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, 2020~~March 31, 2021

Commission File No. 001-11241

CATERPILLAR FINANCIAL SERVICES CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware						37-1105865
(State of incorporation)						(IRS Employer I.D. No.)

2120 West End Ave., Nashville, Tennessee						37203-0001
(Address of principal executive offices)						(Zip Code)

~~Registrant's~~Registrant’s telephone number, including area code: (615) 341-1000

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Medium-Term Notes, Series H,
3.300% Notes Due 2024

CAT/24

New York Stock Exchange

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 the definitions of ~~"large~~“large accelerated filer,~~" "accelerated~~”“accelerated filer,~~" "smaller~~”“smaller reporting company,"” and ~~"emerging~~“emerging growth ~~company"~~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 ☒

As of ~~November 4, 2020,~~May 5, 2021, 1 share of common stock of the registrant was outstanding, which is owned by Caterpillar Inc.

The registrant is a wholly owned subsidiary of Caterpillar Inc. and meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q, and is therefore filing this form with the reduced disclosure format.

UNAUDITED

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In addition to the accompanying unaudited consolidated financial statements for Caterpillar Financial Services Corporation (together with its subsidiaries, ~~"Cat~~“Cat Financial,~~" "the~~” “the Company,~~" "we," "us"~~” “we,” “us” or ~~"our"~~“our”), we suggest that you read our ~~2019~~2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February ~~19, 2020.~~17, 2021. The Company files electronically with the SEC required reports on Form 8-K, Form 10-Q, Form 10-K; registration statements on Form S-3; and other forms or reports as required. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Copies of our annual ~~report~~reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished with the SEC are available free of charge through Caterpillar’s website (www.caterpillar.com/secfilings) as soon as reasonably practicable after filing with the SEC. In addition, the public may obtain more detailed information about our parent company, Caterpillar, by visiting its website (www.caterpillar.com). None of the information contained at any time on our website or Caterpillar’s website is incorporated by reference into this document.

UNAUDITED

Caterpillar Financial Services Corporation

CONSOLIDATED STATEMENTS OF PROFIT

(Unaudited)

(Dollars in Millions)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

Revenues:	Revenues:									Revenues:
Retail finance	Retail finance	$	306	$	346	$	942	$	1,031	Retail finance	$	303	$	329
Operating lease	Operating lease	214		262		718		777		Operating lease	244		257
Wholesale finance	Wholesale finance	75		125		258		375		Wholesale finance	78		99
Other, net	Other, net	3		15		16		58		Other, net	14		10
Total revenues	Total revenues	598		748		1,934		2,241		Total revenues	639		695

Expenses:	Expenses:									Expenses:
Interest	Interest	137		198		462		599		Interest	125		175
Depreciation on equipment leased to others	Depreciation on equipment leased to others	169		205		564		611		Depreciation on equipment leased to others	192		201
General, operating and administrative	General, operating and administrative	108		128		320		378		General, operating and administrative	121		108
Provision for credit losses	Provision for credit losses	70		20		217		144		Provision for credit losses	(10)		61
Other	Other	8		9		33		28		Other	7		13
Total expenses	Total expenses	492		560		1,596		1,760		Total expenses	435		558

Other income (expense)	Other income (expense)	(10)		(4)		(26)		(14)		Other income (expense)	(8)		(10)

Profit before income taxes	Profit before income taxes	96		184		312		467		Profit before income taxes	196		127

Provision for income taxes	Provision for income taxes	44		49		102		144		Provision for income taxes	53		33

Profit of consolidated companies	Profit of consolidated companies	52		135		210		323		Profit of consolidated companies	143		94

Less: Profit attributable to noncontrolling interests	Less: Profit attributable to noncontrolling interests	4		6		13		17		Less: Profit attributable to noncontrolling interests	3		4

Profit(1)	Profit(1)	$	48	$	129	$	197	$	306	Profit(1)	$	140	$	90

(1) Profit attributable to Caterpillar Financial Services Corporation.

See Notes to Consolidated Financial Statements (Unaudited).

UNAUDITED

Caterpillar Financial Services Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in Millions)

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019

Profit of consolidated companies $ 52 $ 135 $ 210 $ 323
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax (expense)/benefit of:
2020 $22 three months, $21 nine months;
2019 $(22) three months, $(19) nine months
150 (165) (32) (132)
Derivative financial instruments:
Gains (losses) deferred, net of tax (expense)/benefit of:
2020 $14 three months, $4 nine months;
2019 $(20) three months, $(14) nine months
(49) 68 (17) 46
(Gains) losses reclassified to earnings, net of tax expense/(benefit) of:
2020 $(14) three months, $(9) nine months;
2019 $22 three months, $25 nine months
57 (73) 38 (87)
Total Other comprehensive income (loss), net of tax 158 (170) (11) (173)
Comprehensive income (loss) 210 (35) 199 150
Less: Comprehensive income (loss) attributable to the noncontrolling
interests 9 1 16 12
Comprehensive income (loss) attributable to Caterpillar Financial
Services Corporation $ 201 $ (36) $ 183 $ 138


	Three Months Ended March 31,
	2021		2020

Profit of consolidated companies	$	143	$	94

Other comprehensive income (loss), net of tax (Note 5):
Foreign currency translation	(121)		(307)
Derivative financial instruments	11		6
Total Other comprehensive income (loss), net of tax	(110)		(301)

Comprehensive income (loss)	33		(207)

Less: Comprehensive income (loss) attributable to the noncontrolling interests	1		3

Comprehensive income (loss) attributable to Caterpillar Financial Services Corporation	$	32	$	(210)

See Notes to Consolidated Financial Statements (Unaudited).

UNAUDITED

Caterpillar Financial Services Corporation

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(Dollars in Millions, except share data)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	678	$	690	Cash and cash equivalents	$	735	$	411
Finance receivables, net of Allowance for credit losses of $460 and $424		26,021		27,832
Finance receivables, net of Allowance for credit losses of $441 and $479						Finance receivables, net of Allowance for credit losses of $441 and $479	26,500		26,575
Notes receivable from Caterpillar	Notes receivable from Caterpillar	350		296		Notes receivable from Caterpillar	331		356
Equipment on operating leases, net	Equipment on operating leases, net	3,339		3,583		Equipment on operating leases, net	3,237		3,366

Other assets	Other assets	1,377		1,292		Other assets	1,280		1,283
Total assets	Total assets	$	31,765	$	33,693	Total assets	$	32,083	$	31,991

Liabilities and shareholder’s equity:	Liabilities and shareholder’s equity:					Liabilities and shareholder’s equity:
Payable to dealers and others	Payable to dealers and others	$	132	$	135	Payable to dealers and others	$	148	$	144
Payable to Caterpillar - borrowings and other	Payable to Caterpillar - borrowings and other	77		693		Payable to Caterpillar - borrowings and other	96		1,087
Accrued expenses	Accrued expenses	235		241		Accrued expenses	259		400

Short-term borrowings	Short-term borrowings	2,660		5,161		Short-term borrowings	3,625		2,005
Current maturities of long-term debt	Current maturities of long-term debt	7,962		6,194		Current maturities of long-term debt	6,898		7,729
Long-term debt	Long-term debt	16,365		17,140		Long-term debt	16,605		16,250
Other liabilities	Other liabilities	912		893		Other liabilities	928		885
Total liabilities	Total liabilities	28,343		30,457		Total liabilities	28,559		28,500

Commitments and contingent liabilities (Note 7)	Commitments and contingent liabilities (Note 7)					Commitments and contingent liabilities (Note 7)	0		0

Common stock - $1 par value	Common stock - $1 par value					Common stock - $1 par value
Authorized: 2,000 shares; Issued and	Authorized: 2,000 shares; Issued and					Authorized: 2,000 shares; Issued and
outstanding: 1 share (at paid-in amount)	outstanding: 1 share (at paid-in amount)	745		745		outstanding: 1 share (at paid-in amount)	745		745
Additional paid-in capital	Additional paid-in capital	2		2		Additional paid-in capital	2		2
Retained earnings	Retained earnings	3,346		3,162		Retained earnings	3,282		3,142
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(859)		(845)		Accumulated other comprehensive income (loss)	(703)		(595)
Noncontrolling interests	Noncontrolling interests	188		172		Noncontrolling interests	198		197
Total shareholder’s equity	Total shareholder’s equity	3,422		3,236		Total shareholder’s equity	3,524		3,491

Total liabilities and shareholder’s equity	Total liabilities and shareholder’s equity	$	31,765	$	33,693	Total liabilities and shareholder’s equity	$	32,083	$	31,991

See Notes to Consolidated Financial Statements (Unaudited).

UNAUDITED

Caterpillar Financial Services Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDER'S~~SHAREHOLDER’S EQUITY

(Unaudited)

(Dollars in Millions)


Three Months Ended September 30, 2019		Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests		Total
Balance at June 30, 2019		$	745	$	2	$	2,954	$	(831)	$	164	$	3,034
Three Months Ended March 31, 2020														Three Months Ended March 31, 2020	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests		Total
Balance at December 31, 2019														Balance at December 31, 2019	$	745	$	2	$	3,162	$	(845)	$	172	$	3,236
Profit of consolidated companies														Profit of consolidated companies					90				4		94

Foreign currency translation, net of tax														Foreign currency translation, net of tax							(306)		(1)		(307)
Derivative financial instruments, net of tax														Derivative financial instruments, net of tax							6				6
Adjustment to adopt new accounting guidance(1)														Adjustment to adopt new accounting guidance(1)					(13)						(13)

Balance at March 31, 2020														Balance at March 31, 2020	$	745	$	2	$	3,239	$	(1,145)	$	175	$	3,016

Three Months Ended March 31, 2021														Three Months Ended March 31, 2021
Balance at December 31, 2020														Balance at December 31, 2020	$	745	$	2	$	3,142	$	(595)	$	197	$	3,491
Profit of consolidated companies	Profit of consolidated companies					129				6		135		Profit of consolidated companies					140				3		143

Foreign currency translation, net of tax	Foreign currency translation, net of tax							(160)		(5)		(165)		Foreign currency translation, net of tax							(119)		(2)		(121)
Derivative financial instruments, net of tax	Derivative financial instruments, net of tax							(5)				(5)		Derivative financial instruments, net of tax							11				11

Balance at September 30, 2019		$	745	$	2	$	3,083	$	(996)	$	165	$	2,999

Three Months Ended September 30, 2020
Balance at June 30, 2020		$	745	$	2	$	3,298	$	(1,012)	$	179	$	3,212
Profit of consolidated companies						48				4		52

Foreign currency translation, net of tax								145		5		150
Derivative financial instruments, net of tax								8				8
Balance at March 31, 2021														Balance at March 31, 2021	$	745	$	2	$	3,282	$	(703)	$	198	$	3,524

Balance at September 30, 2020		$	745	$	2	$	3,346	$	(859)	$	188	$	3,422

Nine Months Ended September 30, 2019
Balance at December 31, 2018		$	745	$	2	$	2,874	$	(925)	$	153	$	2,849
Profit of consolidated companies						306				17		323

Foreign currency translation, net of tax								(127)		(5)		(132)
Derivative financial instruments, net of tax								(41)				(41)
Adjustment to adopt new accounting guidance(1)						(97)		97				0

Balance at September 30, 2019		$	745	$	2	$	3,083	$	(996)	$	165	$	2,999

Nine Months Ended September 30, 2020
Balance at December 31, 2019		$	745	$	2	$	3,162	$	(845)	$	172	$	3,236
Profit of consolidated companies						197				13		210

Foreign currency translation, net of tax								(35)		3		(32)
Derivative financial instruments, net of tax								21				21
Adjustment to adopt new accounting guidance(2)						(13)						(13)

Balance at September 30, 2020		$	745	$	2	$	3,346	$	(859)	$	188	$	3,422

(1) Adjustment to adopt new accounting guidance related to ~~reclassification of certain tax effects from accumulated other comprehensive income (loss).~~

~~(2)~~ ~~Adjustment to adopt new accounting guidance related to~~ credit ~~losses (See Note 2).~~losses.

See Notes to Consolidated Financial Statements (Unaudited).

