UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
cfsc-20210331_g1.jpg
FORM 10-Q
x ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2021
Commission File No. 001-11241
CATERPILLAR FINANCIAL SERVICES CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware37-1105865
(State of incorporation)(IRS Employer I.D. No.)
2120 West End Ave.
, Nashville, Tennessee
37203-0001
(Address of principal executive offices)(Zip Code)
Registrant'sRegistrant’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/24New 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 [ü ]☒ No [    ]☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ü ]☒ 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
[ü ]
☒		(Do not check if a smaller reporting company)
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 [ü ]☒


As of NovemberMay 5, 2021, 1 2017, one 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 20162020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 15, 2017.17, 2021. The Company files electronically with the SEC required reports on Form 8-K, Form 10-Q, Form 10-K and10-K; registration statements on Form S-3S-3; and other forms or reports as required. The public may read and copy any materials the Company has filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  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 reportreports 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 Inc.'sCaterpillar’s website (www.caterpillar.com/secfilings) as soon as reasonably practicable after filing with the SEC. Copies may also be obtained free of charge by writing to: Legal Dept., Caterpillar Financial Services Corporation, 2120 West End Ave., Nashville, Tennessee 37203-0001.  In addition, the public may obtain more detailed information about our parent company, Caterpillar, Inc. (together with its subsidiaries, "Caterpillar" or "Cat") by visiting its website (www.caterpillar.com).  None of the information contained at any time on our website Caterpillar’s website or the SEC’sCaterpillar’s website is incorporated by reference into this document.


2
UNAUDITED




Caterpillar Financial Services Corporation
CONSOLIDATED STATEMENTS OF PROFIT
(Unaudited)
(Dollars in Millions)
Three Months Ended
March 31,
 20212020
  
Revenues:
Retail finance$303 $329 
Operating lease244 257 
Wholesale finance78 99 
Other, net14 10 
Total revenues639 695 
Expenses:  
Interest125 175 
Depreciation on equipment leased to others192 201 
General, operating and administrative121 108 
Provision for credit losses(10)61 
Other7 13 
Total expenses435 558 
Other income (expense)(8)(10)
Profit before income taxes196 127 
Provision for income taxes53 33 
Profit of consolidated companies143 94 
Less:  Profit attributable to noncontrolling interests3 4 
Profit(1)
$140 $90 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017
2016 2017 2016
        
Revenues:       
Retail finance$309
 $307
 $924
 $914
Operating lease247
 257
 737
 756
Wholesale finance79
 62
 222
 202
Other, net38
 25
 128
 81
Total revenues673
 651
 2,011
 1,953
        
Expenses: 
  
  
  
Interest169
 151
 499
 458
Depreciation on equipment leased to others201
 213
 608
 627
General, operating and administrative113
 97
 319
 292
Provision for credit losses48
 29
 82
 96
Other12
 12
 36
 31
Total expenses543
 502
 1,544
 1,504
        
Other income (expense)(4) (3) (10) (10)
        
Profit before income taxes126
 146
 457
 439
        
Provision for income taxes38
 48
 137
 136
        
Profit of consolidated companies88
 98
 320
 303
        
Less:  Profit attributable to noncontrolling interests2
 1
 5
 4
        
Profit 1
$86
 $97
 $315
 $299
        
1(1) Profit attributable to Caterpillar Financial Services Corporation.


See Notes to Consolidated Financial Statements (unaudited)(Unaudited).

3
UNAUDITED




Caterpillar Financial Services Corporation
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Millions)

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017
2016 2017 2016
        
Profit of consolidated companies$88
 $98
 $320
 $303
        
Other comprehensive income (loss), net of tax:       
Foreign currency translation, net of tax (expense)/benefit of:
2017 $30 three months, $94 nine months;
2016 $4 three months, $21 nine months		154
 (5) 395
 100
Derivative financial instruments:       
Gains (losses) deferred, net of tax (expense)/benefit of:
2017 $8 three months, $22 nine months;
2016 $5 three months, $8 nine months
(14) (10) (41) (15)
(Gains) losses reclassified to earnings, net of tax expense/(benefit) of:
2017 $(7) three months, $(23) nine months;
2016 $(3) three months, $(6) nine months		11
 7
 41
 13
Available-for-sale securities:       
Gains (losses) deferred, net of tax (expense)/benefit of:
2017 $0 three months, $0 nine months;
2016 $(1) three months, $(1) nine months		(1) 1
 —
 (1)
(Gains) losses reclassified to earnings, net of tax expense/(benefit) of:
2017 $0 three months, $0 nine months;
2016 $0 three months, $0 nine months		—
 —
 —
 —
Total Other comprehensive income (loss), net of tax150
 (7) 395
 97
 

      
Comprehensive income (loss)238
 91
 715
 400
        
Less: Comprehensive income (loss) attributable to the noncontrolling
interests
5
 1
 11
 2
        
Comprehensive income (loss) attributable to Caterpillar Financial
Services Corporation
$233
 $90
 $704
 $398
        
Three Months Ended
March 31,
 20212020
  
Profit of consolidated companies$143 $94 
Other comprehensive income (loss), net of tax (Note 5):
Foreign currency translation(121)(307)
Derivative financial instruments11 6 
Total Other comprehensive income (loss), net of tax(110)(301)
Comprehensive income (loss)33 (207)
Less: Comprehensive income (loss) attributable to the noncontrolling interests1 3 
Comprehensive income (loss) attributable to Caterpillar Financial Services Corporation$32 $(210)
See Notes to Consolidated Financial Statements (unaudited)(Unaudited).

4
UNAUDITED




Caterpillar Financial Services Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Dollars in Millions, except share data)
September 30,
2017		 December 31,
2016		March 31,
2021		December 31,
2020
Assets:   Assets:  
Cash and cash equivalents$710
 $1,795
Cash and cash equivalents$735 $411 
Finance receivables, net26,597
 26,212
Finance receivables, net of Allowance for credit losses of $441 and $479Finance receivables, net of Allowance for credit losses of $441 and $47926,500 26,575 
Notes receivable from Caterpillar1,577
 530
Notes receivable from Caterpillar331 356 
Equipment on operating leases, 
  
less accumulated depreciation3,580
 3,708
Deferred and refundable income taxes156
 119
Equipment on operating leases, netEquipment on operating leases, net3,237 3,366 
Other assets1,063
 1,251
Other assets1,280 1,283 
Total assets$33,683
 $33,615
Total assets$32,083 $31,991 
   
Liabilities and shareholder’s equity: 
  
Liabilities and shareholder’s equity:  
Payable to dealers and others$142
 $140
Payable to dealers and others$148 $144 
Payable to Caterpillar - other60
 49
Payable to Caterpillar - borrowings and otherPayable to Caterpillar - borrowings and other96 1,087 
Accrued expenses241
 172
Accrued expenses259 400 
Income taxes payable95
 32
Payable to Caterpillar - borrowings1,493
 1,637
Short-term borrowings5,459
 7,094
Short-term borrowings3,625 2,005 
Current maturities of long-term debt5,614
 6,155
Current maturities of long-term debt6,898 7,729 
Long-term debt16,015
 14,382
Long-term debt16,605 16,250 
Deferred income taxes and other liabilities864
 969
Other liabilitiesOther liabilities928 885 
Total liabilities29,983
 30,630
Total liabilities28,559 28,500 
   
Commitments and contingent liabilities (Notes 7 and 9)

 

Commitments and contingent liabilities (Note 7)Commitments and contingent liabilities (Note 7)00
   
Common stock - $1 par value   
Common stock - $1 par value 
Authorized: 2,000 shares; Issued and 
  
Authorized: 2,000 shares; Issued and  
outstanding: one share (at paid-in amount)745
 745
outstanding: 1 share (at paid-in amount)outstanding: 1 share (at paid-in amount)745 745 
Additional paid-in capital2
 2
Additional paid-in capital2 2 
Retained earnings3,423
 3,108
Retained earnings3,282 3,142 
Accumulated other comprehensive income/(loss)(606) (995)
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(703)(595)
Noncontrolling interests136
 125
Noncontrolling interests198 197 
Total shareholder’s equity3,700
 2,985
Total shareholder’s equity3,524 3,491 
   
Total liabilities and shareholder’s equity$33,683
 $33,615
Total liabilities and shareholder’s equity$32,083 $31,991 
   
See Notes to Consolidated Financial Statements (unaudited)(Unaudited).

5
UNAUDITED




Caterpillar Financial Services Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'SSHAREHOLDER’S EQUITY
(Unaudited)
(Dollars in Millions)
Three Months Ended March 31, 2020Common
stock		Additional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
income (loss)		Noncontrolling
interests		Total
Balance at December 31, 2019$745 $2 $3,162 $(845)$172 $3,236 
Profit of consolidated companies90 4 94 
Foreign currency translation, net of tax(306)(1)(307)
Derivative financial instruments, net of tax6 6 
Adjustment to adopt new accounting guidance(1)
(13)(13)
Balance at March 31, 2020$745 $2 $3,239 $(1,145)$175 $3,016 
Three Months Ended March 31, 2021
Balance at December 31, 2020$745 $2 $3,142 $(595)$197 $3,491 
Profit of consolidated companies140 3 143 
Foreign currency translation, net of tax(119)(2)(121)
Derivative financial instruments, net of tax11 11 
Balance at March 31, 2021$745 $2 $3,282 $(703)$198 $3,524 
Nine Months Ended
September 30, 2016
Common
stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income/(loss)
 
Noncontrolling
interests
 Total
Balance at December 31, 2015$745
 $2
 $2,999
 $(897) $126
 $2,975
Profit of consolidated companies 
  
 299
  
 4
 303
Foreign currency translation, net of tax 
  
  
 102
 (2) 100
Derivative financial instruments, net of tax 
  
  
 (2)  
 (2)
Available-for-sale securities, net of tax      (1)   (1)
Balance at September 30, 2016$745
 $2
 $3,298
 $(798) $128
 $3,375
            
Nine Months Ended
September 30, 2017		 
  
  
  
  
  
Balance at December 31, 2016$745
 $2
 $3,108
 $(995) $125
 $2,985
Profit of consolidated companies 
  
 315
  
 5
 320
Foreign currency translation, net of tax 
  
  
 389
 6
 395
Derivative financial instruments, net of tax 
  
  
 —
  
 —
Available-for-sale securities, net of tax      —
   —
Balance at September 30, 2017$745
 $2
 $3,423
 $(606) $136
 $3,700
            
(1) Adjustment to adopt new accounting guidance related to credit losses.

See Notes to Consolidated Financial Statements (unaudited)(Unaudited).

