finance receivable portfolio and includes consideration of accounts that have been individually identified as impaired, as well as pools of finance receivables where it is probable that certain receivables in the pool are impaired but the individual accounts cannot yet be identified. In identifying and measuring impairment, management takes into consideration past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of underlying collateral and current economic conditions.

Accounts are identified for individual review based on past-due status and information available about the customer, such as financial statements, news reports and published credit ratings, as well as general information regarding industry trends and the economic environment in which Cat Financial’s customers operate. The allowance for credit losses attributable to finance receivables that are individually evaluated and determined to be impaired is based on the present value of expected future cash flows discounted at the receivables’ effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable. In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. Cat Financial also considers credit enhancements such as additional collateral and contractual third-party guarantees. The allowance for credit losses attributable to the remaining accounts not yet individually identified as impaired is estimated based on loss forecast models utilizing probabilities of default, our estimate of the loss emergence period and the estimated loss given default. In addition, qualitative factors not able to be fully captured in the loss forecast models including industry trends, macroeconomic factors and model imprecision are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

~~Cat Financial’s allowance for credit losses is segregated into two portfolio segments:~~

•~~Customer - Finance receivables with retail customers.~~

•~~Dealer - Finance receivables with Caterpillar dealers.~~

Portfolio segments

A portfolio segment is the level at which ~~the company~~Cat Financial develops a systematic methodology for determining its allowance for credit losses. Cat Financial's portfolio segments and related methods for estimating expected credit losses are as follows:

Customer

Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use, the majority of which operate in construction-related industries. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio is approximately 48 months with an average remaining term of approximately 22 months.

Cat Financial typically maintains a security interest in financed equipment and requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial's collection efforts fail to bring a defaulted account current, Cat Financial generally can repossess the financed equipment, after satisfying local legal requirements, and sell it within the Caterpillar dealer network or through third party auctions.

Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific macro-economic factors.

As of March 31, 2020, Cat Financial's forecasts for the markets in which it operates reflected a decline in economic conditions resulting from a contracting economy, elevated unemployment rates and an increase in the level and trend of delinquencies due to the COVID-19 pandemic. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long term trends.

Dealer

Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their new Caterpillar equipment inventory and rental fleets and are generally secured by the financed equipment. In addition, Cat Financial provides unsecured loans to Caterpillar dealers for working capital.

Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

Although forecasts indicate a decline in economic conditions, Cat Financial's Dealer portfolio segment has not historically resulted in increased credit losses during prior economic downturns due to its close working relationships with the dealers and their financial strength. Therefore, no adjustments to historical loss rates were made during the three-month period ended March 31, 2020.

Classes of finance receivables

Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. Typically, Cat ~~Financial’s~~Financial's finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk. Cat ~~Financial’s~~Financial's classes, which align with management reporting for credit losses, are as follows:


•	North America - Finance receivables originated in the United States and Canada.


•	EAME - Finance receivables originated in Europe, Africa, the Middle East and the Commonwealth of Independent States.


•	Asia/Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.


•	Mining - Finance receivables related to large mining customers worldwide.


•	Latin America - Finance receivables originated in Mexico and Central and South American countries.


•	Caterpillar Power Finance - Finance receivables originated worldwide related to marine vessels with Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the ~~United States or Canada.~~

~~EAME - Finance receivables originated in Europe, Africa,~~judgment of management, they are considered uncollectible (generally upon repossession of the ~~Middle East and~~collateral). The amount of the ~~Commonwealth~~write-off is determined by comparing the fair value of ~~Independent States.~~

~~Asia Pacific - Finance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and India.~~

~~Mining - Finance receivables related~~the collateral, less cost to ~~large mining customers worldwide.~~

~~Latin America - Finance receivables originated in Mexico, and Central and South American countries.~~

~~Caterpillar Power Finance - Finance receivables originated worldwide related~~sell, to ~~marine vessels with Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.~~the amortized cost. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.

An analysis of the allowance for credit losses was as follows:



(Millions of dollars)	September 30, 2019								March 31, 2020
Allowance for Credit Losses:	Customer			Dealer		Total			Customer			Dealer		Total
Balance at beginning of year	$	486		$	21	$	507		$	375		$	45	$	420
Adjustment to adopt new accounting guidance ¹									12			—		12
Receivables written off	(238		)	—		(238		)	(37		)	—		(37		)
Recoveries on receivables previously written off	31			—		31			7			—		7
Provision for credit losses	120			24		144			60			—		60
Other	(14		)	—		(14		)	(9		)	—		(9		)
Balance at end of period	$	385		$	45	$	430		$	408		$	45	$	453

Individually evaluated for impairment	$	182		$	39	$	221
Collectively evaluated for impairment	203			6		209
Individually evaluated									$	176		$	39	$	215
Collectively evaluated									232			6		238
Ending Balance	$	385		$	45	$	430		$	408		$	45	$	453

Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	665		$	78	$	743
Collectively evaluated for impairment	17,622			3,656		21,278
Finance Receivables:
Individually evaluated									$	570		$	78	$	648
Collectively evaluated									17,436			3,500		20,936
Ending Balance	$	18,287		$	3,734	$	22,021		$	18,006		$	3,578	$	21,584

¹ See Note 2 regarding new accounting guidance related to credit losses.



(Millions of dollars)	December 31, 2018								December 31, 2019
Allowance for Credit Losses:	Customer			Dealer		Total			Customer			Dealer		Total
Balance at beginning of year	$	353		$	9	$	362		$	486		$	21	$	507
Receivables written off	(235		)	—		(235		)	(281		)	—		(281		)
Recoveries on receivables previously written off	46			—		46			44			—		44
Provision for credit losses	337			12		349			138			24		162
Other	(15		)	—		(15		)	(12		)	—		(12		)
Balance at end of year	$	486		$	21	$	507		$	375		$	45	$	420

Individually evaluated for impairment	$	288		$	14	$	302
Collectively evaluated for impairment	198			7		205
Individually evaluated									$	178		$	39	$	217
Collectively evaluated									197			6		203
Ending Balance	$	486		$	21	$	507		$	375		$	45	$	420

Recorded Investment in Finance Receivables:
Individually evaluated for impairment	$	858		$	78	$	936
Collectively evaluated for impairment	18,152			3,338		21,490
Finance Receivables:
Individually evaluated									$	594		$	78	$	672
Collectively evaluated									18,093			3,632		21,725
Ending Balance	$	19,010		$	3,416	$	22,426		$	18,687		$	3,710	$	22,397

Credit quality of finance receivables

At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, Cat Financial monitors credit quality based on past-due status ~~and collection experience~~ as there is a meaningful correlation between the past-due status of customers and the risk of loss.

In determining past-due status, Cat Financial considers the entire ~~recorded investment in~~ finance ~~receivables~~receivable past due when any installment is over 30 days past due.

Customer

The ~~tables~~table below ~~summarize~~summarizes the aging category of Cat Financial's amortized cost of finance receivables in the Customer portfolio segment by origination year:




(Millions of dollars)	March 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	931	$	3,274	$	2,010	$	952	$	455	$	155	$	157	$	7,934
31-60 days past due	6		55		52		29		21		5		—		168
61-90 days past due	—		11		11		10		3		1		—		36
91+ days past due	—		14		21		15		10		6		—		66
EAME
Current	249		1,164		773		358		133		44		—		2,721
31-60 days past due	2		11		5		4		2		—		—		24
61-90 days past due	—		7		3		2		1		1		—		14
91+ days past due	—		8		22		23		53		61		—		167
Asia/Pacific
Current	217		1,021		570		163		21		9		—		2,001
31-60 days past due	2		26		25		9		—		1		—		63
61-90 days past due	—		14		14		5		1		—		—		34
91+ days past due	—		15		17		8		1		—		—		41
Mining
Current	72		701		413		235		139		215		199		1,974
31-60 days past due	—		—		1		—		—		1		—		2
61-90 days past due	—		3		12		6		—		—		—		21
91+ days past due	—		12		12		23		—		—		1		48
Latin America
Current	175		483		253		88		23		49		—		1,071
31-60 days past due	—		15		10		8		4		2		—		39
61-90 days past due	—		5		7		5		2		—		—		19
91+ days past due	—		11		29		24		9		7		—		80
Caterpillar Power Finance
Current	3		273		221		287		137		158		160		1,239
31-60 days past due	—		—		11		—		4		11		—		26
61-90 days past due	—		—		—		1		—		—		—		1
91+ days past due	—		—		20		11		37		149		—		217
Total Customer	$	1,657	$	7,123	$	4,512	$	2,266	$	1,056	$	875	$	517	$	18,006

Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other machinery. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the machinery.

Dealer

As of March 31, 2020, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $78 million that was 91+ days past due in Latin America. These past due receivables were originated in 2017.

The table below summarizes Cat Financial's recorded investment in finance receivables by aging category.

September 30, 2019
(Millions of dollars)
31-60
Days
Past Due

61-90
Days
Past Due

91+
Days
Past Due

Total Past
Due
Current
Recorded Investment in Finance
Receivables

91+ Still
Accruing
Customer

North America $ 73
$ 16
$ 48
$ 137
$ 7,773
$ 7,910
$ 15
EAME 33
10
136
179
2,853
3,032
4
Asia Pacific 36
21
24
81
2,437
2,518
6
Mining 1
24
19
44
1,810
1,854
—
Latin America 43
29
93
165
1,110
1,275
1
Caterpillar Power Finance 1
1
241
243
1,455
1,698
14
Dealer

North America —
—
—
—
2,109
2,109
—
EAME —
—
—
—
346
346
—
Asia Pacific —
—
—
—
434
434
—
Mining —
—
—
—
4
4
—
Latin America —
—
81
81
759
840
—
Caterpillar Power Finance —
—
—
—
1
1
—
Total $ 187
$ 101
$ 642
$ 930
$ 21,091
$ 22,021
$ 40



	December 31, 2018														December 31, 2019
(Millions of dollars)	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Recorded Investment in Finance Receivables		91+ Still Accruing		31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables
Customer
North America	$	65	$	18	$	84	$	167	$	7,825	$	7,992	$	14	$	72	$	23	$	55	$	150	$	8,002	$	8,152
EAME	19		9		153		181		2,850		3,031		5		30		31		141		202		2,882		3,084
Asia Pacific	24		9		8		41		2,409		2,450		5		40		14		29		83		2,181		2,264
Mining	28		1		9		38		1,642		1,680		—		5		—		19		24		2,266		2,290
Latin America	38		29		71		138		1,421		1,559		—		41		23		80		144		1,089		1,233
Caterpillar Power Finance	10		1		384		395		1,903		2,298		—		10		10		225		245		1,419		1,664
Dealer
North America	—		—		—		—		1,895		1,895		—		—		—		—		—		2,136		2,136
EAME	—		—		—		—		333		333		—		—		—		—		—		342		342
Asia Pacific	—		—		—		—		466		466		—		—		—		—		—		437		437
Mining	—		—		—		—		4		4		—		—		—		—		—		4		4
Latin America	—		—		78		78		638		716		—		—		—		78		78		712		790
Caterpillar Power Finance	—		—		—		—		2		2		—		—		—		—		—		1		1
Total	$	184	$	67	$	787	$	1,038	$	21,388	$	22,426	$	24	$	198	$	101	$	627	$	926	$	21,471	$	22,397

Impaired finance receivables

~~For all classes, a~~A finance receivable is considered impaired, based on current information and events, if it is probable that Cat Financial will be unable to collect all amounts due according to the contractual terms. Impaired finance receivables include finance receivables that have been restructured and are considered to be troubled debt ~~restructurings.~~restructures.

In Cat Financial’s Customer portfolio segment, impaired finance receivables and the related unpaid principal balances and allowance were as follows:



	December 31, 2019
(Millions of dollars)	Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired Finance Receivables With No Allowance Recorded
North America	$	6	$	6	$	—
EAME	—		—		—
Asia Pacific	—		—		—
Mining	22		22		—
Latin America	8		8		—
Caterpillar Power Finance	58		58		—
Total	$	94	$	94	$	—

Impaired Finance Receivables With An Allowance Recorded
North America	$	30	$	30	$	11
EAME	61		61		29
Asia Pacific	8		8		2
Mining	37		36		9
Latin America	58		58		20
Caterpillar Power Finance	306		319		107
Total	$	500	$	512	$	178

Total Impaired Finance Receivables
North America	$	36	$	36	$	11
EAME	61		61		29
Asia Pacific	8		8		2
Mining	59		58		9
Latin America	66		66		20
Caterpillar Power Finance	364		377		107
Total	$	594	$	606	$	178



	Three Months Ended March 31, 2019
(Millions of dollars)	Average Recorded Investment		Interest Income Recognized
Impaired Finance Receivables With No Allowance Recorded
North America	$	10	$	—
EAME	1		—
Asia Pacific	—		—
Mining	31		—
Latin America	24		—
Caterpillar Power Finance	60		1
Total	$	126	$	1

Impaired Finance Receivables With An Allowance Recorded
North America	$	40	$	1
EAME	94		1
Asia Pacific	7		—
Mining	43		1
Latin America	77		1
Caterpillar Power Finance	451		3
Total	$	712	$	7

Total Impaired Finance Receivables
North America	$	50	$	1
EAME	95		1
Asia Pacific	7		—
Mining	74		1
Latin America	101		1
Caterpillar Power Finance	511		4
Total	$	838	$	8

There were $78 million ofin impaired finance receivables with a related allowance of $39 million ~~and $14 million~~ as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively,~~2019 for the Dealer portfolio segment, all of which was in Latin America. ~~Cat Financial’s recorded investment in impaired finance receivables and the related unpaid principal balances and allowance for the Customer portfolio segment were as follows:~~

September 30, 2019 December 31, 2018
(Millions of dollars)
Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance
Impaired Finance Receivables With No Allowance Recorded

North America $ 9
$ 9
$ —
$ 10
$ 10
$ —
EAME —
—
—
1
1
—
Asia Pacific —
—
—
—
—
—
Mining 23
23
—
33
33
—
Latin America 25
25
—
29
29
—
Caterpillar Power Finance 71
113
—
69
83
—
Total $ 128
$ 170
$ —
$ 142
$ 156
$ —

Impaired Finance Receivables With An Allowance Recorded

North America $ 31
$ 30
$ 9
$ 40
$ 41
$ 14
EAME 60
60
27
92
92
57
Asia Pacific 10
10
4
4
4
2
Mining 61
59
18
56
55
26
Latin America 66
64
22
75
75
25
Caterpillar Power Finance 309
322
102
449
455
164
Total $ 537
$ 545
$ 182
$ 716
$ 722
$ 288

Total Impaired Finance Receivables

North America $ 40
$ 39
$ 9
$ 50
$ 51

$ 14
EAME 60
60
27
93
93

57
Asia Pacific 10
10
4
4
4

2
Mining 84
82
18
89
88
26
Latin America 91
89
22
104
104

25
Caterpillar Power Finance 380
435
102
518
538

164
Total $ 665
$ 715
$ 182
$ 858
$ 878
$ 288

Three Months Ended September 30, 2019 Three Months Ended September 30, 2018
(Millions of dollars)
Average Recorded
Investment

Interest Income
Recognized

Average Recorded
Investment

Interest Income
Recognized
Impaired Finance Receivables With No Allowance Recorded

North America $ 10
$ —
$ 19
$ —
EAME 15
—
4
—
Asia Pacific —
—
29
1
Mining 26
—
35
—
Latin America 22
—
37
1
Caterpillar Power Finance 57
1
94
2
Total $ 130
$ 1
$ 218
$ 4

Impaired Finance Receivables With An Allowance Recorded

North America $ 30
$ —
$ 47
$ —
EAME 80
1
59
—
Asia Pacific 12
1
2
—
Mining 65
1
60
1
Latin America 69
1
51
1
Caterpillar Power Finance 376
1
374
4
Total $ 632
$ 5
$ 593
$ 6

Total Impaired Finance Receivables

North America $ 40
$ —
$ 66
$ —
EAME 95
1
63
—
Asia Pacific 12
1
31
1
Mining 91
1
95
1
Latin America 91
1
88
2
Caterpillar Power Finance 433
2
468
6
Total $ 762
$ 6
$ 811
$ 10

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018
(Millions of dollars)
Average Recorded
Investment

Interest Income
Recognized

Average Recorded
Investment

Interest Income
Recognized
Impaired Finance Receivables With No Allowance Recorded

Customer

North America $ 10
$ —
$ 17
$ 1
EAME 7
—
17
—
Asia Pacific —
—
30
2
Mining 29
1
65
2
Latin America 22
1
41
2
Caterpillar Power Finance 53
2
149
5
Total $ 121
$ 4
$ 319
$ 12

Impaired Finance Receivables With An Allowance Recorded

Customer

North America $ 36
$ 1
$ 51
$ 1
EAME 88
2
41
1
Asia Pacific 9
1
4
—
Mining 49
2
43
2
Latin America 73
4
69
3
Caterpillar Power Finance 422
8
364
8
Total $ 677
$ 18
$ 572
$ 15

Total Impaired Finance Receivables

Customer

North America $ 46
$ 1
$ 68
$ 2
EAME 95
2
58
1
Asia Pacific 9
1
34
2
Mining 78
3
108
4
Latin America 95
5
110
5
Caterpillar Power Finance 475
10
513
13
Total $ 798
$ 22
$ 891
$ 27

Non-accrual finance receivables

Recognition of income is suspended and the finance receivable is placed on non-accrual status when management determines that collection of future income is not ~~probable (generally after~~probable. Contracts on non-accrual status are generally more than 120 days past ~~due)~~due or have been restructured in a troubled debt restructuring (TDR). Recognition is resumed and previously suspended income is recognized when the finance receivable becomes current and collection of remaining amounts is considered probable. Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. Interest earned but uncollected prior to the receivable being placed on non-accrual status is written off through Provision for credit losses when, in the judgment of management, it is considered uncollectible.

In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:




	March 31, 2020
	Amortized Cost
(Millions of dollars)	Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing

North America	$	50	$	—	$	20
EAME	168		1		5
Asia Pacific	29		—		12
Mining	40		—		9
Latin America	87		—		—
Caterpillar Power Finance	329		—		7
Total	$	703	$	1	$	53

There was less than $1 million of interest income recognized during the three months ended March 31, 2020 for customer finance receivables on non-accrual status.




(Millions of dollars)	December 31, 2019
	Recorded Investment
	Non-accrual Finance Receivables		91+ Still Accruing
North America	$	44	$	15
EAME	165		4
Asia Pacific	21		8
Mining	47		—
Latin America	89		2
Caterpillar Power Finance	361		—
Total	$	727	$	29

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, there were ~~$81 million and~~ $78 million ~~respectively,~~ in finance receivables on non-accrual status ~~for the~~in Cat Financial's Dealer portfolio segment, all of which was in Latin America. ~~The recorded investment~~There were 0 finance receivables in ~~customer~~Cat Financial's Dealer portfolio segment more than 90 days past due and still accruing income as of March 31, 2020 and 0 interest income was recognized on dealer finance receivables on non-accrual status ~~was as follows:~~

(Millions of dollars)
September 30, 2019 December 31, 2018
North America $ 38
$ 77
EAME 168
154
Asia Pacific 19
4
Mining 44
50
Latin America 103
106
Caterpillar Power Finance 372
416
Total $ 744
$ 807

during the three months ended March 31, 2020.

Troubled ~~Debt Restructurings~~debt restructurings

A restructuring of a finance receivable constitutes a ~~troubled debt restructuring (TDR)~~TDR when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, ~~extended skip~~ payment ~~periods~~deferrals and reduction of principal and/or accrued interest.