UNAUDITED

Caterpillar Financial Services Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Profit of consolidated companies	Profit of consolidated companies	$	210	$	323	Profit of consolidated companies	$	143	$	94
Adjustments for non-cash items:	Adjustments for non-cash items:					Adjustments for non-cash items:
Depreciation and amortization	Depreciation and amortization	575		621		Depreciation and amortization	195		205
Amortization of receivables purchase discount		(235)		(346)
Accretion of Caterpillar purchased receivable revenue						Accretion of Caterpillar purchased receivable revenue	(74)		(91)
Provision for credit losses	Provision for credit losses	217		144		Provision for credit losses	(10)		61

Other, net	Other, net	164		128		Other, net	23		150
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Other assets	Other assets	23		65		Other assets	(12)		(42)
Payable to dealers and others	Payable to dealers and others	26		26		Payable to dealers and others	13		35
Accrued expenses	Accrued expenses	(34)		(44)		Accrued expenses	28		(17)
Other payables with Caterpillar	Other payables with Caterpillar	(24)		(14)		Other payables with Caterpillar	6		9
Other liabilities	Other liabilities	8		51		Other liabilities	23		(3)
Net cash provided by operating activities	Net cash provided by operating activities	930		954		Net cash provided by operating activities	335		401

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Expenditures for equipment on operating leases	Expenditures for equipment on operating leases	(772)		(1,079)		Expenditures for equipment on operating leases	(224)		(246)
Capital expenditures - excluding equipment on operating leases	Capital expenditures - excluding equipment on operating leases	(11)		(14)		Capital expenditures - excluding equipment on operating leases	(4)		(1)
Proceeds from disposals of equipment	Proceeds from disposals of equipment	436		548		Proceeds from disposals of equipment	244		155
Additions to finance receivables	Additions to finance receivables	(10,234)		(10,633)		Additions to finance receivables	(2,867)		(3,213)
Collections of finance receivables	Collections of finance receivables	10,828		10,161		Collections of finance receivables	3,062		3,422
Net changes in Caterpillar purchased receivables	Net changes in Caterpillar purchased receivables	971		763		Net changes in Caterpillar purchased receivables	(411)		376
Proceeds from sales of receivables	Proceeds from sales of receivables	37		183		Proceeds from sales of receivables	5		31
Net change in variable lending to Caterpillar	Net change in variable lending to Caterpillar	2		51		Net change in variable lending to Caterpillar	19		0
Additions to other notes receivable with Caterpillar	Additions to other notes receivable with Caterpillar	(75)		(80)		Additions to other notes receivable with Caterpillar	(23)		0
Collections on other notes receivable with Caterpillar	Collections on other notes receivable with Caterpillar	19		222		Collections on other notes receivable with Caterpillar	28		6

Settlements of undesignated derivatives	Settlements of undesignated derivatives	(59)		(38)		Settlements of undesignated derivatives	(51)		35

Other, net						Other, net	1		0
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	1,142		84		Net cash provided by (used for) investing activities	(221)		565

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in variable lending from Caterpillar	Net change in variable lending from Caterpillar	(597)		(627)		Net change in variable lending from Caterpillar	(1,000)		(596)

Payments on borrowings with Caterpillar		0		(93)

Proceeds from debt issued (original maturities greater than three months)	Proceeds from debt issued (original maturities greater than three months)	7,427		7,348		Proceeds from debt issued (original maturities greater than three months)	1,779		2,126
Payments on debt issued (original maturities greater than three months)	Payments on debt issued (original maturities greater than three months)	(6,771)		(6,054)		Payments on debt issued (original maturities greater than three months)	(2,243)		(2,460)
Short-term borrowings, net (original maturities three months or less)	Short-term borrowings, net (original maturities three months or less)	(2,133)		(1,006)		Short-term borrowings, net (original maturities three months or less)	1,669		(35)

Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	(2,074)		(432)		Net cash provided by (used for) financing activities	205		(965)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(11)		(9)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	0		(22)

Increase (decrease) in cash, cash equivalents and restricted cash	Increase (decrease) in cash, cash equivalents and restricted cash	(13)		597		Increase (decrease) in cash, cash equivalents and restricted cash	319		(21)
Cash, cash equivalents and restricted cash at beginning of year(1)	Cash, cash equivalents and restricted cash at beginning of year(1)	695		773		Cash, cash equivalents and restricted cash at beginning of year(1)	425		695
Cash, cash equivalents and restricted cash at end of period(1)	Cash, cash equivalents and restricted cash at end of period(1)	$	682	$	1,370	Cash, cash equivalents and restricted cash at end of period(1)	$	744	$	674

(1) As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, restricted cash, which is included in Other assets in the Consolidated Statements of Financial Position, was $4$9 million and $5$14 million, respectively. Restricted cash primarily includes cash related to syndication activities.

See Notes to Consolidated Financial Statements (Unaudited).

UNAUDITED

Notes to Consolidated Financial Statements

(Unaudited)

1.~~Summary of Significant Accounting Policies~~

A.Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated profit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ (b) the consolidated comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ (c) the consolidated financial position at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, (d) the consolidated changes in ~~shareholder's~~shareholder’s equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ and (e) the consolidated cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The preparation of financial statements, in conformity with generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), requires management to make estimates and assumptions that affect the reported amounts. Significant estimates include residual values for leased assets, allowance for credit losses and income taxes. ~~The continued impact of the COVID-19 pandemic could cause our actual~~Actual results tomay differ ~~materially~~ from ~~the estimates and assumptions used in preparation of the financial statements. Changes in estimates are recorded in the period that the events or circumstances giving rise to such changes occur.~~these estimates.

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 consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, ~~2019 (2019~~2020 (2020 Form 10-K). The December 31, ~~2019~~2020 financial position data included herein was derived from the audited consolidated financial statements included in the ~~2019~~2020 Form 10-K but does not include all disclosures required by generally accepted accounting principles. ~~Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.~~

We consolidate all variable interest entities (VIEs) where we are the primary beneficiary. For VIEs, we assess whether we are the primary beneficiary as prescribed by the accounting guidance on the consolidation of VIEs. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. Please refer to Note 7 for more information.

We have customers and dealers 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. Credit risk was evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses.

B.~~Accounting Policy Updates~~

~~For a discussion of our significant accounting policies, see Note 1 in our 2019 Form 10-K~~. Significant accounting policies that have been revised since our 2019 Form 10-K are shown below. These accounting policy changes were effective January 1, 2020 with the adoption of the new credit loss accounting guidance discussed in Note 2. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods.

~~Finance Receivables~~

Finance receivables are generally classified as held for investment and recorded at amortized cost given that we have the intent and ability to hold them for the foreseeable future. Amortized cost is the principal balance outstanding plus accrued interest less write-downs, net of unamortized purchase discounts and deferred fees and costs.

~~Allowance for Credit Losses~~

The allowance for credit losses is management’s estimate of expected losses over the life of 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.

~~UNAUDITED~~

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. See Note 3 for a description of our portfolio segments and allowance methodologies.

Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgment of management, they are considered uncollectible (generally upon repossession of the collateral). The amount of the write-off is determined by comparing the fair value of the collateral, less cost to sell, to the amortized cost. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.

2.New Accounting Pronouncements

A.Adoption of New Accounting Standards

~~Credit losses~~ Reference rate reform~~(Accounting~~ (Accounting Standards Update (ASU) ~~2016-13)~~2020-04) – In ~~June 2016,~~March 2020, the Financial Accounting Standards Board (FASB) issued new 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 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 also applies to debt securities and other financial assets measured at fair value through other comprehensive income. The new guidance was effective January 1, 2020. We applied the new guidance using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2020. We have not recast prior period comparative information, which we continue to report under the accounting guidance in effect for those periods.

The most significant effects of adoption relate to the change in methodology for estimating our Allowance for credit losses from an incurred loss model to a current expected credit loss model. We elected to present accrued interest receivable related to our finance receivables in Finance receivables, net. In prior period comparative information, accrued interest receivable continues to be reported in Other assets. Our adoption of the new guidance did not have a material impact on our financial statements.

~~The cumulative effect of initially applying the new credit loss guidance to our consolidated financial statements on January 1, 2020 was as follows:~~

Consolidated Statement of Financial Position
(Millions of dollars) Balance as of
December 31, 2019 Cumulative Impact
from Adopting New
Credit Loss Standard Balance as of
January 1, 2020
Assets:
Finance receivables, net $ 27,832 $ 42 $ 27,874
Other assets $ 1,292 $ (53) $ 1,239
Liabilities:
Other liabilities $ 893 $ 2 $ 895
Shareholder's equity
Retained earnings $ 3,162 $ (13) $ 3,149

~~See Note 3 for additional information.~~

~~UNAUDITED~~

~~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~~

~~Reference rate reform~~ ~~(ASU 2020-04) – In March 2020, the FASB~~ issued accounting guidance to ease the potential burden in accounting for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and may be elected over time as reference rate reform activities occur between March 12, 2020 through December 31, 2022. In January 2021, we elected to adopt optional expedients impacting our derivative instruments. We ~~are evaluating~~continue to evaluate the impact of reference rate reform on our other contracts and ~~assessing~~assess the impacts of adopting this guidance on our financial statements.

We adopted the following ASUs effective January 1, 2021, none of which had a material impact on our financial statements:


ASU			Description

2020-08			Codification improvements – Receivables – Nonrefundable fees and other costs
2021-01			Reference rate reform – Scope

B.Accounting Standards Issued But Not Yet Adopted

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

UNAUDITED

3.Finance Receivables

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.

A summary of finance receivables included in the Consolidated Statements of Financial Position was as follows:


(Millions of dollars)	(Millions of dollars)	September 30, 2020		December 31, 2019		(Millions of dollars)	March 31, 2021		December 31, 2020
Retail loans, net(1)	Retail loans, net(1)	$	14,808	$	15,424	Retail loans, net(1)	$	14,698	$	15,037
Retail leases, net	Retail leases, net	7,501		7,660		Retail leases, net	7,734		7,812
Caterpillar purchased receivables, net	Caterpillar purchased receivables, net	3,545		4,448		Caterpillar purchased receivables, net	4,065		3,646
Wholesale loans, net(1)	Wholesale loans, net(1)	593		664		Wholesale loans, net(1)	423		533
Wholesale leases, net	Wholesale leases, net	34		60		Wholesale leases, net	21		26
Total finance receivables	Total finance receivables	26,481		28,256		Total finance receivables	26,941		27,054
Less: Allowance for credit losses	Less: Allowance for credit losses	(460)		(424)		Less: Allowance for credit losses	(441)		(479)
Total finance receivables, net	Total finance receivables, net	$	26,021	$	27,832	Total finance receivables, net	$	26,500	$	26,575

(1) Includes failed sale leasebacks.

Finance leases

Revenues from finance leases were ~~$124~~$122 million and ~~$135~~$125 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $368 million and $388 million for the nine months ended September 30, 2020 and 2019,~~ respectively, and are included in retail and wholesale finance revenue in the Consolidated Statements of Profit. The residual values for finance leases are included in Finance receivables, net in the Consolidated Statements of Financial Position. Residual value adjustments are recognized through a reduction of finance revenue over the remaining lease term.

~~UNAUDITED~~

Allowance for credit losses

Portfolio segments

A portfolio segment is the level at which we develop a systematic methodology for determining our allowance for credit losses. Our portfolio segments and related methods for estimating expected credit losses are as follows:

Customer

We provide 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. We also provide financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of our customer finance receivable portfolio was approximately 48 months with an average remaining term of approximately 2326 months as of ~~September 30, 2020.~~March 31, 2021.

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

We estimate the allowance for credit losses related to our customer finance receivables based on loss forecast models utilizing probabilities of default and our 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~~economic factors.

~~Our~~During the three months ended March 31, 2021, our forecasts for the markets in which we operate ~~slightly improved during the three months ended September 30, 2020, but continued to reflect~~reflected an overall ~~decline~~rebound in economic conditions, ~~resulting from a contracting economy, elevated unemployment rates and an increase in delinquencies~~which had deteriorated due to the COVID-19 ~~pandemic.~~pandemic, resulting from a growing economy, improved unemployment rates and a decrease in delinquencies. We believe the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.

UNAUDITED

Dealer

We provide financing to Caterpillar dealers in the form of wholesale financing plans. Our wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, we provide a variety of secured and unsecured loans to Caterpillar ~~dealers for working capital.~~dealers.

We estimate 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 our forecasts continued to indicate a decline in economic conditions,~~In general, our Dealer portfolio segment has not historically experienced ~~increased~~large increases or decreases in credit losses ~~during prior~~based on changes in economic ~~downturns~~conditions due to our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

Caterpillar Purchased Receivables

We purchase receivables from Caterpillar, primarily related to the sale of equipment and parts to dealers. Caterpillar purchased receivables are non-interest-bearing short-term trade receivables that are purchased at a discount.

We estimate the allowance for credit losses for Caterpillar purchased receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

~~Although our forecasts continued to indicate a decline in economic conditions,~~In general, our Caterpillar Purchased Receivables portfolio segment has not historically experienced ~~increased~~large increases or decreases in credit losses ~~during prior~~based on changes in economic ~~downturns~~conditions due to the short-term maturities of the receivables and our close working relationships with the dealers and their financial strength. Therefore, we made no adjustments to historical loss rates during the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

~~UNAUDITED~~

Classes of finance receivables

We further evaluate our 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, our finance receivables within a geographic area have similar credit risk profiles and methods for assessing and monitoring credit risk. Our 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.

UNAUDITED

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


(Millions of dollars)	(Millions of dollars)	September 30, 2020								(Millions of dollars)	March 31, 2021
Allowance for Credit Losses:	Allowance for Credit Losses:	Customer		Dealer		Caterpillar Purchased Receivables		Total		Allowance for Credit Losses:	Customer		Dealer		Caterpillar Purchased Receivables		Total
Balance at beginning of year	Balance at beginning of year	$	375	$	45	$	4	$	424	Balance at beginning of year	$	431	$	44	$	4	$	479
Adjustment to adopt new accounting guidance(1)		12		0		0		12
Receivables written off	Receivables written off	(212)		0		0		(212)		Receivables written off	(34)		0		0		(34)
Recoveries on receivables previously written off	Recoveries on receivables previously written off	27		0		0		27		Recoveries on receivables previously written off	10		0		0		10
Provision for credit losses	Provision for credit losses	213		0		(1)		212		Provision for credit losses	(10)		0		0		(10)

Foreign currency translation adjustment	Foreign currency translation adjustment	(3)		0		0		(3)		Foreign currency translation adjustment	(4)		0		0		(4)
Balance at end of period	Balance at end of period	$	412	$	45	$	3	$	460	Balance at end of period	$	393	$	44	$	4	$	441

Individually evaluated	Individually evaluated	$	172	$	39	$	0	$	211	Individually evaluated	$	185	$	39	$	0	$	224
Collectively evaluated	Collectively evaluated	240		6		3		249		Collectively evaluated	208		5		4		217
Ending Balance	Ending Balance	$	412	$	45	$	3	$	460	Ending Balance	$	393	$	44	$	4	$	441

Finance Receivables:	Finance Receivables:									Finance Receivables:
Individually evaluated	Individually evaluated	$	612	$	78	$	0	$	690	Individually evaluated	$	579	$	78	$	0	$	657
Collectively evaluated	Collectively evaluated	18,637		3,609		3,545		25,791		Collectively evaluated	19,219		3,000		4,065		26,284
Ending Balance	Ending Balance	$	19,249	$	3,687	$	3,545	$	26,481	Ending Balance	$	19,798	$	3,078	$	4,065	$	26,941


(Millions of dollars)	December 31, 2020
Allowance for Credit Losses:	Customer		Dealer		Caterpillar Purchased Receivables		Total
Balance at beginning of year	$	375	$	45	$	4	$	424
Adjustment to adopt new accounting guidance(1)	12		0		0		12
Receivables written off	(263)		0		0		(263)
Recoveries on receivables previously written off	41		0		0		41
Provision for credit losses	262		(1)		0		261

Foreign currency translation adjustment	4		0		0		4
Balance at end of year	$	431	$	44	$	4	$	479

Individually evaluated	$	187	$	39	$	0	$	226
Collectively evaluated	244		5		4		253
Ending Balance	$	431	$	44	$	4	$	479

Finance Receivables:
Individually evaluated	$	594	$	78	$	0	$	672
Collectively evaluated	19,333		3,403		3,646		26,382
Ending Balance	$	19,927	$	3,481	$	3,646	$	27,054

(1) ~~See Note 2 regarding~~Adjustment to adopt new accounting guidance related to credit losses.