6
UNAUDITED




Caterpillar Financial Services Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
Three Months Ended
March 31,
 20212020
Cash flows from operating activities:  
Profit of consolidated companies$143 $94 
Adjustments for non-cash items:  
Depreciation and amortization195 205 
Accretion of Caterpillar purchased receivable revenue(74)(91)
Provision for credit losses(10)61 
Other, net23 150 
Changes in assets and liabilities:  
Other assets(12)(42)
Payable to dealers and others13 35 
Accrued expenses28 (17)
Other payables with Caterpillar6 9 
Other liabilities23 (3)
Net cash provided by operating activities335 401 
Cash flows from investing activities:  
Expenditures for equipment on operating leases(224)(246)
Capital expenditures - excluding equipment on operating leases(4)(1)
Proceeds from disposals of equipment244 155 
Additions to finance receivables(2,867)(3,213)
Collections of finance receivables3,062 3,422 
Net changes in Caterpillar purchased receivables(411)376 
Proceeds from sales of receivables5 31 
Net change in variable lending to Caterpillar19 0 
Additions to other notes receivable with Caterpillar(23)0 
Collections on other notes receivable with Caterpillar28 6 
Settlements of undesignated derivatives(51)35 
Other, net1 0 
Net cash provided by (used for) investing activities(221)565 
Cash flows from financing activities:  
Net change in variable lending from Caterpillar(1,000)(596)
Proceeds from debt issued (original maturities greater than three months)1,779 2,126 
Payments on debt issued (original maturities greater than three months)(2,243)(2,460)
Short-term borrowings, net (original maturities three months or less)1,669 (35)
Net cash provided by (used for) financing activities205 (965)
Effect of exchange rate changes on cash, cash equivalents and restricted cash0 (22)
Increase (decrease) in cash, cash equivalents and restricted cash319 (21)
Cash, cash equivalents and restricted cash at beginning of year(1)
425 695 
Cash, cash equivalents and restricted cash at end of period(1)
$744 $674 
 Nine Months Ended
September 30,
 2017 2016
Cash flows from operating activities:   
Profit of consolidated companies$320
 $303
Adjustments for non-cash items: 
  
Depreciation and amortization616
 635
Amortization of receivables purchase discount(180) (158)
Provision for credit losses82
 96
Other, net12
 81
Changes in assets and liabilities: 
  
Receivables from others69
 10
Other receivables/payables with Caterpillar1
 (2)
Payable to dealers and others(31) 30
Accrued interest payable3
 (17)
Accrued expenses and other liabilities, net(4) 22
Income taxes payable38
 100
Settlements of designated derivatives(7) 36
Debt exchange premium—
 (33)
Net cash provided by operating activities919
 1,103
    
Cash flows from investing activities: 
  
Capital expenditures for equipment on operating leases and other capital expenditures(1,018) (1,265)
Proceeds from disposals of equipment753
 497
Additions to finance receivables(9,765) (8,888)
Collections of finance receivables10,192
 9,307
Net changes in Caterpillar purchased receivables(161) 580
Proceeds from sales of receivables98
 55
Net change in variable lending to Caterpillar(1,051) (1,001)
Additions to other notes receivable with Caterpillar(53) (91)
Collections on other notes receivable with Caterpillar56
 46
Proceeds from sale of securities4
 —
Restricted cash and cash equivalents activity, net(2) 7
Settlements of undesignated derivatives23
 (23)
Net cash provided by (used for) investing activities(924) (776)
    
Cash flows from financing activities: 
  
Net change in variable lending from Caterpillar(105) 466
Proceeds from borrowings with Caterpillar—
 253
Payments on borrowings with Caterpillar(49) (3)
Proceeds from debt issued (original maturities greater than three months)6,972
 4,424
Payments on debt issued (original maturities greater than three months)(5,714) (5,077)
Short-term borrowings, net (original maturities three months or less)(2,207) (365)
Net cash provided by (used for) financing activities(1,103) (302)
    
Effect of exchange rate changes on cash and cash equivalents23
 10
    
Increase/(decrease) in cash and cash equivalents(1,085) 35
Cash and cash equivalents at beginning of year1,795
 1,016
Cash and cash equivalents at end of period$710
 $1,051
    
Non-cash activity: In September 2016, $381 million of medium-term notes with varying interest rates and maturity dates were exchanged for $366 million of 1.93% medium-term notes due in 2021 and $15 million of cash. In addition, a debt exchange premium of $33 million was paid and is included in the operating section of the Consolidated Statements of Cash Flows.
(1) As of March 31, 2021 and December 31, 2020, restricted cash, which is included in Other assets in the Consolidated Statements of Financial Position, was $9 million and $14 million, respectively. Restricted cash primarily includes cash related to syndication activities.

See Notes to Consolidated Financial Statements (unaudited(Unaudited).

7
UNAUDITED




Notes to Consolidated Financial Statements
(Unaudited)


1.Basis of Presentation
1.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, 2017March 31, 2021 and 2016,2020, (b) the consolidated comprehensive income for the three and nine months ended September 30, 2017March 31, 2021 and 2016,2020, (c) the consolidated financial position as of September 30, 2017at March 31, 2021 and December 31, 2016,2020, (d) the consolidated changes in shareholder'sshareholder’s equity for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 and (e) the consolidated cash flows for the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020. The preparation of financial statements, in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), 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. Actual results may differ from 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, 2016 (20162020 (2020 Form 10-K) filed with the SEC on February 15, 2017.. The December 31, 20162020 financial position data included herein was derived from the audited consolidated financial statements included in the 20162020 Form 10-K but does not include all disclosures required by U.S. GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.generally accepted accounting principles.


We consolidate all variable-interestvariable 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. These risks areCredit risk was evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses.
2.New Accounting Pronouncements
2.New Accounting Pronouncements
 
Revenue recognitionA.Adoption of New Accounting Standards

Reference rate reform (Accounting Standards Update (ASU) 2020-04) – In May 2014,March 2020, the Financial Accounting Standards Board (FASB) issued new revenue recognitionaccounting guidance to provide a single, comprehensive revenue recognition modelease the potential burden in accounting for allreference 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 continue to evaluate the impact of reference rate reform on our other contracts with customers. Underand assess the newimpacts of adopting this guidance an entity will recognize revenue to depicton our financial statements.

We adopted the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. A five step model has been introduced for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements and isfollowing ASUs effective January 1, 2018. Entities have2021, none of which had a material impact on our financial statements:
ASUDescription
2020-08Codification improvements – Receivables – Nonrefundable fees and other costs
2021-01Reference rate reform – Scope

B.Accounting Standards Issued But Not Yet Adopted

We consider the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Statement of Changes in Shareholder's Equity. We will adopt the new guidance effective January 1, 2018 under the modified retrospective approach. We have completed our evaluation of theapplicability and impact of all ASUs. We assessed the new standardASUs and dodetermined that they either were not expect the adoptionapplicable or were not expected to have a material impact on our financial statements.


Recognition and measurement of financial assets and financial liabilities – In January 2016, the FASB issued accounting guidance that affects the accounting for equity investments, financial liabilities accounted for under the fair value option and the presentation and disclosure requirements for financial instruments. Under the new guidance, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification for equity securities with readily determinable fair values. For financial liabilities when the fair value option has been elected, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new guidance is effective January 1, 2018, with the cumulative effect adjustment from initially applying the new guidance recognized in the Consolidated Statement of Financial Position as of the beginning of the year of adoption. We do not expect the adoption to have a material impact on our financial statements.8
UNAUDITED




3.Finance Receivables

Lease accounting – In February 2016, the FASB issued accounting guidance that revises the accounting for leases. Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability for all leases. The new guidance will continue to classify leases as either financing or operating, with classification affecting the pattern of expense recognition. The accounting applied by a lessor under the new guidance will be substantially equivalent to current lease accounting guidance. The new guidance is effective January 1, 2019 with early adoption permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented and provides for certain practical expedients. We are in the process of evaluating the effect of the new guidance on our financial statements.

Measurement of credit losses on financial instruments – In June 2016, the FASB issued accounting guidance to introduce a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance will apply to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance will also apply to debt securities and other financial assets measured at fair value through other comprehensive income. The new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019. We are in the process of evaluating the effect of the new guidance on our financial statements.

Classification for certain cash receipts and cash payments – In August 2016, the FASB issued accounting guidance related to the presentation and classification of certain transactions in the statement of cash flows where diversity in practice exists. The guidance is effective January 1, 2018 with early adoption permitted. We do not expect the adoption to have a material impact on our financial statements.

Classification of restricted cash – In November 2016, the FASB issued accounting guidance related to the presentation and classification of changes in restricted cash on the statement of cash flows where diversity in practice exists. The new standard is required to be applied with a retrospective approach. The guidance is effective January 1, 2018 with early adoption permitted. We do not expect the adoption to have a material impact on our financial statements.

Derivatives and hedging – In August 2017, the FASB issued accounting guidance to better align hedge accounting with a company’s risk management activities, simplify the application of hedge accounting and improve the disclosures of hedging arrangements. The new guidance is required to be applied on a modified retrospective basis. The guidance is effective January 1, 2019, with early adoption permitted. We are in the process of evaluating the effect of the new guidance on our financial statements.

3.Finance Receivables


A summary of finance receivables included in the Consolidated Statements of Financial Position was as follows:
(Millions of dollars)March 31,
2021		December 31,
2020
Retail loans, net(1)
$14,698 $15,037 
Retail leases, net7,734 7,812 
Caterpillar purchased receivables, net4,065 3,646 
Wholesale loans, net(1)
423 533 
Wholesale leases, net21 26 
Total finance receivables26,941 27,054 
Less: Allowance for credit losses(441)(479)
Total finance receivables, net$26,500 $26,575 
(Millions of dollars) September 30,
2017		 December 31,
2016
Finance leases and installment sale contracts – Retail (1)
 $14,172
 $13,565
Retail notes receivable 9,711
 10,195
Wholesale notes receivable 3,753
 3,457
Finance leases and installment sale contracts – Wholesale 118
 103
  27,754
 27,320
Less: Unearned income (814) (765)
Recorded investment in finance receivables 26,940
 26,555
Less: Allowance for credit losses (343) (343)
Total finance receivables, net $26,597

$26,212
     
(1) Includes failed sale leasebacks.
(1) Includes $0
Finance leases
Revenues from finance leases were $122 million and $4$125 million for the three months ended March 31, 2021 and 2020, 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 receivables classifiedrevenue over the remaining lease term.

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 heldfollows:

Customer
We provide loans and finance leases to end-user customers primarily for salethe 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 26 months as of September 30, 2017March 31, 2021.

We typically maintain a security interest in financed equipment and December 31, 2016, respectively.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.


UNAUDITED



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

Accounts are identified for individual review based on past-due status and information available about the customer, such as financial statements, news reports and published credit ratings, as well as general information regarding industry trends and the economic environment in which our customers operate. The allowance for credit losses attributable to finance receivables that are individually evaluated and determined to be impaired is based either on the present value of expected future cash flows discounted at the receivables' effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.  In determining collateral value, 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. The allowance for credit losses attributable to the remaining accounts not yet individually identified as impaired is estimated based on loss forecast models utilizing probabilities of default our estimate of the loss emergence period and theour estimated loss given default.default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.

During the three months ended March 31, 2021, our forecasts for the markets in which we operate reflected an overall rebound in economic conditions, which had deteriorated due to the COVID-19 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.

9
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, qualitative factors not ablewe provide a variety of secured and unsecured loans to be fully captured in our loss forecast models including industry trends, macroeconomic factors and model imprecision are considered in the evaluation of the adequacy ofCaterpillar dealers.
We estimate the allowance for credit losses.  These qualitative factorslosses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.

In general, our Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic 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 months ended 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 subjective and requirenon-interest-bearing short-term trade receivables that are purchased at a degree of management judgment.discount.

OurWe estimate the allowance for credit losses is segregated into three portfolio segments:for Caterpillar purchased receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.


Customer - Finance receivables with retail customers.
Dealer - Finance receivables with Caterpillar dealers.
In general, our Caterpillar Purchased Receivables - Trade receivables purchased from Caterpillar entities.

A portfolio segment ishas not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to the level at whichshort-term maturities of the Company develops a systematic methodology for determining its allowance for credit losses.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 months ended March 31, 2021.


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 - Includes financeFinance receivables originated in the United States and Canada.
Europe•EAME - Includes financeFinance receivables originated in Europe, Africa, the Middle East and the Commonwealth of Independent States.
•Asia/Pacific - Includes financeFinance receivables originated in Australia, New Zealand, China, Japan, Southeast Asia and Southeast Asia.
India.
•Mining - Includes financeFinance receivables related to large mining customers worldwide and project financing in various countries.
worldwide.
•Latin America - Includes financeFinance receivables originated in Mexico and Central and South American countries.
•Caterpillar Power Finance - Includes financeFinance receivables originated worldwide related to marine vessels with Caterpillar engines worldwide and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems worldwide.systems.