~~As of September 30, 2019 and December 31, 2018, there were 0 additional funds committed to lend to a borrower whose terms have been modified in a TDR.~~

There were 0 finance receivables modified as TDRs during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~or 2018~~ for the Dealer portfolio segment. Cat Financial’s ~~investment in~~ finance receivables in the Customer portfolio segment modified as TDRs ~~during the~~ ~~three and nine~~ ~~months ended September 30, 2019 and 2018 was~~were as follows:



	Three Months Ended September 30, 2019					Three Months Ended September 30, 2018					Three Months Ended March 31, 2020					Three Months Ended March 31, 2019
(Millions of dollars)	Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment		Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment
North America	4	$	—	$	—	4	$	—	$	—
Caterpillar Power Finance	4	56		55		2	40		40
Total	8	$	56	$	55	6	$	40	$	40

	Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018
	Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment		Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment
North America	12	$	5	$	4	34	$	13	$	13
(Dollars in millions)											Number of Contracts	Pre-TDR Amortized Cost		Post-TDR Amortized Cost		Number of Contracts	Pre-TDR Recorded Investment		Post-TDR Recorded Investment
EAME	21	21		17		—	—		—		0	$	—	$	—	17	$	7	$	7
Mining	1	6		6		1	29		29
Latin America	4	2		2		1	3		3		5	2		2		—	—		—
Caterpillar Power Finance	19	154		152		7	93		60		0	—		—		8	51		50
Total	57	$	188	$	181	43	$	138	$	105	5	$	2	$	2	25	$	58	$	57

TDRs in the Customer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, were as follows:




	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
(Millions of dollars)	Number of Contracts	Post-TDR Recorded Investment		Number of Contracts	Post-TDR Recorded Investment
(Dollars in millions)							Number of Contracts	Post-TDR Amortized Cost		Number of Contracts	Post-TDR Recorded Investment
Customer
North America	—	$	—	7	$	9
EAME							2	$	10	—	$	—
Latin America	—	—		1	—		3	1		—	—
Caterpillar Power Finance	—	—		3	33
Total	—	$	—	11	$	42	5	$	11	—	$	—

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018

Number of
Contracts

Post-TDR
Recorded
Investment

Number of
Contracts

Post-TDR
Recorded
Investment
Customer

North America — $ —
10 $ 10
Latin America — —
3 1
Caterpillar Power Finance — —
3 33
Total — $ —
16 $ 44

18. Fair value disclosures

A. Fair value measurements

The guidance on fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:


•	Level 1 – Quoted prices for identical instruments in active markets.


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


•	Level 3 – Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterparty or Caterpillar) will not be fulfilled. For financial assets traded in an active market (Level 1 and certain Level 2), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.

Investments in debt and equity securities

We have investments in certain debt and equity securities, primarily at Insurance Services, that are recorded at fair value. Fair values for our U.S. treasury bonds and large capitalization value and smaller company growth equity securities are based upon valuations for identical instruments in active markets. Fair values for other government bonds, corporate bonds and mortgage-backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.

In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is recorded at fair value based on the net asset value (NAV) of the investment and is not classified within the fair value hierarchy.

See Note 8 for additional information on our investments in debt and equity securities.

Derivative financial instruments

The fair value of interest rate contracts is primarily based on models that utilize the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The fair value of foreign currency and commodity forward, option and cross currency contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are summarized below:


	September 30, 2019										March 31, 2020
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value		Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value
Assets
Debt securities
Government debt
U.S. treasury bonds	$	9	$	—	$	—	$	—	$	9	$	9	$	—	$	—	$	—	$	9
Other U.S. and non-U.S. government bonds	—		48		—		—		48		—		47		—		—		47
Corporate bonds
Corporate bonds	—		840		—		—		840		—		871		—		—		871
Asset-backed securities	—		53		—		—		53		—		86		—		—		86
Mortgage-backed debt securities
U.S. governmental agency	—		331		—		—		331		—		378		—		—		378
Residential	—		6		—		—		6		—		5		—		—		5
Commercial	—		41		—		—		41		—		53		—		—		53
Total debt securities	9		1,319		—		—		1,328		9		1,440		—		—		1,449
Equity securities
Large capitalization value	310		—		—		—		310		139		—		—		—		139
Smaller company growth	47		—		8		—		55		23		—		2		—		25
REIT	—		—		—		124		124		—		—		—		137		137
Total equity securities	357		—		8		124		489		162		—		2		137		301
Derivative financial instruments, net	—		55		—		—		55		—		121		—		—		121
Total assets	$	366	$	1,374	$	8	$	124	$	1,872	$	171	$	1,561	$	2	$	137	$	1,871


	December 31, 2018										December 31, 2019
(Millions of dollars)	Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value		Level 1		Level 2		Level 3		Measured at NAV		Total Assets / Liabilities, at Fair Value
Assets
Debt securities
Government debt
U.S. treasury bonds	$	9	$	—	$	—	$	—	$	9	$	9	$	—	$	—	$	—	$	9
Other U.S. and non-U.S. government bonds	—		42		—		—		42		—		54		—		—		54
Corporate bonds
Corporate bonds	—		720		—		—		720		—		856		—		—		856
Asset-backed securities	—		63		—		—		63		—		62		—		—		62
Mortgage-backed debt securities
U.S. governmental agency	—		297		—		—		297		—		331		—		—		331
Residential	—		7		—		—		7		—		6		—		—		6
Commercial	—		13		—		—		13		—		47		—		—		47
Total debt securities	9		1,142		—		—		1,151		9		1,356		—		—		1,365
Equity securities
Large capitalization value	260		—		—		—		260		187		—		—		—		187
Smaller company growth	46		—		—		—		46		29		—		4		—		33
REIT	—		—		—		119		119		—		—		—		126		126
Total equity securities	306		—		—		119		425		216		—		4		126		346
Derivative financial instruments, net											—		45		—		—		45
Total assets	$	315	$	1,142	$	—	$	119	$	1,576	$	225	$	1,401	$	4	$	126	$	1,756
Liabilities
Derivative financial instruments, net	$	—	$	19	$	—	$	—	$	19
Total liabilities	$	—	$	19	$	—	$	—	$	19

In addition to the amounts above, Cat Financial impaired loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is considered impaired when management determines that collection of contractual amounts due is not probable. In these cases, an allowance for credit losses may be established based either on the present value of expected future cash flows discounted at the receivables’ effective interest rate, the fair value of the collateral for collateral-dependent receivables, or the observable market price of the receivable. In determining collateral value, Cat Financial estimates the current fair market value of the collateral less selling costs. Cat Financial had impaired loans with a fair value of ~~$373~~$324 million and ~~$469~~$343 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

B. Fair values of financial instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair value measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments:

Cash and short-term investments

Carrying amount approximated fair value.

Restricted cash and short-term investments

Carrying amount approximated fair value. Restricted cash and short-term investments are included in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position.

Finance receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Wholesale inventory receivables

Fair value was estimated by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.

Short-term borrowings

Carrying amount approximated fair value.

Long-term debt

Fair value for fixed and floating rate debt was estimated based on quoted market prices.

Guarantees

The fair value of guarantees is based upon our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions.

~~Please refer to the table below for the fair~~Fair values of our financial ~~instruments.~~instruments were as follows:


	Fair Value of Financial Instruments										Fair Value of Financial Instruments
	September 30, 2019				December 31, 2018						March 31, 2020				December 31, 2019
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	7,906	$	7,906	$	7,857	$	7,857	1		$	7,123	$	7,123	$	8,284	$	8,284	1
Restricted cash and short-term investments	$	30	$	30	$	33	$	33	1		$	7	$	7	$	8	$	8	1
Investments in debt and equity securities	$	1,817	$	1,817	$	1,576	$	1,576	1, 2 & 3	Note 8	$	1,750	$	1,750	$	1,711	$	1,711	1, 2 & 3	Note 8
Finance receivables – net (excluding finance leases ¹)	$	14,218	$	14,351	$	14,714	$	14,798	3	Note 17	$	14,076	$	14,149	$	14,473	$	14,613	3	Note 17
Wholesale inventory receivables – net (excluding finance leases ¹)	$	1,118	$	1,090	$	1,050	$	1,025	3		$	1,104	$	1,071	$	1,105	$	1,076	3
Foreign currency contracts – net	$	116	$	116	$	47	$	47	2	Note 5	$	129	$	129	$	62	$	62	2	Note 5
Interest rate contracts – net											$	26	$	26	$	—	$	—	2	Note 5
Commodity contracts – net											$	—	$	—	$	3	$	3	2	Note 5

Liabilities
Short-term borrowings	$	4,268	$	4,268	$	5,723	$	5,723	1		$	4,789	$	4,789	$	5,166	$	5,166	1
Long-term debt (including amounts due within one year)
Machinery, Energy & Transportation	$	9,159	$	11,412	$	8,015	$	9,046	2		$	9,141	$	11,061	$	9,157	$	11,216	2
Financial Products	$	24,479	$	24,798	$	22,815	$	22,684	2		$	23,163	$	23,226	$	23,334	$	23,655	2
Interest rate contracts – net	$	54	$	54	$	36	$	36	2	Note 5	$	—	$	—	$	20	$	20	2	Note 5
Commodity contracts – net	$	7	$	7	$	30	$	30	2	Note 5	$	34	$	34	$	��	$	—	2	Note 5
Guarantees	$	6	$	6	$	8	$	8	3	Note 11	$	5	$	5	$	5	$	5	3	Note 11


¹	Represents finance leases and failed sales leasebacks of ~~$7,668~~$7,328 million and $7,800 million at ~~September 30, 2019~~March 31, 2020 and ~~finance leases of $7,463 million~~ at December 31, ~~2018,~~2019, respectively.

19. Other income (expense)


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(Millions of dollars)	2019			2018			2019			2018			2020				2019
Investment and interest income	$	50		$	59		$	156		$	139		$	43			$	52
Foreign exchange gains (losses) ¹	(5		)	(81		)	(34		)	(160		)	(75		)		18
License fee income	31			29			87			96			25				25
Net periodic pension and OPEB income (cost), excluding service cost	24			85			74			257			333			²	26
Gains (losses) on securities	2			13			55			18			(58		)		39
Miscellaneous income (loss)	(14		)	(3		)	(22		)	—			(46		)		—
Total	$	88		$	102		$	316		$	350		$	222			$	160

¹ Includes gains (losses) from foreign exchange derivative contracts. See Note 5 for further details.

² Includes a remeasurement gain of $254 million from settlement of a non-U.S. pension obligation. See Note 9 for further details.

20. Restructuring costs

Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, eligible separation costs are recognized at the time of employee acceptance unless the acceptance requires explicit approval by the company. For involuntary programs, eligible costs are recognized when management has approved the program, the affected employees have been properly notified and the costs are estimable.

Restructuring costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows:



(Millions of dollars)		Three Months Ended September 30					Three Months Ended March 31
		2019		2018			2020		2019
Employee separations ¹		$	8	$	44		$	11	$	15
Long-lived asset impairments ¹		3		18
Other ²		13		48
Total restructuring costs		$	24	$	110


		Nine Months Ended September 30
		2019		2018
Employee separations ¹		$	33	$	121
Contract terminations ¹							1		—
Long-lived asset impairments ¹		39		49			9		7
Other²		110		123			16		26
Total restructuring costs		$	182	$	293		$	37	$	48

¹ Recognized in Other operating (income) expenses.	¹ Recognized in Other operating (income) expenses.					¹ Recognized in Other operating (income) expenses.
² Represents costs related to our restructuring programs, primarily for inventory write-downs, project management costs, accelerated depreciation, building demolition and equipment relocation, all of which are primarily included in Cost of goods sold.
² Represents costs related to our restructuring programs, primarily for inventory write-downs, equipment relocation, building demolition and project management, all of which are primarily included in Cost of goods sold.						² Represents costs related to our restructuring programs, primarily for inventory write-downs, equipment relocation, building demolition and project management, all of which are primarily included in Cost of goods sold.

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the restructuring costs were primarily related to ~~restructuring actions in Construction Industries and Energy & Transportation.~~a strategic action to address a certain product line, which were partially offset by a gain on the sale of a manufacturing facility that had been closed. For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the restructuring costs were primarily related to ongoing facility closures across the company.

Certain restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. See Note 16 for more information.

The following table summarizes the ~~2018~~2019 and ~~2019~~2020 employee separation activity:



(Millions of dollars)
Liability balance at December 31, 2017		$	249
Increase in liability (separation charges)		112
Reduction in liability (payments)		(276		)
Liability balance at December 31, 2018	Liability balance at December 31, 2018	85			Liability balance at December 31, 2018	$	85
Increase in liability (separation charges)	Increase in liability (separation charges)	33			Increase in liability (separation charges)	48
Reduction in liability (payments)	Reduction in liability (payments)	(73		)	Reduction in liability (payments)	(85		)
Liability balance at September 30, 2019		$	45
Liability balance at December 31, 2019					Liability balance at December 31, 2019	48
Increase in liability (separation charges)					Increase in liability (separation charges)	11
Reduction in liability (payments)					Reduction in liability (payments)	(16		)
Liability balance at March 31, 2020					Liability balance at March 31, 2020	$	43

Most of the liability balance at ~~September 30, 2019~~March 31, 2020 is expected to be paid in ~~2019~~2020 and ~~2020.~~2021.

21.Subsequent event

As the COVID-19 global pandemic continues to evolve, Caterpillar’s financial results for the remainder of 2020 and perhaps beyond will be impacted by the continued global economic uncertainty. The magnitude of the pandemic, including the extent of any impact on Caterpillar’s business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time due to the rapid development and fluidity of the situation. The ultimate effect of the COVID-19 pandemic on the company will be determined by a variety of factors beyond the company’s control, including the duration of the pandemic, its geographic spread, business disruptions and the overall impact on the global economy.

Caterpillar, as a result, has taken decisive actions to enhance our strong financial position and increase liquidity. On a consolidated basis, Caterpillar ended the first quarter with $7.1 billion of cash and available global credit facilities of $10.5 billion. In ~~September 2015,~~April, Caterpillar raised $2.0 billion of incremental cash by issuing new 10- and 30- year bonds. In addition, we ~~announced a large scale restructuring plan (the Plan) including a voluntary retirement enhancement program~~have added an incremental $3.9 billion short-term credit facility and registered for ~~qualifying U.S. employees, several voluntary separation~~$4.1 billion in commercial paper support programs ~~outside of~~now available in the United States ~~additional involuntary programs throughout~~and Canada. We also temporarily suspended our share repurchase program. The existing share repurchase program remains authorized by the ~~company~~Board, and ~~manufacturing facility consolidations and closures that occurred through 2018. The largest action among those included~~we may resume share repurchases in the ~~Plan was related to~~future at any time depending upon market conditions, our European manufacturing footprint, which led to the Gosselies, Belgium, facility closure. In the first nine months of 2019, we incurred $30 million of restructuring costs related to the Plan. Total restructuring costs incurred since the inceptioncapital needs and other factors.

The Company has not made any drawings under any of the ~~Plan were $1,818 million. The remaining costs~~above mentioned credit facilities nor does it have any outstanding borrowings under either commercial paper support program as of ~~approximately $20 million related to~~ the ~~Plan are expected to be recognized in 2019.~~date of this filing.

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited financial statements and related notes included elsewhere in this report and our discussion of significant risks to the company’s business under Part I, Item 1A. Risk Factors of the 2019 Form 10-K as supplemented by Part II, Item 1A. Risk Factors of this report.

Overview

~~Third-quarter 2019~~Total sales and revenues for the first quarter of 2020 were ~~$12.758~~$10.635 billion, a decrease of ~~$752 million,~~$2.831 billion, or 621 percent, compared with ~~$13.510~~$13.466 billion in the ~~third~~first quarter of ~~2018.~~2019. The decline was due to lower sales volume driven by lower end-user demand and the ~~unfavorable~~ impact from changes in dealer ~~inventories, partially offset by higher end-user demand across the three primary segments.~~inventories. Dealers ~~decreased~~increased machine and engine inventories about ~~$400~~$100 million during the ~~third~~first quarter of ~~2019,~~2020, compared with ~~an increase of~~ about ~~$800 million~~$1.3 billion during the ~~third~~first quarter of ~~2018.~~2019. The changes in dealer inventories came primarily in Construction Industries, driven by North America, and Resource Industries. Sales ~~decreased~~were lower across all regions and in the three primary ~~segments and in all regions except for~~ ~~Latin America, which was about flat.~~segments. Unfavorable currency impacts, ~~were offset by favorable~~unfavorable price realization and ~~higher~~lower Financial ~~Products’~~Products ~~revenues.~~revenues also contributed to the decrease.

~~Third-quarter 2019~~First-quarter 2020 profit per share was ~~$2.66,~~$1.98, a decrease of ~~$0.22,~~$1.27, or 839 percent, compared with ~~$2.88~~$3.25 profit per share in the ~~third~~first quarter of ~~2018.~~2019. Profit per share in the first quarter of 2020 included a pre-tax remeasurement gain of $254 million, or $0.38 per share, resulting from the settlement of a non-U.S. pension obligation. Profit per share in the first quarter of 2019 included a discrete tax benefit related to U.S. tax reform of $178 million, or $0.31 per share. Profit was ~~$1.494~~$1.092 billion in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$233~~$789 million, or 1342 percent, compared with ~~$1.727~~$1.881 billion in the ~~third~~first quarter of ~~2018.~~2019. The decrease was ~~primarily~~mostly due to lower sales volume. ~~This decrease was partially~~Higher tax expense, unfavorable impacts from equity securities at Insurance Services and foreign currency exchange gains (losses) were mostly offset by ~~favorable price realization and~~a remeasurement gain resulting from the settlement of a non-U.S. pension obligation, lower selling, general and administrative (SG&A) and research and development (R&D) ~~expenses.~~expenses as well as favorable manufacturing costs. Lower SG&A/R&D expenses and manufacturing costs were ~~mostly due to a reduction in~~primarily driven by reduced short-term incentive compensation ~~expense. In addition, the~~expense, a favorable ~~impact of Financial Products’ profit~~change in fair value adjustments related to deferred compensation plans and ~~favorable~~ other ~~operating (income) expense were mostly offset by higher~~ ~~manufacturing costs~~ ~~and unfavorable currency impacts. Favorable price continued~~cost-reduction actions implemented in response to ~~offset manufacturing costs in the quarter.~~lower sales volumes.

Sales and revenues for the nine months ended September 30, 2019, were $40.656 billion, an increase of $276 million, or 1 percent, from $40.380 billion for the nine months ended September 30, 2018. Profit per share for the nine months ended September 30, 2019, was $8.75, an increase of $0.30, or 4 percent, from $8.45 for the same period last year. Profit was $4.995 billion for the nine months ended September 30, 2019, down $104 million, or 2 percent, from $5.099 billion for the nine months ended September 30, 2018.

Highlights for the ~~third~~first quarter of ~~2019~~2020 include:

~~Third-quarter~~First-quarter 2020 sales and revenues were ~~$12.758~~$10.635 billion, compared with ~~$13.510~~$13.466 billion in the ~~third~~first quarter of ~~2018.~~2019. Sales decreased across all regions and in the three primary ~~segments, while Financial Products’ revenues increased.~~segments. The decline was due to lower sales volume driven by lower end-user demand and the ~~unfavorable~~ impact from changes in dealer ~~inventories, partially offset by higher end-user demand.~~inventories. Dealers ~~decreased~~increased machine and engine inventories about ~~$400~~$100 million during the ~~third~~first quarter of ~~2019,~~2020, compared with ~~an increase of~~ about ~~$800 million~~$1.3 billion during the ~~third~~first quarter of ~~2018.~~2019.

Operating profit ~~as a~~margin was 13.2 percent in the first quarter of ~~sales and revenues was 15.8~~2020, compared with 16.4 percent ~~for both~~in the ~~third quarters~~first quarter of ~~2019 and 2018.~~2019.

Profit per share was ~~$2.66~~$1.98 in the ~~third~~first quarter of 2020, compared with $3.25 in the first quarter of 2019. Profit per share in the first quarter of 2020 included a pre-tax remeasurement gain of $254 million, or $0.38 per share, resulting from the settlement of a non-U.S. pension obligation. Profit per share in the first quarter of 2019 ~~compared with $2.88 in~~included a discrete tax benefit related to U.S. tax reform of $178 million, or $0.31 per share.

During the ~~third~~first quarter of ~~2018.~~

•

~~During the third quarter of 2019, the company made a $1.5 billion discretionary pension contribution financed from proceeds of a debt issuance. As a result,~~ ~~Machinery, Energy & Transportation (ME&T)~~ ~~operating cash flow was negative $188 million. The company also repurchased $1.2 billion of Caterpillar common stock and paid dividends of $0.6 billion in the third quarter of 2019. The~~2020, enterprise ~~cash balance at the end of the third quarter of 2019 was $7.9 billion.~~

~~Highlights for the nine months ended September 30, 2019, include:~~


•	~~Sales and revenues for the nine months ended September 30, 2019, were $40.656 billion, compared with $40.380 billion for the nine months ended September 30, 2018. Sales increased in~~ ~~Resource Industries~~ ~~and~~ ~~Construction Industries, while~~ ~~Energy & Transportation~~ ~~decreased. Financial Products’ revenues also increased.~~

~~Operating profit as a percent of sales and revenues was 15.8 percent for the nine months ended September 30, 2019, compared with 15.9 percent for the nine months ended September 30, 2018.~~

~~Profit per share was $8.75 for the nine months ended September 30, 2019, compared with $8.45 for the nine months ended September 30, 2018.~~

~~ME&T~~ operating cash flow was ~~$2.632~~$1.130 billion. Caterpillar has taken actions to improve its strong financial position by increasing sources of liquidity. On a consolidated basis, Caterpillar ended the first quarter with $7.1 billion of cash and available global credit facilities of $10.5 billion. In April, Caterpillar raised $2.0 billion of incremental cash by issuing new 10- and 30-year bonds. In addition, we entered into an incremental $3.9 billion short-term credit facility and registered for $4.1 billion in commercial paper support programs now available in the United States and Canada.