1211

UNAUDITED

(Millions of dollars) December 31, 2019
Allowance for Credit Losses: Customer Dealer Caterpillar
Purchased
Receivables Total
Balance at beginning of year $ 486 $ 21 $ 4 $ 511
Receivables written off (281) 0 0 (281)
Recoveries on receivables previously written off 44 0 0 44
Provision for credit losses 138 24 0 162
Adjustment due to sale of receivables (11) 0 0 (11)
Foreign currency translation adjustment (1) 0 0 (1)
Balance at end of year $ 375 $ 45 $ 4 $ 424
Individually evaluated $ 178 $ 39 $ 0 $ 217
Collectively evaluated 197 6 4 207
Ending Balance $ 375 $ 45 $ 4 $ 424
Finance Receivables:
Individually evaluated $ 594 $ 78 $ 0 $ 672
Collectively evaluated 18,770 4,366 4,448 27,584
Ending Balance $ 19,364 $ 4,444 $ 4,448 $ 28,256

Credit quality of finance receivables

At origination, we evaluate credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, ~~credit-rating agency~~credit ratings, loan-to-value ratios, probabilities of default, industry trends, macroeconomic factors and other internal metrics. On an ongoing basis, we monitor credit quality based on past-due status as there is a meaningful correlation between the past-due status of customers and the risk of loss. In determining past-due status, we consider the entire finance receivable past due when any installment is over 30 days past due.

~~UNAUDITED~~

Customer

The ~~table~~tables below ~~summarizes~~summarize the aging category of our amortized cost of finance receivables in the Customer portfolio segment by origination year.


(Millions of dollars)	(Millions of dollars)	September 30, 2020														(Millions of dollars)	March 31, 2021
		2020		2019		2018		2017		2016		Prior		Revolving Finance Receivables				Total Finance Receivables			2021		2020		2019		2018		2017		Prior		Revolving Finance Receivables		Total Finance Receivables
North America	North America																			North America
Current	Current	$	2,697	$	2,711	$	1,588	$	660	$	288	$	59	$	89			$	8,092	Current	$	1,149	$	3,551	$	2,192	$	1,156	$	425	$	166	$	61	$	8,700
31-60 days past due	31-60 days past due	41		57		39		21		9		3		1				171		31-60 days past due	5		34		30		18		7		8		1		103
61-90 days past due	61-90 days past due	12		24		21		13		4		1		0				75		61-90 days past due	0		14		9		7		4		1		0		35
91+ days past due	91+ days past due	6		29		30		20		8		5		0				98		91+ days past due	0		18		35		22		16		10		1		102

EAME	EAME																			EAME
Current	Current	903		1,049		684		313		92		28		0				3,069		Current	459		1,307		811		419		164		56		0		3,216
31-60 days past due	31-60 days past due	6		9		6		3		1		0		0				25		31-60 days past due	1		8		5		3		1		0		0		18
61-90 days past due	61-90 days past due	4		4		1		0		1		1		0				11		61-90 days past due	0		3		3		1		1		0		0		8
91+ days past due	91+ days past due	6		8		13		8		40		43		0				118		91+ days past due	0		9		5		12		5		81		0		112

Asia/Pacific	Asia/Pacific																			Asia/Pacific
Current	Current	1,162		1,033		502		147		40		12		31				2,927		Current	448		1,431		775		297		85		25		34		3,095
31-60 days past due	31-60 days past due	9		25		23		7		1		0		0				65		31-60 days past due	0		16		16		10		1		0		0		43
61-90 days past due	61-90 days past due	4		9		7		4		0		0		0				24		61-90 days past due	0		7		9		7		4		0		0		27
91+ days past due	91+ days past due	3		21		12		2		0		0		0				38		91+ days past due	0		8		12		12		2		0		0		34

Mining	Mining																			Mining
Current	Current	340		618		339		208		104		160		160				1,929		Current	230		473		567		315		109		206		86		1,986
31-60 days past due	31-60 days past due	0		0		1		0		0		0		0				1		31-60 days past due	5		0		0		0		0		0		0		5
61-90 days past due	61-90 days past due	0		1		4		2		0		0		0				7		61-90 days past due	0		0		0		1		0		0		0		1
91+ days past due	91+ days past due	1		11		8		24		0		0		1				45		91+ days past due	0		1		2		4		2		0		0		9

Latin America	Latin America																			Latin America
Current	Current	402		393		182		64		18		38		0				1,097		Current	124		490		264		106		35		23		0		1,042
31-60 days past due	31-60 days past due	0		3		3		2		0		0		0				8		31-60 days past due	0		6		6		6		3		0		0		21
61-90 days past due	61-90 days past due	1		1		1		1		0		0		0				4		61-90 days past due	0		3		4		6		1		13		0		27
91+ days past due	91+ days past due	0		13		45		25		7		5		0				95		91+ days past due	0		3		9		10		22		10		0		54

Caterpillar Power Finance	Caterpillar Power Finance																			Caterpillar Power Finance
Current	Current	149		260		138		274		117		132		129				1,199		Current	6		219		175		102		214		207		112		1,035
31-60 days past due	31-60 days past due	0		0		18		0		0		3		0				21		31-60 days past due	0		0		0		0		0		0		0		0
61-90 days past due	61-90 days past due	0		0		0		0		0		0		0				0		61-90 days past due	0		0		0		0		1		1		0		2
91+ days past due	91+ days past due	0		0		3		8		29		90		0				130		91+ days past due	0		2		0		25		3		93		0		123

Total	Total	$	5,746	$	6,279	$	3,668	$	1,806	$	759	$	580	$	411			$	19,249	Total	$	2,427	$	7,603	$	4,929	$	2,539	$	1,105	$	900	$	295	$	19,798

UNAUDITED


(Millions of dollars)	December 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Finance Receivables		Total Finance Receivables
North America
Current	$	3,780	$	2,423	$	1,344	$	522	$	212	$	27	$	89	$	8,397
31-60 days past due	52		49		33		16		7		2		0		159
61-90 days past due	22		25		16		9		2		1		0		75
91+ days past due	14		35		31		20		9		4		2		115

EAME
Current	1,605		931		501		203		60		18		0		3,318
31-60 days past due	5		15		3		2		0		0		0		25
61-90 days past due	1		1		2		1		0		0		0		5
91+ days past due	7		7		12		4		39		43		0		112

Asia/Pacific
Current	1,583		933		412		115		32		6		32		3,113
31-60 days past due	13		23		13		6		0		0		0		55
61-90 days past due	7		11		7		1		0		0		0		26
91+ days past due	4		10		9		3		0		0		0		26

Mining
Current	515		574		289		181		92		151		137		1,939
31-60 days past due	5		0		5		1		0		0		0		11
61-90 days past due	0		0		0		0		0		0		0		0
91+ days past due	0		11		8		2		0		0		1		22

Latin America
Current	561		348		151		48		13		34		0		1,155
31-60 days past due	3		6		4		3		0		0		0		16
61-90 days past due	1		7		6		3		2		0		0		19
91+ days past due	2		14		11		24		5		4		0		60

Caterpillar Power Finance
Current	217		199		111		273		99		117		119		1,135
31-60 days past due	0		0		6		0		0		0		0		6
61-90 days past due	0		0		0		0		0		9		0		9
91+ days past due	2		0		20		3		25		79		0		129

Total	$	8,399	$	5,622	$	2,994	$	1,440	$	597	$	495	$	380	$	19,927

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 ~~September 30, 2020,~~March 31, 2021, our 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, all of which was originated in 2017. As of December 31, 2020, our total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $81 million that was 91+ days past due in Latin America. ~~These~~Of these past due receivables, $78 million were originated in ~~2017.~~2017 and $3 million were originated prior to 2016.

1413

UNAUDITED

Caterpillar Purchased Receivables

The ~~table~~tables below ~~summarizes~~summarize the aging category of our amortized cost of finance receivables in the Caterpillar Purchased Receivables portfolio segment.


(Millions of dollars)	(Millions of dollars)														(Millions of dollars)
		September 30, 2020												March 31, 2021
		31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables				31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables

North America	North America	$	11	$	5	$	6	$	22	$	1,850	$	1,872		North America	$	7	$	3	$	3	$	13	$	2,070	$	2,083
EAME	EAME	1		1		0		2		633		635			EAME	0		0		1		1		777		778
Asia/Pacific	Asia/Pacific	1		0		1		2		596		598			Asia/Pacific	2		1		2		5		802		807
Mining	Mining	0		0		0		0		0		0			Mining	0		0		0		0		0		0
Latin America	Latin America	0		0		0		0		433		433			Latin America	0		0		0		0		392		392
Caterpillar Power Finance	Caterpillar Power Finance	0		0		1		1		6		7			Caterpillar Power Finance	0		0		0		0		5		5
Total	Total	$	13	$	6	$	8	$	27	$	3,518	$	3,545		Total	$	9	$	4	$	6	$	19	$	4,046	$	4,065

~~The table below summarizes our recorded investment in finance receivables by aging category.~~

(Millions of dollars)
December 31, 2019
31-60
Days
Past Due 61-90
Days
Past Due 91+
Days
Past Due Total
Past Due Current
Total Finance
Receivables
Customer
North America $ 72 $ 23 $ 55 $ 150 $ 8,085 $ 8,235
EAME 30 31 141 202 2,882 3,084
Asia/Pacific 40 14 29 83 2,733 2,816
Mining 5 0 19 24 2,266 2,290
Latin America 41 23 80 144 1,131 1,275
Caterpillar Power Finance 10 10 225 245 1,419 1,664
Dealer
North America 0 0 0 0 2,514 2,514
EAME 0 0 0 0 600 600
Asia/Pacific 0 0 0 0 487 487
Mining 0 0 0 0 4 4
Latin America 0 0 78 78 758 836
Caterpillar Power Finance 0 0 0 0 3 3
Caterpillar Purchased Receivables
North America 15 6 18 39 2,450 2,489
EAME 1 0 2 3 574 577
Asia/Pacific 1 0 0 1 891 892
Mining 0 0 0 0 0 0
Latin America 0 0 0 0 475 475
Caterpillar Power Finance 0 0 0 0 15 15
Total $ 215 $ 107 $ 647 $ 969 $ 27,287 $ 28,256

~~UNAUDITED~~

~~Impaired finance receivables~~

A finance receivable is considered impaired, based on current information and events, if it is probable that we 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 restructures.

~~In our Customer portfolio segment, impaired finance receivables and the related unpaid principal balances and allowance were as follows:~~

(Millions of dollars)
As of December 31, 2019
Impaired Finance Receivables With
No Allowance Recorded Recorded
Investment Unpaid
Principal
Balance Related
Allowance
North America $ 6 $ 6 $ 0
EAME 0 0 0
Asia/Pacific 0 0 0
Mining 22 22 0
Latin America 8 8 0
Caterpillar Power Finance 58 58 0
Total $ 94 $ 94 $ 0
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

~~UNAUDITED~~

(Millions of dollars)
Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Impaired Finance Receivables With
No Allowance Recorded Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
North America $ 10 $ 0 $ 10 $ 0
EAME 15 0 7 0
Asia/Pacific 0 0 0 0
Mining 26 0 29 1
Latin America 22 0 22 1
Caterpillar Power Finance 57 1 53 2
Total $ 130 $ 1 $ 121 $ 4
Impaired Finance Receivables With
An Allowance Recorded
North America $ 30 $ 0 $ 36 $ 1
EAME 80 1 88 2
Asia/Pacific 12 1 9 1
Mining 65 1 49 2
Latin America 69 1 73 4
Caterpillar Power Finance 376 1 422 8
Total $ 632 $ 5 $ 677 $ 18
Total Impaired Finance Receivables
North America $ 40 $ 0 $ 46 $ 1
EAME 95 1 95 2
Asia/Pacific 12 1 9 1
Mining 91 1 78 3
Latin America 91 1 95 5
Caterpillar Power Finance 433 2 475 10
Total $ 762 $ 6 $ 798 $ 22

There were $78 million in impaired finance receivables with a related allowance of $39 million as of December 31, 2019 for the Dealer portfolio segment, all of which was in Latin America. There were 0 impaired finance receivables as of December 31, 2019 for the Caterpillar Purchased Receivables portfolio segment.


(Millions of dollars)
	December 31, 2020
	31-60 Days Past Due		61-90 Days Past Due		91+ Days Past Due		Total Past Due		Current		Total Finance Receivables















North America	$	14	$	11	$	6	$	31	$	1,889	$	1,920
EAME	1		0		1		2		632		634
Asia/Pacific	2		1		1		4		581		585
Mining	0		0		0		0		0		0
Latin America	0		0		0		0		501		501
Caterpillar Power Finance	0		0		0		0		6		6
Total	$	17	$	12	$	8	$	37	$	3,609	$	3,646

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. Contracts on non-accrual status are generally more than 120 days past 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.