10

UNAUDITED




Our allowance for credit losses as of September 30, 2017 was $343 million or 1.27 percent of our recorded investment in finance receivables compared with $343 million or 1.29 percent as of December 31, 2016. An analysis of the allowance for credit losses was as follows:
(Millions of dollars)March 31, 2021
Allowance for Credit Losses:CustomerDealerCaterpillar
Purchased
Receivables		Total
Balance at beginning of year$431 $44 $4 $479 
Receivables written off(34)0 0 (34)
Recoveries on receivables previously written off10 0 0 10 
Provision for credit losses(10)0 0 (10)
Foreign currency translation adjustment(4)0 0 (4)
Balance at end of period$393 $44 $4 $441 
Individually evaluated$185 $39 $0 $224 
Collectively evaluated208 5 4 217 
Ending Balance$393 $44 $4 $441 
Finance Receivables:    
Individually evaluated$579 $78 $0 $657 
Collectively evaluated19,219 3,000 4,065 26,284 
Ending Balance$19,798 $3,078 $4,065 $26,941 
(Millions of dollars)       
 September 30, 2017
Allowance for Credit Losses:Customer Dealer 
Caterpillar
Purchased
Receivables
 Total
Balance at beginning of year$331
 $10
 $2
 $343
Receivables written off(119) —
 —
 (119)
Recoveries on receivables previously written off31
 —
 —
 31
Provision for credit losses80
 —
 —
 80
Adjustment due to sale of receivables(1) —
 —
 (1)
Foreign currency translation adjustment9
 —
 —
 9
Balance at end of period$331
 $10
 $2
 $343
        
Individually evaluated for impairment$100
 $—
 $—
 $100
Collectively evaluated for impairment231
 10
 2
 243
Ending Balance$331
 $10
 $2
 $343
        
Recorded Investment in Finance Receivables: 
  
  
  
Individually evaluated for impairment$869
 $—
 $—
 $869
Collectively evaluated for impairment18,704
 4,544
 2,823
 26,071
Ending Balance$19,573
 $4,544
 $2,823
 $26,940
        
.

(Millions of dollars)December 31, 2020
Allowance for Credit Losses:CustomerDealerCaterpillar
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 off41 0 0 41 
Provision for credit losses262 (1)0 261 
Foreign currency translation adjustment4 0 0 4 
Balance at end of year$431 $44 $4 $479 
Individually evaluated$187 $39 $0 $226 
Collectively evaluated244 5 4 253 
Ending Balance$431 $44 $4 $479 
Finance Receivables:    
Individually evaluated$594 $78 $0 $672 
Collectively evaluated19,333 3,403 3,646 26,382 
Ending Balance$19,927 $3,481 $3,646 $27,054 
(1) Adjustment to adopt new accounting guidance related to credit losses.


11
(Millions of dollars)       
 December 31, 2016
Allowance for Credit Losses:Customer Dealer 
Caterpillar
Purchased
Receivables
 Total
Balance at beginning of year$327
 $9
 $2
 $338
Receivables written off(158) —
 —
 (158)
Recoveries on receivables previously written off35
 —
 —
 35
Provision for credit losses132
 1
 —
 133
Adjustment due to sale of receivables(8) —
 —
 (8)
Foreign currency translation adjustment3
 —
 —
 3
Balance at end of year$331
 $10
 $2
 $343
        
Individually evaluated for impairment$85
 $—
 $—
 $85
Collectively evaluated for impairment246
 10
 2
 258
Ending Balance$331
 $10
 $2
 $343
        
Recorded Investment in Finance Receivables: 
  
  
  
Individually evaluated for impairment$786
 $—
 $—
 $786
Collectively evaluated for impairment18,859
 4,479
 2,431
 25,769
Ending Balance$19,645
 $4,479
 $2,431
 $26,555
        
UNAUDITED





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 agencycredit 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 and collection experience as there is a meaningful correlation between the past-due status of customers and the risk of loss.

In determining past-due status, we consider the entire recorded investment in finance receivable past due when any installment is over 30 days past due.

Customer
The tables below summarize the aging category of our recorded investment inamortized cost of finance receivables in the Customer portfolio segment by aging category.origination year.
(Millions of dollars)March 31, 2021
20212020201920182017PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$1,149 $3,551 $2,192 $1,156 $425 $166 $61 $8,700 
31-60 days past due5 34 30 18 7 8 1 103 
61-90 days past due0 14 9 7 4 1 0 35 
91+ days past due0 18 35 22 16 10 1 102 
EAME
Current459 1,307 811 419 164 56 0 3,216 
31-60 days past due1 8 5 3 1 0 0 18 
61-90 days past due0 3 3 1 1 0 0 8 
91+ days past due0 9 5 12 5 81 0 112 
Asia/Pacific
Current448 1,431 775 297 85 25 34 3,095 
31-60 days past due0 16 16 10 1 0 0 43 
61-90 days past due0 7 9 7 4 0 0 27 
91+ days past due0 8 12 12 2 0 0 34 
Mining
Current230 473 567 315 109 206 86 1,986 
31-60 days past due5 0 0 0 0 0 0 5 
61-90 days past due0 0 0 1 0 0 0 1 
91+ days past due0 1 2 4 2 0 0 9 
Latin America
Current124 490 264 106 35 23 0 1,042 
31-60 days past due0 6 6 6 3 0 0 21 
61-90 days past due0 3 4 6 1 13 0 27 
91+ days past due0 3 9 10 22 10 0 54 
Caterpillar Power Finance
Current6 219 175 102 214 207 112 1,035 
31-60 days past due0 0 0 0 0 0 0 0 
61-90 days past due0 0 0 0 1 1 0 2 
91+ days past due0 2 0 25 3 93 0 123 
Total$2,427 $7,603 $4,929 $2,539 $1,105 $900 $295 $19,798 


12
(Millions of dollars)             
 September 30, 2017
 
31-60
Days
Past Due
 
61-90
Days
Past Due
 
91+
Days
Past Due
 
Total
Past Due
 Current 
Recorded
Investment in
Finance
Receivables
 
91+ Still
Accruing
Customer 
  
  
        
North America$64
 $17
 $49
 $130
 $7,916
 $8,046
 $8
Europe27
 9
 56
 92
 2,642
 2,734
 4
Asia/Pacific27
 13
 17
 57
 2,299
 2,356
 9
Mining8
 4
 52
 64
 1,682
 1,746
 1
Latin America53
 28
 180
 261
 1,672
 1,933
 —
Caterpillar Power Finance11
 34
 124
 169
 2,589
 2,758
 11
Dealer 
  
  
        
North America—
 —
 —
 —
 2,816
 2,816
 —
Europe—
 —
 —
 —
 350
 350
 —
Asia/Pacific—
 —
 —
 —
 580
 580
 —
Mining—
 —
 —
 —
 5
 5
 —
Latin America5
 —
 3
 8
 783
 791
 —
Caterpillar Power Finance—
 —
 —
 —
 2
 2
 —
Caterpillar Purchased Receivables 
  
  
        
North America13
 5
 3
 21
 1,666
 1,687
 3
Europe2
 —
 —
 2
 333
 335
 —
Asia/Pacific1
 —
 —
 1
 396
 397
 —
Mining—
 —
 —
 —
 —
 —
 —
Latin America—
 —
 —
 —
 400
 400
 —
Caterpillar Power Finance—
 —
 —
 —
 4
 4
 —
Total$211
 $110
 $484
 $805
 $26,135
 $26,940
 $36
              
UNAUDITED




(Millions of dollars)December 31, 2020
20202019201820172016PriorRevolving
Finance
Receivables		Total
Finance
Receivables
North America
Current$3,780 $2,423 $1,344 $522 $212 $27 $89 $8,397 
31-60 days past due52 49 33 16 7 2 0 159 
61-90 days past due22 25 16 9 2 1 0 75 
91+ days past due14 35 31 20 9 4 2 115 
EAME
Current1,605 931 501 203 60 18 0 3,318 
31-60 days past due5 15 3 2 0 0 0 25 
61-90 days past due1 1 2 1 0 0 0 5 
91+ days past due7 7 12 4 39 43 0 112 
Asia/Pacific
Current1,583 933 412 115 32 6 32 3,113 
31-60 days past due13 23 13 6 0 0 0 55 
61-90 days past due7 11 7 1 0 0 0 26 
91+ days past due4 10 9 3 0 0 0 26 
Mining
Current515 574 289 181 92 151 137 1,939 
31-60 days past due5 0 5 1 0 0 0 11 
61-90 days past due0 0 0 0 0 0 0 0 
91+ days past due0 11 8 2 0 0 1 22 
Latin America
Current561 348 151 48 13 34 0 1,155 
31-60 days past due3 6 4 3 0 0 0 16 
61-90 days past due1 7 6 3 2 0 0 19 
91+ days past due2 14 11 24 5 4 0 60 
Caterpillar Power Finance
Current217 199 111 273 99 117 119 1,135 
31-60 days past due0 0 6 0 0 0 0 6 
61-90 days past due0 0 0 0 0 9 0 9 
91+ days past due2 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 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. Of these past due receivables, $78 million were originated in 2017 and $3 million were originated prior to 2016.


13
(Millions of dollars)             
 December 31, 2016
 
31-60
Days
Past Due
 
61-90
Days
Past Due
 
91+
Days
Past Due
 
Total
Past Due
 Current 
Recorded
Investment in
Finance
Receivables
 
91+ Still
Accruing
Customer 
  
  
        
North America$50
 $16
 $59
 $125
 $8,051
 $8,176
 $5
Europe16
 12
 39
 67
 2,388
 2,455
 6
Asia/Pacific18
 7
 15
 40
 1,944
 1,984
 4
Mining3
 2
 63
 68
 1,756
 1,824
 2
Latin America40
 33
 214
 287
 1,808
 2,095
 —
Caterpillar Power Finance11
 9
 73
 93
 3,018
 3,111
 1
Dealer 
  
  
        
North America—
 —
 —
 —
 2,705
 2,705
 —
Europe—
 —
 —
 —
 336
 336
 —
Asia/Pacific—
 —
 —
 —
 582
 582
 —
Mining—
 —
 —
 —
 6
 6
 —
Latin America—
 —
 —
 —
 848
 848
 —
Caterpillar Power Finance—
 —
 —
 —
 2
 2
 —
Caterpillar Purchased Receivables 
  
  
        
North America11
 3
 1
 15
 1,303
 1,318
 1
Europe—
 —
 1
 1
 268
 269
 —
Asia/Pacific—
 —
 —
 —
 475
 475
 —
Mining—
 —
 —
 —
 —
 —
 —
Latin America—
 —
 —
 —
 366
 366
 —
Caterpillar Power Finance—
 —
 —
 —
 3
 3
 —
Total$149
 $82
 $465
 $696
 $25,859
 $26,555
 $19
              
UNAUDITED




Caterpillar Purchased Receivables

Impaired finance receivables
For all classes, 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 toThe tables below summarize the contractual terms. Impairedaging category of our amortized cost of finance receivables include finance receivables that have been restructured and are considered to be Troubled Debt Restructures.