Response to COVID-19 and Global Business Conditions:

Operational Impacts

Caterpillar has implemented safeguards in its facilities to protect team members, including increased frequency of cleaning and disinfecting facilities, social distancing practices and other measures consistent with specific regulatory requirements and guidance from health authorities.

Many governments classified Caterpillar’s operations as an essential activity for support of critical infrastructure. Caterpillar has suspended operations temporarily at certain facilities during the last several months due to supply chain issues, weak customer demand or government regulations. As of mid-April 2020, globally and across the three primary segments, approximately 75 percent of the company’s primary production facilities continue to operate. Some facilities that were temporarily closed have reopened. The company will continue to monitor the situation and may suspend operations temporarily at additional facilities if warranted by business conditions.

The company has taken actions to reduce costs, including reducing discretionary expenses and suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. Caterpillar is prioritizing spending to allow continued investment in services and expanded offerings, key elements of its strategy for profitable growth introduced in 2017.

Caterpillar’s financial results for the ~~nine months ended September 30, 2019, compared~~remainder of 2020 will be impacted by continued global economic uncertainty due to ~~$3.880 billion for~~ the ~~nine months ended September 30, 2018.~~COVID-19 pandemic. We expect the impacts of the pandemic on our results to be more significant in the second quarter than in the first quarter, and to continue until global economic conditions improve.

Notes:

Glossary of terms is included on pages 7959 - ~~81;~~61; first occurrence of terms shown in bold italics.

Information on non-GAAP financial measures is included on page ~~86.~~66.

Consolidated Results of Operations

THREE MONTHS ENDED ~~SEPTEMBER 30, 2019~~MARCH 31, 2020 COMPARED WITH THREE MONTHS ENDED ~~SEPTEMBER 30, 2018~~MARCH 31, 2019

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the ~~third~~first quarter of ~~2018~~2019 (at left) and the ~~third~~first quarter of ~~2019~~2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees.

Total sales and revenues infor the ~~third~~first quarter of ~~2019~~2020 were ~~$12.758~~$10.635 billion, a decrease of ~~$752 million,~~$2.831 billion, or 621 percent, compared with ~~$13.510~~$13.466 billion in the ~~third~~first quarter of ~~2018.~~2019. The decline was due to lower sales volume driven by lower end-user demand and the ~~unfavorable~~impact from changes in dealer inventories. Dealers increased machine and engine inventories about $100 million during the first quarter of 2020, compared with about $1.3 billion during the first quarter of 2019. The changes in dealer inventories came primarily in Construction Industries, driven by North America, and in Resource Industries.

Sales were lower across all regions and in the three primary segments.

North America sales declined 25 percent driven by the impact from changes in dealer inventories ~~partially offset by higher~~and lower end-user demand across the three primary segments. Dealers decreased machine and engine inventories about $400 million during the third quarter of 2019, compared with an increase of about $800 million during the third quarter of 2018, led by Construction Industries and Resource Industries. Unfavorable currency impacts were offset by favorable price realization and higher Financial Products’ revenues. Sales decreased across the three primary segments, while Financial Products’ revenues increased.

~~North America sales declined 3 percent driven by the unfavorable impact from changes in dealer inventories, partially offset by higher end-user demand and favorable price realization.~~demand. Dealers increased inventories during the ~~third~~first quarter of ~~2018, compared with a decrease~~2019 and dealer inventories were about flat during the ~~third~~first quarter of ~~2019.~~2020.

Sales ~~increased 2~~decreased 22 percent in Latin America due to ~~improved~~lower demand in ~~a few~~most countries ~~while~~across the ~~region remains at low levels.~~region.

EAME sales decreased 7 percent ~~driven by the unfavorable impact from changes~~due to lower demand in ~~dealer inventories~~many countries and unfavorable currency ~~impacts, partially offset by higher end-user demand.~~impacts. The unfavorable currency impacts were mostly due to a weaker ~~euro and British pound. Dealers increased inventories during the third quarter of 2018 and were about flat during the third quarter of 2019.~~euro.

Asia/Pacific sales decreased 1428 percent ~~driven by~~due to lower demand across ~~several~~most countries in the region, including unfavorable changes in dealer ~~inventories.~~inventories, primarily in China. Dealers ~~increased~~decreased inventories during the ~~third~~first quarter of ~~2018,~~2020, compared with ~~a decrease~~an increase during the ~~third~~first quarter of 2019. ~~The lower demand was primarily~~Decreases in China ~~amid continued competitive pressures.~~reflected lower end-user demand mostly due to the COVID-19 pandemic.

Dealer machine and engine inventories increased about $100 million during the first quarter of 2020, compared with an increase of about $1.3 billion during the first quarter of 2019. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rental rates and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. We expect dealer inventories to decline by at least $1.5 billion during 2020.


Sales and Revenues by Segment	Sales and Revenues by Segment																							Sales and Revenues by Segment
(Millions of dollars)	Third Quarter 2018			Sales Volume			Price Realization			Currency			Inter-Segment / Other			Third Quarter 2019			$ Change			% Change		First Quarter 2019			Sales Volume			Price Realization			Currency			Inter-Segment / Other			First Quarter 2020			$ Change			% Change

Construction Industries	$	5,683		$	(358	)	$	26		$	(47	)	$	(15	)	$	5,289		$	(394	)	(7	%)	$	5,873		$	(1,418	)	$	(63	)	$	(59	)	$	(27	)	$	4,306		$	(1,567	)	(27	%)
Resource Industries	2,638			(389		)	50			(20		)	32			2,311			(327		)	(12	%)	2,752			(607		)	(21		)	(40		)	—			2,084			(668		)	(24	%)
Energy & Transportation	5,555			31			11			(57		)	(88		)	5,452			(103		)	(2	%)	5,210			(599		)	21			(37		)	(246		)	4,349			(861		)	(17	%)
All Other Segment	113			(9		)	—			(1		)	8			111			(2		)	(2	%)	121			(9		)	—			—			(3		)	109			(12		)	(10	%)
Corporate Items and Eliminations	(1,226		)	(26		)	(1		)	1			63			(1,189		)	37					(1,232		)	22			1			(1		)	276			(934		)	298
Machinery, Energy & Transportation Sales	12,763			(751		)	86			(124		)	—			11,974			(789		)	(6	%)	12,724			(2,611		)	(62		)	(137		)	—			9,914			(2,810		)	(22	%)

Financial Products Segment	845			—			—			—			20			865			20			2	%	850			—			—			—			(36		)	814			(36		)	(4	%)
Corporate Items and Eliminations	(98		)	—			—			—			17			(81		)	17					(108		)	—			—			—			15			(93		)	15
Financial Products Revenues	747			—			—			—			37			784			37			5	%	742			—			—			—			(21		)	721			(21		)	(3	%)

Consolidated Sales and Revenues	$	13,510		$	(751	)	$	86		$	(124	)	$	37		$	12,758		$	(752	)	(6	%)	$	13,466		$	(2,611	)	$	(62	)	$	(137	)	$	(21	)	$	10,635		$	(2,831	)	(21	%)

Sales and Revenues by Geographic Region


	North America					Latin America					EAME					Asia/Pacific					External Sales and Revenues						Inter-Segment					Total Sales and Revenues					North America					Latin America					EAME					Asia/Pacific					External Sales and Revenues						Inter-Segment					Total Sales and Revenues
(Millions of dollars)	$			% Chg		$			% Chg		$			% Chg		$			% Chg		$				% Chg		$			% Chg		$			% Chg		$			% Chg		$			% Chg		$			% Chg		$			% Chg		$				% Chg		$			% Chg		$			% Chg
Third Quarter 2019
First Quarter 2020
Construction Industries	$	2,728		3	%	$	413		12	%	$	1,048		(6	%)	$	1,086		(29	%)	$	5,275			(7	%)	$	14		(52	%)	$	5,289		(7	%)	$	2,085		(30	%)	$	265		(17	%)	$	889		(12	%)	$	1,073		(31	%)	$	4,312			(26	%)	$	(6	)	(129	%)	$	4,306		(27	%)
Resource Industries	789			(7	%)	349			(18	%)	396			(31	%)	645			(6	%)	2,179				(14	%)	132			32	%	2,311			(12	%)	696			(27	%)	320			(24	%)	395			(16	%)	568			(29	%)	1,979				(25	%)	105			—	%	2,084			(24	%)
Energy & Transportation	2,129			(8	%)	378			15	%	1,224			4	%	831			10	%	4,562				—	%	890			(9	%)	5,452			(2	%)	1,738			(19	%)	249			(25	%)	1,053			2	%	578			(19	%)	3,618				(15	%)	731			(25	%)	4,349			(17	%)
All Other Segment	1			(93	%)	6			—	%	8			100	%	12			(33	%)	27				(27	%)	84			11	%	111			(2	%)	5			(38	%)	2			—	%	11			—	%	10			(44	%)	28				(24	%)	81			(4	%)	109			(10	%)
Corporate Items and Eliminations	(62		)			1					(7		)			(1		)			(69		)				(1,120		)			(1,189		)			(15		)			(2		)			(4		)			(2		)			(23		)				(911		)			(934		)
Machinery, Energy & Transportation Sales	5,585			(3	%)	1,147			2	%	2,669			(7	%)	2,573			(14	%)	11,974				(6	%)	—			—		11,974			(6	%)	4,509			(25	%)	834			(22	%)	2,344			(7	%)	2,227			(28	%)	9,914				(22	%)	—			—		9,914			(22	%)

Financial Products Segment	560			—	%	79			16	%	102			1	%	124			6	%	865			¹	2	%	—			—		865			2	%	525			(6	%)	70			—	%	102			—	%	117			(3	%)	814			¹	(4	%)	—			—		814			(4	%)
Corporate Items and Eliminations	(43		)			(15		)			(8		)			(15		)			(81		)				—					(81		)			(54		)			(12		)			(9		)			(18		)			(93		)				—					(93		)
Financial Products Revenues	517			4	%	64			14	%	94			(1	%)	109			10	%	784				5	%	—			—		784			5	%	471			(4	%)	58			(2	%)	93			—	%	99			(2	%)	721				(3	%)	—			—		721			(3	%)

Consolidated Sales and Revenues	$	6,102		(3	%)	$	1,211		2	%	$	2,763		(7	%)	$	2,682		(13	%)	$	12,758			(6	%)	$	—		—		$	12,758		(6	%)	$	4,980		(24	%)	$	892		(21	%)	$	2,437		(7	%)	$	2,326		(27	%)	$	10,635			(21	%)	$	—		—		$	10,635		(21	%)

Third Quarter 2018
First Quarter 2019
Construction Industries	$	2,646				$	369				$	1,109				$	1,530				$	5,654					$	29				$	5,683				$	2,965				$	319				$	1,006				$	1,562				$	5,852					$	21				$	5,873
Resource Industries	849					427					574					688					2,538						100					2,638					951					423					468					805					2,647						105					2,752
Energy & Transportation	2,309					330					1,180					758					4,577						978					5,555					2,151					332					1,032					718					4,233						977					5,210
All Other Segment	15					—					4					18					37						76					113					8					—					11					18					37						84					121
Corporate Items and Eliminations	(40		)			1					(5		)			1					(43		)				(1,183		)			(1,226		)			(41		)			1					(3		)			(2		)			(45		)				(1,187		)			(1,232		)
Machinery, Energy & Transportation Sales	5,779					1,127					2,862					2,995					12,763						—					12,763					6,034					1,075					2,514					3,101					12,724						—					12,724

Financial Products Segment	559					68					101					117					845			¹			—					845					558					70					102					120					850			¹			—					850
Corporate Items and Eliminations	(62		)			(12		)			(6		)			(18		)			(98		)				—					(98		)			(69		)			(11		)			(9		)			(19		)			(108		)				—					(108		)
Financial Products Revenues	497					56					95					99					747						—					747					489					59					93					101					742						—					742

Consolidated Sales and Revenues	$	6,276				$	1,183				$	2,957				$	3,094				$	13,510					$	—				$	13,510				$	6,523				$	1,134				$	2,607				$	3,202				$	13,466					$	—				$	13,466

¹ Includes revenues from Machinery, Energy & Transportation of ~~$131~~$105 million and ~~$122~~$131 million in the ~~third~~first quarter of ~~2019~~2020 and ~~2018,~~2019, respectively.

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the ~~third~~first quarter of ~~2018~~2019 (at left) and the ~~third~~first quarter of ~~2019~~2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & ~~Transportation’s~~Transportation other operating (income) expenses.

Operating profit for the ~~third~~first quarter of ~~2019~~2020 was ~~$2.020~~$1.404 billion, a decrease of ~~$115~~$803 million, or 536 percent, compared with ~~$2.135~~$2.207 billion in the ~~third~~first quarter of ~~2018.~~2019. The decrease was ~~primarily~~mostly due to lower sales ~~volume. This decrease was partially offset by favorable price realization and lower selling, general and administrative (SG&A) and research and development (R&D) expenses.~~

~~Favorable price realization continued to offset manufacturing costs. The increase in manufacturing costs was primarily due to higher warranty expense,~~volume and unfavorable ~~cost absorption,~~currency impacts related to the Australian dollar, partially offset by lower ~~period~~SG&A/R&D expenses as well as favorable manufacturing costs primarily due to lower short-term incentive compensation expense. Cost absorption was unfavorable as inventory increased more significantly in the third quarter of 2018, than in the third quarter of 2019. costs.

Lower SG&A/R&D expenses reflected reduced short-term incentive compensation expense, a favorable change in fair value adjustments related to deferred compensation plans and other cost-reduction actions implemented in response to lower sales volumes.

Favorable manufacturing costs were primarily driven by lower period manufacturing and material costs, partially offset by higher warranty expense. Period manufacturing costs declined mostly due to a reduction in short-term incentive compensation ~~expense.~~expense and other cost-reduction actions implemented in response to lower sales volumes.

Short-term incentive compensation expense is directly related to financial and operational performance, measured against targets set annually. In response to the continued global economic uncertainty due to the COVID-19 pandemic, Caterpillar suspended 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. As a result, no short-term incentive compensation expense was recognized in the first quarter of 2020, compared with about ~~$130~~$220 million in the ~~third~~first quarter of ~~2019, compared with about $350 million in the third quarter of 2018.~~2019.

Operating profit margin was ~~15.8~~13.2 percent ~~for~~in the ~~third quarters~~first quarter of ~~both 2019 and 2018.~~2020, compared with 16.4 percent in the first quarter of 2019.

Profit (Loss) by Segment
(Millions of dollars) Third Quarter 2019 Third Quarter 2018
$
Change

%
Change
Construction Industries $ 940
$ 1,058
$ (118 ) (11 %)
Resource Industries 311
414
(103 ) (25 %)
Energy & Transportation 1,021
973
48
5 %
All Other Segment (21 ) (10 ) (11 ) (110 %)
Corporate Items and Eliminations (363 ) (371 ) 8

Machinery, Energy & Transportation 1,888
2,064
(176 ) (9 %)

Financial Products Segment 218
201
17
8 %
Corporate Items and Eliminations 21
(30 ) 51

Financial Products 239
171
68
40 %
Consolidating Adjustments (107 ) (100 ) (7 )
Consolidated Operating Profit $ 2,020
$ 2,135
$ (115 ) (5 %)



Profit by Segment
(Millions of dollars)	First Quarter 2020			First Quarter 2019			$ Change			% Change
Construction Industries	$	640		$	1,085		$	(445	)	(41	%)
Resource Industries	304			576			(272		)	(47	%)
Energy & Transportation	602			838			(236		)	(28	%)
All Other Segment	7			25			(18		)	(72	%)
Corporate Items and Eliminations	(212		)	(375		)	163
Machinery, Energy & Transportation	1,341			2,149			(808		)	(38	%)

Financial Products Segment	105			211			(106		)	(50	%)
Corporate Items and Eliminations	47			(46		)	93
Financial Products	152			165			(13		)	(8	%)
Consolidating Adjustments	(89		)	(107		)	18
Consolidated Operating Profit	$	1,404		$	2,207		$	(803	)	(36	%)

Other Profit/Loss and Tax Items


▪	Interest expense excluding Financial Products in the ~~third~~first quarter of ~~2019~~2020 was ~~$103~~$113 million, compared with ~~$102~~$103 million in the ~~third~~first quarter of ~~2018.~~2019. The increase was due to higher average debt outstanding during the first quarter of 2020, compared with the first quarter of 2019.

▪

Other ~~income/expense~~income (expense) in the ~~third~~first quarter of ~~2019~~2020 was income of ~~$88~~$222 million, compared with income of ~~$102~~$160 million in the ~~third~~first quarter of ~~2018.~~2019. The change was primarily due to a $254 million remeasurement gain resulting from the settlement of a non-U.S. pension obligation, partially offset by unfavorable impacts from equity securities at Insurance Services and foreign currency exchange gains (losses) primarily due to the Australian dollar and Brazilian real. The unfavorable impact of equity securities was due to unrealized losses in the first quarter of 2020, compared with unrealized gains in the first quarter of 2019. The company experienced foreign currency exchange net losses in the first quarter of 2020, compared with net gains in the first quarter of 2019.

▪

The provision for income taxes for the ~~third~~first quarter of ~~2019~~2020 reflected ana higher estimated annual tax rate of 2631 percent compared with 2426 percent for the ~~third~~first quarter of ~~2018,~~2019, excluding the discrete ~~item~~items discussed below. The increase in the ~~following paragraph. The increase was largely driven by~~estimated annual tax rate is primarily related to changes in the ~~application~~expected geographic mix of profits from a tax perspective for 2020, including the impact of U.S. tax ~~reform provisions to the~~on non-U.S. earnings as a result of ~~certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end. These provisions did not apply to these subsidiaries in 2018.~~U.S. tax reform.

~~The provision for income taxes~~In the first quarter of 2020, a $43 million tax charge was recorded related to the $254 million remeasurement gain resulting from the settlement of a non-U.S. pension obligation. This gain and related tax were excluded from the estimated annual tax rate as the future period remeasurement impacts cannot currently be estimated. In addition, a discrete tax benefit of $8 million was recorded in the ~~third~~first quarter of ~~2018~~2020, compared with $23 million in the first quarter of 2019, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. During the first quarter of 2019, a $178 million discrete tax benefit was also ~~included a $95 million net benefit~~recorded to adjust ~~deferred~~previously unrecognized tax ~~balances. See Note 15~~benefits as a result of ~~Part 1, Item 1~~receipt of ~~this Form 10-Q for more information.~~additional guidance related to the calculation of the mandatory deemed repatriation of non-U.S. earnings.

Construction Industries

Construction Industries’ total sales were ~~$5.289~~$4.306 billion in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$394 million,~~$1.567 billion, or 727 percent, compared with ~~$5.683~~$5.873 billion in the ~~third~~first quarter of ~~2018.~~2019. The decrease was due to lower sales volume, driven by lower end-user demand and the ~~unfavorable~~ impact from changes in dealer ~~inventories, partially offset by higher end-user demand for construction equipment.~~inventories. Dealers increased inventories significantly more during the ~~third~~first quarter of ~~2018, compared with a decrease during~~2019 than in the ~~third~~first quarter of ~~2019.~~2020.

▪

In North America, sales ~~increased primarily~~decreased due to ~~favorable price realization~~lower demand driven by the impact from changes in dealer inventories and ~~higher~~lower end-user demand. Dealers increased inventories more during the first quarter of 2019 than in the first quarter of 2020. The lower end-user demand ~~for equipment, mostly to support road~~was driven primarily by non-residential and ~~non-residential building construction activities.~~pipeline construction.


▪	Sales ~~were higher~~declined in Latin America ~~but construction activities remained at low levels.~~primarily due to the impact from changes in dealer inventories and unfavorable currency impacts from a weaker Brazilian real. Dealers decreased inventories more during the first quarter of 2020 than in the first quarter of 2019.