1714

UNAUDITED

In our 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:


(Millions of dollars)	(Millions of dollars)	September 30, 2020							(Millions of dollars)	March 31, 2021						December 31, 2020
		Amortized Cost						Amortized Cost						Amortized Cost
		Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing		Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing		Non-accrual With an Allowance		Non-accrual Without an Allowance		91+ Still Accruing
North America	North America	$	82	$	1	$	28		North America	$	76	$	2	$	27	$	86	$	1	$	34
EAME	EAME	137		0		1			EAME	109		0		3		113		1		1
Asia/Pacific	Asia/Pacific	26		0		13			Asia/Pacific	20		0		14		13		0		13
Mining	Mining	38		1		10			Mining	7		1		1		21		1		0
Latin America	Latin America	95		2		0			Latin America	57		1		2		63		0		1
Caterpillar Power Finance	Caterpillar Power Finance	207		17		0			Caterpillar Power Finance	147		11		0		170		17		0
Total	Total	$	585	$	21	$	52		Total	$	416	$	15	$	47	$	466	$	20	$	49

There was $2$3 million and $8less than $1 million of interest income recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively, 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 0
Latin America 89 2
Caterpillar Power Finance 361 0
Total $ 727 $ 29

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, there were $78 million in~~2020, finance receivables ~~on non-accrual status~~ in our Dealer portfolio segment on non-accrual status were $78 million and $81 million, respectively, all of which was in Latin America. There were 0 finance receivables in our Dealer portfolio segment more than 90 days past due and still accruing income as of ~~September 30,~~March 31, 2021 and December 31, 2020 and 0 interest income was recognized on dealer finance receivables on non-accrual status during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020.

Troubled debt restructurings

A restructuring of a finance receivable constitutes a 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, payment deferrals and reduction of principal and/or accrued interest. We individually evaluate TDR contracts and establish an allowance based on the present value of expected future cash flows discounted at the receivable’s effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.

~~UNAUDITED~~

There were 0 finance receivables modified as TDRs during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ for the Dealer or Caterpillar Purchased Receivables portfolio segments. Finance receivables in the Customer portfolio segment modified as TDRs were as follows:

(Dollars in millions) Three Months Ended
September 30, 2020 Three Months Ended
September 30, 2019
Number of
Contracts Pre-TDR
Amortized
Cost Post-TDR
Amortized
Cost Number of
Contracts Pre-TDR
Recorded
Investment Post-TDR
Recorded
Investment
North America 3 $ 1 $ 1 4 $ 0 $ 0
Asia/Pacific 79 4 4 0 0 0
Mining 12 5 5 0 0 0
Latin America 3 16 16 0 0 0
Caterpillar Power Finance 8 50 50 4 56 55
Total 105 $ 76 $ 76 8 $ 56 $ 55
Nine Months Ended
September 30, 2020 Nine Months Ended
September 30, 2019
Number of
Contracts Pre-TDR
Amortized
Cost Post-TDR
Amortized
Cost Number of
Contracts Pre-TDR
Recorded
Investment Post-TDR
Recorded
Investment
North America 13 $ 10 $ 10 12 $ 5 $ 4
EAME 0 0 0 19 17 17
Asia/Pacific(1)
183 12 12 0 0 0
Mining(2)
52 22 22 1 6 6
Latin America 9 18 18 4 2 2
Caterpillar Power Finance 14 87 87 19 154 152
Total 271 $ 149 $ 149 55 $ 184 $ 181

~~(1)~~ ~~During the nine months ended September 30, 2020, 183 contracts with a pre-TDR and post-TDR amortized cost of $12 million were related to seven customers.~~

~~(2)~~ ~~During the nine months ended September 30, 2020, 52 contracts with a pre-TDR and post-TDR amortized cost of $22 million were related to three customers.~~


(Millions of dollars)	Three Months Ended March 31, 2021					Three Months Ended March 31, 2020
		Pre-TDR Amortized Cost		Post-TDR Amortized Cost			Pre-TDR Amortized Cost		Post-TDR Amortized Cost



Mining		$	11	$	5		$	0	$	0
Latin America		0		0			2		2

Total		$	11	$	5		$	2	$	2

UNAUDITED

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:


(Dollars in millions)		Three Months Ended September 30, 2020			Three Months Ended September 30, 2019
(Millions of dollars)								(Millions of dollars)	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
		Number of Contracts	Post-TDR Amortized Cost		Number of Contracts	Post-TDR Recorded Investment			Post-TDR Amortized Cost			Post-TDR Amortized Cost
North America	North America	1	$	6	0	$	0	North America	$	1		$	0
EAME								EAME	0			10
Asia/Pacific								Asia/Pacific	4			0

Mining		1	1		0	0

Latin America								Latin America	0			1
Caterpillar Power Finance	Caterpillar Power Finance	2	18		0	0		Caterpillar Power Finance	5			0
Total	Total	4	$	25	0	$	0	Total	$	10		$	11

		Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
		Number of Contracts	Post-TDR Amortized Cost		Number of Contracts	Post-TDR Recorded Investment
North America		2	$	6	0	$	0
EAME		2	10		0	0

Mining		1	1		0	0
Latin America		3	1		0	0
Caterpillar Power Finance		2	18		0	0
Total		10	$	36	0	$	0

~~UNAUDITED~~

4.Derivative Financial Instruments and Risk Management

Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate 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 and interest rate contracts. Our derivative activities are subject to the management, direction and control of our senior financial officers. We present at least annually to our Board of Directors and the Audit Committee of the Caterpillar Inc. Board of Directors on our risk management practices, including our use of financial derivative instruments.

We recognize all derivatives at their fair value on the Consolidated Statements of Financial Position. On the date the derivative contract is entered into, we designate the derivative ~~instrument is~~as (1) ~~designated as~~ a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) ~~designated as~~ a hedge of a forecasted transaction or the variability of cash ~~flows~~flow (cash flow hedge) or (3) ~~undesignated.~~an undesignated instrument. We record in current earnings 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. We record in Accumulated other comprehensive income (loss) (AOCI) changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge, to the extent effective, on the Consolidated Statements of Financial Position until we reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings. We report changes in the fair value of undesignated derivative instruments in current earnings. We classify cash flows from designated derivative financial instruments within the same category as the item being hedged on the Consolidated Statements of Cash Flows. We include cash flows from undesignated derivative financial instruments in the investing category on the Consolidated Statements of Cash Flows.

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 Statements 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 value 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 derecognition criteria for hedge accounting.

Foreign currency exchange rate risk

We have balance sheet positions and expected future transactions denominated in foreign currencies, thereby creating exposure to movements in exchange rates. In managing foreign currency risk, 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.

UNAUDITED

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.

We have a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate and duration) of our debt portfolio with the interest rate profile of our finance receivable 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 finance receivable 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.

~~UNAUDITED~~

As of ~~September 30, 2020,~~ ~~$17 million~~ of deferred net losses, net of tax, included in equity (AOCI in the Consolidated Statements of Financial Position), related to our floating-to-fixed interest rate contracts, are expected to be reclassified to Interest expense over the next twelve months. The actual amount recorded in Interest expense will vary based on interest rates at the time the hedged transactions impact earnings.

~~As of September 30, 2020,~~March 31, 2021, the cumulative amount of fair value hedging adjustments related to our fixed-to-floating interest rate contracts included in the carrying amount of Long-term debt w~~as $64 million~~a.s $31 million. Fair value gains and losses on these interest rate contracts and the related hedged items generally offset within interest expense. We have, at certain times, liquidated fixed-to-floating interest rate contracts that resulted in deferred gains at the time of liquidation. The deferred gains associated with these interest rate contracts are included in Long-term debt in the Consolidated Statements of Financial Position and are being amortized to Interest expense over the remaining term of the previously designated hedged item.

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


(Millions of dollars)	(Millions of dollars)		Asset (Liability) Fair Value				(Millions of dollars)		Asset (Liability) Fair Value
		Consolidated Statements of Financial Position Location	September 30, 2020		December 31, 2019			Consolidated Statements of Financial Position Location	March 31, 2021		December 31, 2020
Designated derivatives	Designated derivatives						Designated derivatives
Interest rate contracts	Interest rate contracts	Other assets	$	63	$	5	Interest rate contracts	Other assets	$	41	$	59
Interest rate contracts	Interest rate contracts	Accrued expenses	(12)		(25)		Interest rate contracts	Accrued expenses	(10)		(5)
Cross currency contracts	Cross currency contracts	Other assets	16		67		Cross currency contracts	Other assets	34		2
Cross currency contracts	Cross currency contracts	Accrued expenses	(39)		(3)		Cross currency contracts	Accrued expenses	(64)		(148)
			$	28	$	44			$	1	$	(92)
Undesignated derivatives	Undesignated derivatives						Undesignated derivatives
Foreign exchange contracts	Foreign exchange contracts	Other assets	$	57	$	7	Foreign exchange contracts	Other assets	$	60	$	17
Foreign exchange contracts	Foreign exchange contracts	Accrued expenses	(18)		(21)		Foreign exchange contracts	Accrued expenses	(15)		(107)
Cross currency contracts	Cross currency contracts	Other assets	12		5		Cross currency contracts	Other assets	7		7
Cross currency contracts	Cross currency contracts	Accrued expenses	0		(1)		Cross currency contracts	Accrued expenses	0		0

			$	51	$	(10)			$	52	$	(83)

The total notional amount of our derivative instruments was ~~$11.54~~ $10.64 billion and ~~$8.93~~$11.26 billion as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The notional amounts of derivative financial instruments do not represent amounts exchanged by the parties. We calculate the amounts exchanged by the parties by referencing the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates and interest rates.

2117

UNAUDITED

The effect of derivatives designated as hedging instruments on the Consolidated Statements of Profit was as follows:


Cash Flow Hedges	Cash Flow Hedges								Cash Flow Hedges
(Millions of dollars)	(Millions of dollars)	Three Months Ended September 30, 2020							(Millions of dollars)	Three Months Ended March 31, 2021
				Recognized in Earnings								Recognized in Earnings
		Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit			Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit
Interest rate contracts	Interest rate contracts	$	1	Interest expense	$	(16)	$	137	Interest rate contracts	$	0	Interest expense	$	(10)	$	125
Cross currency contracts	Cross currency contracts	(64)		Other income (expense)	(63)		(10)		Cross currency contracts	119		Other income (expense)	112		(8)
				Interest expense	8		137					Interest expense	2		125
		$	(63)		$	(71)				$	119		$	104

		Three Months Ended September 30, 2019								Three Months Ended March 31, 2020
				Recognized in Earnings								Recognized in Earnings
		Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit			Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit
Interest rate contracts	Interest rate contracts	$	(12)	Interest expense	$	(3)	$	198	Interest rate contracts	$	(15)	Interest expense	$	(5)	$	175
Cross currency contracts	Cross currency contracts	100		Other income (expense)	89		(4)		Cross currency contracts	101		Other income (expense)	71		(10)
				Interest expense	9		198					Interest expense	11		175
		$	88		$	95				$	86		$	77

		Nine Months Ended September 30, 2020
				Recognized in Earnings
		Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit
Interest rate contracts		$	(23)	Interest expense	$	(40)	$	462
Cross currency contracts		2		Other income (expense)	(35)		(26)
				Interest expense	28		462
		$	(21)		$	(47)

		Nine Months Ended September 30, 2019
				Recognized in Earnings
		Amount of Gains (Losses) Recognized in AOCI		Classification	Amount of Gains (Losses) Reclassified from AOCI		Amount of the line items in the Consolidated Statements of Profit
Interest rate contracts		$	(72)	Interest expense	$	(2)	$	599
Cross currency contracts		132		Other income (expense)	91		(14)
				Interest expense	23		599
		$	60		$	112

~~UNAUDITED~~As of March 31, 2021, $2 million of deferred net losses, net of tax, included in equity (AOCI in the Consolidated Statements of Financial Position), related to our cash flow hedges, are expected to be reclassified to earnings over the next twelve months. The actual amount recorded in earnings will vary based on interest rates and exchange rates at the time the hedged transactions impact earnings.

The effect of derivatives not designated as hedging instruments on the Consolidated Statements of Profit was as follows:


(Millions of dollars)	(Millions of dollars)		Three Months Ended September 30,				(Millions of dollars)		Three Months Ended March 31,
		Classification	2020		2019			Classification	2021		2020
Foreign exchange contracts	Foreign exchange contracts	Other income (expense)	$	(74)	$	12	Foreign exchange contracts	Other income (expense)	$	85	$	99
Cross currency contracts	Cross currency contracts	Other income (expense)	1		3		Cross currency contracts	Other income (expense)	1		9

			$	(73)	$	15			$	86	$	108

			Nine Months Ended September 30,
		Classification	2020		2019
Foreign exchange contracts		Other income (expense)	$	1	$	(26)
Cross currency contracts		Other income (expense)	11		2

			$	12	$	(24)

UNAUDITED

We enter into International Swaps and Derivatives Association ~~(ISDA)~~ master netting agreements that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits us 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 us under the master netting agreements. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, no cash collateral was received or pledged under the master netting agreements.

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


(Millions of dollars)	(Millions of dollars)	September 30, 2020		December 31, 2019		(Millions of dollars)	March 31, 2021		December 31, 2020
Derivative Assets	Derivative Assets					Derivative Assets
Gross Amount of Recognized Assets	Gross Amount of Recognized Assets	$	148	$	84	Gross Amount of Recognized Assets	$	142	$	85
Gross Amounts Offset	Gross Amounts Offset	0		0		Gross Amounts Offset	0		0
Net Amount of Assets(1)	Net Amount of Assets(1)	148		84		Net Amount of Assets(1)	142		85

Gross Amounts Not Offset	Gross Amounts Not Offset	(37)		(21)		Gross Amounts Not Offset	(55)		(57)

Net Amount	Net Amount	$	111	$	63	Net Amount	$	87	$	28

Derivative Liabilities	Derivative Liabilities					Derivative Liabilities
Gross Amount of Recognized Liabilities	Gross Amount of Recognized Liabilities	$	(69)	$	(50)	Gross Amount of Recognized Liabilities	$	(89)	$	(260)
Gross Amounts Offset	Gross Amounts Offset	0		0		Gross Amounts Offset	0		0
Net Amount of Liabilities(1)	Net Amount of Liabilities(1)	(69)		(50)		Net Amount of Liabilities(1)	(89)		(260)

Gross Amounts Not Offset	Gross Amounts Not Offset	37		21		Gross Amounts Not Offset	55		57

Net Amount	Net Amount	$	(32)	$	(29)	Net Amount	$	(34)	$	(203)

(1) As presented in the Consolidated Statements of Financial Position.