There were no impaired finance receivables as of September 30, 2017 and December 31, 2016, forin the Dealer and Caterpillar Purchased Receivables portfolio segments. Our recorded investment in impairedsegment.
(Millions of dollars)      
 March 31, 2021
 31-60
Days
Past Due		61-90
Days
Past Due		91+
Days
Past Due		Total
Past Due		Current
Total Finance
Receivables
North America$7 $3 $3 $13 $2,070 $2,083 
EAME0 0 1 1 777 778 
Asia/Pacific2 1 2 5 802 807 
Mining0 0 0 0 0 0 
Latin America0 0 0 0 392 392 
Caterpillar Power Finance0 0 0 0 5 5 
Total$9 $4 $6 $19 $4,046 $4,065 

(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 
EAME1 0 1 2 632 634 
Asia/Pacific2 1 1 4 581 585 
Mining0 0 0 0 0 0 
Latin America0 0 0 0 501 501 
Caterpillar Power Finance0 0 0 0 6 6 
Total$17 $12 $8 $37 $3,609 $3,646 

Non-accrual finance receivables and the related unpaid principal balances and allowance for the Customer portfolio segment were as follows:
(Millions of dollars)           
 As of September 30, 2017 As of December 31, 2016
Impaired Finance Receivables With
No Allowance Recorded
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
North America$16
 $21
 $—
 $10
 $10
 $—
Europe47
 47
 —
 49
 48
 —
Asia/Pacific32
 31
 —
 3
 2
 —
Mining127
 125
 —
 129
 129
 —
Latin America60
 60
 —
 68
 68
 —
Caterpillar Power Finance187
 200
 —
 271
 271
 —
Total$469
 $484
 $—
 $530
 $528
 $—
Impaired Finance Receivables With
An Allowance Recorded
 
  
  
  
  
  
North America$36
 $35
 $13
 $61
 $60
 $22
Europe8
 8
 5
 7
 7
 3
Asia/Pacific25
 25
 3
 50
 50
 8
Mining—
 —
 —
 —
 —
 —
Latin America92
 104
 35
 93
 104
 34
Caterpillar Power Finance239
 241
 44
 45
 44
 18
Total$400
 $413
 $100
 $256
 $265
 $85
Total Impaired Finance Receivables 
  
  
  
  
  
North America$52
 $56
 $13
 $71
 $70
 $22
Europe55
 55
 5
 56
 55
 3
Asia/Pacific57
 56
 3
 53
 52
 8
Mining127
 125
 —
 129
 129
 —
Latin America152
 164
 35
 161
 172
 34
Caterpillar Power Finance426
 441
 44
 316
 315
 18
Total$869
 $897
 $100
 $786
 $793
 $85
            
UNAUDITED



(Millions of dollars)       
 Three Months Ended
September 30, 2017		 Three Months Ended
September 30, 2016
Impaired Finance Receivables With
No Allowance Recorded
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
North America$14
 $1
 $24
 $—
Europe47
 —
 49
 1
Asia/Pacific30
 1
 1
 —
Mining128
 1
 90
 2
Latin America68
 1
 58
 —
Caterpillar Power Finance171
 1
 282
 3
Total$458
 $5
 $504
 $6
Impaired Finance Receivables With
An Allowance Recorded
 
  
  
  
North America$44
 $—
 $42
 $—
Europe6
 —
 10
 —
Asia/Pacific28
 1
 35
 —
Mining—
 —
 19
 —
Latin America102
 1
 67
 1
Caterpillar Power Finance251
 3
 43
 —
Total$431
 $5
 $216
 $1
Total Impaired Finance Receivables 
  
  
  
North America$58
 $1
 $66
 $—
Europe53
 —
 59
 1
Asia/Pacific58
 2
 36
 —
Mining128
 1
 109
 2
Latin America170
 2
 125
 1
Caterpillar Power Finance422
 4
 325
 3
Total$889
 $10
 $720
 $7
        

UNAUDITED



(Millions of dollars)       
 Nine Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2016
Impaired Finance Receivables With
No Allowance Recorded
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
North America$12
 $1
 $19
 $1
Europe48
 1
 45
 1
Asia/Pacific22
 2
 2
 —
Mining128
 5
 84
 3
Latin America69
 2
 39
 —
Caterpillar Power Finance233
 7
 269
 8
Total$512
 $18
 $458
 $13
Impaired Finance Receivables With
An Allowance Recorded
 
  
  
  
North America$52
 $1
 $28
 $—
Europe6
 —
 11
 —
Asia/Pacific35
 2
 34
 2
Mining—
 —
 15
 —
Latin America101
 3
 59
 2
Caterpillar Power Finance141
 4
 50
 1
Total$335
 $10
 $197
 $5
Total Impaired Finance Receivables 
  
  
  
North America$64
 $2
 $47
 $1
Europe54
 1
 56
 1
Asia/Pacific57
 4
 36
 2
Mining128
 5
 99
 3
Latin America170
 5
 98
 2
Caterpillar Power Finance374
 11
 319
 9
Total$847
 $28
 $655
 $18
        

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




14
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)March 31, 2021December 31, 2020
Amortized CostAmortized 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
North America$76 $2 $27 $86 $1 $34 
EAME109 0 3 113 1 1 
Asia/Pacific20 0 14 13 0 13 
Mining7 1 1 21 1 0 
Latin America57 1 2 63 0 1 
Caterpillar Power Finance147 11 0 170 17 0 
Total$416 $15 $47 $466 $20 $49 
There was $3 million and less than $1 million of interest income recognized during the three months ended March 31, 2021 and 2020, respectively, for customer finance receivables on non-accrual status.

As of September 30, 2017March 31, 2021 and December 31, 2016, there2020, finance receivables 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 March 31, 2021 and December 31, 2020 and 0 interest income was recognized on dealer finance receivables on non-accrual status forduring the Dealer portfolio segment of $3 millionthree months ended March 31, 2021 and $-, respectively, all of which were in the Latin America finance receivable class. As of September 30, 2017 and December 31, 2016, there were finance receivables on non-accrual status for the Caterpillar Purchased Receivables portfolio segment of $- and $1 million, respectively, all of which were in the Europe finance receivable class. The recorded investment in Customer finance receivables on non-accrual status was as follows: 2020.
(Millions of dollars)September 30,
2017		 December 31,
2016
North America$48
 $66
Europe56
 35
Asia/Pacific11
 12
Mining55
 69
Latin America242
 307
Caterpillar Power Finance277
 90
Total$689
 $579
    

UNAUDITED




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

As of September 30, 2017, there were no additional funds committed to lend to a borrower whose terms have been modified in a TDR. As of December 31, 2016, there were $11 million of additional funds committed to lend to a borrower whose terms have been modified in a TDR.


There were no0 finance receivables modified as TDRs during the three and nine months ended September 30, 2017March 31, 2021 and 20162020 for the Dealer or Caterpillar Purchased Receivables portfolio segments. Our recorded investment in financeFinance receivables in the Customer portfolio segment modified as TDRs were as follows:
(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 America0 0 2 2 
Total$11 $5 $2 $2 


15
UNAUDITED

(Dollars in millions)Three Months Ended
September 30, 2017		 Three Months Ended
September 30, 2016
 
Number of
Contracts
 
Pre-TDR
Recorded
Investment
 
Post-TDR
Recorded
Investment
 
Number of
Contracts
 
Pre-TDR
Recorded
Investment
 
Post-TDR
Recorded
Investment
North America11
 $4
 $5
 2
 $—
 $—
Europe1
 —
 —
 —
 —
 —
Asia/Pacific—
 —
 —
 4
 1
 1
Mining—
 —
 —
 1
 33
 30
Latin America(1)
3
 21
 22
 341
 105
 74
Caterpillar Power Finance5
 51
 44
 4
 13
 13
Total20
 $76
 $71
 352
 $152
 $118
            
 Nine Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2016
 
Number of
Contracts
 
Pre-TDR
Recorded
Investment
 
Post-TDR
Recorded
Investment
 
Number of
Contracts
 
Pre-TDR
Recorded
Investment
 
Post-TDR
Recorded
Investment
North America37
 $13
 $13
 15
 $16
 $16
Europe2
 —
 —
 3
 11
 8
Asia/Pacific6
 39
 30
 8
 4
 4
Mining2
 57
 56
 2
 43
 35
Latin America17
 26
 27
 431
 117
 87
Caterpillar Power Finance(2)
59
 319
 305
 34
 196
 177
Total123
 $454
 $431
 493
 $387
 $327
            
(1) ForTDRs in the three months ended September 30, 2016, 321 contracts with a pre-TDR recorded investment of $94 million and a post-TDR recorded investment of $64 million are related to four customers.
(2) For the nine months ended September 30, 2017, 44 contracts with a pre-TDR recorded investment of $200 million and a post-TDR recorded investment of $200 million are related to four customers.

During the nine months ended September 30, 2017, there were 241 contracts, primarily related to two customers, with a recorded investment of $16 millionCustomer portfolio segment with a payment default (defined as 91+ days past due) which had been modified within twelve months prior to the default date, in the Customer portfolio segment, all of which were in the Latin America finance receivable class.as follows:

UNAUDITED
(Millions of dollars)Three Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
 Post-TDR
Amortized
Cost		Post-TDR
Amortized
Cost
North America$1 $0 
EAME0 10 
Asia/Pacific4 0 
Latin America0 1 
Caterpillar Power Finance5 0 
Total$10 $11 




4.Derivative Financial Instruments and Risk Management
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.  Risk management practices, including the use of financial derivative instruments, are presentedWe 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 least annually.

All derivatives are recognizedtheir fair value on the Consolidated Statements of Financial Position at their fair value.Position. On the date the derivative contract is entered into, we designate the derivative instrument isas (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 flowsflow (cash flow hedge) or (3) undesignated.  Changesan 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, are recordedrisk.  We record in current earnings.  ChangesAccumulated 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, are recorded in Accumulated other comprehensive income/(loss) (AOCI), to the extent effective, on the Consolidated Statements of Financial Position until they are reclassifiedwe reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings.  ChangesWe report changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings.  CashWe classify cash flows from designated derivative financial instruments are classified within the same category as the item being hedged on the Consolidated Statements of Cash Flows.  CashWe include cash flows from undesignated derivative financial instruments are included 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 option and cross currencyoption 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 ratefixed-rate assets and liabilities.
 

16
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, 2017, $2 millionMarch 31, 2021, the cumulative amount of deferred net gains, net of tax, included in equity (AOCI in the Consolidated Statements of Financial Position),fair value hedging adjustments related to our floating-to-fixedfixed-to-floating interest rate contracts are expected to be reclassified to Interest expense overincluded in the next twelve months.  The actualcarrying amount recorded in Interest expense will vary basedof Long-term debt was $31 million. Fair value gains and losses on these interest rates atrate contracts and the time therelated hedged transactions impact earnings.
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) Asset (Liability) Fair Value
 Consolidated Statements of
Financial Position Location		March 31,
2021		December 31,
2020
Designated derivatives   
Interest rate contractsOther assets$41 $59 
Interest rate contractsAccrued expenses(10)(5)
Cross currency contractsOther assets34 2 
Cross currency contractsAccrued expenses(64)(148)
  $1 $(92)
Undesignated derivatives   
Foreign exchange contractsOther assets$60 $17 
Foreign exchange contractsAccrued expenses(15)(107)
Cross currency contractsOther assets7 7 
Cross currency contractsAccrued expenses0 0 
  $52 $(83)
(Millions of dollars)     
   Asset (Liability) Fair Value
 
Consolidated Statements of
Financial Position Location
 September 30,
2017		 December 31,
2016
Designated derivatives     
Interest rate contractsOther assets $3
 $4
Interest rate contractsAccrued expenses (1) (1)
Cross currency contractsOther assets 8
 29
Cross currency contractsAccrued expenses (41) (3)
   $(31) $29
Undesignated derivatives   
  
Foreign exchange contractsOther assets $17
 $12
Foreign exchange contractsAccrued expenses (8) (4)
Cross currency contractsOther assets 25
 27
   $34
 $35
      

The total notional amount of our derivative instruments was $3.56$10.64 billion and $2.63$11.26 billion as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. The notional amounts of derivative financial instruments do not represent amounts exchanged by the parties. TheWe calculate the amounts exchanged by the parties are calculated by reference toreferencing the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates and interest rates.