▪	In EAME, the sales decrease was primarily due to lower end-user demand across most of the region and unfavorable currency impacts ~~related to the~~from a weaker euro. ~~Unfavorable price realization and lower sales volume also contributed to the decrease.~~


▪	Sales declined in Asia/Pacific ~~were~~due to lower end-user demand across most of the region, primarily in China. Decreases in China reflected lower end-user demand mostly due to ~~lower demand in China, including unfavorable changes in dealer inventories, amid continued competitive pressures.~~COVID-19 pandemic-related impacts.

Construction Industries’ profit was ~~$940~~$640 million in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$118~~$445 million, or 1141 percent, compared with ~~$1.058~~$1.085 billion in the ~~third~~first quarter of ~~2018.~~2019. The decrease was ~~primarily~~mainly due to lower sales volume, partially offset by lower ~~SG&A/R&D expenses and favorable price realization. Lower SG&A/R&D expenses~~manufacturing costs. Favorable manufacturing costs were primarily due to lower period manufacturing and material costs, partially offset by higher warranty expense. Lower period manufacturing costs reflected a reduction in short-term incentive compensation ~~expense.~~expense and targeted cost-reduction actions implemented in response to lower sales volumes.

Construction Industries’ profit as a percent of total sales was ~~17.8~~14.9 percent in the ~~third~~first quarter of ~~2019,~~2020, compared with ~~18.6~~18.5 percent in the ~~third~~first quarter of ~~2018.~~2019.

Resource Industries

Resource Industries’ total sales were ~~$2.311~~$2.084 billion in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$327~~$668 million, or 1224 percent, compared with ~~$2.638~~$2.752 billion in the ~~third~~first quarter of ~~2018.~~2019. The decrease was due to lower sales volume, driven by ~~the unfavorable impact from~~ changes in dealer inventories ~~partially offset by higher~~and lower end-user ~~demand for equipment and favorable price realization.~~demand. Dealers ~~decreased~~increased inventories during the ~~third~~first quarter of 2019, compared with ~~an increase~~a decrease during the ~~third~~first quarter of ~~2018. While commodity prices are generally supportive of reinvestment, the company believes mining customers are cautious~~2020. Mining equipment sales were lower due to ~~economic uncertainty. Mining sales were also impacted by lower thermal coal prices.~~weakness in certain commodities. In addition, ~~sales~~demand decreased for equipment supporting non-residential construction and quarry and ~~aggregates driven by a reduction in dealer inventories.~~aggregates.

Resource Industries’ profit was ~~$311~~$304 million in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$103~~$272 million, or 2547 percent, compared with ~~$414~~$576 million in the ~~third~~first quarter of ~~2018.~~2019. The decrease was ~~primarily~~mainly due to lower sales ~~volume, partially offset by favorable price realization.~~volume. Manufacturing costs were about flat as the unfavorable impact of cost absorption and higher warranty expense ~~was~~were more than offset by lower period manufacturing costs, freight expense and material costs. Cost absorption was unfavorable as inventory increased more in the first quarter of 2019 than in the first quarter of 2020. Lower period manufacturing costs were primarily due to lower short-term incentive compensation ~~expense.~~expense and the favorable impact of restructuring and other cost-reduction actions.

Resource Industries’ profit as a percent of total sales was ~~13.5~~14.6 percent in the ~~third~~first quarter of ~~2019,~~2020, compared with ~~15.7~~20.9 percent in the ~~third~~first quarter of ~~2018.~~

2019.

Energy & Transportation


Sales by Application
(Millions of dollars)	Third Quarter 2019		Third Quarter 2018		$ Change			% Change		First Quarter 2020		First Quarter 2019		$ Change			% Change
Oil and Gas	$	1,246	$	1,362	$	(116	)	(9	%)	$	861	$	1,131	$	(270	)	(24	%)
Power Generation	1,123		1,102		21			2	%	854		1,036		(182		)	(18	%)
Industrial	980		863		117			14	%	801		904		(103		)	(11	%)
Transportation	1,213		1,250		(37		)	(3	%)	1,102		1,162		(60		)	(5	%)
External Sales	4,562		4,577		(15		)	—	%	3,618		4,233		(615		)	(15	%)
Inter-segment	890		978		(88		)	(9	%)	731		977		(246		)	(25	%)
Total Sales	$	5,452	$	5,555	$	(103	)	(2	%)	$	4,349	$	5,210	$	(861	)	(17	%)

Energy & Transportation’s total sales were ~~$5.452~~$4.349 billion in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$103~~$861 million, or 217 percent, compared with ~~$5.555~~$5.210 billion in the ~~third~~first quarter of ~~2018.~~2019. Sales ~~decreased primarily due to lower~~declined across all applications and inter-segment engine sales.


▪	Oil and Gas – Sales ~~decreased for reciprocating engines~~were lower mainly in North ~~America primarily~~America. The sales decline was largely due to lower demand for reciprocating engines used in gas compression and well ~~servicing applications. This was partially offset by higher sales of turbines and turbine-related services.~~servicing.


▪	Power Generation – Sales ~~increased mostly~~decreased primarily due to ~~higher deliveries~~lower sales in Asia/Pacific and North America for ~~large diesel~~both reciprocating engines and ~~turbines, partially offset by lower sales of reciprocating engines in EAME.~~turbine-related projects.


▪	Industrial – Sales ~~improved primarily in EAME and Asia/Pacific driven by higher end-user demand.~~decreased due to lower demand across all regions.


▪	Transportation – Sales ~~were lower primarily due to timing of locomotive deliveries.~~declined in both rail and marine applications.

Energy & Transportation’s profit was ~~$1.021 billion~~$602 million in the ~~third~~first quarter of ~~2019, an increase~~2020, a decrease of ~~$48~~$236 million, or 528 percent, compared with ~~$973~~$838 million in the ~~third~~first quarter of ~~2018. Lower~~2019. The decrease was mostly due to lower sales ~~volume, including an unfavorable mix of products,~~volume. The decline was ~~more than~~partially offset by ~~favorable other operating income/expense and~~lower SG&A/R&D expenses and manufacturing costs, both of which were mostly ~~due to~~impacted by a reduction in short-term incentive compensation ~~expense.~~expense and other cost-reduction actions implemented in response to lower sales volumes.

Energy & Transportation’s profit as a percent of total sales was ~~18.7~~13.8 percent in the ~~third~~first quarter of ~~2019,~~2020, compared with ~~17.5~~16.1 percent in the ~~third~~first quarter of ~~2018.~~2019.

Financial Products Segment

Financial Products’ segment revenues were ~~$865~~$814 million in the ~~third~~first quarter of ~~2019, an increase~~2020, a decrease of ~~$20~~$36 million, or 24 percent, from the ~~third~~first quarter of ~~2018.~~2019. The decrease was primarily due to lower average earning assets in North America.

Financial Products’ segment profit was $105 million in the first quarter of 2020, compared with $211 million in the first quarter of 2019. Most of the decrease was due to an unfavorable impact from equity securities in Insurance Services. Additionally, Cat Financial experienced lower average earning assets. These unfavorable impacts were partially offset by a reduction in SG&A expenses due to lower short-term incentive compensation expense.

At the end of the first quarter of 2020, past dues at Cat Financial were 4.13 percent, compared with 3.61 percent at the end of the first quarter of 2019. The increase was primarily due to ~~higher average financing rates in~~ North America, Asia/Pacific and ~~Asia/Pacific,~~Mining, partially offset by ~~an unfavorable impact due to the absence of fees associated with an intercompany credit facility in North America.~~

Financial Products’ segment profit was $218 million in the third quarter of 2019, up 8 percent compared with $201 million in the third quarter of 2018. The favorable change was primarily due to an increase in net yield on average ~~earning assets~~ ~~and~~ a decrease in the provision for credit losses at Cat Financial, partially offset by unfavorable impacts from higher SG&A expenses, the mark-to-market on equity securities in Insurance Services and the absence of the intercompany credit facility.

~~At the end of the third quarter of 2019, past dues at Cat Financial were 3.19 percent, compared with 3.47 percent at the end of the third quarter of 2018.~~Caterpillar Power Finance. Write-offs, net of recoveries, were ~~$103~~$30 million for the ~~third~~first quarter of ~~2019, compared with $40 million for the third quarter of 2018. The increase in write-offs, net of recoveries, was primarily driven by Caterpillar Power Finance, concentrated in the marine portfolio,~~both 2020 and ~~EAME, mostly in the Middle East.~~2019. As of ~~September 30, 2019,~~March 31, 2020, Cat ~~Financial’s~~Financial's allowance for credit losses totaled ~~$434~~$457 million, or ~~1.57~~1.69 percent of finance receivables, compared with ~~$523~~$424 million, or ~~1.81~~1.50 percent of finance receivables, at ~~June 30,~~December 31, 2019. The increase in allowance for credit losses ~~at year-end 2018~~ was ~~$511 million, or 1.80 percent~~driven by the forecast of ~~finance receivables.~~deteriorating economic conditions from the COVID-19 pandemic.

~~Corporate Items and Eliminations~~Resource Industries

~~Expense for corporate items and eliminations was $342 million~~Resource Industries’ total sales were $2.084 billion in the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~$59~~$668 million, ~~from~~or 24 percent, compared with $2.752 billion in the ~~third~~first quarter of ~~2018, primarily~~2019. The decrease was due to lower ~~restructuring costs, partially offset by methodology differences.~~

~~NINE MONTHS ENDED~~ ~~SEPTEMBER 30, 2019~~ ~~COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2018~~

~~CONSOLIDATED SALES AND REVENUES~~

~~The chart above graphically illustrates reasons for the change in consolidated~~ sales and revenues between the nine months ended September 30, 2018 (at left) and the nine months ended September 30, 2019 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees.

Total sales and revenues were $40.656 billion for the nine months ended September 30, 2019, an increase of $276 million, or 1 percent, compared with $40.380 billion for the nine months ended September 30, 2018. The increase was primarily due to favorable price realization, mostly offset by unfavorable currency impacts, primarily from a weaker euro, Australian dollar and Chinese yuan. Sales increased in Resource Industries and Construction Industries, while Energy & Transportation decreased. Financial Products’ revenues also increased.

~~North America sales improved 5 percent~~volume, driven by ~~higher demand, including a favorable impact from~~ changes in dealer inventories and ~~favorable price realization.~~lower end-user demand. Dealers increased inventories ~~more significantly~~ during the ~~nine months ended September 30,~~first quarter of 2019, ~~than~~compared with a decrease during the ~~nine months ended September 30, 2018.~~

~~Sales increased 6 percent in Latin America~~first quarter of 2020. Mining equipment sales were lower due to ~~improved~~weakness in certain commodities. In addition, demand decreased for equipment supporting non-residential construction and quarry and aggregates.

Resource Industries’ profit was $304 million in the first quarter of 2020, a ~~few countries, while~~decrease of $272 million, or 47 percent, compared with $576 million in the ~~region remains at low levels.~~

~~EAME~~first quarter of 2019. The decrease was mainly due to lower sales ~~decreased 6 percent primarily driven by~~volume. Manufacturing costs were about flat as the unfavorable impact ~~from changes in dealer inventories~~of cost absorption and unfavorable currency impacts, partially offset by favorable price realization. The unfavorable currency impacts were due to a weaker euro and British pound. Dealers increased inventories more significantly during the nine months ended September 30, 2018, than during the nine months ended September 30, 2019.

Asia/Pacific sales decreased 5 percent mostly due to unfavorable currency impacts and lower demand, including unfavorable changes in dealer inventories, partially offset by favorable price realization. The unfavorable currency impacts were due to a weaker Australian dollar and Chinese yuan. Dealers increased inventories more during the nine months ended September 30, 2018, than during the nine months ended September 30, 2019. The lower demand was primarily in China due to continued competitive pressures, which was partially offset by higher ~~demand in other countries in the region.~~

During the nine months ended September 30, 2018, dealer machine and engine inventories increased about $2.1 billion, compared to an increase of about $1.4 billion during the nine months ended September 30, 2019. Dealers are independent, and there could be many reasons for changes in their inventory levels, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rental rates and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. Based on current dealer inventory levels and global economic uncertainty, we now expect dealer inventories will increase for the full year by about $500 million compared to prior year end.

Sales and Revenues by Segment
(Millions of dollars) Nine Months Ended September 30, 2018
Sales
Volume

Price
Realization
Currency Inter-Segment / Other Nine Months Ended September 30, 2019
$
Change

%
Change

Construction Industries $ 17,532
$ 5
$ 435
$ (317 ) $ (26 ) $ 17,629
$ 97
1 %
Resource Industries 7,473
170
289
(99 ) 48
7,881
408
5 %
Energy & Transportation 16,498
(91 ) 82
(239 ) (102 ) 16,148
(350 ) (2 %)
All Other Segment 353
(14 ) —
(3 ) 21
357
4
1 %
Corporate Items and Eliminations (3,664 ) (41 ) (1 ) 1
59
(3,646 ) 18

Machinery, Energy & Transportation Sales 38,192
29
805
(657 ) —
38,369
177
— %

Financial Products Segment 2,467
—
—
—
121
2,588
121
5 %
Corporate Items and Eliminations (279 ) —
—
—
(22 ) (301 ) (22 )
Financial Products Revenues 2,188
—
—
—
99
2,287
99
5 %

Consolidated Sales and Revenues $ 40,380
$ 29
$ 805
$ (657 ) $ 99
$ 40,656
$ 276
1 %

~~Sales and Revenues by Geographic Region~~

North America Latin America EAME Asia/Pacific External Sales and Revenues Inter-Segment Total Sales and Revenues
(Millions of dollars) $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg
Nine Months Ended September 30, 2019

Construction Industries $ 9,206
15 % $ 1,124
2 % $ 3,162
(6 %) $ 4,081
(18 %) $ 17,573
1 % $ 56
(32 %) $ 17,629
1 %
Resource Industries 2,798
14 % 1,220
3 % 1,310
(21 %) 2,209
17 % 7,537
5 % 344
16 % 7,881
5 %
Energy & Transportation 6,577
(8 %) 1,035
15 % 3,416
— % 2,291
8 % 13,319
(2 %) 2,829
(3 %) 16,148
(2 %)
All Other Segment 23
(51 %) 7
600 % 23
92 % 45
(18 %) 98
(15 %) 259
9 % 357
1 %
Corporate Items and Eliminations (142 )

—

(15 )

(1 )

(158 )

(3,488 )

(3,646 )

Machinery, Energy & Transportation Sales 18,462
5 % 3,386
6 % 7,896
(6 %) 8,625
(5 %) 38,369
— % —
— % 38,369
— %

Financial Products Segment 1,681
5 % 225
6 % 306
1 % 376
10 % 2,588
¹
5 % —
— % 2,588
5 %
Corporate Items and Eliminations (184 )

(37 )

(26 )

(54 )

(301 )

—

(301 )

Financial Products Revenues 1,497
4 % 188
6 % 280
(2 %) 322
13 % 2,287
5 % —
— % 2,287
5 %

Consolidated Sales and Revenues $ 19,959
5 % $ 3,574
6 % $ 8,176
(6 %) $ 8,947
(4 %) $ 40,656
1 % $ —
— % $ 40,656
1 %

Nine Months Ended September 30, 2018

Construction Industries $ 8,005
$ 1,105
$ 3,347
$ 4,993

$ 17,450
$ 82

$ 17,532

Resource Industries 2,451
1,181
1,663
1,882

7,177
296

7,473

Energy & Transportation 7,116
897
3,425
2,129

13,567
2,931

16,498

All Other Segment 47
1
12
55

115
238

353

Corporate Items and Eliminations (108 ) (1 ) (8 ) —
(117 ) (3,547 ) (3,664 )
Machinery, Energy & Transportation Sales 17,511

3,183

8,439

9,059

38,192

—

38,192

Financial Products Segment 1,608
213
303
343

2,467
¹
—

2,467

Corporate Items and Eliminations (168 ) (36 ) (18 ) (57 )
(279 ) —

(279 )
Financial Products Revenues 1,440

177

285

286

2,188

—

2,188

Consolidated Sales and Revenues $ 18,951

$ 3,360

$ 8,724

$ 9,345

$ 40,380

$ —

$ 40,380

¹ ~~Includes revenues from Machinery, Energy & Transportation of $398 million and $345 million in the nine months ended September 30, 2019 and 2018, respectively.~~

~~CONSOLIDATED OPERATING PROFIT~~

~~The chart above graphically illustrates reasons for the change in consolidated operating profit between the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2018~~ ~~(at left) and the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2019~~ (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation’s other operating (income) expenses.

Operating profit for the nine months ended September 30, 2019, was $6.440 billion, compared with $6.410 billion for the nine months ended September 30, 2018. The increase of $30 million was primarily due to favorable price realization mostly offset by higher manufacturing costs. In addition, lower SG&A/R&D expenses, higher Financial Products’ operating profit and favorable other operating (income)warranty expense were more than offset by lower ~~sales volume and unfavorable currency impacts.~~

The lower sales volume was the result of an unfavorable mix of products primarily within Construction Industries and Energy & Transportation partially offset by favorable sales volume in Resource Industries.

~~The increase in~~period manufacturing costs, ~~was primarily due to higher variable labor and burden, warranty~~freight expense and material costs. ~~SG&A/R&D expenses~~Cost absorption was unfavorable as inventory increased more in the first quarter of 2019 than in the first quarter of 2020. Lower period manufacturing costs were ~~lower~~ primarily due to lower short-term incentive compensation expense ~~partially offset by increased targeted investments~~ and ~~timing~~the favorable impact of ~~corporate-level expenses.~~restructuring and other cost-reduction actions.

Short-term incentive compensation expense is directly related to financial and operational performance, measured against targets set annually. Expense for the nine months ended September 30, 2019, was about $560 million, compared with about $1.070 billion for the nine months ended September 30, 2018. For 2019, short-term incentive compensation expense is expected to be about $750 million, compared with $1.4 billion in 2018.

Profit by Segment
(Millions of dollars) Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018
$
Change

%
Change
Construction Industries $ 3,272
$ 3,329
$ (57 ) (2 )%
Resource Industries 1,368
1,203
165
14 %
Energy & Transportation 2,745
2,859
(114 ) (4 )%
All Other Segment 15
70
(55 ) (79 )%
Corporate Items and Eliminations (1,179 ) (1,208 ) 29

Machinery, Energy & Transportation 6,221
6,253
(32 ) (1 )%

Financial Products Segment 622
476
146
31 %
Corporate Items and Eliminations (75 ) (37 ) (38 )
Financial Products 547
439
108
25 %
Consolidating Adjustments (328 ) (282 ) (46 )
Consolidated Operating Profit $ 6,440
$ 6,410
$ 30
— %

~~Other Profit/Loss and Tax Items~~


▪	~~Interest expense excluding Financial Products for the nine months ended September 30, 2019, was $309 million, compared with $305 million for the nine months ended September 30, 2018.~~


▪	Other income/expense for the nine months ended September 30, 2019, was income of $316 million, compared with income of $350 million for the nine months ended September 30, 2018. The unfavorable change was primarily a result of the impact from pension and other postemployment benefits (OPEB) plans, mostly offset by lower currency translation and hedging net losses.

▪

The provision for income taxes for the first nine months of 2019 reflected an estimated annual tax rate of 26 percent, compared with 24 percent for the first nine months of 2018, excluding the discrete items discussed in the following paragraph. The increase was largely driven by the application of U.S. tax reform provisions to the earnings of certain non-U.S. subsidiaries, which do not have a calendar fiscal year-end. These provisions did not apply to these subsidiaries in 2018.

As a result of final regulations received in 2019 providing additional guidance related to the calculation of the mandatory deemed repatriation of non-U.S. earnings due to U.S. tax reform, we recorded a discrete tax benefit of $178 million in the first nine months of 2019 to adjust unrecognized tax benefits. In addition, a discrete tax benefit of $28 million was recorded in the first nine months of 2019, compared with $52 million for the first nine months of 2018, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. The provision for income taxes for the first nine months of 2018 also included a $120 million net benefit to adjust deferred tax balances. See Note 15 of Part 1, Item 1 of this Form 10-Q for more information.

~~Construction Industries~~

Construction Industries’ total sales were $17.629 billion for the nine months ended September 30, 2019, an increase of $97 million, or 1 percent, compared with $17.532 billion for the nine months ended September 30, 2018. The increase was mostly due to favorable price realization, partially offset by unfavorable currency impacts, primarily from a weaker euro, Chinese yuan and Australian dollar.