2319

UNAUDITED

5.Accumulated Other Comprehensive Income (Loss)

We present Comprehensive income (loss) and its components in the Consolidated Statements of Comprehensive Income. Changes in Accumulated other comprehensive income (loss), net of tax, included in the Consolidated Statements of Changes in ~~Shareholder's~~Shareholder’s Equity, consisted of the following:

(Millions of dollars) Foreign
currency
translation Derivative
financial
instruments Total
Three Months Ended September 30, 2019
Balance at June 30, 2019 $ (758) $ (73) $ (831)
Other comprehensive income (loss) before reclassifications (160) 68 (92)
Amounts reclassified from accumulated other comprehensive (income) loss 0 (73) (73)
Other comprehensive income (loss) (160) (5) (165)
Balance at September 30, 2019 $ (918) $ (78) $ (996)
Three Months Ended September 30, 2020
Balance at June 30, 2020 $ (957) $ (55) $ (1,012)
Other comprehensive income (loss) before reclassifications 145 (49) 96
Amounts reclassified from accumulated other comprehensive (income) loss 0 57 57
Other comprehensive income (loss) 145 8 153
Balance at September 30, 2020 $ (812) $ (47) $ (859)
Nine Months Ended September 30, 2019
Balance at December 31, 2018 $ (889) $ (36) $ (925)
Other comprehensive income (loss) before reclassifications (127) 46 (81)
Amounts reclassified from accumulated other comprehensive (income) loss 0 (87) (87)
Adjustment to adopt new accounting guidance(1)
98 (1) 97
Other comprehensive income (loss) (29) (42) (71)
Balance at September 30, 2019 $ (918) $ (78) $ (996)
Nine Months Ended September 30, 2020
Balance at December 31, 2019 $ (777) $ (68) $ (845)
Other comprehensive income (loss) before reclassifications (35) (17) (52)
Amounts reclassified from accumulated other comprehensive (income) loss 0 38 38
Other comprehensive income (loss) (35) 21 (14)
Balance at September 30, 2020 $ (812) $ (47) $ (859)

~~(1)~~ ~~Adjustment to adopt new accounting guidance related to reclassification of certain tax effects from Accumulated other comprehensive income (loss).~~


(Millions of dollars)	Three Months Ended March 31,
	2021		2020
Foreign currency translation
Balance at beginning of period	$	(551)	$	(777)


Gains (losses) on foreign currency translation	(94)		(294)
Less: Tax provision/(benefit)	25		12
Net gains (losses) on foreign currency translation	(119)		(306)



Other comprehensive income (loss), net of tax	(119)		(306)
Balance at end of period	$	(670)	$	(1,083)

Derivative financial instruments
Balance at beginning of period	$	(44)	$	(68)


Gains (losses) deferred	119		86
Less: Tax provision/(benefit)	25		19
Net gains (losses) deferred	94		67
(Gains) losses reclassified to earnings	(104)		(77)
Less: Tax (provision)/benefit	(21)		(16)
Net (gains) losses reclassified to earnings	(83)		(61)
Other comprehensive income (loss), net of tax	11		6
Balance at end of period	$	(33)	$	(62)

Total Accumulated other comprehensive income (loss) at end of period	$	(703)	$	(1,145)

~~UNAUDITED~~

The effect of the reclassifications out of Accumulated other comprehensive income (loss) on the Consolidated Statements of Profit was as follows:


(Millions of dollars)	(Millions of dollars)		Three Months Ended September 30,				Nine Months Ended September 30,				(Millions of dollars)		Three Months Ended March 31,
Derivative financial instruments	Derivative financial instruments	Classification of income (expense)	2020		2019		2020		2019		Derivative financial instruments	Classification of income (expense)	2021		2020
Cross currency contracts	Cross currency contracts	Other income (expense)	$	(63)	$	89	$	(35)	$	91	Cross currency contracts	Other income (expense)	$	112	$	71
Cross currency contracts	Cross currency contracts	Interest expense	8		9		28		23		Cross currency contracts	Interest expense	2		11
Interest rate contracts	Interest rate contracts	Interest expense	(16)		(3)		(40)		(2)		Interest rate contracts	Interest expense	(10)		(5)
Reclassifications before tax	Reclassifications before tax		(71)		95		(47)		112		Reclassifications before tax		104		77
Tax (provision) benefit	Tax (provision) benefit		14		(22)		9		(25)		Tax (provision) benefit		(21)		(16)
Total reclassifications from Accumulated other comprehensive income (loss)	Total reclassifications from Accumulated other comprehensive income (loss)		$	(57)	$	73	$	(38)	$	87	Total reclassifications from Accumulated other comprehensive income (loss)		$	83	$	61

UNAUDITED

6.Segment Information

A. Basis for Segment Information

We report information internally for operating segments based on management responsibility. Our operating segments provide financing alternatives to customers and dealers around the world for Caterpillar products and ~~provide financing for~~ vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, retail loans, working capital loans to Caterpillar dealers and wholesale financing plans within each of the operating segments. Certain operating segments also purchase short-term trade receivables from Caterpillar.

B. Description of Segments

We have six operating segments that offer financing services. Following is a brief description of our segments:

•North America - Includes our operations in the United States and Canada.

•EAME - Includes our operations in Europe, Africa, the Middle East and the Commonwealth of Independent States.

•Asia/Pacific - Includes our operations in Australia, New Zealand, China, Japan, Southeast Asia and India.

•Latin America - Includes our operations in Mexico and Central and South American countries.

•Caterpillar Power Finance - Provides financing worldwide for marine vessels with Caterpillar engines and for Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.

•Mining - Provides financing for large mining customers worldwide.

To align with changes in executive management responsibilities and measurement of segment performance, our management reporting was updated effective January 1, 2020. Prior year data has been revised to conform to the 2020 presentation.

C. Segment Measurement and Reconciliations

Cash, debt and other expenses are allocated to our segments based on their respective portfolios. The related Interest expense is calculated based on the amount of allocated debt and the rates associated with that debt. The performance of each segment is assessed based on a consistent leverage ratio. The Provision for credit losses is based on each ~~segment's~~segment’s respective finance receivable portfolio. Capital expenditures include expenditures for equipment on operating leases and other miscellaneous capital expenditures.

Reconciling items are created based on accounting differences between segment reporting and consolidated external reporting. For the reconciliation of Profit before income taxes, we have grouped the reconciling items as follows:

•Unallocated - This item is related to corporate requirements and strategies that are considered to be for the benefit of the entire organization. Also included are the consolidated results of the special purpose corporation (see Note 7 for additional information) and other miscellaneous items.

~~UNAUDITED~~

•Timing - Timing differences in the recognition of costs between segment reporting and consolidated external reporting.

•Methodology - Methodology differences between segment reporting and consolidated external reporting are as follows:

◦Segment assets include off-balance sheet managed assets for which we maintain servicing responsibilities.

◦The impact of differences between the actual leverage and the segment leverage ratios.

◦Interest expense includes realized forward points on foreign currency forward contracts.

◦The net gain or loss from interest rate derivatives is excluded from segment reporting.

UNAUDITED

Supplemental segment data and reconciliations to consolidated external reporting for the three months ended ~~September 30~~March 31 was as follows:


(Millions of dollars) 2020		External Revenues		Profit before income taxes		Interest Expense		Depreciation on equipment leased to others		Provision for credit losses		Assets at September 30, 2020		Capital expenditures
(Millions of dollars) 2021																(Millions of dollars) 2021	External Revenues		Profit before income taxes		Interest Expense		Depreciation on equipment leased to others		Provision for credit losses		Assets at March 31, 2021		Capital expenditures
North America	North America	$	314	$	81	$	72	$	116	$	7	$	14,686	$	206	North America	$	347	$	99	$	69	$	137	$	1	$	14,928	$	178
EAME	EAME	70		(3)		7		16		31		4,968		10		EAME	67		30		5		15		(4)		4,947		10
Asia/Pacific	Asia/Pacific	83		38		20		1		9		4,444		1		Asia/Pacific	92		51		23		2		0		4,902		3
Latin America	Latin America	50		19		12		3		4		2,630		3		Latin America	47		16		14		2		3		2,504		7
Caterpillar Power Finance	Caterpillar Power Finance	12		(25)		7		0		25		1,394		16		Caterpillar Power Finance	13		11		4		1		(7)		1,184		0
Mining	Mining	68		20		14		33		(5)		2,572		41		Mining	71		18		10		35		(3)		2,582		26
Total Segments	Total Segments	597		130		132		169		71		30,694		277		Total Segments	637		225		125		192		(10)		31,047		224
Unallocated	Unallocated	5		(76)		59		0		(1)		1,613		3		Unallocated	5		(72)		50		0		0		1,373		4
Timing	Timing	(4)		(1)		0		0		0		11		0		Timing	(3)		1		0		0		0		12		0
Methodology	Methodology	0		43		(54)		0		0		(161)		0		Methodology	0		42		(50)		0		0		(107)		0
Inter-segment Eliminations (1)	Inter-segment Eliminations (1)	0		0		0		0		0		(392)		0		Inter-segment Eliminations (1)	0		0		0		0		0		(242)		0
Total	Total	$	598	$	96	$	137	$	169	$	70	$	31,765	$	280	Total	$	639	$	196	$	125	$	192	$	(10)	$	32,083	$	228

2019		External Revenues		Profit before income taxes		Interest Expense		Depreciation on equipment leased to others		Provision for credit losses		Assets at December 31, 2019		Capital expenditures
2020																2020	External Revenues		Profit before income taxes		Interest Expense		Depreciation on equipment leased to others		Provision for credit losses		Assets at December 31, 2020		Capital expenditures
North America	North America	$	412	$	126	$	99	$	146	$	3	$	15,496	$	265	North America	$	382	$	75	$	94	$	144	$	22	$	14,749	$	220
EAME	EAME	70		13		12		16		5		4,918		21		EAME	70		16		13		16		7		4,981		4
Asia/Pacific	Asia/Pacific	90		42		25		3		6		4,540		(1)		Asia/Pacific	86		36		27		2		7		4,585		3
Latin America	Latin America	64		19		24		4		3		2,809		2		Latin America	53		6		23		3		7		2,621		3
Caterpillar Power Finance	Caterpillar Power Finance	23		9		10		1		(3)		1,673		0		Caterpillar Power Finance	20		1		8		0		5		1,308		0
Mining	Mining	82		14		18		35		6		2,966		99		Mining	81		8		17		36		13		2,575		16
Total Segments	Total Segments	741		223		188		205		20		32,402		386		Total Segments	692		142		182		201		61		30,819		246
Unallocated	Unallocated	14		(87)		66		0		0		1,896		2		Unallocated	9		(70)		56		0		0		1,576		1
Timing	Timing	(7)		(4)		0		0		0		16		0		Timing	(6)		(1)		0		0		0		12		0
Methodology	Methodology	0		52		(56)		0		0		(216)		0		Methodology	0		56		(63)		0		0		(152)		0
Inter-segment Eliminations (1)	Inter-segment Eliminations (1)	0		0		0		0		0		(405)		0		Inter-segment Eliminations (1)	0		0		0		0		0		(264)		0
Total	Total	$	748	$	184	$	198	$	205	$	20	$	33,693	$	388	Total	$	695	$	127	$	175	$	201	$	61	$	31,991	$	247

(1) Elimination is primarily related to intercompany loans.

~~UNAUDITED~~

~~Supplemental segment data and reconciliations to consolidated external reporting for the nine months ended September 30 was as follows:~~

(Millions of dollars)

2020
External
Revenues Profit
before
income
taxes Interest
Expense Depreciation
on equipment
leased to
others Provision
for
credit
losses Assets at
September 30,
2020 Capital
expenditures
North America $ 1,052 $ 218 $ 253 $ 399 $ 54 $ 14,686 $ 647
EAME 203 27 30 47 44 4,968 23
Asia/Pacific 251 113 70 6 23 4,444 6
Latin America 151 27 56 9 23 2,630 7
Caterpillar Power Finance 49 (34) 21 0 48 1,394 16
Mining 224 27 45 103 26 2,572 75
Total Segments 1,930 378 475 564 218 30,694 774
Unallocated 20 (210) 161 0 (1) 1,613 9
Timing (16) (3) 0 0 0 11 0
Methodology 0 147 (174) 0 0 (161) 0
Inter-segment Eliminations (1)
0 0 0 0 0 (392) 0
Total $ 1,934 $ 312 $ 462 $ 564 $ 217 $ 31,765 $ 783
2019 External
Revenues Profit
before
income
taxes Interest
Expense Depreciation
on equipment
leased to
others Provision
for
credit
losses Assets at
December 31,
2019 Capital
expenditures
North America $ 1,224 $ 373 $ 294 $ 434 $ 12 $ 15,496 $ 831
EAME 211 58 38 50 2 4,918 62
Asia/Pacific 277 128 81 9 14 4,540 9
Latin America 181 25 70 13 31 2,809 9
Caterpillar Power Finance 78 (40) 34 2 65 1,673 0
Mining 245 41 54 103 20 2,966 171
Total Segments 2,216 585 571 611 144 32,402 1,082
Unallocated 48 (253) 195 0 0 1,896 11
Timing (23) (13) 0 0 0 16 0
Methodology 0 148 (167) 0 0 (216) 0
Inter-segment Eliminations (1)
0 0 0 0 0 (405) 0
Total $ 2,241 $ 467 $ 599 $ 611 $ 144 $ 33,693 $ 1,093

~~(1)~~ ~~Elimination is primarily related to intercompany loans.~~

2722

UNAUDITED

7.Commitments and Contingent Liabilities

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 being financed. We also provide residual value guarantees to third-party lenders associated with machinery leased to customers. These guarantees have varying terms. In addition, we participate in standby letters of credit issued to third parties on behalf of our customers. These standby letters of credit have varying terms and beneficiaries and are secured by customer assets.