17
UNAUDITED

The effect of derivatives designated as hedging instruments on the Consolidated Statements of Profit was as follows:
Cash Flow Hedges
(Millions of dollars)Three Months Ended March 31, 2021
Recognized in Earnings
 Amount of
Gains (Losses)
Recognized
in AOCI		ClassificationAmount of
Gains (Losses)
Reclassified
from AOCI		Amount of the line
items in the
Consolidated
Statements of Profit
Interest rate contracts$0 Interest expense$(10)$125 
Cross currency contracts119 Other income (expense)112 (8)
Interest expense2 125 
 $119  $104 
Three Months Ended March 31, 2020
 Recognized in Earnings
 Amount of
Gains (Losses)
Recognized
in AOCI		ClassificationAmount of
Gains (Losses)
Reclassified
from AOCI		Amount of the line
items in the
Consolidated
Statements of Profit
Interest rate contracts$(15)Interest expense$(5)$175 
Cross currency contracts101 Other income (expense)71 (10)
Interest expense11 175 
 $86  $77 
Fair Value Hedges
(Millions of dollars)  Three Months Ended
September 30, 2017		 Three Months Ended
September 30, 2016
 Classification 
Gains
(Losses)
on
Derivatives
 
Gains
(Losses)
on
Borrowings 
 
Gains
(Losses)
on
Derivatives
 
Gains 
(Losses)
on
Borrowings
Interest rate contractsOther income (expense) $—
 $—
 $(11) $11
          
   Nine Months Ended
September 30, 2017		 Nine Months Ended
September 30, 2016
 Classification 
Gains
(Losses)
on
Derivatives
 
Gains
(Losses)
on
Borrowings 
 
Gains
(Losses)
on
Derivatives
 
Gains 
(Losses)
on
Borrowings
Interest rate contractsOther income (expense) $(1) $1
 $(11) $10
          


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.
UNAUDITED



Cash Flow Hedges
(Millions of dollars)Three Months Ended September 30, 2017
  Recognized in Earnings
 
Amounts of Gains
(Losses) Recognized in
AOCI (Effective Portion)
Classification 
Reclassified from
AOCI to Earnings
(Effective Portion)
 
Recognized in
Earnings
(Ineffective Portion)
Interest rate contracts$(1)Interest expense $1
 $—
Cross currency contracts(21)Other income (expense) (20) —
Cross currency contracts Interest expense 1
 —
 $(22)  $(18) $—
       
 Three Months Ended September 30, 2016
  Recognized in Earnings
 
Amounts of Gains
(Losses) Recognized in
AOCI (Effective Portion)
Classification 
Reclassified from
AOCI to Earnings
(Effective Portion)
 
Recognized in
Earnings
(Ineffective Portion)
Interest rate contracts$2
Interest expense $—
 $—
Cross currency contracts(17)Other income (expense) (10) —
 $(15)  $(10) $—
       
 Nine Months Ended September 30, 2017
  Recognized in Earnings
 
Amounts of Gains
(Losses) Recognized in
AOCI (Effective Portion)
Classification 
Reclassified from
AOCI to Earnings
(Effective Portion)
 
Recognized in
Earnings
(Ineffective Portion)
Interest rate contracts$(1)Interest expense $2
 $—
Cross currency contracts(62)Other income (expense) (69) —
Cross currency contracts Interest expense 3
 —
 $(63)  $(64) $—
       
 Nine Months Ended September 30, 2016
  Recognized in Earnings
 
Amounts of Gains
(Losses) Recognized in
AOCI (Effective Portion)
Classification 
Reclassified from
AOCI to Earnings
(Effective Portion)
 
Recognized in
Earnings
(Ineffective Portion)
Interest rate contracts$—
Interest expense $(3) $—
Cross currency contracts(23)Other income (expense) (16) —
 $(23)  $(19) $—
       

UNAUDITED



The effect of derivatives not designated as hedging instruments on the Consolidated Statements of Profit was as follows:
(Millions of dollars) Three Months Ended March 31,
 Classification20212020
Foreign exchange contractsOther income (expense)$85 $99 
Cross currency contractsOther income (expense)1 9 
  $86 $108 



18
(Millions of dollars)  Three Months Ended September 30,
 Classification 2017 2016
Foreign exchange contractsOther income (expense) $14
 $(5)
Cross currency contractsOther income (expense) (3) —
   $11
 $(5)
      
   Nine Months Ended September 30,
 Classification 2017 2016
Foreign exchange contractsOther income (expense) $25
 $(21)
Cross currency contractsOther income (expense) (4) (12)
   $21
 $(33)
      
UNAUDITED


Balance sheet offsetting
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, 2017March 31, 2021 and December 31, 2016,2020, 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)March 31,
2021		December 31,
2020
Derivative Assets
Gross Amount of Recognized Assets$142 $85 
Gross Amounts Offset0 0 
Net Amount of Assets(1)
142 85 
Gross Amounts Not Offset(55)(57)
Net Amount$87 $28 
Derivative Liabilities
Gross Amount of Recognized Liabilities$(89)$(260)
Gross Amounts Offset0 0 
Net Amount of Liabilities(1)
(89)(260)
Gross Amounts Not Offset55 57 
Net Amount$(34)$(203)
Offsetting of Derivative Assets and Liabilities    
(Millions of dollars)    
  September 30,
2017		 December 31,
2016
Derivative Assets    
Gross Amount of Recognized Assets $53
 $72
Gross Amounts Offset —
 —
Net Amount of Assets(1)
 53
 72
Gross Amounts Not Offset (8) (7)
Net Amount $45
 $65
     
Derivative Liabilities    
Gross Amount of Recognized Liabilities $(50) $(8)
Gross Amounts Offset —
 —
Net Amount of Liabilities(1)
 (50) (8)
Gross Amounts Not Offset 8
 7
Net Amount $(42) $(1)
     
(1) As presented in the Consolidated Statements of Financial Position.


19
UNAUDITED




5.Accumulated Other Comprehensive Income (Loss)
5.Accumulated Other Comprehensive Income/(Loss)
 
We present Comprehensive income/income (loss) and its components are presented in the Consolidated Statements of Comprehensive Income. Changes in Accumulated other comprehensive income/income (loss), net of tax, included in the Consolidated Statements of Changes in Shareholder'sShareholder’s Equity, consisted of the following:
(Millions of dollars)Three Months Ended
March 31,
20212020
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) deferred119 86 
Less: Tax provision/(benefit)25 19 
Net gains (losses) deferred94 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 tax11 6 
Balance at end of period$(33)$(62)
Total Accumulated other comprehensive income (loss) at end of period$(703)$(1,145)
(Millions of dollars)
Foreign
currency
translation
 
Derivative
financial
instruments
 
Available-for-
sale securities
 Total
        
Three Months Ended September 30, 2016       
Balance at June 30, 2016$(790) $1
 $(2) $(791)
Other comprehensive income/(loss) before
reclassifications
(5) (10) 1
 (14)
Amounts reclassified from accumulated other
comprehensive (income)/loss
—
 7
 —
 7
Other comprehensive income/(loss)(5) (3) 1
 (7)
Balance at September 30, 2016$(795) $(2) $(1) $(798)
        
Three Months Ended September 30, 2017       
Balance at June 30, 2017$(756) $2
 $1
 $(753)
Other comprehensive income/(loss) before
reclassifications
151
 (14) (1) 136
Amounts reclassified from accumulated other
comprehensive (income)/loss
—
 11
 —
 11
Other comprehensive income/(loss)151
 (3) (1) 147
Balance at September 30, 2017$(605) $(1) $—
 $(606)
        
Nine Months Ended September 30, 2016       
Balance at December 31, 2015$(897) $—
 $—
 $(897)
Other comprehensive income/(loss) before
reclassifications
102
 (15) (1) 86
Amounts reclassified from accumulated other
comprehensive (income)/loss
—
 13
 —
 13
Other comprehensive income/(loss)102
 (2) (1) 99
Balance at September 30, 2016$(795) $(2) $(1) $(798)
        
Nine Months Ended September 30, 2017       
Balance at December 31, 2016$(994) $(1) $—
 $(995)
Other comprehensive income/(loss) before
reclassifications
389
 (41) —
 348
Amounts reclassified from accumulated other
comprehensive (income)/loss
—
 41
 —
 41
Other comprehensive income/(loss)389
 —
 —
 389
Balance at September 30, 2017$(605) $(1) $—
 $(606)
        

UNAUDITED




The effect of the reclassifications out of Accumulated other comprehensive income/income (loss) on the Consolidated Statements of Profit was as follows:
(Millions of dollars)Three Months Ended
March 31,
Derivative financial instrumentsClassification of
income (expense)		20212020
Cross currency contractsOther income (expense)$112 $71 
Cross currency contractsInterest expense2 11 
Interest rate contractsInterest expense(10)(5)
Reclassifications before tax104 77 
Tax (provision) benefit(21)(16)
Total reclassifications from Accumulated other comprehensive income (loss)$83 $61 


20
(Millions of dollars)  Three Months Ended
September 30,		 Nine Months Ended
September 30,
 
Classification of
income (expense)
 2017 2016 2017 2016
Cross currency contractsOther income (expense) $(20) $(10) $(69) $(16)
Cross currency contractsInterest expense 1
 —
 3
 —
Interest rate contractsInterest expense 1
 —
 2
 (3)
Reclassifications before tax  (18) (10) (64) (19)
Tax (provision) benefit  7
 3
 23
 6
Total reclassifications from Accumulated other comprehensive
income/(loss)
 $(11) $(7) $(41) $(13)
          
UNAUDITED


6.Segment Information
6.Segment Information


A.     Basis for Segment Information


We report information internally for operating segments based on management responsibility. Our operating segments offerprovide financing alternatives to customers and dealers foraround the purchase and lease of Caterpillar and other equipment, as well as financingworld for Caterpillar sales to dealers.products and vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts,retail loans, working capital loans to Caterpillar dealers and wholesale financing plans within each of the respectiveoperating segments. Certain operating segments also purchase short-term trade receivables from Caterpillar.


B.     Description of Segments


We have fivesix 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.
Europe •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 Southeast Asia.  
India.  
•Latin Americaand Caterpillar Power Finance - Includes our operations in Mexico and Central and South American countries. This segment also includes
•Caterpillar Power Finance (CPF), which finances- Provides financing worldwide for marine vessels with Caterpillar engines worldwide and also provides financing for Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems worldwide. 
systems. 
•Mining - ServesProvides financing for large mining customers worldwide and provides project financing in various countries. 
worldwide.


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'ssegment’s respective finance receivable portfolio. Capital expenditures include expenditures for equipment on operating leases and other miscellaneous capital expenditures.

UNAUDITED




Reconciling items are created based on accounting differences between segment reporting and consolidated external reporting. For the reconciliation of profitProfit 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.
•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.


21
◦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.
◦The profit attributable to noncontrolling interests is considered a component of segment profit.