Sales volume was about flat as higher end-user demand for construction equipment was offset by unfavorable changes in dealer inventories. Dealer inventories increased significantly more during the nine months ended September 30, 2018, than during the nine months ended September 30, 2019.

~~Sales increased in North America and Latin America, and decreased in Asia/Pacific and EAME.~~

In North America, the sales increase was primarily due to higher demand for construction equipment, including favorable changes in dealer inventories, and favorable price realization. Dealer inventories increased significantly more in the nine months ended September 30, 2019, than during the nine months ended September 30, 2018.

~~Sales were higher in Latin America, but construction activities remained at low levels.~~

Sales decreased in EAME primarily due to unfavorable currency impacts, mostly from a weaker euro, and lower sales volume partially offset by favorable price realization. Sales volume declined primarily due to unfavorable impacts of changes in dealer inventories, partially offset by higher end-user demand. Dealer inventories increased more significantly during the nine months ended September 30, 2018, than during the nine months ended September 30, 2019.

Sales in Asia/Pacific decreased mostly due to lower demand, including unfavorable changes in dealer inventories and unfavorable currency impacts. The unfavorable currency impacts were due to a weaker Chinese yuan and Australian dollar. Dealers increased inventories during the nine months ended September 30, 2018 and decreased inventories during the nine months ended September 30, 2019. The lower demand was primarily in China due to continued competitive pressures.

Construction Industries’ profit was $3.272 billion for the nine months ended September 30, 2019, a decrease of $57 million, or 2 percent, compared with $3.329 billion for the nine months ended September 30, 2018. The decrease was primarily due to favorable price realization and lower SG&A/R&D expenses, which were more than offset by higher manufacturing costs and lower sales volume, including an unfavorable mix of products. Manufacturing costs increased primarily due to unfavorable variable labor and burden and higher material costs. Lower SG&A/R&D expenses were due to lower short-term incentive compensation expense, partially offset by increased targeted investments.

~~Construction~~Resource Industries’ profit as a percent of total sales was ~~18.6~~14.6 percent in the first quarter of 2020, compared with 20.9 percent in the first quarter of 2019.

Energy & Transportation



Sales by Application
(Millions of dollars)	First Quarter 2020		First Quarter 2019		$ Change			% Change
Oil and Gas	$	861	$	1,131	$	(270	)	(24	%)
Power Generation	854		1,036		(182		)	(18	%)
Industrial	801		904		(103		)	(11	%)
Transportation	1,102		1,162		(60		)	(5	%)
External Sales	3,618		4,233		(615		)	(15	%)
Inter-segment	731		977		(246		)	(25	%)
Total Sales	$	4,349	$	5,210	$	(861	)	(17	%)

Energy & Transportation’s total sales were $4.349 billion in the first quarter of 2020, a decrease of $861 million, or 17 percent, compared with $5.210 billion in the first quarter of 2019. Sales declined across all applications and inter-segment engine sales.


▪	Oil and Gas – Sales were lower mainly in North America. The sales decline was largely due to lower demand for reciprocating engines used in gas compression and well servicing.


▪	Power Generation – Sales decreased primarily due to lower sales in Asia/Pacific and North America for both reciprocating engines and turbine-related projects.


▪	Industrial – Sales decreased due to lower demand across all regions.


▪	Transportation – Sales declined in both rail and marine applications.

Energy & Transportation’s profit was $602 million in the first quarter of 2020, a decrease of $236 million, or 28 percent, compared with $838 million in the first quarter of 2019. The decrease was mostly due to lower sales volume. The decline was partially offset by lower SG&A/R&D expenses and manufacturing costs, both of which were mostly impacted by a reduction in short-term incentive compensation expense and other cost-reduction actions implemented in response to lower sales volumes.

Energy & Transportation’s profit as a percent of total sales was 13.8 percent in the first quarter of 2020, compared with 16.1 percent in the first quarter of 2019.

Financial Products Segment

Financial Products’ segment revenues were $814 million in the first quarter of 2020, a decrease of $36 million, or 4 percent, from the first quarter of 2019. The decrease was primarily due to lower average earning assets in North America.

At the end of the first quarter of 2020, past dues at Cat Financial were 4.13 percent, compared with 3.61 percent at the end of the first quarter of 2019. The increase was primarily due to North America, Asia/Pacific and Mining, partially offset by a decrease in Caterpillar Power Finance. Write-offs, net of recoveries, were $30 million for the ~~nine months ended September 30, 2019,~~first quarter of both 2020 and 2019. As of March 31, 2020, Cat Financial's allowance for credit losses totaled $457 million, or 1.69 percent of finance receivables, compared with ~~19.0~~$424 million, or 1.50 percent of finance receivables, at December 31, 2019. The increase in allowance for credit losses was driven by the ~~nine months ended September 30, 2018.~~forecast of deteriorating economic conditions from the COVID-19 pandemic.

Resource Industries

Resource Industries’ total sales were ~~$7.881~~$2.084 billion ~~for~~in the ~~nine months ended September 30, 2019, an increase~~first quarter of ~~$408~~2020, a decrease of $668 million, or 524 percent, compared with ~~$7.473~~$2.752 billion ~~from~~in the ~~nine months ended September 30, 2018.~~first quarter of 2019. The ~~increase~~decrease was ~~primarily~~ due to ~~higher equipment end-user demand and favorable price realization, partially offset~~lower sales volume, driven by ~~unfavorable~~ changes in dealer ~~inventories. Higher~~inventories and lower end-user demand. Dealers increased inventories during the first quarter of 2019, compared with a decrease during the first quarter of 2020. Mining equipment sales were ~~driven by increased capital investment by mining customers~~lower due to ~~support ongoing mine site operations.~~weakness in certain commodities. In addition, ~~sales increased~~demand decreased for ~~our~~equipment supporting non-residential construction and quarry and ~~aggregate customers. Dealers increased inventories more significantly during the nine months ended September 30, 2018, than during the nine months ended September 30, 2019.~~aggregates.

Resource Industries’ profit was ~~$1.368 billion for~~$304 million in the ~~nine months ended September 30, 2019, an increase $165~~first quarter of 2020, a decrease of $272 million, or 1447 percent, compared with ~~$1.203 billion for~~$576 million in the ~~nine months ended September 30, 2018.~~first quarter of 2019. The ~~improvement~~decrease was ~~mostly~~mainly due to ~~favorable price realization and higher~~lower sales ~~volume, partially offset by higher manufacturing costs.~~volume. Manufacturing costs ~~increased due to~~were about flat as the unfavorable impact of cost absorption and higher warranty expense ~~variable labor and burden~~were more than offset by lower period manufacturing costs, freight expense and material costs. Cost absorption was unfavorable as inventory increased more in the first quarter of 2019 than in the first quarter of 2020. Lower period manufacturing costs were primarily due to lower short-term incentive compensation expense and the favorable impact of restructuring and other cost-reduction actions.

Resource Industries’ profit as a percent of total sales was ~~17.4~~14.6 percent ~~for~~in the ~~nine months ended September 30, 2019,~~first quarter of 2020, compared with ~~16.1~~20.9 percent ~~for~~in the ~~nine months ended September 30, 2018.~~first quarter of 2019.

Energy & Transportation


Sales by Application
(Millions of dollars)	Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018		$ Change			% Change		First Quarter 2020		First Quarter 2019		$ Change			% Change
Oil and Gas	$	3,682	$	4,044	$	(362	)	(9	%)	$	861	$	1,131	$	(270	)	(24	%)
Power Generation	3,180		3,063		117			4	%	854		1,036		(182		)	(18	%)
Industrial	2,841		2,738		103			4	%	801		904		(103		)	(11	%)
Transportation	3,616		3,722		(106		)	(3	%)	1,102		1,162		(60		)	(5	%)
External Sales	13,319		13,567		(248		)	(2	%)	3,618		4,233		(615		)	(15	%)
Inter-Segment	2,829		2,931		(102		)	(3	%)
Inter-segment										731		977		(246		)	(25	%)
Total Sales	$	16,148	$	16,498	$	(350	)	(2	%)	$	4,349	$	5,210	$	(861	)	(17	%)

Energy & Transportation’s total sales were ~~$16.148~~$4.349 billion ~~for~~in the ~~nine months ended September 30, 2019,~~first quarter of 2020, a decrease of ~~$350~~$861 million, or 217 percent, compared with ~~$16.498~~$5.210 billion ~~for~~in the ~~nine months ended September 30, 2018. The decrease was primarily due to unfavorable currency impacts~~first quarter of 2019. Sales declined across all applications and ~~lower sales volume, including~~ inter-segment ~~sales, partially offset by favorable price realization.~~engine sales.

▪

Oil and Gas – Sales ~~decreased~~were lower mainly in North ~~America primarily~~America. The sales decline was largely due to lower ~~new equipment~~ demand for reciprocating engines used in gas compression and well ~~servicing and timing of turbine project deliveries that occurred in the nine months ended September 30, 2018. Lower sales in North America were partially offset by increases in all other regions.~~servicing.


▪	Power Generation – Sales ~~increased mostly~~decreased primarily due to ~~higher deliveries~~lower sales in Asia/Pacific and North America for both ~~diesel~~ reciprocating engines and ~~turbines. The increase was partially offset by lower diesel reciprocating engine sales in EAME driven by gas power generation applications and unfavorable currency impacts.~~turbine-related projects.


▪	Industrial – Sales ~~improved primarily in Asia/Pacific and North America driven by higher end-user demand.~~decreased due to lower demand across all regions.


▪	Transportation – Sales ~~were slightly lower primarily due to the timing of locomotive deliveries.~~declined in both rail and marine applications.

Energy & Transportation’s profit was ~~$2.745 billion for~~$602 million in the ~~nine months ended September 30, 2019,~~first quarter of 2020, a decrease of ~~$114~~$236 million, or 428 percent, compared with ~~$2.859 billion for~~$838 million in the ~~nine months ended September 30, 2018.~~first quarter of 2019. The decrease was mostly due to lower sales ~~volumes, including an unfavorable mix of applications, and higher manufacturing costs. This~~volume. The decline was partially offset by ~~favorable price realization,~~ lower SG&A/R&D expenses and ~~favorable other operating income/expense. Manufacturing~~manufacturing costs, ~~increased due to higher variable labor and burden, targeted investments, material costs and warranty expense, partially offset~~both of which were mostly impacted by ~~lower short-term incentive compensation expense. Lower SG&A/R&D expenses were primarily due to lower~~a reduction in short-term incentive compensation expense ~~partially offset by increased targeted investments.~~and other cost-reduction actions implemented in response to lower sales volumes.

Energy & Transportation’s profit as a percent of total sales was ~~17.0~~13.8 percent ~~for~~in the ~~nine months ended September 30, 2019,~~first quarter of 2020, compared with ~~17.3~~16.1 percent ~~for~~in the ~~nine months ended September 30, 2018.~~

first quarter of 2019.

Financial Products Segment

Financial Products’ segment revenues were ~~$2.588 billion for~~$814 million in the ~~nine months ended September 30, 2019, an increase~~first quarter of ~~$121~~2020, a decrease of $36 million, or 54 percent, from the first quarter of 2019. The decrease was primarily due to lower average earning assets in North America.

At the end of the first quarter of 2020, past dues at Cat Financial were 4.13 percent, compared with ~~$2.467 billion for~~3.61 percent at the ~~nine months ended September 30, 2018.~~end of the first quarter of 2019. The increase was primarily due to ~~higher average financing rates in~~ North America, ~~and~~ Asia/Pacific ~~higher average earning assets in North America~~ and ~~a favorable impact from Insurance Services revenues across all regions. These favorable impacts were~~Mining, partially offset by ~~the absence~~a decrease in Caterpillar Power Finance. Write-offs, net of ~~fees associated with an intercompany credit facility in North America.~~

~~Financial Products’ segment profit was $622~~recoveries, were $30 million for the ~~nine months ended September 30, 2019, up~~first quarter of both 2020 and 2019. As of March 31, ~~percent compared with $476 million for the nine months ended September 30, 2018. The favorable change was primarily due to a decrease in the provision~~2020, Cat Financial's allowance for credit losses totaled $457 million, or 1.69 percent of finance receivables, compared with $424 million, or 1.50 percent of finance receivables, at ~~Cat Financial, an~~December 31, 2019. The increase in ~~net yield on average earning assets, and favorable impacts~~allowance for credit losses was driven by the forecast of deteriorating economic conditions from the mark-to-market on equity securities in Insurance Services and Insurance Services margin. These favorable impacts were partially offset by higher SG&A expenses and the absence of the intercompany credit facility.COVID-19 pandemic.

Corporate Items and Eliminations

Expense for corporate items and eliminations was ~~$1.254 billion for~~$165 million in the ~~nine months ended September 30,~~first quarter of 2020, a decrease of $256 million from the first quarter of 2019, ~~compared with $1.245 billion for the nine months ended September 30, 2018.~~

primarily due to a favorable change in fair value adjustments related to deferred compensation plans and segment reporting methodology differences.

RESTRUCTURING COSTS

Restructuring costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows:



(Millions of dollars)		Three Months Ended September 30					Three Months Ended March 31
		2019		2018			2020		2019
Employee separations ¹		$	8	$	44		$	11	$	15
Long-lived asset impairments ¹		3		18
Other ²		13		48
Total restructuring costs		$	24	$	110

		Nine Months Ended September 30
		2019		2018
Employee separations ¹		$	33	$	121
Contract terminations ¹							1		—
Long-lived asset impairments ¹		39		49			9		7
Other²		110		123			16		26
Total restructuring costs		$	182	$	293		$	37	$	48

¹ Recognized in Other operating (income) expenses.	¹ Recognized in Other operating (income) expenses.					¹ Recognized in Other operating (income) expenses.
² Represents costs related to our restructuring programs, primarily for inventory write-downs, project management costs, accelerated depreciation, building demolition and equipment relocation, all of which are primarily included in Cost of goods sold.
² Represents costs related to our restructuring programs, primarily for inventory write-downs, equipment relocation, building demolition and project management, all of which are primarily included in Cost of goods sold.						² Represents costs related to our restructuring programs, primarily for inventory write-downs, equipment relocation, building demolition and project management, all of which are primarily included in Cost of goods sold.

Certain restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes.

The following table summarizes the ~~2018~~2019 and ~~2019~~2020 employee separation activity:



(Millions of dollars)
Liability balance at December 31, 2017		$	249
Increase in liability (separation charges)		112
Reduction in liability (payments)		(276		)
Liability balance at December 31, 2018	Liability balance at December 31, 2018	85			Liability balance at December 31, 2018	$	85
Increase in liability (separation charges)	Increase in liability (separation charges)	33			Increase in liability (separation charges)	48
Reduction in liability (payments)	Reduction in liability (payments)	(73		)	Reduction in liability (payments)	(85		)
Liability balance at September 30, 2019		$	45
Liability balance at December 31, 2019					Liability balance at December 31, 2019	48
Increase in liability (separation charges)					Increase in liability (separation charges)	11
Reduction in liability (payments)					Reduction in liability (payments)	(16		)
Liability balance at March 31, 2020					Liability balance at March 31, 2020	$	43

Most of the liability balance at ~~September 30, 2019~~March 31, 2020 is expected to be paid in ~~2019~~2020 and ~~2020.~~2021.

In September 2015, we announced a large scale restructuring plan (the Plan) including a voluntary retirement enhancement program for qualifying U.S. employees, several voluntary separation programs outside of the United States, additional involuntary programs throughout the company and manufacturing facility consolidations and closures that occurred through 2018. The largest action among those included in the Plan was relatedWe expect to ~~our European manufacturing footprint, which led to the Gosselies, Belgium, facility closure. In the first nine months of 2019, we incurred $30~~incur about $300 - $400 million of restructuring costs ~~related~~in 2020, about half for restructuring actions across the company and the remainder for strategic actions to ~~the Plan. Total restructuring costs incurred since the inception~~address a small number of ~~the Plan were $1,818 million. The remaining costs of approximately $20 million related to the Plan are expected to be recognized in 2019.~~

products. We expect that prior restructuring actions will result in an incremental benefit to operating costs, primarily Cost of goods sold and SG&A expenses of about ~~$300~~$200 million in ~~2019~~2020 compared with ~~2018.~~2019.

GLOSSARY OF TERMS

All Other Segment – Primarily includes activities such as: business ~~strategy,~~strategy; product management and ~~development,~~development; manufacturing and sourcing of filters and fluids, undercarriage, ~~ground-engaging~~ground engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat® products; parts distribution; integrated logistics ~~solutions,~~solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in ~~Japan,~~Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.


2.	Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products.

Construction Industries– A segment primarily responsible for supporting customers using machinery in infrastructure ~~forestry~~ and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; compactors; cold planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators; ~~forestry excavators; feller bunchers; harvesters; knuckleboom loaders;~~ motor graders; pipelayers; road reclaimers; ~~skidders;~~ skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders; utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts and work tools.


4.	Corporate Items and Eliminations – Includes corporate-level ~~expenses;~~expenses, timing differences as(as some expenses are reported in segment profit on a cash ~~basis;~~basis), methodology differences between segment and consolidated external ~~reporting;~~reporting, certain restructuring ~~costs;~~costs, and inter-segment eliminations.

Currency– With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation lines of business; currency impacts on Financial ~~Products’~~Products revenues and operating profit are included in the Financial ~~Products’~~Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates (hedging) and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results (translation).


6.	EAME – A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS).


7.	Earning Assets– Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases, less accumulated depreciation at Cat Financial.

Energy & Transportation– A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related parts across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including ~~marine~~marine- and rail-related businesses. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales, and product support of the following product portfolio: turbine machinery and integrated systems and solutions and turbine-related ~~services;~~services, reciprocating engine-powered generator ~~sets;~~sets, integrated systems used in the electric power generation ~~industry;~~industry, reciprocating engines and integrated systems and solutions for the marine and oil and gas ~~industries;~~industries, and reciprocating engines supplied to the industrial industry as well as Cat ~~machinery;~~machinery. Responsibilities also include the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies; the business strategy, product design, product management and development, manufacturing, remanufacturing, leasing and service of diesel-electric locomotives and components and other rail-related products and services; and product support of on-highway vocational trucks for North America.

Financial Products Segment– Provides financing alternatives to customers and dealers around the world for Caterpillar products, as well as financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of ~~our~~Caterpillar equipment. The segment also earns revenues from ~~Machinery, Energy & Transportation,~~ME&T, but the related costs are not allocated to operating segments. Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items.


10.	Latin America – A geographic region including Central and South American countries and Mexico.


11.	Machinery, Energy & Transportation (ME&T)– Represents the aggregate total of Construction Industries, Resource Industries, Energy & Transportation, All Other Segment and related corporate items and ~~eliminations.~~eliminations with Financial Products accounted for on the equity basis.


12.	Machinery, Energy & ~~Transportation’s~~Transportation Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements, and accruals.

13.

Manufacturing Costs– Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume, such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.


14.	Price Realization – The impact of net price changes excluding currency and new product introductions. Price realization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions.

15.

Resource Industries – A segment primarily responsible for supporting customers using machinery in mining, heavy construction, quarry and aggregates, waste and material handling applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales, and product support. The product portfolio includes large track-type tractors, large mining trucks, hard rock vehicles, longwall miners, electric rope shovels, draglines, hydraulic shovels, rotary drills, large wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, landfill compactors, soil compactors, ~~hard rock continuous mining systems,~~ select work tools, machinery components, electronics and control systems, and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics and autonomous machine capabilities. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing and research and development.

16.

Restructuring Costs – May include costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.

17.

Sales Volume– With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including ~~emissions-~~emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales.

related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales.


18.	Services – Enterprise services include, but are not limited to, aftermarket parts, Financial ~~Products’~~Products revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude most Financial ~~Products’~~Products revenues.

LIQUIDITY AND CAPITAL RESOURCES

Sources of funds

We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. ~~During~~Despite lower volume in most of the industries we serve, we had positive operating cash flow in the first ~~nine months~~quarter of ~~2019, we experienced favorable global liquidity conditions in~~2020 within both our ME&T and Financial ~~Products’~~Products' operations. On a consolidated basis, we ended the first ~~nine~~three months of ~~2019~~2020 with ~~$7.91~~$7.12 billion of cash, ~~an increase~~a decrease of ~~$49 million~~$1.16 billion from year-end ~~2018.~~2019. We intend to maintain a strong cash and liquidity position.