No significant loss has been experienced or is anticipated under any of these guarantees. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the related recorded liability was less than $1 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 was ~~$37 million and $65~~$40 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020.

We provide guarantees to repurchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a VIE (see Note 1 for additional information regarding the accounting guidance on the consolidation of VIEs). 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. We have a loan purchase agreement with the SPC that obligates us to purchase certain loans that are not paid at maturity. We receive a fee for providing this guarantee, which provides a source of liquidity for the SPC. We are the primary beneficiary of the SPC as our guarantees result in us having both the power to direct the activities that most significantly impact the ~~SPC's~~SPC’s economic performance and the obligation to absorb losses and therefore we have consolidated the financial statements of the SPC. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the SPC’s assets of ~~$1.10 billion~~$841 million and ~~$1.45~~$1.03 billion, respectively, were primarily comprised of loans to dealers, which are included in Finance receivables, net in the Consolidated Statements of Financial Position, and the ~~SPC's~~SPC’s liabilities of ~~$1.10 billion~~$840 million and ~~$1.45~~$1.03 billion, respectively, were primarily comprised of commercial paper, which is included in Short-term borrowings in the Consolidated Statements of Financial Position. The assets of the SPC are not available to pay our creditors. We 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.

Litigation and claims

We are involved in unresolved legal actions that arise in the normal course of business. Although it is not possible to predict with certainty the outcome of our unresolved legal actions, we believe that these unresolved legal actions will neither individually nor in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.

2823

UNAUDITED

8.Fair Value Measurements

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~~We classify fair value measurements ~~are classified~~ according to the lowest level input or value-driver that is significant to the valuation. ~~A measurement~~We may therefore ~~be classified~~classify a measurement 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 us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly.

Derivative financial instruments

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

Derivative financial instruments are measured on a recurring basis at fair value and are classified as Level 2 measurements. We had derivative financial instruments ~~in a~~ ~~net asset position~~included in our Consolidated Statements of Financial Position in a net asset position of ~~$79~~$53 million and ~~$34~~a net liability position of $175 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

~~Impaired loans~~Loans measured at fair value

~~Our impaired~~Certain loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is ~~considered impaired~~measured at fair value when management determines that collection of contractual amounts due is not ~~probable.~~probable and the loan is individually evaluated. 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'~~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 had ~~impaired~~ loans carried at ~~the~~ fair value of ~~$269~~ $232 million and ~~$343~~$243 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

2924

UNAUDITED

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 use the following methods and assumptions to estimate the fair value of our financial instruments:

Cash and cash equivalents – carrying amount approximates fair value.

Restricted cash and cash equivalents – carrying amount approximates fair value.

Finance receivables, net – we estimate fair value by discounting the future cash flows using current rates representative of receivables with similar remaining maturities.

Short-term borrowings – carrying amount approximates fair value.

Long-term debt – we estimate fair value for fixed and floating-rate debt based on quoted market prices.

Fair values of our financial instruments were as follows:


(Millions of dollars)	(Millions of dollars)	September 30, 2020				December 31, 2019						(Millions of dollars)	March 31, 2021				December 31, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Cash and cash equivalents	Cash and cash equivalents	$	678	$	678	$	690	$	690	1		Cash and cash equivalents	$	735	$	735	$	411	$	411	1
Restricted cash and cash equivalents(1)	Restricted cash and cash equivalents(1)	$	4	$	4	$	5	$	5	1		Restricted cash and cash equivalents(1)	$	9	$	9	$	14	$	14	1
Finance receivables, net (excluding finance leases(2))	Finance receivables, net (excluding finance leases(2))	$	18,359	$	18,662	$	20,022	$	20,133	3	Note 3	Finance receivables, net (excluding finance leases(2))	$	18,580	$	18,844	$	18,599	$	18,910	3	Note 3
Interest rate contracts:	Interest rate contracts:											Interest rate contracts:
In a receivable position	In a receivable position	$	63	$	63	$	5	$	5	2	Note 4	In a receivable position	$	41	$	41	$	59	$	59	2	Note 4
In a payable position	In a payable position	$	(12)	$	(12)	$	(25)	$	(25)	2	Note 4	In a payable position	$	(10)	$	(10)	$	(5)	$	(5)	2	Note 4
Cross currency contracts:	Cross currency contracts:											Cross currency contracts:
In a receivable position	In a receivable position	$	28	$	28	$	72	$	72	2	Note 4	In a receivable position	$	41	$	41	$	9	$	9	2	Note 4
In a payable position	In a payable position	$	(39)	$	(39)	$	(4)	$	(4)	2	Note 4	In a payable position	$	(64)	$	(64)	$	(148)	$	(148)	2	Note 4
Foreign exchange contracts:	Foreign exchange contracts:											Foreign exchange contracts:
In a receivable position	In a receivable position	$	57	$	57	$	7	$	7	2	Note 4	In a receivable position	$	60	$	60	$	17	$	17	2	Note 4
In a payable position	In a payable position	$	(18)	$	(18)	$	(21)	$	(21)	2	Note 4	In a payable position	$	(15)	$	(15)	$	(107)	$	(107)	2	Note 4

Short-term borrowings	Short-term borrowings	$	(2,660)	$	(2,660)	$	(5,161)	$	(5,161)	1		Short-term borrowings	$	(3,625)	$	(3,625)	$	(2,005)	$	(2,005)	1
Long-term debt	Long-term debt	$	(24,327)	$	(24,982)	$	(23,334)	$	(23,655)	2		Long-term debt	$	(23,503)	$	(23,960)	$	(23,979)	$	(24,614)	2

(1) Included in Other assets in the Consolidated Statements of Financial Position.

(2) Represents finance leases and failed sale leasebacks of ~~$7.66~~$7.92 billion and ~~$7.81~~$7.98 billion as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

9.Income Taxes

The provision for income taxes reflected an estimated annual tax rate of 3327 percent in the ~~third~~first quarter of ~~2020,~~2021, compared with 2826 percent in the ~~third~~first quarter of ~~2019.~~2020. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.

3025

UNAUDITED

ITEM 2. ~~MANAGEMENT'S~~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~~ 2020 Form 10-K ~~as supplemented by Part II, Item 1A. Risk Factors of this report.~~.

OVERVIEW

We reported ~~third-quarter 2020~~first-quarter 2021 revenues of ~~$598~~$639 million, a decrease of ~~$150~~$56 million, or 208 percent, compared with the ~~third~~first quarter of ~~2019. Third-quarter 2020~~2020. First-quarter 2021 profit was ~~$48~~$140 million, ~~an $81~~a $50 million, or 6356 percent, ~~decrease~~increase from the ~~third~~first quarter of ~~2019.~~2020.

The decrease in revenues was primarily due to a ~~$76~~$40 million unfavorable impact from lower average financing rates and a ~~$40~~$19 million unfavorable impact from lower average earning assets.

~~Third-quarter 2020~~First-quarter 2021 profit before income taxes was ~~$96~~$196 million, ~~an $88~~a $69 million, or 4854 percent, ~~decrease~~increase from the ~~third~~first quarter of ~~2019.~~2020. The ~~decrease~~increase was primarily due to a ~~$50~~$71 million ~~increase~~decrease in provision for credit losses, ~~a $29 million decrease in net yield on average earning assets and an $18 million unfavorable impact from lower average earning assets. These unfavorable impacts were~~ partially offset by a ~~$20~~$13 million ~~decrease~~increase in general, operating and administrative expenses, primarily due to higher incentive compensation. The impact of lower ~~short-term incentive compensation and employee benefit expenses.~~average financing rates was offset by lower interest expense.

The provision for income taxes reflected an estimated annual tax rate of 3327 percent in the ~~third~~first quarter of ~~2020,~~2021, compared with 2826 percent in the ~~third~~first quarter of ~~2019. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.~~2020.

During the ~~third~~first quarter of ~~2020,~~2021, retail new business volume was ~~$2.60~~$2.81 billion, ~~a decrease~~an increase of ~~$329~~$497 million, or 1121 percent, from the ~~third~~first quarter of ~~2019.~~2020. The ~~decrease~~increase was driven by ~~lower~~higher volume ~~across all segments with the exception of~~in Asia/Pacific, North America, Mining and EAME, partially offset by a ~~slight increase~~decrease in ~~Asia/Pacific.~~Latin America.

At the end of the ~~third~~first quarter of ~~2020,~~2021, past dues were ~~3.81~~2.90 percent, compared with ~~3.19~~4.13 percent at the end of the ~~third~~first quarter of ~~2019.~~2020. Past dues ~~increased primarily due to the impact of the COVID-19 pandemic, partially offset by decreases in the Caterpillar Power Finance and Latin American portfolios.~~decreased across all portfolio segments as global markets generally improved. Write-offs, net of recoveries, were ~~$125~~$24 million for the ~~third~~first quarter of ~~2020,~~2021, compared with ~~$103~~$30 million for the ~~third~~first quarter of ~~2019.~~2020. As of ~~September 30, 2020,~~March 31, 2021, the allowance for credit losses totaled ~~$460~~$441 million, or ~~1.74~~1.64 percent of finance receivables, compared with ~~$515~~$479 million, or ~~1.92~~1.77 percent of finance receivables at ~~June 30,~~December 31, 2020. The decrease in the allowance for credit losses was primarily driven by write-offs of previously reserved accounts in the Caterpillar Power Finance portfolio. The allowance for credit losses at year-end 2019 was $424 million, or 1.50 percent of finance receivables.

Response to COVID-19 and Global Business Conditions

~~Operational Status~~

We continue to implement safeguards in our facilities to protect team members, including increased frequency of cleaning and disinfecting, social distancing practices and other measures consistent with specific ~~regulatory~~governmental requirements and guidance from health ~~authorities.~~

Weauthorities and continue to monitor the situation ~~closely and focus~~closely. We remain focused on portfolio ~~health. We~~health and continue to provide qualified customers and dealers with new loans and leases to support their current and future business needs.

3126

UNAUDITED

~~THIRD~~FIRST QUARTER ~~2020~~2021 COMPARED WITH ~~THIRD~~FIRST QUARTER ~~2019~~2020

Consolidated Total Revenues

The chart above graphically illustrates reasons for the change in ~~Consolidated Total Revenues~~consolidated total revenues between ~~third~~first quarter ~~2019~~2020 (at left) and ~~third~~first quarter ~~2020~~2021 (at right). Items favorably impacting total revenues appear as upward stair steps with corresponding dollar amounts above each bar, while items negatively impacting total revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Management utilizes these charts internally to visually communicate results.

Retail revenue for the ~~third~~first quarter of ~~2020~~2021 was ~~$306~~$303 million, a decrease of ~~$40~~$26 million from the same period in ~~2019.~~2020. The decrease was primarily due to a ~~$35~~$25 million unfavorable impact from lower interest rates on retail finance ~~receivables and a $5 million unfavorable impact from lower average earning assets.~~receivables. For the quarter ended ~~September 30, 2020,~~March 31, 2021, retail average earning assets were ~~$22.55~~$22.63 billion, a decrease of ~~$390~~$34 million from the same period in ~~2019.~~2020. The annualized average yield was ~~5.44~~5.36 percent for the ~~third~~first quarter of ~~2020,~~2021, compared with ~~6.03~~5.80 percent for the ~~third~~first quarter of ~~2019.~~2020.

Operating lease revenue for the ~~third~~first quarter of ~~2020~~2021 was ~~$214~~$244 million, a decrease of ~~$48~~$13 million from the same period in ~~2019. During the third quarter of 2020, we updated our accounting convention for recognizing revenue and depreciation on operating leases from a monthly~~2020. The decrease was primarily due to a ~~daily basis. This update resulted in a $29~~$14 million unfavorable impact from lower average earning assets.

Wholesale revenue for the first quarter of 2021 was $78 million, a decrease of $21 million from the same period in 2020. The decrease was due to ~~operating lease revenue which was mostly offset by~~ a ~~$24 million favorable impact to depreciation on equipment leased to others. Additionally, there was a $13~~$14 million unfavorable impact from lower average earning assets and a ~~$6 million unfavorable impact from lower average rental rates on operating leases.~~

~~Wholesale revenue for the third quarter of 2020 was $75 million, a decrease of $50 million from the same period in 2019. The decrease was due to a $27~~$7 million unfavorable impact from lower interest rates on wholesale finance ~~receivables and a $23 million unfavorable impact from lower average earning assets.~~receivables. For the quarter ended ~~September 30, 2020,~~March 31, 2021, wholesale average earning assets were ~~$4.27~~$4.16 billion, a decrease of ~~$1.05 billion~~$663 million from the same period in ~~2019.~~2020. The annualized average yield was ~~7.03~~7.51 percent for the ~~third~~first quarter of ~~2020,~~2021, compared with ~~9.35~~8.22 percent for the ~~third~~first quarter of ~~2019.~~2020.

Other revenue, net items were as follows:


(Millions of dollars)	(Millions of dollars)	Three Months Ended September 30,						(Millions of dollars)	Three Months Ended March 31,
		2020		2019		Change			2021		2020		Change
Finance receivable and operating lease fees (including late charges)	Finance receivable and operating lease fees (including late charges)	$	13	$	16	$	(3)	Finance receivable and operating lease fees (including late charges)	$	13	$	13	$	—

Interest income on Notes receivable from Caterpillar	Interest income on Notes receivable from Caterpillar	3		7		(4)		Interest income on Notes receivable from Caterpillar	4		3		1
Net loss on returned or repossessed equipment	Net loss on returned or repossessed equipment	(16)		(12)		(4)		Net loss on returned or repossessed equipment	(6)		(9)		3
Miscellaneous other revenue, net	Miscellaneous other revenue, net	3		4		(1)		Miscellaneous other revenue, net	3		3		—
Total Other revenue, net	Total Other revenue, net	$	3	$	15	$	(12)	Total Other revenue, net	$	14	$	10	$	4

There was a $4$9 million ~~unfavorable~~favorable impact from currency on revenues in the ~~third~~first quarter of ~~2020.~~2021. Currency represents the net translation impact resulting from changes in foreign currency exchange rates versus the U.S. dollar and is included in all financial statement line items and each of the items included in the above analysis.