UNAUDITED

Supplemental segment data and reconciliations to consolidated external reporting for the three months ended September 30March 31 was as follows:
(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$347 $99 $69 $137 $1 $14,928 $178 
EAME67 30 5 15 (4)4,947 10 
Asia/Pacific92 51 23 2 0 4,902 3 
Latin America47 16 14 2 3 2,504 7 
Caterpillar Power Finance13 11 4 1 (7)1,184 0 
Mining71 18 10 35 (3)2,582 26 
Total Segments637 225 125 192 (10)31,047 224 
Unallocated5 (72)50 0 0 1,373 4 
Timing(3)1 0 0 0 12 0 
Methodology0 42 (50)0 0 (107)0 
Inter-segment Eliminations (1)
0 0 0 0 0 (242)0 
Total$639 $196 $125 $192 $(10)$32,083 $228 
2020External
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$382 $75 $94 $144 $22 $14,749 $220 
EAME70 16 13 16 7 4,981 4 
Asia/Pacific86 36 27 2 7 4,585 3 
Latin America53 6 23 3 7 2,621 3 
Caterpillar Power Finance20 1 8 0 5 1,308 0 
Mining81 8 17 36 13 2,575 16 
Total Segments692 142 182 201 61 30,819 246 
Unallocated9 (70)56 0 0 1,576 1 
Timing(6)(1)0 0 0 12 0 
Methodology0 56 (63)0 0 (152)0 
Inter-segment Eliminations (1)
0 0 0 0 0 (264)0 
Total$695 $127 $175 $201 $61 $31,991 $247 
(Millions of dollars)


 
2017
External
Revenues
 
Profit
before
income
taxes
 
Interest
Expense
 
Depreciation
on equipment
leased to
others
 
Provision
for
credit
losses
 
Assets at
September 30,
2017
 
Capital
expenditures
North America$338
 $90
 $77
 $130
 $11
 $14,703
 $187
Europe68
 20
 9
 19
 2
 4,084
 25
Asia/Pacific68
 25
 22
 5
 1
 3,924
 2
Latin America and CPF101
 2
 41
 10
 20
 6,371
 6
Mining71
 12
 12
 36
 4
 2,372
 88
Total Segments646
 149
 161
 200
 38
 31,454
 308
Unallocated35
 (47) 50
 —
 —
 2,718
 —
Timing(8) (13) —
 1
 10
 16
 —
Methodology—
 37
 (42) —
 —
 (225) —
Inter-segment Eliminations (1)
—
 —
 —
 —
 —
 (280) —
Total$673
 $126
 $169
 $201
 $48
 $33,683
 $308
              
2016
External
Revenues
 
Profit
before
income
taxes
 
Interest
Expense
 
Depreciation
on equipment
leased to
others
 
Provision
for
credit
losses
 
Assets at
December 31,
2016
 
Capital
expenditures
North America$310
 $79
 $70
 $123
 $10
 $14,925
 $281
Europe68
 21
 8
 21
 1
 3,834
 44
Asia/Pacific65
 20
 21
 8
 1
 3,620
 4
Latin America and CPF122
 31
 36
 15
 17
 7,270
 11
Mining73
 14
 11
 45
 (3) 2,734
 19
Total Segments638
 165
 146
 212
 26
 32,383
 359
Unallocated21
 (35) 32
 —
 —
 1,688
 (3)
Timing(8) (7) —
 1
 3
 27
 —
Methodology—
 23
 (27) —
 —
 (220) —
Inter-segment Eliminations (1)
—
 —
 —
 —
 —
 (263) —
Total$651
 $146
 $151
 $213
 $29
 $33,615
 $356
              
(1) Eliminations are Elimination is primarily related to intercompany loans.


22
UNAUDITED




7.Commitments and Contingent Liabilities
Supplemental segment data and reconciliations to consolidated external reporting for the nine months ended September 30 was as follows:
(Millions of dollars)


 
2017
External
Revenues
 
Profit
before
income
taxes
 
Interest
Expense
 
Depreciation
on equipment
leased to
others
 
Provision
for
credit
losses
 
Assets at
September 30,
2017
 
Capital
expenditures
North America$989
 $262
 $224
 $388
 $25
 $14,703
 $722
Europe200
 62
 27
 60
 —
 4,084
 71
Asia/Pacific197
 73
 64
 19
 (5) 3,924
 5
Latin America and CPF335
 48
 124
 33
 56
 6,371
 48
Mining213
 57
 37
 107
 (5) 2,372
 168
Total Segments1,934
 502
 476
 607
 71
 31,454
 1,014
Unallocated100
 (128) 139
 —
 —
 2,718
 4
Timing(23) (20) —
 1
 11
 16
 —
Methodology—
 103
 (116) —
 —
 (225) —
Inter-segment Eliminations (1)
—
 —
 —
 —
 —
 (280) —
Total$2,011
 $457
 $499
 $608
 $82
 $33,683
 $1,018
              
2016
External
Revenues
 
Profit
before
income
taxes
 
Interest
Expense
 
Depreciation
on equipment
leased to
others
 
Provision
for
credit
losses
 
Assets at
December 31,
2016
 
Capital
expenditures
North America$927
 $255
 $216
 $350
 $23
 $14,925
 $933
Europe202
 63
 25
 62
 3
 3,834
 120
Asia/Pacific190
 56
 62
 21
 6
 3,620
 73
Latin America and CPF367
 76
 118
 47
 59
 7,270
 35
Mining232
 35
 35
 145
 3
 2,734
 105
Total Segments1,918
 485
 456
 625
 94
 32,383
 1,266
Unallocated60
 (99) 81
 —
 1
 1,688
 —
Timing(25) (13) —
 2
 1
 27
 (1)
Methodology—
 66
 (79) —
 —
 (220) —
Inter-segment Eliminations (1)
—
 —
 —
 —
 —
 (263) —
Total$1,953
 $439
 $458
 $627
 $96
 $33,615
 $1,265
              
(1) Eliminations are primarily related to intercompany loans.

7.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, 2017March 31, 2021 and December 31, 2016,2020, the related recorded liability was less than $1 million and $1 million, respectively.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 $87 million and $43$40 million at September 30, 2017March 31, 2021 and December 31, 2016, respectively.2020.
UNAUDITED





We provide guarantees to repurchase certain loans of Caterpillar dealers from a special purposespecial-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'sSPC’s economic performance and the obligation to absorb losses and therefore we have consolidated the financial statements of the SPC. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the SPC’s assets of $1.10 billion$841 million and $1.09$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'sSPC’s liabilities of $1.10 billion$840 million and $1.09$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
8.Fair Value Measurements
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.
A.Fair Value Measurements


23
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.


FairWe classify fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation.  A measurementWe may therefore be classifiedclassify 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 modelsvaluation model that utilizeutilizes 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 a standard industry accepted valuation modelmodels that discountsdiscount 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 $3$53 million and $64a net liability position of $175 million as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.


UNAUDITEDLoans measured at fair value



Impaired loans
Our impairedCertain loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is considered impairedmeasured 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 $251$232 million and $137$243 million as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.

24
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 useduse the following methods and assumptions to estimate the fair value of our financial instruments.instruments:


Cash and cash equivalents – carrying amount approximatedapproximates fair value. 
Restricted cash and cash equivalents – carrying amount approximates fair value. 
Finance receivables, net – we estimate fair value was estimated by discounting the future cash flows using current rates representative of receivables with similar remaining maturities. 
Restricted cash and cash equivalents – carrying amount approximated fair value. 
Short-term borrowings – carrying amount approximatedapproximates fair value. 
Long-term debt – we estimate fair value for fixed and floating-rate debt was estimated based on quoted market prices.
Guarantees – fair value of guarantees is based on our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone, arms-length transaction with an unrelated party.  If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions.

Please refer to the table below for the fairFair values of our financial instruments.instruments were as follows:
(Millions of dollars)March 31, 2021December 31, 2020
 Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value		Fair Value
Levels		Reference
Cash and cash equivalents$735 $735 $411 $411 1
Restricted cash and cash equivalents(1)
$9 $9 $14 $14 1
Finance receivables, net (excluding finance leases(2))
$18,580 $18,844 $18,599 $18,910 3Note 3
Interest rate contracts:
In a receivable position$41 $41 $59 $59 2Note 4
In a payable position$(10)$(10)$(5)$(5)2Note 4
Cross currency contracts:
In a receivable position$41 $41 $9 $9 2Note 4
In a payable position$(64)$(64)$(148)$(148)2Note 4
Foreign exchange contracts:
In a receivable position$60 $60 $17 $17 2Note 4
In a payable position$(15)$(15)$(107)$(107)2Note 4
Short-term borrowings$(3,625)$(3,625)$(2,005)$(2,005)1
Long-term debt$(23,503)$(23,960)$(23,979)$(24,614)2
(Millions of dollars)September 30, 2017 December 31, 2016    
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Fair Value
Levels
 Reference
Cash and cash equivalents$710
 $710
 $1,795
 $1,795
 1  
Finance receivables, net (excluding finance leases(1))
$19,797
 $19,787
 $20,101
 $19,949
 3 Note 3
Interest rate contracts:           
In a net receivable position$3
 $3
 $4
 $4
 2 Note 4
In a net payable position$(1) $(1) $(1) $(1) 2 Note 4
Cross currency contracts:           
In a receivable position$33
 $33
 $56
 $56
 2 Note 4
In a payable position$(41) $(41) $(3) $(3) 2 Note 4
Foreign currency contracts:           
In a receivable position$17
 $17
 $12
 $12
 2 Note 4
In a payable position$(8) $(8) $(4) $(4) 2 Note 4
Restricted cash and cash equivalents(2)
$31
 $31
 $29
 $29
 1  
Short-term borrowings$(5,459) $(5,459) $(7,094) $(7,094) 1  
Long-term debt$(21,629) $(21,854) $(20,537) $(20,724) 2  
Guarantees$—
 $—
 $(1) $(1) 3 Note 7
            
(1)As of September 30, 2017 and December 31, 2016, represents finance leases with a net carrying value of $6.80 billion and $6.11 billion, respectively.
(2) Included in Other assets in the Consolidated Statements of Financial Position.

UNAUDITED(2) Represents finance leases and failed sale leasebacks of $7.92 billion and $7.98 billion as of March 31, 2021 and December 31, 2020, respectively.




9.Contingencies
9.Income Taxes
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.

10.
Income Taxes


The Provisionprovision for income taxes reflectsreflected an estimated annual tax rate of 3027 percent in the thirdfirst quarter of 2017,2021, compared with 3126 percent in the thirdfirst quarter of 2016.2020. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.



25
UNAUDITED




ITEM 2. MANAGEMENT'SMANAGEMENT’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 2020 Form 10-K.

OVERVIEW


We reported third-quarter 2017first-quarter 2021 revenues of $673$639 million, an increasea decrease of $22$56 million, or 38 percent, compared with the thirdfirst quarter of 2016. 2020. First-quarter 2021 profit was $140 million, a $50 million, or 56 percent, increase from the first quarter of 2020.

The increasedecrease in revenues was primarily due to a $15$40 million favorableunfavorable impact from higherlower average financing rates and a $14 million favorable impact from lending activity with Caterpillar, partially offset by a $6$19 million unfavorable impact from lower average earning assets.


ProfitFirst-quarter 2021 profit before income taxes was $126$196 million, fora $69 million, or 54 percent, increase from the thirdfirst quarter of 2017, compared with $146 million for the third quarter of 2016.2020. The decreaseincrease was primarily due to a $19$71 million increasedecrease in provision for credit losses, andpartially offset by a $16$13 million increase in general, operating and administrative expenses, primarily due to higher incentive compensation. These unfavorable impacts were partiallyThe impact of lower average financing rates was offset by a $9 million favorable impact from lending activity with Caterpillar and an $8 million increase in net yield on average earning assets.lower interest expense.


The Provisionprovision for income taxes reflectsreflected an estimated annual tax rate of 3027 percent in the thirdfirst quarter of 2017,2021, compared with 3126 percent in the thirdfirst quarter of 2016.2020.