Consolidated operating cash flow for the first ~~nine~~three months of ~~2019~~2020 was ~~$4.48~~$1.13 billion, ~~which was~~about flat with the same ~~as the first nine months of 2018. Compared to the first nine months of 2018, we experienced~~period last year. Items favorably impacting cash flow included lower payments for short-term incentive compensation and reduced working capital requirements. Favorable changes in receivables and inventory were partially offset by unfavorable changes in accounts payable and accrued expenses. Mostly offsetting these favorable changes ~~in working capital in 2019, which were offset by~~was lower profit ~~excluding~~adjusted for non-cash items, including lower accruals for short-term incentive compensation ~~a higher discretionary pension contribution~~ and ~~higher cash payments for income taxes. Within working capital, changes~~postemployment benefits. Higher taxes paid during the first three months of 2020 compared to ~~accounts receivable, inventories, accrued expenses and customer advances favorably~~the same period last year also unfavorably impacted cash ~~flow, but were partially offset by changes in accounts payable. See further discussion of operating cash flow under ME&T and Financial Products.~~flow.

Total debt as of ~~September 30, 2019~~March 31, 2020 was ~~$37.91~~$37.09 billion, ~~an increase~~a decrease of ~~$1.35 billion~~$564 million from year-end ~~2018.~~2019. Debt related to Financial Products ~~increased $209 million.~~decreased $543 million, primarily due to lower portfolio funding requirements. Debt related to ME&T ~~increased $1.14 billion~~decreased $21 million in the first ~~nine~~three months of ~~2019, primarily due to the issuance~~2020.

As of debt to finance a discretionary pension contribution, which was partially offset by the impact of new accounting guidance on a previously failed sale-leaseback transaction in Japan. In the first nine months of 2019,March 31, 2020, we ~~repurchased $3.28 billion of Caterpillar common stock.~~

~~We have~~had three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes. Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of ~~September 30, 2019~~March 31, 2020 was $2.75 billion. Information on our Credit Facility is as follows:

~~In September 2019, we entered into a new 364-day facility.~~ The 364-day facility of $3.15 billion (of which $0.82 billion is available to ME&T) expires in September 2020.

~~In September 2019, we~~The three-year facility, as amended and restated ~~the 2015 three-year facility (as amended and restated, the “three-year facility”). The three-year facility~~in September of 2019, of $2.73 billion (of which $0.72 billion is available to ME&T) expires in September 2022.

~~In September 2019, we~~The five-year facility, as amended and restated ~~the 2015 five-year facility (as amended and restated, the “five-year facility”). The five-year facility~~in September of 2019, of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2024.

At ~~September 30, 2019,~~March 31, 2020, Caterpillar’s consolidated net worth was ~~$14.98~~$14.25 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined as the consolidated shareholders’ equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).

At ~~September 30, 2019,~~March 31, 2020, Cat Financial’s covenant interest coverage ratio was ~~1.62~~1.78 to 1. This is above the 1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net gain/(loss) from interest rate derivatives to (2) interest expense calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.

In addition, at ~~September 30, 2019,~~March 31, 2020, Cat Financial’s six-month covenant leverage ratio was ~~8.01~~7.29 to 1. This is below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility.

In the event Caterpillar or Cat Financial does not meet one or more of their respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of Cat Financial’s other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At ~~September 30, 2019,~~March 31, 2020, there were no borrowings under the Credit Facility.

Our total credit commitments and available credit as of ~~September 30, 2019~~March 31, 2020 were:


	September 30, 2019								March 31, 2020
(Millions of dollars)	Consolidated			Machinery, Energy & Transportation		Financial Products			Consolidated			Machinery, Energy & Transportation		Financial Products
Credit lines available:
Global credit facilities	$	10,500		$	2,751	$	7,749		$	10,500		$	2,751	$	7,749
Other external	4,685			—		4,685			4,335			167		4,168
Total credit lines available	15,185			2,751		12,434			14,835			2,918		11,917
Less: Commercial paper outstanding	(3,444		)	—		(3,444		)	(4,060		)	—		(4,060		)
Less: Utilized credit	(1,059		)	—		(1,059		)	(854		)	—		(854		)
Available credit	$	10,682		$	2,751	$	7,931		$	9,921		$	2,918	$	7,003

The other external consolidated credit lines with banks as of ~~September 30, 2019~~March 31, 2020 totaled ~~$4.69~~$4.34 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

Since the outbreak of the COVID-19 global pandemic, Caterpillar has taken actions to maintain our strong financial position and increase liquidity. In April 2020, we raised $2.0 billion of incremental cash by issuing $800 million in ten-year bonds at 2.6 percent and $1.2 billion in 30-year bonds at 3.25 percent. In addition, we entered into an incremental $3.9 billion short-term credit facility that expires on December 31, 2020 and also registered for $4.1 billion in commercial paper support programs now available in the United States and Canada. The Company has not made any drawings under any of the above mentioned credit facilities nor does it have any outstanding borrowings under either commercial paper support program as of the date of this filing.

We receive debt ratings from the major credit rating agencies. Moody’s currently rates our debt as “low-A”, while Fitch and S&P maintain a “mid-A” debt rating. To date, this split rating has not had a material impact on our borrowing costs or our overall financial health. However, a downgrade of our credit ratings by any of the major credit rating agencies would result in increased borrowing costs and could make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our ~~Credit Facility.~~committed credit facilities. Our Financial Products’ operations would rely on cash flow from its existing portfolio, existing cash balances, access to our ~~Credit Facility~~committed credit facilities and other credit line facilities of Cat Financial, commercial paper support facilities sponsored by the U.S. Federal Reserve and the Bank of Canada, and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.

Machinery, Energy & Transportation

Net cash provided by operating activities was ~~$2.63 billion~~$318 million in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$3.88 billion~~$860 million for the same period in ~~2018.~~2019. The decrease was primarily due to lower profit ~~excluding~~adjusted for non-cash items, including lower accruals for short-term incentive compensation ~~expense, higher cash payments for income~~and postemployment benefits. Higher taxes ~~and a higher discretionary pension contribution, which was partially offset by favorable working capital. Within working capital, inventory grew at a slower rate~~paid during the first ~~nine~~three months of ~~2019~~2020 compared to the same period ~~of 2018, which positively~~last year also unfavorably impacted cash flow. ~~However, during the third quarter of 2019, material purchases have declined due to our inventory reduction efforts resulting in~~Partially offsetting these unfavorable changes were lower ~~accounts payable. In addition, changes to accrued expenses, customer advances and accounts receivable favorably impacted cash flow.~~payments for short-term incentive compensation.

Net cash provided by investing activities in the first ~~nine~~three months of ~~2019~~2020 was ~~$138~~$324 million, compared with net cash used of ~~$836~~$226 million in the first ~~nine~~three months of ~~2018.~~2019. The change was primarily due to decreased ME&T lending ~~activity~~ with Financial ~~Products during 2019 and the acquisitions of ECM S.p.A. and Downer Freight Rail in the first nine months of 2018.~~Products.

Net cash used for financing activities during the first ~~nine~~three months of ~~2019~~2020 was ~~$3.32~~$1.63 billion, compared with net cash used of ~~$3.13~~$1.25 billion in the same period of ~~2018.~~2019. In the first ~~nine~~three months of ~~2019,~~2020, we repurchased ~~$3.28~~$1.04 billion of Caterpillar common stock, an increase of ~~$1.28 billion~~$292 million compared to the first ~~nine~~three months of ~~2018.~~2019. Additionally, ~~proceeds from common stock issued from stock options exercised decreased $230 million and~~ dividends paid increased ~~$120~~$73 million in the first ~~nine~~three months of ~~2019~~2020 compared to the ~~prior period. This activity was mostly offset by an increase in debt proceeds of $1.43 billion to finance a discretionary pension contribution in the first nine months of 2019.~~same period last year.

While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities. Our top priority is to maintain a strong financial position in support of a mid-A rating. Next, we intend to fund operational requirements and commitments. Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases. Additional information on cash deployment is as follows:

Strong financial position – Our top priority is to maintain a strong financial position in support of a mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies.

Operational excellence and commitments – Capital expenditures were ~~$730~~$302 million during the first ~~nine~~three months of ~~2019,~~2020, compared to ~~$845~~$297 million for the same period in ~~2018.~~2019. We expect ME&T’s capital expenditures in ~~2019~~2020 to be about ~~$1.2~~$1.0 billion. We made ~~$1.77 billion~~$98 million of contributions to our pension and other postretirement benefit plans during the first ~~nine~~three months of ~~2019, including a $1.5 billion discretionary U.S. pension plan contribution made in September 2019.~~2020. We currently anticipate full-year ~~2019~~2020 contributions of approximately ~~$1.83 billion.~~$280 million. In comparison, we made ~~$1.29 billion~~$119 million of contributions to our pension and other postretirement benefit plans during the first ~~nine~~three months of ~~2018, including a $1.0 billion discretionary contribution made to our U.S. pension plans in September 2018.~~2019.

Fund strategic growth initiatives and return capital to shareholders – We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings and services, including acquisitions.

As part of our ~~new~~ capital allocation strategy, ME&T free cash flow is a liquidity measure we ~~will~~ use ~~going forward~~ to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations excluding discretionary pension and other postretirement benefit plan contributions less capital expenditures. A goal of our ~~new~~ capital allocation strategy is to return substantially all ME&T free cash flow to shareholders in the form of dividends and share repurchases, while maintaining our mid-A rating.

Our share repurchase plans are subject to the company’s cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company and the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In July 2018, the Board of Directors approved an authorization to repurchase up to $10 billion of Caterpillar common stock (the 2018 Authorization) effective January 1, 2019, with no expiration. In the first ~~nine~~three months of ~~2019,~~2020, we repurchased ~~$3.28~~$1.04 billion of Caterpillar common stock, with ~~$6.72~~$4.91 billion remaining under the 2018 Authorization as of ~~September 30, 2019.~~March 31, 2020. Our basic shares outstanding as of ~~September 30, 2019~~March 31, 2020 were approximately ~~553~~542 million. Due to current economic uncertainty, we have temporarily suspended our share repurchase program. The existing share repurchase program remains authorized by the Board, and we may resume share repurchases in the future at any time depending upon market conditions, our capital needs and other factors.

Each quarter, our Board of Directors reviews the company’s dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. In April 2020, the Board of Directors approved maintaining our quarterly dividend representing $1.03 per share and we continue to expect our strong financial position to support the dividend. Dividends paid totaled ~~$1.56 billion~~$567 million in the first ~~nine~~three months of ~~2019, representing 86 cents per share paid in each of the first and second quarters and $1.03 per share paid in the third quarter.~~2020.

Financial Products

Financial Products operating cash flow was ~~$1.18 billion~~$431 million in the first ~~nine~~three months of ~~2019,~~2020, compared with ~~$1.08 billion~~$350 million for the same period a year ago. Net cash ~~used for~~provided by investing activities was ~~$101~~$444 million for the first ~~nine~~three months of ~~2019,~~2020, compared with net cash ~~used~~provided of ~~$2.00 billion~~$19 million for the same period in ~~2018.~~2019. The change was primarily due to the impact of net intercompany purchased receivables and higher collections of finance receivables, partially offset by higher additions to finance receivables. Net cash used for financing activities was ~~$433~~$968 million for the first ~~nine~~three months of ~~2019,~~2020, compared with net cash ~~provided by financing activities~~used of ~~$846~~$489 million for the same period in ~~2018.~~2019. The change was primarily due to lower portfolio funding requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - “New accounting guidance.”

CRITICAL ACCOUNTING POLICIES

For a discussion of the company’s critical accounting policies, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2018~~2019 Annual Report on Form 10-K. ~~There have been no significant changes to our~~The following critical accounting ~~policies~~policy has been revised since our ~~2018~~2019 Annual Report on Form ~~10-K.~~10-K:

Allowance for credit losses -The allowance for credit losses is management’s estimate of losses inherent in our finance receivable portfolio calculated using loss forecast models that take into consideration historical credit loss experience, current economic conditions and forecasts and scenarios that capture country and industry-specific economic factors. In addition, qualitative factors not able to be fully captured in our loss forecast models, including borrower-specific and Company-specific macro-economic factors, are considered in the evaluation of the adequacy of our allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist and on an individual basis when it is determined that similar risk characteristics do not exist. Finance receivables are identified for individual evaluation based on past-due status and information available about the customer, such as financial statements, news reports and published credit ratings, as well as general information regarding industry trends and the economic environment in which our customers operate. The allowance for credit losses attributable to finance receivables that are individually evaluated is based on the present value of expected future cash flows discounted at the receivables' effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable. In determining collateral value, we estimate the current fair market value of the collateral less selling costs. We also consider credit enhancements such as additional collateral and contractual third-party guarantees.

While management believes it has exercised prudent judgment and applied reasonable assumptions, there can be no assurance that in the future, changes in economic conditions or other factors would not cause changes in the financial health of our customers. If the financial health of our customers deteriorates, the timing and level of payments received could be impacted and therefore, could result in a change to our estimated losses.

OTHER MATTERS

Environmental and Legal Matters

On January 7, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requested documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries). The Company has received additional subpoenas relating to this investigation requesting additional documents and information relating to, among other things, the purchase and resale of replacement parts by Caterpillar Inc. and non-U.S. Caterpillar subsidiaries, dividend distributions of certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. On March 2-3, 2017, agents with the Department of Commerce, the Federal Deposit Insurance Corporation and the Internal Revenue Service executed search and seizure warrants at three facilities of the Company in the Peoria, Illinois area, including its former corporate headquarters. The warrants identify, and agents seized, documents and information related to, among other things, the export of products from the United States, the movement of products between the United States and Switzerland, the relationship between Caterpillar Inc. and CSARL, and sales outside the United States. It is the Company’s understanding that the warrants, which concern both tax and export activities, are related to the ongoing grand jury investigation. The Company is continuing to cooperate with this investigation. The Company is unable to predict the outcome or reasonably estimate any potential loss; however, we currently believe that this matter will not have a material adverse effect on the Company’s consolidated results of operations, financial position or liquidity.

On March 20, 2014, Brazil’s Administrative Council for Economic Defense (CADE) published a Technical Opinion which named 18 companies and over 100 individuals as defendants, including two subsidiaries of Caterpillar Inc., MGE - Equipamentos e Serviços Ferroviários Ltda. (MGE) and Caterpillar Brasil Ltda. The publication of the Technical Opinion opened CADE’s official administrative investigation into allegations that the defendants participated in anticompetitive bid activity for the construction and maintenance of metro and train networks in Brazil. While companies cannot be held criminally liable for anticompetitive conduct in Brazil, criminal charges have been brought against one current employee of MGE and two former employees of MGE involving the same conduct alleged by CADE. On July 8, 2019, CADE found MGE, one of its current employees and two of its former employees liable for anticompetitive conduct. CBL was dismissed from the proceeding without any finding of liability. MGE intends to appeal CADE’s findings. We currently believe that this matter will not have a material adverse effect on the Company’s consolidated results of operations, financial position or liquidity.

~~Retirement Benefits~~

We recognize mark-to-market gains and losses immediately through earnings upon the remeasurement of our pension and OPEB plans. Mark-to-market gains and losses represent the effects of actual results differing from our assumptions and the effects of changing assumptions. We will record a mark-to-market adjustment as of the measurement date, December 31, 2019. Based on market conditions as of September 30, 2019, we would recognize a decrease to the funded status of our plans of approximately $1.3 billion. This would result in an increase in our Liability for postemployment benefits and the recognition of a net mark-to-market loss in earnings of approximately $1.3 billion pre-tax, $1.0 billion net of tax or $1.83 per share. The loss would be primarily due to lower discount rates at September 30, 2019 (approximately 3.1 percent for our U.S. pension plans) as compared to the discount rates used at December 31, 2018 (approximately 4.2 percent for our U.S. pension plans), partially offset by gains resulting from higher than expected returns on plan assets. It is difficult to predict the December 31, 2019 adjustment amount, as it is dependent on several factors including the discount rate, actual returns on plan assets and other actuarial assumptions.

Order Backlog

At the end of the ~~third~~first quarter of ~~2019,~~2020, the dollar amount of backlog believed to be firm was approximately ~~$14.6~~$14.1 billion, about $400 million ~~lower~~higher than the ~~second~~fourth quarter of 2019. The ~~order backlog decreased~~increase was in ~~Resource Industries and Construction Industries, while~~ Energy & Transportation and Resource Industries, while Construction Industries was about flat. We believe that dealers have placed fewer machine orders as we expect dealers to reduce their inventory levels based on global economic uncertainty. Compared with the third quarter of 2018, the order backlog decreased about $2.7 billion with decreases across the three primary segments. Of the total backlog at ~~September 30, 2019,~~March 31, 2020, approximately ~~$3.8~~$4.0 billion was not expected to be filled in the following twelve months.

NON-GAAP FINANCIAL MEASURES

The following definitions are provided for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend for these items to be considered in isolation or as a substitute for the related GAAP measures.

We believe it is important to separately quantify the profit impact of ~~several~~two significant items in order for our results to be meaningful to our readers. These items consist of (i) a remeasurement gain resulting from the settlement of a non-U.S. pension obligation in the first quarter of 2020 and (ii) a discrete tax benefit related to U.S. tax reform in the first quarter of ~~2019, (ii) 2018 restructuring costs, which were incurred to generate longer-term benefits and (iii) a net tax benefit to adjust deferred tax balances in the third quarter of 2018.~~2019. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP ~~measures will provide~~measure provides investors with useful perspective on underlying business results and trends and aids with assessing our period-over-period results. In addition, we provide a calculation of ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation available for financing activities including debt repayments, dividends and share repurchases.

Reconciliations of adjusted ~~operating profit margin to the most directly comparable GAAP measure, operating profit as a percent of sales and revenues are as follows:~~

Three Months Ended September 30 Nine Months Ended September 30
2019 2018 2019 2018
Operating profit as a percent of total sales and revenues 15.8 % 15.8 % 15.8 % 15.9 %
Restructuring costs ¹
—
0.8 % —
0.7 %
Adjusted operating profit margin 15.8 % 16.6 % 15.8 % 16.6 %
¹ 2019 restructuring costs are not material.

~~Reconciliations of adjusted~~ profit per share to the most directly comparable GAAP measure, profit per share - diluted are as follows:



	Three Months Ended September 30					Nine Months Ended September 30						Three Months Ended March 31
	2019		2018			2019			2018			2020			2019
Profit per share - diluted	$	2.66	$	2.88		$	8.75		$	8.45		$	1.98		$	3.25
Per share remeasurement gain of a non-US pension obligation ¹												$	(0.38	)	$	—
Per share U.S. tax reform impact	$	—	$	—		$	(0.31	)	$	—		$	—		$	(0.31	)
Per share restructuring costs¹	$	—	$	0.14		$	—		$	0.37
Per share deferred tax balance adjustment	$	—	$	(0.16	)	$	—		$	(0.16	)
Adjusted profit per share	$	2.66	$	2.86		$	8.44		$	8.66		$	1.60		$	2.94
¹ At estimated annual tax rate of 24 percent. 2019 restructuring costs are not material.
¹At statutory tax rates.												¹At statutory tax rates.

Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities are as follows:



Millions of dollars	Nine Months Ended September 30
(Millions of dollars)							Three Months Ended March 31
	2019			2018			2020			2019
ME&T net cash provided by operating activities ¹	$	2,632		$	3,880		$	318		$	860
ME&T discretionary pension contributions	$	1,500		$	1,000
ME&T capital expenditures	$	(730	)	$	(845	)	$	(302	)	$	(297	)
ME&T free cash flow	$	3,402		$	4,035		$	16		$	563
¹See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 94-95.
¹See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 72-73.							¹See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 72-73.

Supplemental Consolidating Data

We are providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation – Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery, Energy & Transportation information relates to the design, manufacturing and marketing of our products. Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We also believe this presentation will assist readers in understanding our business.

Financial Products – Our finance and insurance subsidiaries, primarily Cat Financial and Insurance Services.

Consolidating Adjustments – Eliminations of transactions between Machinery, Energy & Transportation and Financial Products.