3227

UNAUDITED

Consolidated Profit Before Income Taxes

(1) Analysis excludes $5 million in offsetting revenues and expenses for property taxes on operating leases for both the ~~third~~first quarter of ~~2020~~2021 and ~~2019.~~2020.

The chart above graphically illustrates reasons for the change in ~~Consolidated Profit Before Income Taxes~~consolidated profit before income taxes between ~~third~~first quarter ~~2019~~2020 (at left) and ~~third~~first quarter ~~2020~~2021 (at right). Items favorably impacting profit before income taxes appear as upward stair steps with corresponding dollar amounts above each bar, while items negatively impacting profit before income taxes appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Management utilizes these charts internally to visually communicate results.

~~Third-quarter 2020~~First-quarter 2021 profit before income taxes was ~~$96~~$196 million, compared with ~~$184~~$127 million for the ~~third~~first quarter of ~~2019.~~2020. The ~~decrease~~increase was primarily due to a ~~$50~~$71 million ~~increase~~decrease in provision for credit losses, ~~a $29 million decrease in net yield on average earning assets and an $18 million unfavorable impact from lower average earning assets. These unfavorable impacts were~~ partially offset by a ~~$20~~$13 million ~~decrease~~increase in general, operating and administrative expenses, primarily due to higher incentive compensation. The impact of lower ~~short-term incentive compensation and employee benefit expenses.~~average financing rates was offset by lower interest expense.

There was a $2$5 million ~~unfavorable~~favorable impact from currency on profit before income taxes in the ~~third~~first quarter of ~~2020.~~2021. Currency represents the net translation impact resulting from changes in foreign currency exchange rates versus the U.S. dollar and is included in all financial statement line items and each of the items included in the above analysis.

Provision for Income Taxes

The provision for income taxes reflected an estimated annual tax rate of 3327 percent in the ~~third~~first quarter of ~~2020,~~2021, compared with 2826 percent in the ~~third~~first quarter of ~~2019. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.~~2020.

~~UNAUDITED~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2020 VS. NINE MONTHS ENDED SEPTEMBER 30, 2019~~

~~Consolidated Total Revenues~~

The chart above graphically illustrates reasons for the change in Consolidated Total Revenues between September YTD 2019 (at left) and September YTD 2020 (at right). Items favorably impacting total revenues appear as upward stair steps with corresponding dollar amounts above each bar, while items negatively impacting total revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Management utilizes these charts internally to visually communicate results.

Retail revenue for the first nine months of 2020 was $942 million, a decrease of $89 million from the same period in 2019. The decrease was due to a $74 million unfavorable impact from lower interest rates on retail finance receivables and a $15 million unfavorable impact from lower average earning assets. For the nine months ended September 30, 2020, retail average earning assets were $22.58 billion, a decrease of $331 million from the same period in 2019. The annualized average yield was 5.56 percent for the first nine months of 2020, compared with 6.00 percent for the same period in 2019.

Operating lease revenue for the first nine months of 2020 was $718 million, a decrease of $59 million from the same period in 2019. During the third quarter of 2020, we updated our accounting convention for recognizing revenue and depreciation on operating leases from a monthly to a daily basis. This update resulted in a $29 million unfavorable impact to operating lease revenue which was mostly offset by a $24 million favorable impact to depreciation on equipment leased to others. Additionally, there was a $24 million unfavorable impact from lower average earning assets and a $6 million unfavorable impact from lower average rental rates on operating leases.

Wholesale revenue for the first nine months of 2020 was $258 million, a decrease of $117 million from the same period in 2019. The decrease was due to a $65 million unfavorable impact from lower average earning assets and a $52 million unfavorable impact from lower interest rates on wholesale finance receivables. For the nine months ended September 30, 2020, wholesale average earning assets were $4.53 billion, a decrease of $949 million from the same period in 2019. The annualized average yield was 7.60 percent for the first nine months of 2020, compared with 9.11 percent for the same period in 2019.

~~Other revenue, net items were as follows:~~

(Millions of dollars)

Nine Months Ended
September 30,
2020 2019 Change
Finance receivable and operating lease fees (including late charges) $ 37 $ 46 $ (9)
Fees on committed credit facility extended to Caterpillar — 5 (5)
Interest income on Notes receivable from Caterpillar 10 22 (12)
Net loss on returned or repossessed equipment (39) (27) (12)
Miscellaneous other revenue, net 8 12 (4)
Total Other revenue, net $ 16 $ 58 $ (42)

~~UNAUDITED~~

There was a $21 million unfavorable impact from currency on revenues in the first nine months of 2020. Currency represents the net translation impact resulting from changes in foreign currency exchange rates versus the U.S. dollar and is included in all financial statement line items and each of the items included in the above analysis.

~~Consolidated Profit Before Income Taxes~~

~~(1) Analysis excludes $15 million in offsetting revenues and expenses for property taxes on operating leases for both September YTD 2020 and 2019.~~

The chart above graphically illustrates reasons for the change in Consolidated Profit Before Income Taxes between September YTD 2019 (at left) and September YTD 2020 (at right). Items favorably impacting profit before income taxes appear as upward stair steps with corresponding dollar amounts above each bar, while items negatively impacting profit before income taxes appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Management utilizes these charts internally to visually communicate results.

Profit before income taxes was $312 million for the first nine months of 2020, compared with $467 million for the same period in 2019. The decrease was primarily due to a $73 million increase in provision for credit losses, a $53 million unfavorable impact from lower average earning assets and a $50 million decrease in net yield on average earning assets. These unfavorable impacts were partially offset by a $58 million decrease in general, operating and administrative expenses primarily due to lower short-term incentive compensation and employee benefit expenses.

There was a $9 million unfavorable impact from currency on profit before income taxes in the first nine months of 2020. Currency represents the net translation impact resulting from changes in foreign currency exchange rates versus the U.S. dollar and is included in all financial statement line items and each of the items included in the above analysis.

~~Provision for Income Taxes~~

~~The provision for income taxes reflected an estimated annual tax rate of 33 percent for the first nine months of 2020, compared with~~ 28 percent for the same period in 2019, excluding a discrete item in the first nine months of 2019 of $13 million for a valuation allowance against the deferred tax assets of a non-U.S. subsidiary. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.

UNAUDITED

Finance Receivables and Equipment on Operating Leases

New Business Volume


(Millions of dollars)	(Millions of dollars)	Nine Months Ended September 30,						(Millions of dollars)	Three Months Ended March 31,
		2020		2019		Change			2021		2020		Change
New retail financing	New retail financing	$	6,858	$	7,499	$	(641)	New retail financing	$	2,579	$	2,060	$	519
New operating lease activity	New operating lease activity	792		1,129		(337)		New operating lease activity	230		252		(22)
New wholesale financing	New wholesale financing	24,967		33,721		(8,754)		New wholesale financing	9,638		8,833		805
Total	Total	$	32,617	$	42,349	$	(9,732)	Total	$	12,447	$	11,145	$	1,302��

New retail financing ~~decreased~~increased due to ~~lower~~higher volume ~~across all segments with the exception of slight increases~~ in North America, Asia/Pacific, Mining and ~~Asia/Pacific. New operating lease activity (which is substantially related to retail) decreased due to lower rentals of Cat equipment across all segments with the exception of~~EAME, partially offset by a ~~slight increase~~decrease in ~~Caterpillar Power Finance.~~Latin America. New wholesale financing ~~decreased~~increased primarily due to ~~lower~~higher purchases of trade receivables from Caterpillar.

Total Managed Portfolio

We define total portfolio as Finance receivables, net plus Equipment on operating leases, net. We also manage and service receivables and leases that have been sold by us to third parties with limited or no recourse in order to mitigate our concentration of credit risk with certain customers. These assets are not available to pay our creditors. Total managed portfolio was as follows:


(Millions of dollars)	(Millions of dollars)	September 30, 2020		December 31, 2019		Change		(Millions of dollars)	March 31, 2021		December 31, 2020		Change
Finance receivables, net	Finance receivables, net	$	26,021	$	27,832	$	(1,811)	Finance receivables, net	$	26,500	$	26,575	$	(75)
Equipment on operating leases, net	Equipment on operating leases, net	3,339		3,583		(244)		Equipment on operating leases, net	3,237		3,366		(129)
Total portfolio	Total portfolio	$	29,360	$	31,415	$	(2,055)	Total portfolio	$	29,737	$	29,941	$	(204)

Retail loans, net	Retail loans, net	$	164	$	186	$	(22)	Retail loans, net	$	125	$	139	$	(14)
Retail leases, net	Retail leases, net	65		81		(16)		Retail leases, net	44		56		(12)
Operating leases	Operating leases	21		26		(5)		Operating leases	23		24		(1)
Total off-balance sheet managed assets	Total off-balance sheet managed assets	$	250	$	293	$	(43)	Total off-balance sheet managed assets	$	192	$	219	$	(27)

Total managed portfolio	Total managed portfolio	$	29,610	$	31,708	$	(2,098)	Total managed portfolio	$	29,929	$	30,160	$	(231)

Total Portfolio Metrics

At the end of the ~~third~~first quarter of ~~2020,~~2021, past dues were ~~3.81~~2.90 percent, compared with ~~3.19~~4.13 percent at the end of the ~~third~~first quarter of ~~2019.~~2020. Past dues ~~increased primarily due to the impact of the COVID-19 pandemic, partially offset by decreases in the Caterpillar Power Finance and Latin American portfolios.~~decreased across all portfolio segments as global markets generally improved. Total non-performing finance receivables, which represent finance receivables currently on non-accrual status, were ~~$684~~$509 million and ~~$805~~$567 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Total non-performing finance receivables as a percentage of our finance receivables were ~~2.58~~1.89 percent and ~~2.85~~2.10 percent at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

As it relates to COVID-19, we provided payment relief through Cat Financial Customer Care Programs launched globally, including account modifications to accommodate customer needs. Generally, the Customer Care Programs provided payment relief for customers that were current in their payment obligations and included payment deferrals of three months, with the option to extend for an additional three months. Additionally, we are continuing to respond to government requirements to adjust the repayment terms for customers. Since the start of the pandemic, modification requests were received from customers representing approximately 25 percent of the customer portfolio. Most customers who have exited the modification period have resumed payments and have not requested additional relief.

Our allowance for credit losses as of ~~September 30, 2020~~March 31, 2021 was ~~$460~~$441 million, or ~~1.74~~1.64 percent of finance receivables, compared with ~~$424~~$479 million, or ~~1.50~~1.77 percent, as of December 31, ~~2019.~~2020. The allowance is subject to an ongoing evaluation based on many quantitative and qualitative factors, including 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 economic forecasts. We believe our allowance is sufficient to provide for losses over the remaining life of our finance receivable portfolio as of ~~September 30, 2020.~~March 31, 2021.

3629

UNAUDITED

CAPITAL RESOURCES AND LIQUIDITY

Capital resources and liquidity provide us with the ability to meet our financial obligations on a timely basis. Maintaining and managing adequate capital and liquidity resources includes management of funding sources and their utilization based on current, future and contingent needs. Throughout the ~~third~~first quarter of ~~2020,~~2021, we experienced favorable liquidity conditions. We ended the ~~third~~first quarter of ~~2020~~2021 with ~~$678~~$735 million of cash, ~~a decrease~~an increase of ~~$12~~$324 million from year-end ~~2019.~~2020. Our cash balances are held in numerous locations throughout the world with approximately ~~$183~~$322 million held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use and could be used in the U.S. without incurring significant additional U.S. taxes. We expect to meet our U.S. funding needs without repatriating undistributed profits that are indefinitely reinvested outside the U.S.

BORROWINGS

Borrowings consist primarily of medium-term notes and commercial paper, the combination of which is used to manage interest rate risk and funding requirements.

We receive debt ratings from the major credit rating agencies. In April 2021, Moody’s ~~long- and short-term ratings of~~upgraded our debt ~~are A3 and Prime-2,~~rating to “mid A”, while Fitch and S&P maintain a ~~"mid-A"~~“mid-A” debt rating. ~~This split rating has not had a material impact on our borrowing costs or our overall financial health. However, a~~A downgrade of our ~~credit~~debt 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, we would rely on cash flows from our existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities, ~~commercial paper support facilities sponsored by the U.S. Federal Reserve and the Bank of Canada,~~ and potential borrowings from Caterpillar. In addition, Caterpillar maintains a support agreement with us, which requires Caterpillar to remain our sole owner and may, under certain circumstances, require Caterpillar to make payments to us should we fail to maintain certain financial ratios.