During the thirdfirst quarter of 2017,2021, retail new business volume was $2.78$2.81 billion, an increase of $83$497 million, or 321 percent, from the thirdfirst quarter of 2016.2020. The increase was primarily related todriven by higher volume in Asia/Pacific, North America, Mining and Mining,EAME, partially offset by decreasesa decrease in Latin America and Caterpillar Power Finance.America.


At the end of the thirdfirst quarter of 2017,2021, past dues were 2.732.90 percent, compared with 2.774.13 percent at the end of the thirdfirst quarter of 2016.2020. Past dues decreased across all portfolio segments as global markets generally improved. Write-offs, net of recoveries, were $47$24 million for the thirdfirst quarter of 2017,2021, compared with $29$30 million for the thirdfirst quarter of 2016. The increase in write-offs, net of recoveries, was primarily due to the Latin America and marine portfolios.2020. As of September 30, 2017,March 31, 2021, the allowance for credit losses totaled $343$441 million, or 1.271.64 percent of finance receivables, compared with $346$479 million, or 1.281.77 percent of finance receivables at September 30, 2016. The allowance for credit losses at year-end 2016 was $343 million, or 1.29 percentDecember 31, 2020.

Response to COVID-19 and Global Business Conditions
We continue to implement safeguards in our facilities to protect team members, including increased frequency of finance receivables.cleaning and disinfecting, social distancing practices and other measures consistent with specific governmental requirements and guidance from health authorities and continue to monitor the situation closely. We remain focused on portfolio health and continue to provide qualified customers and dealers with new loans and leases to support their current and future business needs.


26
UNAUDITED




THIRDFIRST QUARTER 20172021 COMPARED WITH THIRDFIRST QUARTER 20162020


Consolidated Total Revenues
consrev3q17vs3q16.jpg
cfsc-20210331_g2.jpg
The chart above graphically illustrates reasons for the change in Consolidated Total Revenuesconsolidated total revenues between thirdfirst quarter 20162020 (at left) and thirdfirst quarter 20172021 (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 thirdfirst quarter of 20172021 was $309$303 million, an increasea decrease of $2$26 million from the same period in 2016.2020. The increasedecrease was primarily due to an $8a $25 million favorableunfavorable impact from higherlower interest rates on retail finance receivables, partially offset byreceivables. For the quarter ended March 31, 2021, retail average earning assets were $22.63 billion, a $6decrease of $34 million from the same period in 2020. The annualized average yield was 5.36 percent for the first quarter of 2021, compared with 5.80 percent for the first quarter of 2020.

Operating lease revenue for the first quarter of 2021 was $244 million, a decrease of $13 million from the same period in 2020. The decrease was primarily due to a $14 million unfavorable impact from lower average earning assets. For

Wholesale revenue for the first quarter ended September 30, 2017, retail average earning assets were $23.05 billion,of 2021 was $78 million, a decrease of $544$21 million from the same period in 2016. The annualized average yield was 5.37 percent for the third quarter of 2017, compared with 5.20 percent for the third quarter of 2016.

Operating lease revenue for the third quarter of 2017 was $247 million, a decrease of $10 million from the same period in 2016.2020. The decrease was due to a $12$14 million unfavorable impact from lower average earning assets partially offset byand a $2$7 million favorableunfavorable impact from higher average rentallower interest rates on operating leases.

Wholesale revenue forwholesale finance receivables. For the third quarter ended March 31, 2021, wholesale average earning assets were $4.16 billion, a decrease of 2017 was $79 million, an increase of $17$663 million from the same period in 2016. The increase was due to an $11 million favorable impact from higher interest rates on wholesale finance receivables and a $6 million favorable impact from higher average earning assets. For the quarter ended September 30, 2017, wholesale average earning assets were $3.94 billion, an increase of $366 million from the same period in 2016.2020. The annualized average yield was 8.077.51 percent for the thirdfirst quarter of 2017,2021, compared with 6.918.22 percent for the thirdfirst quarter of 2016.2020.


Other revenue, net items were as follows:
(Millions of dollars)
Three Months Ended
September 30,
(Millions of dollars)
Three Months Ended
March 31,
2017
2016 $ Change 20212020Change
Interest income on Notes Receivable from Caterpillar(1)
$21
 $9
 $12
Finance receivable and operating lease fees (including late charges)(2)
21

19
 2
Fees on committed credit facility extended to Caterpillar10

10
 —
Finance receivable and operating lease fees (including late charges)Finance receivable and operating lease fees (including late charges)$13 $13 $— 
Interest income on Notes receivable from CaterpillarInterest income on Notes receivable from Caterpillar4 3 1 
Net loss on returned or repossessed equipment(20) (16) (4)Net loss on returned or repossessed equipment(6)(9)3 
Miscellaneous other revenue, net6

3
 3
Miscellaneous other revenue, net3 3 — 
Total Other revenue, net$38

$25
 $13
Total Other revenue, net$14 $10 $4 
     
(1)For the three months ended September 30, 2017 and 2016, includes $7 million and
There was a $9 million respectively,favorable impact from currency on revenues in the first quarter of portfolio-related revenues.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.
(2)Portfolio-related revenues.


27
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Consolidated Profit Before Income Taxes
pbt3q17vs3q16.jpg
cfsc-20210331_g3.jpg
(1) Analysis excludes $5 million in offsetting revenues and expenses for property taxes on operating leases for both the first quarter of 2021 and 2020.
The chart above graphically illustrates reasons for the change in Consolidated Profit Before Income Taxesconsolidated profit before income taxes between thirdfirst quarter 20162020 (at left) and thirdfirst quarter 20172021 (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.


ProfitFirst-quarter 2021 profit before income taxes was $126$196 million, compared with $127 million for the thirdfirst quarter of 2017, compared with $146 million for the third quarter of 2016.2020. The decreaseincrease was primarily due to a $19$71 million increasedecrease in provision for credit losses, andpartially offset by a $16$13 million increase in general, operating and administrative expenses, primarily due to higher incentive compensation. These unfavorable impacts were partiallyThe impact of lower average financing rates was offset by lower interest expense.

There was a $9$5 million favorable impact from lending activity with Caterpillarcurrency on profit before income taxes in the first quarter of 2021. Currency represents the net translation impact resulting from changes in foreign currency exchange rates versus the U.S. dollar and an $8 million increaseis included in net yield on average earning assets.all financial statement line items and each of the items included in the above analysis.


Provision for income taxesIncome Taxes
The Provisionprovision for income taxes reflectsreflected an estimated annual tax rate of 3027 percent in the thirdfirst quarter of 2017,2021, compared with 3126 percent in the thirdfirst quarter of 2016.2020.








28
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NINE MONTHS ENDED SEPTEMBER 30, 2017 VS. NINE MONTHS ENDED SEPTEMBER 30, 2016

Consolidated Total Revenues
consrev3q17ytdvs3q16ytd.jpg
The chart above graphically illustrates reasons for the change in Consolidated Total Revenues between September YTD 2016 (at left) and September YTD 2017 (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 2017 was $924 million, an increase of $10 million from the same period in 2016. The increase was due to a $29 million favorable impact from higher interest rates on retail finance receivables, partially offset by a $19 million unfavorable impact from lower average earning assets. For the nine months ended September 30, 2017, retail average earning assets were $23.09 billion, a decrease of $493 million from the same period in 2016. The annualized average yield was 5.34 percent for the first nine months of 2017, compared with 5.17 percent for the same period in 2016.

Operating lease revenue for the first nine months of 2017 was $737 million, a decrease of $19 million from the same period in 2016. The decrease was due to a $16 million unfavorable impact from lower average earning assets and a $3 million unfavorable impact from lower average rental rates on operating leases.

Wholesale revenue for the first nine months of 2017 was $222 million, an increase of $20 million from the same period in 2016. The increase was due to a $27 million favorable impact from higher interest rates on wholesale finance receivables, partially offset by a $7 million unfavorable impact from lower average earning assets. For the nine months ended September 30, 2017, wholesale average earning assets were $3.70 billion, a decrease of $135 million from the same period in 2016. The annualized average yield was 8.01 percent for the first nine months of 2017, compared with 7.00 percent for the same period in 2016.

Other revenue, net, items were as follows:
(Millions of dollars)
 
Nine Months Ended
September 30,
 2017 2016 $ Change
Interest income on Notes Receivable from Caterpillar(1)
$59
 $23
 $36
Finance receivable and operating lease fees (including late charges)(2)
57
 55
 2
Fees on committed credit facility extended to Caterpillar30
 30
 —
Net loss on returned or repossessed equipment(30) (36) 6
Miscellaneous other revenue, net12
 9
 3
Total Other revenue, net$128
 $81
 $47
      
(1)For the nine months ended September 30, 2017 and 2016, includes $20 million and $23 million, respectively, of portfolio-related revenues.
(2)Portfolio-related revenues.
UNAUDITED



Consolidated Profit Before Income Taxes
pbt3q17ytdvs3q16ytd.jpg
The chart above graphically illustrates reasons for the change in Consolidated Profit Before Income Taxes between September YTD 2016 (at left) and September YTD 2017 (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 $457 million for the first nine months of 2017, compared with $439 million for the same period in 2016. The increase was primarily due to a $26 million favorable impact from lending activity with Caterpillar, a $17 million increase in net yield on average earning assets and a $14 million decrease in provision for credit losses. These favorable impacts were partially offset by a $27 million increase in general, operating and administrative expenses primarily due to higher incentive compensation and an $18 million unfavorable impact from lower average earning assets.

Provision for income taxes
The Provision for income taxes reflects an estimated annual tax rate of 30 percent for the nine months ended September 30, 2017, compared with 31 percent for the nine months ended September 30, 2016.

Finance Receivables and Equipment on Operating Leases


New Business Volume
(Millions of dollars)Three Months Ended
March 31,
20212020Change
New retail financing$2,579 $2,060 $519 
New operating lease activity230 252 (22)
New wholesale financing9,638 8,833 805 
Total$12,447 $11,145 $1,302��
(Millions of dollars)Nine Months Ended
September 30,
 2017 2016 $ Change
New retail financing$6,785
 $6,771
 $14
New operating lease activity1,029
 1,295
 (266)
New wholesale financing26,349
 23,194
 3,155
Total$34,163
 $31,260
 $2,903
      


New retail financing increased primarily due to higher volume in North America, Asia/Pacific, Mining and EAME, partially offset by lower volume across all other regions. New operating lease activity (which is substantially related to retail) decreased primarily due to lower rentals of Cat equipmenta decrease in North America, Europe and Asia/Pacific.Latin America. New wholesale financing increased primarily due to higher purchases of trade receivables from Caterpillar.

UNAUDITED




Total Managed Portfolio
We define total portfolio as financeFinance receivables, net plus equipmentEquipment on operating leases, less accumulated depreciation.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)
March 31,
2021		December 31,
2020		Change
Finance receivables, net$26,500 $26,575 $(75)
Equipment on operating leases, net3,237 3,366 (129)
Total portfolio$29,737 $29,941 $(204)
Retail loans, net$125 $139 $(14)
Retail leases, net44 56 (12)
Operating leases23 24 (1)
Total off-balance sheet managed assets$192 $219 $(27)
Total managed portfolio$29,929 $30,160 $(231)
(Millions of dollars)
September 30,
2017		 December 31,
2016		 $ Change
Finance receivables, net$26,597
 $26,212
 $385
Equipment on operating leases, less accumulated depreciation3,580
 3,708
 (128)
Total portfolio$30,177
 $29,920
 $257
      
Retail finance leases$91
 $41
 $50
Retail installment sale contracts75
 79
 (4)
Retail notes receivable58
 87
 (29)
Operating leases43
 79
 (36)
Total off-balance sheet managed assets$267
 $286
 $(19)
      
Total managed portfolio$30,444
 $30,206
 $238
      


Total Portfolio Metrics
At the end of the thirdfirst quarter of 2017,2021, past dues were 2.732.90 percent, compared with 2.774.13 percent at the end of the thirdfirst quarter of 2016.2020. Past dues 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 $692$509 million and $580$567 million at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Total non-performing finance receivables as a percentage of our recorded investment in finance receivables were 2.571.89 percent and 2.182.10 percent at September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively.