Pages 8868 to 9573 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended ~~September 30, 2019~~March 31, 2020

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data
Consolidated
Machinery,
Energy &
Transportation ¹

Financial
Products

Consolidating
Adjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation $ 11,974
$ 11,974
$ —
$ —

Revenues of Financial Products 784
—
920
(136 )
²

Total sales and revenues 12,758
11,974
920
(136 )

Operating costs:

Cost of goods sold 8,569
8,569
—
—

Selling, general and administrative expenses 1,251
1,095
163
(7 )
³

Research and development expenses 431
431
—
—

Interest expense of Financial Products 189
—
198
(9 )
⁴

Other operating (income) expenses 298
(9 ) 320
(13 )
³

Total operating costs 10,738
10,086
681
(29 )

Operating profit 2,020
1,888
239
(107 )

Interest expense excluding Financial Products 103
103
—
—

Other income (expense) 88
(27 ) 8
107
⁵

Consolidated profit before taxes 2,005
1,758
247
—

Provision (benefit) for income taxes 518
457
61
—

Profit of consolidated companies 1,487
1,301
186
—

Equity in profit (loss) of unconsolidated affiliated companies 7
7
—
—

Equity in profit of Financial Products’ subsidiaries —
180
—
(180 )
⁶

Profit of consolidated and affiliated companies 1,494
1,488
186
(180 )

Less: Profit (loss) attributable to noncontrolling interests —
(6 ) 6
—

Profit ⁷
$ 1,494
$ 1,494
$ 180
$ (180 )


¹	~~Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.~~


²	~~Elimination of Financial Products’ revenues earned from Machinery, Energy & Transportation.~~


³	~~Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.~~


⁴	~~Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.~~


⁵	Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.


⁶	~~Elimination of Financial Products’ profit due to equity method of accounting.~~


⁷	~~Profit attributable to common shareholders.~~

~~Caterpillar Inc.~~

~~Supplemental Data for Results of Operations~~

~~For the~~ ~~Nine Months Ended September 30, 2019~~

~~(Unaudited)~~

~~(Millions of dollars)~~


			Supplemental Consolidating Data											Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation ¹			Financial Products		Consolidating Adjustments				Consolidated		Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	38,369	$	38,369		$	—	$	—			$	9,914	$	9,914		$	—		$	—
Revenues of Financial Products	2,287		—			2,684		(397		)	²	721		—			830			(109		)	²
Total sales and revenues	40,656		38,369			2,684		(397		)		10,635		9,914			830			(109		)

Operating costs:
Cost of goods sold	27,513		27,515			—		(2		)	³	7,266		7,267			—			(1		)	³
Selling, general and administrative expenses	3,879		3,324			564		(9		)	³	1,121		940			182			(1		)	³
Research and development expenses	1,307		1,307			—		—				356		356			—			—
Interest expense of Financial Products	571		—			599		(28		)	⁴	175		—			176			(1		)	⁴
Other operating (income) expenses	946		2			974		(30		)	³	313		10			320			(17		)	³
Total operating costs	34,216		32,148			2,137		(69		)		9,231		8,573			678			(20		)

Operating profit	6,440		6,221			547		(328		)		1,404		1,341			152			(89		)

Interest expense excluding Financial Products	309		318			—		(9		)	⁴	113		112			—			1			⁴
Other income (expense)	316		(71		)	68		319			⁵	222		179			(47		)	90			⁵

Consolidated profit before taxes	6,447		5,832			615		—				1,513		1,408			105			—

Provision (benefit) for income taxes	1,470		1,294			176		—				425		397			28			—
Profit of consolidated companies	4,977		4,538			439		—				1,088		1,011			77			—

Equity in profit (loss) of unconsolidated affiliated companies	20		20			—		—				5		5			—			—
Equity in profit of Financial Products’ subsidiaries	—		422			—		(422		)	⁶	—		73			—			(73		)	⁶

Profit of consolidated and affiliated companies	4,997		4,980			439		(422		)		1,093		1,089			77			(73		)

Less: Profit (loss) attributable to noncontrolling interests	2		(15		)	17		—				1		(3		)	4			—

Profit ⁷	$	4,995	$	4,995		$	422	$	(422	)		$	1,092	$	1,092		$	73		$	(73	)


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of Financial Products’ revenues earned from Machinery, Energy & Transportation.


³	Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.


⁴	Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.


⁵	Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.


⁶	Elimination of Financial Products’ profit due to equity method of accounting.


⁷	Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended ~~September 30, 2018~~March 31, 2019

(Unaudited)

(Millions of dollars)

Supplemental Consolidating Data
Consolidated
Machinery,
Energy &
Transportation ¹

Financial
Products

Consolidating
Adjustments

Sales and revenues:

Sales of Machinery, Energy & Transportation $ 12,763
$ 12,763
$ —
$ —

Revenues of Financial Products 747
—
867
(120 )
²

Total sales and revenues 13,510
12,763
867
(120 )

Operating costs:

Cost of goods sold 9,022
9,022
—
—

Selling, general and administrative expenses 1,299
1,135
169
(5 )
³��

Research and development expenses 479
479
—
—

Interest expense of Financial Products 185
—
194
(9 )
⁴

Other operating (income) expenses 390
63
333
(6 )
³

Total operating costs 11,375
10,699
696
(20 )

Operating profit 2,135
2,064
171
(100 )

Interest expense excluding Financial Products 102
114
—
(12 )
⁴

Other income (expense) 102
(5 ) 19
88
⁵

Consolidated profit before taxes 2,135
1,945
190
—

Provision (benefit) for income taxes 415
376
39
—

Profit of consolidated companies 1,720
1,569
151
—

Equity in profit (loss) of unconsolidated affiliated companies 7
7
—
—

Equity in profit of Financial Products’ subsidiaries —
145
—
(145 )
⁶

Profit of consolidated and affiliated companies 1,727
1,721
151
(145 )

Less: Profit (loss) attributable to noncontrolling interests —
(6 ) 6
—

Profit⁷
$ 1,727
$ 1,727
$ 145
$ (145 )


¹	~~Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.~~


²	~~Elimination of Financial Products’ revenues earned from Machinery, Energy & Transportation.~~


³	~~Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.~~


⁴	~~Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.~~


⁵	Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.


⁶	~~Elimination of Financial Products’ profit due to equity method of accounting.~~


⁷	~~Profit attributable to common shareholders.~~

~~Caterpillar Inc.~~

~~Supplemental Data for Results of Operations~~

~~For the~~ ~~Nine Months Ended September 30, 2018~~

~~(Unaudited)~~

~~(Millions of dollars)~~


			Supplemental Consolidating Data											Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation ¹			Financial Products		Consolidating Adjustments				Consolidated		Machinery, Energy & Transportation ¹			Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	38,192	$	38,192		$	—	$	—			$	12,724	$	12,724		$	—	$	—
Revenues of Financial Products	2,188		—			2,527		(339		)	²	742		—			870		(128		)	²
Total sales and revenues	40,380		38,192			2,527		(339		)		13,466		12,724			870		(128		)

Operating costs:
Cost of goods sold	27,010		27,010			—		—				9,003		9,003			—		—
Selling, general and administrative expenses	4,015		3,445			581		(11		)	³	1,319		1,127			192		—
Research and development expenses	1,384		1,384			—		—				435		435			—		—
Interest expense of Financial Products	533		—			558		(25		)	⁴	190		—			200		(10		)	⁴
Other operating (income) expenses	1,028		100			949		(21		)	³	312		10			313		(11		)	³
Total operating costs	33,970		31,939			2,088		(57		)		11,259		10,575			705		(21		)

Operating profit	6,410		6,253			439		(282		)		2,207		2,149			165		(107		)

Interest expense excluding Financial Products	305		337			—		(32		)	⁴	103		110			—		(7		)	⁴
Other income (expense)	350		76			24		250			⁵	160		19			41		100			⁵

Consolidated profit before taxes	6,455		5,992			463		—				2,264		2,058			206		—

Provision (benefit) for income taxes	1,377		1,274			103		—				387		335			52		—
Profit of consolidated companies	5,078		4,718			360		—				1,877		1,723			154		—

Equity in profit (loss) of unconsolidated affiliated companies	21		21			—		—				7		7			—		—
Equity in profit of Financial Products’ subsidiaries	—		345			—		(345		)	⁶	—		148			—		(148		)	⁶

Profit of consolidated and affiliated companies	5,099		5,084			360		(345		)		1,884		1,878			154		(148		)

Less: Profit (loss) attributable to noncontrolling interests	—		(15		)	15		—				3		(3		)	6		—

Profit⁷	$	5,099	$	5,099		$	345	$	(345	)		$	1,881	$	1,881		$	148	$	(148	)


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of Financial Products’ revenues earned from Machinery, Energy & Transportation.


³	Elimination of net expenses recorded by Machinery, Energy & Transportation paid to Financial Products.


⁴	Elimination of interest expense recorded between Financial Products and Machinery, Energy & Transportation.


⁵	Elimination of discount recorded by Machinery, Energy & Transportation on receivables sold to Financial Products and of interest earned between Machinery, Energy & Transportation and Financial Products.


⁶	Elimination of Financial Products’ profit due to equity method of accounting.


⁷	Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Financial Position

At ~~September 30, 2019~~March 31, 2020

(Unaudited)

(Millions of dollars)


				Supplemental Consolidating Data													Supplemental Consolidating Data
	Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments				Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	7,906		$	6,380		$	1,526		$	—			$	7,123		$	6,251		$	872		$	—
Receivables – trade and other	8,275			3,787			487			4,001			^2,3	7,834			2,722			482			4,630			^2,3
Receivables – finance	9,192			—			14,107			(4,915		)	³	9,120			—			13,886			(4,766		)	³
Prepaid expenses and other current assets	1,607			1,226			448			(67		)	⁴	1,761			1,237			555			(31		)	⁴
Inventories	12,180			12,180			—			—				11,748			11,748			—			—
Total current assets	39,160			23,573			16,568			(981		)		37,586			21,958			15,795			(167		)

Property, plant and equipment – net	12,842			8,499			4,343			—				12,488			8,385			4,103			—
Long-term receivables – trade and other	1,193			313			212			668			^2,3	1,196			268			266			662			^2,3
Long-term receivables – finance	12,412			—			13,091			(679		)	³	12,021			—			12,694			(673		)	³
Investments in Financial Products subsidiaries	—			3,968			—			(3,968		)	⁵	—			3,999			—			(3,999		)	⁵
Noncurrent deferred and refundable income taxes	1,372			1,927			118			(673		)	⁶	1,426			1,975			96			(645		)	⁶
Intangible assets	1,630			1,630			—			—				1,478			1,478			—			—
Goodwill	6,142			6,142			—			—				6,140			6,140			—			—
Other assets	3,242			1,577			1,737			(72		)	⁷	3,559			2,048			1,610			(99		)	⁷
Total assets	$	77,993		$	47,629		$	36,069		$	(5,705	)		$	75,894		$	46,251		$	34,564		$	(4,921	)

Liabilities
Current liabilities:
Short-term borrowings	$	4,268		$	—		$	4,268		$	—			$	4,789		$	—		$	4,789		$	—
Short-term borrowings with consolidated companies	—			—			779			(779		)	⁸	—			—			—			—
Accounts payable	6,141			6,083			193			(135		)	⁹	5,769			5,672			233			(136		)	⁹
Accrued expenses	3,727			3,337			390			—				3,776			3,426			350			—
Accrued wages, salaries and employee benefits	1,518			1,477			41			—				878			862			16			—
Customer advances	1,309			1,309			—			—				1,295			1,295			—			—
Dividends payable	—			—			—			—				—			—			—			—
Other current liabilities	2,188			1,734			536			(82		)	^6,10	2,074			1,500			626			(52		)	^6,10
Long-term debt due within one year	8,050			25			8,025			—				7,935			143			7,792			—
Total current liabilities	27,201			13,965			14,232			(996		)		26,516			12,898			13,806			(188		)

Long-term debt due after one year	25,588			9,145			16,454			(11		)	⁸	24,369			9,009			15,371			(11		)	⁸
Liability for postemployment benefits	5,900			5,900			—			—				6,333			6,332			1			—
Other liabilities	4,311			3,626			1,415			(730		)	⁶	4,437			3,773			1,387			(723		)	⁶
Total liabilities	63,000			32,636			32,101			(1,737		)		61,655			32,012			30,565			(922		)
Commitments and contingencies
Shareholders’ equity
Common stock	5,951			5,951			919			(919		)	⁵	6,046			6,046			919			(919		)	⁵
Treasury stock	(23,693		)	(23,693		)	—			—				(25,341		)	(25,341		)	—			—
Profit employed in the business	34,477			34,477			3,869			(3,869		)	⁵	35,504			35,504			4,057			(4,057		)	⁵
Accumulated other comprehensive income (loss)	(1,783		)	(1,783		)	(985		)	985			⁵	(2,012		)	(2,012		)	(1,152		)	1,152			⁵
Noncontrolling interests	41			41			165			(165		)	⁵	42			42			175			(175		)	⁵
Total shareholders’ equity	14,993			14,993			3,968			(3,968		)		14,239			14,239			3,999			(3,999		)
Total liabilities and shareholders’ equity	$	77,993		$	47,629		$	36,069		$	(5,705	)		$	75,894		$	46,251		$	34,564		$	(4,921	)


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of receivables between Machinery, Energy & Transportation and Financial Products.


³	Reclassification of Machinery, Energy & Transportation’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.


⁴	Elimination of Machinery, Energy & ~~Transportation~~’sTransportation’s insurance premiums that are prepaid to Financial Products.


⁵	Elimination of Financial Products’ equity which is accounted for by Machinery, Energy & Transportation on the equity basis.


⁶	Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.


⁷	Elimination of other intercompany assets between Machinery, Energy & Transportation and Financial Products.


⁸	Elimination of debt between Machinery, Energy & Transportation and Financial Products.


⁹	Elimination of payables between Machinery, Energy & Transportation and Financial Products.


¹⁰	Elimination of prepaid insurance in Financial Products’ other liabilities.

Caterpillar Inc.

Supplemental Data for Financial Position

At December 31, ~~2018~~2019

(Unaudited)

(Millions of dollars)


				Supplemental Consolidating Data													Supplemental Consolidating Data
	Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments				Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments
Assets
Current assets:
Cash and short-term investments	$	7,857		$	6,968		$	889		$	—			$	8,284		$	7,299		$	985		$	—
Receivables – trade and other	8,802			4,677			401			3,724			^2,3	8,568			3,737			451			4,380			^2,3
Receivables – finance	8,650			—			13,989			(5,339		)	³	9,336			—			14,489			(5,153		)	³
Prepaid expenses and other current assets	1,765			1,227			583			(45		)	⁴	1,739			1,290			529			(80		)	⁴
Inventories	11,529			11,529			—			—				11,266			11,266			—			—
Total current assets	38,603			24,401			15,862			(1,660		)		39,193			23,592			16,454			(853		)

Property, plant and equipment – net	13,574			9,085			4,489			—				12,904			8,606			4,298			—
Long-term receivables – trade and other	1,161			302			204			655			^2,3	1,193			348			152			693			^2,3
Long-term receivables – finance	13,286			—			13,951			(665		)	³	12,651			—			13,354			(703		)	³
Investments in Financial Products subsidiaries	—			3,672			—			(3,672		)	⁵	—			4,260			—			(4,260		)	⁵
Noncurrent deferred and refundable income taxes	1,439			2,015			116			(692		)	⁶	1,411			2,002			117			(708		)	⁶
Intangible assets	1,897			1,897			—			—				1,565			1,565			—			—
Goodwill	6,217			6,217			—			—				6,196			6,196			—			—
Other assets	2,332			886			1,446			—				3,340			1,868			1,572			(100		)	⁷
Total assets	$	78,509		$	48,475		$	36,068		$	(6,034	)		$	78,453		$	48,437		$	35,947		$	(5,931	)

Liabilities
Current liabilities:
Short-term borrowings	$	5,723		$	—		$	5,723		$	—			$	5,166		$	5		$	5,161		$	—
Short-term borrowings with consolidated companies	—			—			1,500			(1,500		)	⁷	—			—			600			(600		)	⁸
Accounts payable	7,051			6,972			194			(115		)	⁸	5,957			5,918			212			(173		)	⁹
Accrued expenses	3,573			3,212			361			—				3,750			3,415			335			—
Accrued wages, salaries and employee benefits	2,384			2,350			34			—				1,629			1,580			49			—
Customer advances	1,243			1,243			—			—				1,187			1,187			—			—
Dividends payable	495			495			—			—				567			567			—			—
Other current liabilities	1,919			1,532			433			(46		)	^6,9	2,155			1,689			566			(100		)	^6,10
Long-term debt due within one year	5,830			10			5,820			—				6,210			16			6,194			—
Total current liabilities	28,218			15,814			14,065			(1,661		)		26,621			14,377			13,117			(873		)

Long-term debt due after one year	25,000			8,015			16,995			(10		)	⁷	26,281			9,151			17,140			(10		)	⁸
Liability for postemployment benefits	7,455			7,455			—			—				6,599			6,599			—			—
Other liabilities	3,756			3,111			1,336			(691		)	⁶	4,323			3,681			1,430			(788		)	⁶
Total liabilities	64,429			34,395			32,396			(2,362		)		63,824			33,808			31,687			(1,671		)
Commitments and contingencies
Shareholders’ equity
Common stock	5,827			5,827			919			(919		)	⁵	5,935			5,935			919			(919		)	⁵
Treasury stock	(20,531		)	(20,531		)	—			—				(24,217		)	(24,217		)	—			—
Profit employed in the business	30,427			30,427			3,543			(3,543		)	⁵	34,437			34,437			3,997			(3,997		)	⁵
Accumulated other comprehensive income (loss)	(1,684		)	(1,684		)	(943		)	943			⁵	(1,567		)	(1,567		)	(828		)	828			⁵
Noncontrolling interests	41			41			153			(153		)	⁵	41			41			172			(172		)	⁵
Total shareholders’ equity	14,080			14,080			3,672			(3,672		)		14,629			14,629			4,260			(4,260		)
Total liabilities and shareholders’ equity	$	78,509		$	48,475		$	36,068		$	(6,034	)		$	78,453		$	48,437		$	35,947		$	(5,931	)


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of receivables between Machinery, Energy & Transportation and Financial Products.


³	Reclassification of Machinery, Energy & Transportation’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.


⁴	Elimination of Machinery, Energy & Transportation’s insurance premiums that are prepaid to Financial Products.


⁵	Elimination of Financial Products’ equity which is accounted for by Machinery, Energy & Transportation on the equity basis.


⁶	Reclassification reflecting required netting of deferred tax assets / liabilities by taxing jurisdiction.


⁷	Elimination of ~~debt~~other intercompany assets between Machinery, Energy & Transportation and Financial Products.


⁸	Elimination of ~~payables~~debt between Machinery, Energy & Transportation and Financial Products.


⁹	Elimination of payables between Machinery, Energy & Transportation and Financial Products.