Total borrowings outstanding as of ~~September 30, 2020~~March 31, 2021 were ~~$27.01~~$27.15 billion, ~~a decrease~~an increase of ~~$2.10 billion~~$144 million over December 31, ~~2019 due to lower portfolio funding requirements.~~2020. Outstanding borrowings were as follows:


(Millions of dollars)	(Millions of dollars)	September 30, 2020		December 31, 2019		(Millions of dollars)	March 31, 2021		December 31, 2020
Medium-term notes, net of unamortized discount and debt issuance costs		$	23,903	$	22,692
Medium-term notes, net						Medium-term notes, net	$	23,100	$	23,550
Commercial paper, net of unamortized discount	Commercial paper, net of unamortized discount	1,890		4,168		Commercial paper, net of unamortized discount	2,895		1,321
Bank borrowings – long-term		424		642
Bank borrowings – short-term		403		605
Bank borrowings and other – long-term						Bank borrowings and other – long-term	403		429
Bank borrowings and other – short-term						Bank borrowings and other – short-term	360		307
Variable denomination floating rate demand notes	Variable denomination floating rate demand notes	367		388		Variable denomination floating rate demand notes	370		377
Notes payable to Caterpillar	Notes payable to Caterpillar	22		618		Notes payable to Caterpillar	22		1,022
Total outstanding borrowings	Total outstanding borrowings	$	27,009	$	29,113	Total outstanding borrowings	$	27,150	$	27,006

Medium-term notes

We issue medium-term unsecured notes through securities dealers or underwriters in the U.S., Canada, Europe, Australia, Japan, Hong Kong, and China to both retail and institutional investors. These notes are offered in several currencies and with a variety of maturities. These notes are senior unsecured obligations of the Company. Medium-term notes issued totaled ~~$7.26~~$1.75 billion and redeemed totaled ~~$6.10~~$2.17 billion for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Medium-term notes, net outstanding as of ~~September 30, 2020,~~March 31, 2021 mature as follows:


(Millions of dollars)	(Millions of dollars)			(Millions of dollars)
2020		$	1,376
2021	2021	7,523		2021	$	5,384
2022	2022	6,466		2022	6,478
2023	2023	4,148		2023	5,140
2024	2024	2,653		2024	2,654
2025				2025	1,612
Thereafter	Thereafter	1,737		Thereafter	1,801
Fair value adjustments				Fair value adjustments	31
Total	Total	$	23,903	Total	$	23,100

3730

UNAUDITED

Commercial paper

We issue unsecured commercial paper in the U.S., Europe and other international capital markets. These short-term promissory notes are issued on a discounted basis and are payable at maturity. As of ~~September 30, 2020,~~March 31, 2021, there was ~~$1.89~~$2.90 billion outstanding in commercial paper.

Revolving credit facilities

As of ~~September 30, 2020,~~March 31, 2021, we had three global credit facilities with a syndicate of banks totaling $10.50 billion (Credit Facility) available in the aggregate to both Caterpillar and us for general liquidity purposes. Based on ~~management's~~management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to us as of ~~September 30, 2020~~March 31, 2021 was $7.75 billion. Information on our Credit Facility is as follows:

•~~In September 2020, we entered into a new 364-day facility.~~ The 364-day facility of $3.15 billion (of which $2.33 billion is available to us) expires in September 2021.

•The three-year facility, as amended and restated in September 2019, of $2.73 billion (of which $2.01 billion is available to us) expires in September 2022.

•The five-year facility, as amended and restated in September 2019, of $4.62 billion (of which $3.41 billion is available to us) expires in September 2024.

At ~~September 30, 2020,~~March 31, 2021, Caterpillar’s consolidated net worth was ~~$15.02~~$16.66 billion, which was above the $9.00 billion required under the Credit Facility. The consolidated net worth is defined in the Credit Facility as the consolidated ~~shareholders'~~shareholders’ equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).

At ~~September 30, 2020,~~March 31, 2021, our covenant interest coverage ratio was ~~1.69~~1.93 to 1. This was 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, 2020,~~March 31, 2021, our six-month covenant leverage ratio was ~~6.76~~6.80 to 1. This was 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 that either Caterpillar or we do not meet one or more of our 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 our 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, 2020,~~March 31, 2021, there were no borrowings under the Credit Facility.

Bank borrowings

Available credit lines with banks as of ~~September 30, 2020~~March 31, 2021 totaled ~~$2.93~~$2.96 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 non-U.S. subsidiaries for local funding requirements. We may guarantee subsidiary borrowings under these lines. As of ~~September 30, 2020,~~March 31, 2021, we had ~~$827~~$757 million outstanding against these credit lines and were in compliance with all debt covenants under these credit lines. The remaining available credit commitments may be withdrawn any time at the ~~lenders'~~lenders’ discretion.

Variable denomination floating rate demand notes

We obtain funding from the sale of variable denomination floating rate demand notes, which may be redeemed at any time at the option of the holder without any material restriction. We do not hold reserves to fund the payment of the demand notes. The notes are offered on a continuous basis. As of ~~September 30, 2020,~~March 31, 2021, there ~~was $367~~were $370 million of variable denomination floating rate demand notes outstanding. The maximum amount of variable denomination floating rate demand notes that we may have outstanding at any time may not exceed $1.25 billion.

3831

UNAUDITED

Notes receivable from/payable to Caterpillar

Under our variable amount and term lending agreements and other notes receivable with Caterpillar, we may borrow up to ~~$2.39~~$2.41 billion from Caterpillar and Caterpillar may borrow up to $1.74 billion from us. The variable amount lending agreements are in effect for indefinite periods of time and may be changed or terminated by either party with 30 days notice. The term lending agreements have remaining maturities ranging up to ten years. We had notes payable of $22 million and notes receivable of ~~$350~~$331 million outstanding under these agreements as of ~~September 30, 2020.~~

~~Impact from COVID-19 on liquidity~~

Since the outbreak of the COVID-19 global pandemic, we continue to take actions to maintain our strong financial position and increase liquidity. In April 2020, we registered for $4.2 billion in commercial paper support programs now available in the United States and Canada. In addition, we also benefited from the incremental $3.9 billion short-term credit facility that was arranged by Caterpillar which was set to expire on DecemberMarch 31, 2020. Due to our strong liquidity position, the $3.9 billion short-term credit facility was early terminated by Caterpillar on September 2, 2020. We have not made any drawings on our existing global credit facilities nor do we have any outstanding borrowings under either commercial paper support program as of the date of this filing. In addition, during the third quarter of 2020, we issued $3.25 billion of medium-term notes to refinance maturing medium-term notes and supplement our liquidity position.2021.

OFF-BALANCE SHEET ARRANGEMENTS

We have potential payment exposure for guarantees issued to third parties totaling ~~$37~~$40 million as of ~~September 30, 2020.~~March 31, 2021.

CASH FLOWS

Operating cash flow was ~~$930~~$335 million in the first ~~nine~~three months of ~~2020,~~2021, compared with ~~$954~~$401 million for the same period in ~~2019.~~2020. Net cash ~~provided by~~used for investing activities was ~~$1.14 billion~~$221 million for the first ~~nine~~three months of ~~2020,~~2021, compared with ~~$84~~net cash provided of $565 million for the same period in ~~2019.~~2020. The change was primarily due to Caterpillar purchased receivables portfolio activity. Net cash provided by financing activities was $205 million for the first three months of 2021, compared with net cash used of $965 million for the same period in 2020. The change was primarily due to higher collections of finance receivables and other portfolio related activity. Net cash used for financing activities was $2.07 billion for the first nine months of 2020, compared with $432 million for the same period in 2019. The change was primarily due to lower portfolio funding ~~requirements.~~requirements related to Caterpillar purchased receivables.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - New Accounting Pronouncements.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

For a discussion of the Company’s critical accounting ~~policies,~~ estimates, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2019~~ 2020 Form 10-K. WeThere have ~~revised the following~~been no significant changes to our critical accounting ~~policy~~estimates since our ~~2019~~ 2020 Form ~~10-K:~~10-K.

~~Allowance for credit losses~~

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.

3932

UNAUDITED

CAUTIONARY STATEMENT REGARDING 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,” “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, trend descriptions or any statement concerning our future response to or the expected effects on our business of the continuing global coronavirus pandemic. 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.

Cat Financial’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) government monetary or fiscal policies; (ii) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (iii) demand for Caterpillar products; (iv) our ability to develop, produce and market quality products that meet our customers’ needs; (v) information technology security threats and computer crime; (vi) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (vii) 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; (viii) changes in interest rates, currency fluctuations or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of our customers; (x) our compliance with financial and other restrictive covenants in debt agreements; (xi) alleged or actual violations of trade or anti-corruption laws and regulations; (xii) additional tax expense or exposure; (xiii) new regulations or changes in financial services regulations; (xiv) residual values of leased equipment; (xv) marketing, operational or administrative support received from Caterpillar; (xvi) changes in accounting guidance; (xvii) the ~~continuing~~ongoing global coronavirus ~~pandemic, which has led to periods of significant volatility in financial and other markets;~~pandemic; and (xviii) other factors described in more detail in Cat Financial’s Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

~~UNAUDITED~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report. Based on that evaluation, our CEO and CFO concluded that our 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

There have been no changes in the ~~Company's~~Company’s internal control over financial reporting during the ~~third~~first quarter of ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

UNAUDITED

ITEM 1A. RISK FACTORS

For a discussion of risks and uncertainties that may affect our business, please see Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~19, 2020~~, ~~the information disclosed~~ ~~in the Current Report on Form 8-K filed with the SEC on March 30, 2020 relating to~~ C ~~OVID-19~~, ~~our~~ ~~Quarterly Report on Form 10-Q filed with the SEC on May 6, 2020~~ ~~and~~ ~~our Quarterly Report on Form 10-Q filed with the SEC on August 5, 2020~~.17, 2021. There has been no material change in this information for the current quarter.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~Disclosure Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934. During the first quarter ended March 31, 2021, Caterpillar Eurasia LLC, one of our affiliates, engaged in limited transactions or dealings with the Federal Security Service of Russia (the “FSB”). Specifically, Caterpillar Eurasia LLC, from time to time, directly or indirectly, makes required submissions to and receives regulatory authorizations from the FSB related to the importation of software used in the on-board telematics and control systems of Caterpillar machines that are imported into Russia. Caterpillar Eurasia LLC did not generate any net revenue or net profits from such approval activity and does not make any sales to or have other dealings with the FSB. Caterpillar Eurasia LLC plans to continue these activities as long as it remains lawful to do so.

~~UNAUDITED~~

ITEM 6. EXHIBITS


Exhibit No.			Description of Exhibit

~~10.1~~			~~Credit Agreement (2020 364-Day Facility), dated as of September 3, 2020,~~ a mong the Company, Caterpillar Inc., Caterpillar International Finance Designated Activity Company and Caterpillar Finance Kabushiki Kaisha, certain financial institutions named therein, Citibank, N.A., as Agent, Citibank Europe PLC, UK Branch, as Local Currency Agent, and MUFG Bank, Ltd., as Japan Local Currency Agent (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 8, 2020)
~~10.2~~			Local Currency Addendum, dated as of September 3, 2020, to the 2020 364-Day Facility (incorporated by reference from Exhibit 10.2 to the Company's Current Report on Form 8-K filed on September 8, 2020)
~~10.3~~			Japan Local Currency Addendum, dated as of September 3, 2020, to the 2020 364-Day Facility (incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K filed on September 8, 2020)
31.1			Certification of President, Director and Chief Executive Officer of Caterpillar Financial Services Corporation, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Executive Vice President and Chief Financial Officer of Caterpillar Financial Services Corporation, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32			Certification of President, Director and Chief Executive Officer of Caterpillar Financial Services Corporation, and Executive Vice President and Chief Financial Officer of Caterpillar Financial Services Corporation, 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)

4234

UNAUDITED

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 Financial Services Corporation

Date:	~~November 4, 2020~~May 5, 2021	/s/David T. Walton
		David T. Walton, President, Director and Chief Executive Officer


Date:	~~November 4, 2020~~May 5, 2021	/s/Patrick T. McCartan
		Patrick T. McCartan, Executive Vice President and Chief Financial Officer


Date:	~~November 4, 2020~~May 5, 2021	/s/Jennifer K. Schott
		Jennifer K. Schott, Secretary


Date:	~~November 4, 2020~~May 5, 2021	/s/Jeffry D. Everett
		Jeffry D. Everett, Controller

4335


Consolidated Statement of Financial Position (Millions of dollars)	Balance as of December 31, 2019		Cumulative Impact from Adopting New Credit Loss Standard		Balance as of January 1, 2020
Assets:
Finance receivables, net	$	27,832	$	42	$	27,874
Other assets	$	1,292	$	(53)	$	1,239

Liabilities:
Other liabilities	$	893	$	2	$	895

Shareholder's equity
Retained earnings	$	3,162	$	(13)	$	3,149


(Millions of dollars)
	As of December 31, 2019
Impaired Finance Receivables With No Allowance Recorded		Recorded Investment		Unpaid Principal Balance		Related Allowance
North America		$	6	$	6	$	0
EAME		0		0		0
Asia/Pacific		0		0		0
Mining		22		22		0
Latin America		8		8		0
Caterpillar Power Finance		58		58		0
Total		$	94	$	94	$	0
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


(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		0
Latin America	89		2
Caterpillar Power Finance	361		0
Total	$	727	$	29


(Millions of dollars)	Foreign currency translation		Derivative financial instruments		Total
Three Months Ended September 30, 2019
Balance at June 30, 2019	$	(758)	$	(73)	$	(831)
Other comprehensive income (loss) before reclassifications	(160)		68		(92)
Amounts reclassified from accumulated other comprehensive (income) loss	0		(73)		(73)

Other comprehensive income (loss)	(160)		(5)		(165)
Balance at September 30, 2019	$	(918)	$	(78)	$	(996)

Three Months Ended September 30, 2020
Balance at June 30, 2020	$	(957)	$	(55)	$	(1,012)
Other comprehensive income (loss) before reclassifications	145		(49)		96
Amounts reclassified from accumulated other comprehensive (income) loss	0		57		57

Other comprehensive income (loss)	145		8		153
Balance at September 30, 2020	$	(812)	$	(47)	$	(859)

Nine Months Ended September 30, 2019
Balance at December 31, 2018	$	(889)	$	(36)	$	(925)
Other comprehensive income (loss) before reclassifications	(127)		46		(81)
Amounts reclassified from accumulated other comprehensive (income) loss	0		(87)		(87)
Adjustment to adopt new accounting guidance(1)	98		(1)		97
Other comprehensive income (loss)	(29)		(42)		(71)
Balance at September 30, 2019	$	(918)	$	(78)	$	(996)

Nine Months Ended September 30, 2020
Balance at December 31, 2019	$	(777)	$	(68)	$	(845)
Other comprehensive income (loss) before reclassifications	(35)		(17)		(52)
Amounts reclassified from accumulated other comprehensive (income) loss	0		38		38

Other comprehensive income (loss)	(35)		21		(14)
Balance at September 30, 2020	$	(812)	$	(47)	$	(859)