¹⁰	Elimination of prepaid insurance in Financial Products’ other liabilities.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the ~~Nine~~Three Months Ended ~~September 30, 2019~~March 31, 2020

(Unaudited)

(Millions of dollars)


				Supplemental Consolidating Data													Supplemental Consolidating Data
	Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments				Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	4,997		$	4,980		$	439		$	(422	)	²	$	1,093		$	1,089		$	77		$	(73	)	²
Adjustments for non-cash items:
Depreciation and amortization	1,933			1,283			650			—				614			402			212			—
Undistributed profit of Financial Products	—			(422		)	—			422			³	—			(73		)	—			73			³
Gain on remeasurement of a non-U.S. pension obligation														(254		)	(254		)	—			—
Provision (benefit) for deferred income taxes														20			75			(55		)	—
Other	627			395			(111		)	343			⁴	534			249			170			115			⁴
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	427			125			(16		)	318			^{4, 5}	500			328			(56		)	228			^{4, 5}
Inventories	(676		)	(702		)	—			26			⁴	(541		)	(538		)	—			(3		)	⁴
Accounts payable	(669		)	(651		)	6			(24		)	⁴	90			2			51			37			⁴
Accrued expenses	114			105			11			(2		)	⁴	(97		)	(105		)	8			—
Accrued wages, salaries and employee benefits	(858		)	(865		)	7			—				(722		)	(689		)	(33		)	—
Customer advances	169			171			—			(2		)	⁴	116			116			—			—
Other assets – net	3			(47		)	47			3			⁴	(50		)	15			(16		)	(49		)	⁴
Other liabilities – net	(1,589		)	(1,740		)	144			7			⁴	(173		)	(299		)	73			53			⁴
Net cash provided by (used for) operating activities	4,478			2,632			1,177			669				1,130			318			431			381

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(723		)	(709		)	(14		)	—				(305		)	(304		)	(1		)	—
Expenditures for equipment leased to others	(1,133		)	(21		)	(1,151		)	39			⁴	(243		)	2			(249		)	4			⁴
Proceeds from disposals of leased assets and property, plant and equipment	812			149			766			(103		)	⁴	216			61			156			(1		)	⁴
Additions to finance receivables	(9,453		)	—			(10,633		)	1,180			⁵	(2,953		)	—			(3,213		)	260			⁵
Collections of finance receivables	9,144			—			10,166			(1,022		)	⁵	3,153			—			3,421			(268		)	⁵
Net intercompany purchased receivables	—			—			763			(763		)	⁵	—			—			376			(376		)	⁵
Proceeds from sale of finance receivables	183			—			183			—				31			—			31			—
Net intercompany borrowings	—			721			1			(722		)	⁶	—			599			1			(600		)	⁶
Investments and acquisitions (net of cash acquired)	(6		)	(6		)	—			—				(35		)	(35		)	—			—
Proceeds from sale of businesses and investments (net of cash sold)	3			3			—			—
Proceeds from sale of securities	281			16			265			—				68			6			62			—
Investments in securities	(425		)	(16		)	(409		)	—				(180		)	(5		)	(175		)	—
Other – net	(37		)	1			(38		)	—				35			—			35			—
Net cash provided by (used for) investing activities	(1,354		)	138			(101		)	(1,391		)		(213		)	324			444			(981		)

Cash flow from financing activities:
Dividends paid	(1,564		)	(1,564		)	—			—				(567		)	(567		)	—			—
Common stock issued, including treasury shares reissued	59			59			—			—				(23		)	(23		)	—			—
Common shares repurchased	(3,283		)	(3,283		)	—			—				(1,043		)	(1,043		)	—			—
Net intercompany borrowings	—			(1		)	(721		)	722			⁶	—			(1		)	(599		)	600			⁶
Proceeds from debt issued (original maturities greater than three months)	8,827			1,479			7,348			—				2,141			15			2,126			—
Payments on debt (original maturities greater than three months)	(6,062		)	(8		)	(6,054		)	—				(2,466		)	(6		)	(2,460		)	—
Short-term borrowings – net (original maturities three months or less)	(1,006		)	—			(1,006		)	—				(40		)	(5		)	(35		)	—
Other – net	(2		)	(2		)	—			—
Other �� net														(1		)	(1		)	—			—
Net cash provided by (used for) financing activities	(3,031		)	(3,320		)	(433		)	722				(1,999		)	(1,631		)	(968		)	600
Effect of exchange rate changes on cash	(47		)	(38		)	(9		)	—				(80		)	(59		)	(21		)	—
Increase (decrease) in cash and short-term investments and restricted cash	46			(588		)	634			—				(1,162		)	(1,048		)	(114		)	—
Cash and short-term investments and restricted cash at beginning of period	7,890			6,994			896			—				8,292			7,302			990			—
Cash and short-term investments and restricted cash at end of period	$	7,936		$	6,406		$	1,530		$	—			$	7,130		$	6,254		$	876		$	—


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of Financial Products’ profit after tax due to equity method of accounting.


³	Elimination of non-cash adjustment for the undistributed earnings from Financial Products.


⁴	Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.


⁵	Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.


⁶	Elimination of net proceeds and payments to/from Machinery, Energy & Transportation and Financial Products.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the ~~Nine~~Three Months Ended ~~September 30, 2018~~March 31, 2019

(Unaudited)

(Millions of dollars)


				Supplemental Consolidating Data													Supplemental Consolidating Data
	Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments				Consolidated			Machinery, Energy & Transportation ¹			Financial Products			Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	5,099		$	5,084		$	360		$	(345	)	²	$	1,884		$	1,878		$	154		$	(148	)	²
Adjustments for non-cash items:
Depreciation and amortization	2,065			1,410			655			—				641			424			217			—
Undistributed profit of Financial Products	—			(345		)	—			345			³	—			(148		)	—			148			³
Provision (benefit) for deferred income taxes														(11		)	14			(25		)	—
Other	630			327			36			267			⁴	88			49			(59		)	98			⁴
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	(725		)	19			(33		)	(711		)	^{4, 5}	(150		)	75			(24		)	(201		)	^{4, 5}
Inventories	(1,822		)	(1,774		)	—			(48		)	⁴	(813		)	(818		)	—			5			⁴
Accounts payable	496			544			(55		)	7			⁴	355			336			12			7			⁴
Accrued expenses	(32		)	(63		)	31			—				135			124			11			—
Accrued wages, salaries and employee benefits	(418		)	(403		)	(15		)	—				(1,185		)	(1,177		)	(8		)	—
Customer advances	59			59			—			—				105			105			—			—
Other assets – net	394			343			(9		)	60			⁴	(7		)	(6		)	37			(38		)	⁴
Other liabilities – net	(1,271		)	(1,321		)	110			(60		)	⁴	79			4			35			40			⁴
Net cash provided by (used for) operating activities	4,475			3,880			1,080			(485		)		1,121			860			350			(89		)

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(921		)	(822		)	(99		)	—				(278		)	(274		)	(4		)	—
Expenditures for equipment leased to others	(1,208		)	(23		)	(1,258		)	73			⁴	(269		)	(23		)	(247		)	1			⁴
Proceeds from disposals of leased assets and property, plant and equipment	732			122			632			(22		)	⁴	209			26			189			(6		)	⁴
Additions to finance receivables	(9,092		)	—			(10,151		)	1,059			^{5, 7}	(2,615		)	—			(2,971		)	356			⁵
Collections of finance receivables	8,032			—			9,135			(1,103		)	⁵	2,818			—			3,096			(278		)	⁵
Net intercompany purchased receivables	—			—			(484		)	484			⁵	—			—			(16		)	16			⁵
Proceeds from sale of finance receivables	416			—			416			—				44			—			44			—
Net intercompany borrowings	—			66			—			(66		)	⁶	—			63			—			(63		)	⁶
Investments and acquisitions (net of cash acquired)	(357		)	(357		)	—			—				(2		)	(2		)	—			—
Proceeds from sale of businesses and investments (net of cash sold)	14			20			—			(6		)	⁷
Proceeds from sale of securities	363			154			209			—				57			4			53			—
Investments in securities	(417		)	(21		)	(396		)	—				(107		)	(7		)	(100		)	—
Other – net	24			25			(2		)	1			⁸	(38		)	(13		)	(25		)	—
Net cash provided by (used for) investing activities	(2,414		)	(836		)	(1,998		)	420				(181		)	(226		)	19			26

Cash flow from financing activities:
Dividends paid	(1,444		)	(1,444		)	—			—				(494		)	(494		)	—			—
Common stock issued, including treasury shares reissued	292			292			1			(1		)	⁸	(5		)	(5		)	—			—
Common shares repurchased	(2,000		)	(2,000		)	—			—				(751		)	(751		)	—			—
Net intercompany borrowings	—			—			(66		)	66			⁶	—			—			(63		)	63			⁶
Proceeds from debt issued (original maturities greater than three months)	7,073			47			7,026			—				2,665			—			2,665			—
Payments on debt (original maturities greater than three months)	(5,642		)	(6		)	(5,636		)	—				(2,567		)	(2		)	(2,565		)	—
Short-term borrowings – net (original maturities three months or less)	(465		)	14			(479		)	—				(522		)	4			(526		)	—
Other – net	(32		)	(32		)	—			—				(1		)	(1		)	—			—
Net cash provided by (used for) financing activities	(2,218		)	(3,129		)	846			65				(1,675		)	(1,249		)	(489		)	63
Effect of exchange rate changes on cash	(117		)	(106		)	(11		)	—				3			5			(2		)	—
Increase (decrease) in cash and short-term investments and restricted cash	(274		)	(191		)	(83		)	—				(732		)	(610		)	(122		)	—
Cash and short-term investments and restricted cash at beginning of period	8,320			7,416			904			—				7,890			6,994			896			—
Cash and short-term investments and restricted cash at end of period	$	8,046		$	7,225		$	821		$	—			$	7,158		$	6,384		$	774		$	—


¹	Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.


²	Elimination of Financial ~~Products’profit~~Products’ profit after tax due to equity method of accounting.


³	Elimination of non-cash adjustment for the undistributed earnings from Financial Products.


⁴	Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.


⁵	Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.


⁶	Elimination of net proceeds and payments to/from Machinery, Energy & Transportation and Financial Products.


⁷	~~Elimination of proceeds received from Financial Products related to Machinery, Energy & Transportation’s sale of businesses and investments.~~


⁸	~~Elimination of change in investment and common stock related to Financial Products.~~

Forward-looking Statements

Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers’ needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected ~~events including natural disasters;~~events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) the duration and ~~(xxvi)~~geographic spread of, business disruptions caused by, and the overall global economic impact of, the COVID-19 pandemic; and (xxvii) other factors described in more detail in Caterpillar’s Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this Item is incorporated by reference from Note 5 – “Derivative financial instruments and risk management” included in Part I, Item 1 and Management’s Discussion and Analysis included in Part I, Item 2 of this Form 10-Q.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of the company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report. Based on that evaluation, the CEO and CFO concluded that the company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in internal control over financial reporting

During the ~~third~~first quarter of ~~2019,~~2020, there has been no change in the company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated by reference from Note 14 – “Environmental and legal matters” included in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K) and the information disclosed in the Current Report on Form 8-K filed with the SEC on March 26, 2020 (the COVID-19 8-K) based on information currently known to us and recent developments since the date of the 2019 Form 10-K and the COVID-19 8-K. The matters discussed below should be read in conjunction with the risk factors set forth in in the 2019 Form 10-K and the information disclosed in the COVID-19 8-K. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the 2019 Form 10-K and the COVID-19 8-K filing. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

The COVID-19 pandemic could materially adversely affect our business, financial position, results of operations and/or liquidity.

COVID-19 was identified in China in late 2019 and has spread globally. The rapid spread has resulted in weaker demand and supply constraints and the implementation of numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns. These factors have impacted and may continue to impact all or portions of our workforce and operations, particularly as we have temporarily closed certain of our facilities and may continue to temporarily close facilities as the situation warrants.

Future restrictions on our access to our manufacturing facilities or on our support operations or workforce, any future closure of additional manufacturing facilities due to weaker demand or supply constraints, or similar limitations for our suppliers, disruptions to our supply chain or restrictions or disruptions of transportation, could have a material adverse effect on our business, financial position, results of operations or liquidity. The overall magnitude of the COVID-19 pandemic, including the extent of its impact on our business, financial position, results of operations or liquidity cannot be reasonably estimated due to the rapid development and fluidity of the situation.

In recent weeks, the COVID-19 pandemic has also caused, and is likely to continue to cause economic, market and other disruptions worldwide. Such volatility in the global capital markets could increase the cost of capital and could adversely impact access to capital. Risks related to negative economic conditions are described in our risk factor titled "Our business and the industries we serve are highly sensitive to global and regional economic conditions" under "Macroeconomic Risks" in our "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019.

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

Issuer Purchases of Equity Securities

Period
Total Number
of Shares
Purchased^2,3,4

Average Price
Paid per Share^2,3,4

Total Number
of Shares Purchased
as Part of Publicly Announced Program

Approximate Dollar
Value of Shares that
may yet be Purchased
under the Program (in billions)¹
July 1-31, 2019 6,619,309
$ 126.20
6,619,309
$ 7.128
August 1-31, 2019 2,437,000
$ 119.45
2,437,000
$ 6.837
September 1-30, 2019 1,279,101
$ 124.72
1,279,101
$ 6.677
Total 10,335,410
$ 124.43
10,335,410

¹ In July 2018, the Board approved a share repurchase authorization of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration (the 2018 Authorization). As of September 30, 2019, approximately $6.7 billion remained available under the 2018 Authorization.
²During the second quarter of 2019, we entered into an accelerated stock repurchase (ASR) with a third-party financial institution to purchase $750 million of our common stock. In July 2019, upon final settlement of the ASR, we received an additional 0.8 million shares at an average price per share of $128.29.
³During the third quarter of 2019, we entered into an ASR with a third-party financial institution to purchase $500 million of our common stock. In July 2019, upon payment of the $500 million to the financial institution, we received 3.4 million shares. In August 2019, upon final settlement of the ASR, we received an additional 0.8 million shares. In total, we repurchased 4.2 million shares under this ASR at an average price per share of $119.23.
⁴ In July, August and September of 2019, we repurchased 2.4 million, 1.6 million and 1.3 million shares, respectively, for an aggregate of $678 million in open market transactions at an average price per share of $135.46, $119.56 and $124.72, respectively.



Period	Total Number of Shares Purchased^2,3,4	Average Price Paid per Share^2,3,4		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that may yet be Purchased under the Program (in billions)¹
January 1-31, 2020	768,969	$	142.21	768,969	$	5.892
February 1-29, 2020	4,460,582	$	133.84	4,460,582	$	5.295
March 1-31, 2020	4,098,633	$	107.56	4,098,633	$	4.854
Total	9,328,184	$	122.98	9,328,184

¹ In July 2018, the Board approved a share repurchase authorization of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration (the 2018 Authorization). As of March 31, 2020, approximately $4.9 billion remained available under the 2018 Authorization.
²During the fourth quarter of 2019, we entered into an accelerated share repurchase agreement (ASR) with a third-party financial institution to purchase $600 million of our common stock. In October 2019, upon payment of $600 million to the financial institution, we received 3.5 million shares. In January 2020, upon final settlement of the ASR, we received an additional 0.7 million shares. In total, we repurchased 4.2 million shares under this ASR at an average price per share of $142.48.
³During the first quarter of 2020, we entered into an ASR with a third-party financial institution to purchase $700 million of our common stock. In February 2020, upon payment of the $700 million to the financial institution, we received 4.2 million shares. In March 2020, upon final settlement of the ASR, we received an additional 1.2 million shares. In total, we repurchased 5.4 million shares under this ASR at an average price per share of $130.47.
⁴ In February and March of 2020, we repurchased 0.3 million and 2.9 million shares, respectively, for an aggregate of $338 million in open market transactions at an average price per share of $134.26 and $103.08, respectively. In January of 2020, we repurchased a minimal number of shares in open market transactions as illustrated in the above table.

Non-U.S. Employee Stock Purchase Plans

As of ~~September 30, 2019,~~March 31, 2020, we had 2624 employee stock purchase plans (the “EIP Plans”) that are administered outside the United States for our non-U.S. employees, which had approximately 12,000 active participants in the aggregate. During the ~~third~~first quarter of ~~2019,~~2020, approximately ~~107,000~~104,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.

Item 6. Exhibits



~~4.1~~
3.1		~~Form~~Bylaws amended and restated as of ~~2.600% Senior Note due 2029~~April 8, 2020 (incorporated by reference from Exhibit ~~4.1~~3.1 to the Company's Current Report on Form 8-K filed ~~September 19, 2019)~~on April 14, 2020).

~~4.2~~		~~Form of 3.250% Senior Note due 2049 (incorporated by reference from Exhibit 4.2 to the Company's Current Report on Form 8-K filed September 19, 2019)~~.

10.1		~~364-Day Credit Agreement~~Form of Performance-Base Restricted Stock Unit Award pursuant to the 2014 Long-Term Incentive Plan for awards granted after 2017 (incorporated by reference from Exhibit ~~10.1~~10.5 to the Company's ~~Current~~Quarterly Report on Form ~~8-K filed September 10,~~10-Q for the quarter ended March 31, 2019).

10.2		~~Local Currency Addendum~~First Amendment to the ~~364-Day Credit Agreement~~Caterpillar Inc. Deferred Employees Investment Plan effective July 24, 2017 (incorporated by reference from Exhibit ~~10.2~~10.26 to the Company's ~~Current~~Annual Report onof Form ~~8-K filed September 10, 2019)~~10-K for the year ended December 31, 2017).

~~10.3~~		~~Japan Local Currency Addendum to the 364-Day Credit Agreement (incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K filed September 10, 2019)~~.

~~10.4~~		~~Second Amended and Restated Three-Year Credit Agreement (incorporated by reference from Exhibit 10.4 to the Company's Current Report on Form 8-K filed September 10, 2019)~~.

~~10.5~~		Local Currency Addendum to the Second Amendment and Restated Three-Year Credit Agreement (incorporated by reference from Exhibit 10.5 to the Company's Current Report on Form 8-K filed September 10, 2019).

~~10.6~~		Japan Local Currency Addendum to the Second Amended and Restated Three-Year Credit Agreement (incorporated by reference from Exhibit 10.6 to the Company's Current Report on Form 8-K filed September 10, 2019).

~~10.7~~		~~Second Amended and Restated Five-Year Credit Agreement (incorporated by reference from Exhibit 10.7 to the Company's Current Report on Form 8-K filed September 10, 2019)~~.

~~10.8~~		~~Local Currency Addendum to the Second Amended and Restated Five-Year Credit Agreement (incorporated by reference from Exhibit 10.8 to the Company's Current Report on Form 8-K filed September 10, 2019)~~.

~~10.9~~		Japan Local Currency Addendum to the Second Amended and Restated Five-Year Credit Agreement (incorporated by reference from Exhibit 10.9 to the Company's Current Report on Form 8-K filed September 10, 2019).

31.1		Certification of ~~D. James Umpleby III,~~ Chief Executive Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of ~~Andrew R.J. Bonfield,~~ Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of ~~D. James Umpleby III,~~ Chief Executive Officer of Caterpillar Inc. and ~~Andrew R.J. Bonfield,~~ Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101)

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES

Pursuant to the requirements 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.



	CATERPILLAR INC.


~~October 31, 2019~~May 6, 2020	/s/ D. James Umpleby III	Chairman of the Board & Chief Executive Officer
	D. James Umpleby III


~~October 31, 2019~~May 6, 2020	/s/ Andrew R.J. Bonfield	Chief Financial Officer
	Andrew R.J. Bonfield


~~October 31, 2019~~May 6, 2020	/s/ Suzette M. Long	Chief Legal Officer, General Counsel & Corporate Secretary
	Suzette M. Long


~~October 31, 2019~~May 6, 2020	/s/ G. Michael Marvel	Chief Accounting Officer
	G. Michael Marvel

9978



Consolidated Statement of Financial Position
(Millions of dollars)	Balance as of December 31, 2018		Cumulative Impact from Adopting New Lease Guidance			Balance as of January 1, 2019
Assets
Prepaid expenses and other current assets	$	1,765	$	(17	)	$	1,748
Property, plant and equipment - net	$	13,574	$	(26	)	$	13,548
Noncurrent deferred and refundable income taxes	$	1,439	$	(77	)	$	1,362
Other assets	$	2,332	$	713		$	3,045

Liabilities
Accrued expenses	$	3,573	$	(27	)	$	3,546
Other current liabilities	$	1,919	$	209		$	2,128
Long-term debt due after one year
Machinery, Energy & Transportation	$	8,005	$	(362	)	$	7,643
Other liabilities	$	3,756	$	538		$	4,294

Shareholders’ equity
Profit employed in the business	$	30,427	$	235		$	30,662



(Millions of dollars)

Remaining Three Months of 2019	2020	2021	2022	2023	Thereafter
$80	$307	$289	$271	$214	$469




(Millions of dollars)
	September 30, 2019			January 1, 2019
Operating Leases
Other assets	$	632		$	713
Other current liabilities	$	178		$	209
Other liabilities	$	462		$	511

Weighted average remaining lease term
Operating leases	7 years			7 years

Weighted average discount rates
Operating leases	2		%	2		%




(Millions of dollars)	September 30, 2019
Amounts Due In
Remaining three months of 2019	$	47
2020	165
2021	124
2022	77
2023	59
Thereafter	205
Total lease payments	677
Less: Imputed interest	(37		)
Total	$	640


	December 31, 2018
Amounts Due In
2019	$	205
2020	154
2021	111
2022	67
2023	50
Thereafter	185
Total	$	772



Profit (Loss) by Segment
(Millions of dollars)	Third Quarter 2019			Third Quarter 2018			$ Change			% Change
Construction Industries	$	940		$	1,058		$	(118	)	(11	%)
Resource Industries	311			414			(103		)	(25	%)
Energy & Transportation	1,021			973			48			5	%
All Other Segment	(21		)	(10		)	(11		)	(110	%)
Corporate Items and Eliminations	(363		)	(371		)	8
Machinery, Energy & Transportation	1,888			2,064			(176		)	(9	%)

Financial Products Segment	218			201			17			8	%
Corporate Items and Eliminations	21			(30		)	51
Financial Products	239			171			68			40	%
Consolidating Adjustments	(107		)	(100		)	(7		)
Consolidated Operating Profit	$	2,020		$	2,135		$	(115	)	(5	%)