Our allowance for credit losses as of September 30, 2017March 31, 2021 was $343$441 million, or 1.271.64 percent of finance receivables, compared with $343$479 million, or 1.291.77 percent, as of December 31, 2016.2020. 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 current economic conditions.forecasts. We believe our allowance is sufficient to provide for losses inherent inover the remaining life of our existing finance receivable portfolio as of September 30, 2017.March 31, 2021.


29
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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 thirdfirst quarter of 2017,2021, we experienced favorable liquidity conditions. We ended the thirdfirst quarter of 20172021 with $710$735 million of cash, a decreasean increase of $1.09 billion$324 million from year-end 2016.2020. Our cash balances are held in numerous locations throughout the world with approximately $385$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 December 2016, Moody's Investors Service downgradedApril 2021, Moody’s upgraded our long-term ratingsdebt rating to A3 from A2,“mid A”, while Fitch and short-term ratings to Prime-2 from Prime-1.  The Moody’s downgrade did not haveS&P maintain a material impact on our borrowing costs or our overall financial health.“mid-A” debt rating. A further downgrade of our creditdebt ratings by Moody's or oneany of the other major credit rating agencies would result in increased borrowing costs and could make access to certain credit markets more difficult. However, our long-term ratings with Fitch and S&P continue to be "mid-A". 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 revolvingcommitted credit facilities and our other credit line facilities, and potential borrowings from Caterpillar. In addition, Caterpillar maintains a support agreement with us, which requires Caterpillar to remain as 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, 2017March 31, 2021 were $28.58$27.15 billion, a decreasean increase of $687$144 million over December 31, 2016.2020. Outstanding borrowings were as follows:
(Millions of dollars)
 		March 31,
2021		December 31,
2020
Medium-term notes, net$23,100 $23,550 
Commercial paper, net of unamortized discount2,895 1,321 
Bank borrowings and other – long-term403 429 
Bank borrowings and other – short-term360 307 
Variable denomination floating rate demand notes370 377 
Notes payable to Caterpillar22 1,022 
Total outstanding borrowings$27,150 $27,006 
(Millions of dollars)
 		September 30,
2017		 December 31,
2016
Medium-term notes, net of unamortized discount and debt issuance costs$20,828
 $19,667
Commercial paper, net of unamortized discount4,227
 5,985
Bank borrowings – long-term801
 870
Bank borrowings – short-term755
 553
Variable denomination floating rate demand notes477
 556
Notes payable to Caterpillar1,493
 1,637
Total outstanding borrowings$28,581
 $29,268
    


Medium-term notes
We issue medium-term unsecured notes through securities dealers or underwriters in the U.S., Canada, Europe, Australia, Japan, Hong Kong, China, Argentina and MexicoChina 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 $5.77$1.75 billion and redeemed totaled $4.84$2.17 billion for the ninethree months ended September 30, 2017.March 31, 2021. Medium-term notes, net outstanding as of September 30, 2017,March 31, 2021 mature as follows: 
(Millions of dollars) 
2021$5,384 
20226,478 
20235,140 
20242,654 
20251,612 
Thereafter1,801 
Fair value adjustments31 
Total$23,100 



30
(Millions of dollars) 
2017$1,045
20185,884
20194,534
20204,186
20211,640
Thereafter3,539
Total$20,828
  


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 March 31, 2021, there was $2.90 billion outstanding in commercial paper.
 
Revolving credit facilities
We haveAs of 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'smanagement’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to us as of September 30, 2017March 31, 2021 was $7.75 billion. Information on our Credit Facility is as follows:


In September 2017, 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 2018.2021.
In September 2017, we•The three-year facility, as amended and extended the three-year facility. The three-year facilityrestated in September 2019, of $2.73 billion (of which $2.01 billion is available to us) now expires in September 2020.2022.
In September 2017, we•The five-year facility, as amended and extended the five-year facility. The five-year facilityrestated in September 2019, of $4.62 billion (of which $3.41 billion is available to us) now expires in September 2022. 2024.


At September 30, 2017,March 31, 2021, Caterpillar’s consolidated net worth was $15.69$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/income (loss).


At September 30, 2017,March 31, 2021, our covenant interest coverage ratio was 1.881.93 to 1. This iswas 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, 2017,March 31, 2021, our six-month covenant leverage ratio was 7.206.80 to 1.  This iswas 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, 2017,March 31, 2021, there were no borrowings under the Credit Facility.


Bank borrowings
Available credit lines with banks as of September 30, 2017March 31, 2021 totaled $4.59$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, 2017,March 31, 2021, we had $1.56 billion$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, 2017,March 31, 2021, there was $477were $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.




31
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 $2.77$2.41 billion from Caterpillar and Caterpillar may borrow up to $2.64$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 nineten years. We had notes payable of $1.49 billion$22 million and notes receivable of $1.58 billion$331 million outstanding under these agreements as of September 30, 2017.March 31, 2021.

UNAUDITED



Committed credit facility
We extended a $2 billion committed credit facility to Caterpillar, which expires in February 2019.  We receive a fee from Caterpillar based on amounts drawn under the credit facility and a commitment fee for the undrawn amounts under the credit facility.  At September 30, 2017, there were no borrowings under this credit facility.


OFF-BALANCE SHEET ARRANGEMENTS
We lease all of our facilities. In addition, we have potential payment exposure for guarantees issued to third parties totaling $87$40 million as of September 30, 2017.March 31, 2021.


CASH FLOWS
Operating cash flow was $919$335 million in the first ninethree months of 2017,2021, compared with $1.10 billion$401 million for the same period a year ago.in 2020. Net cash used for investing activities was $924$221 million for the first ninethree months of 2017,2021, compared with $776net cash provided of $565 million for the same period in 2016.2020. The change was primarily due to the impact of intercompanyCaterpillar purchased receivables partially offset by higher proceeds from disposal of equipment and lower capital expenditures for equipment on operating leases.portfolio activity. Net cash used forprovided by financing activities was $1.10 billion$205 million for the first ninethree months of 2017,2021, compared with $302net cash used of $965 million for the same period in 2016.2020. The change was primarily due to the impacthigher portfolio funding requirements related to Caterpillar purchased receivables.

RECENT ACCOUNTING PRONOUNCEMENTS

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


CRITICAL ACCOUNTING POLICIESESTIMATES
 
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 2016 Annual Report on 2020 Form 10-K.10-K. There have been no significant changes to our critical accounting estimates since our 2020 Form 10-K.


32
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
Certain statements contained in this Quarterly Report on Form 10-Q may be considered "forward-looking statements" as that term is defined inrelate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may relate to future events or our future financial performance, which may involve known and unknown risks and uncertainties and other factors that may cause our actual results, levels of activity, performance or achievement to be materially different from those expressed or implied by any forward-looking statements. From time to time, we may also provide forward-looking statements in oral presentations to the public or in other materials we issue to the public. Forward-looking statements give current expectations or forecasts of future events about the company. You may identify these statements by the fact that they do not relate to historical or current facts and may use wordsWords such as "believes," "expects," "estimates," "anticipates," "will," "should," "plan," "project," "intend," "could" and“believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or phrases.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 only predictions. Actual events ormade, and we do not undertake to update our forward-looking statements.

Cat Financial’s actual results may differ materially due tofrom those described or implied in our forward-looking statements based on a number of factors, that affect international businesses, including, changes inbut not limited to: (i) government monetary or fiscal policies; (ii) political and economic conditions, disruptionsrisks, 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 and credit markets and changes in laws, regulations and political stability, as well as factors specific to Cat Financial andlimiting our sources of liquidity or the markets we serve, including the market’s acceptance of our products and services, the creditworthinessliquidity 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 raterates, currency fluctuations or market liquidity conditions; (ix) an increase in delinquencies, repossessions or net losses of our customers; (x) our compliance with financial and currency rate fluctuationsother restrictive covenants in debt agreements; (xi) alleged or actual violations of trade or anti-corruption laws and estimatedregulations; (xii) additional tax expense or exposure; (xiii) new regulations or changes in financial services regulations; (xiv) residual values of leased equipment. These riskequipment; (xv) marketing, operational or administrative support received from Caterpillar; (xvi) changes in accounting guidance; (xvii) the ongoing global coronavirus pandemic; and (xviii) other factors may not be exhaustive. We operatedescribed in a continually changing business environmentmore detail in Cat Financial’s Forms 10-Q, 10-K and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility for the accuracy and completeness of those statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K filedother filings with the Securities and Exchange Commission (SEC) on February 15, 2017 for the fiscal year ended December 31, 2016, as supplemented in our Form 10-Q filings with the SEC on May 3, 2017 and August 2, 2017 and in this Form 10-Q filing. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.
UNAUDITEDCommission.




ITEM 4. CONTROLS AND PROCEDURES


Evaluation of disclosure controlsDisclosure Controls and proceduresProcedures
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 controlInternal Control over financial reportingFinancial Reporting
There have been no changes in the Company'sCompany’s internal control over financial reporting during the thirdfirst quarter of 20172021 that materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.


PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
 
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.



33
UNAUDITED

ITEM 1A.  RISK FACTORS
 
For a discussion of risks and uncertainties that may affect our business, please see Part I.I, Item 1A. Risk Factors in“Risk Factors” of our annual reportAnnual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 15, 2017 for the year ended December 31, 2016.17, 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
Exhibit
No.
Description of Exhibit
10.131.1
Credit Agreement (364-Day Facility), dated as of September 7, 2017, among 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 The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Japan Local Currency Agent (incorporated by reference from Exhibit 99.1 to the Company’s Current Report on Form 8-K filed September 12, 2017)
10.2
Local Currency Addendum, dated as of September 7, 2017, to the 364-Day Facility (incorporated by reference from Exhibit 99.2 to the Company's Current Report on Form 8-K filed on September 12, 2017)
10.3
Japan Local Currency Addendum, dated as of September 7, 2017, to the 364-Day Facility (incorporated by reference from Exhibit 99.3 to the Company's Current Report on Form 8-K filed on September 12, 2017)
10.4
Omnibus Amendment No. 2 to Amended and Restated Credit Agreement (3-Year Facility) and Amendment No. 2 to Japan Local Currency Addendum, dated as of September 8, 2017, among 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 The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Japan Local Currency Agent (incorporated by reference from Exhibit 99.4 to the Company’s Current Report on Form 8-K filed September 12, 2017)
10.5
Omnibus Amendment No. 2 to Amended and Restated Credit Agreement (5-Year Facility) and Amendment No. 2 to Japan Local Currency Addendum, dated as of September 8, 2017, among 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 The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Japan Local Currency Agent (incorporated by reference from Exhibit 99.5 to the Company’s Current Report on Form 8-K filed September 12, 2017)
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Computation of Ratio of Earnings to Fixed Charges
31.1
Certification of David T. Walton, President, Director and Chief Executive Officer of Caterpillar Financial Services Corporation, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
31.2
Certification of James A. Duensing, Executive Vice President and Chief Financial Officer of Caterpillar Financial Services Corporation, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
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CertificationsCertification of David T. Walton, President, Director and Chief Executive Officer of Caterpillar Financial Services Corporation, and James A. Duensing, Executive Vice President and Chief Financial Officer of Caterpillar Financial Services Corporation, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101)

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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
(Registrant)
Date:November 1, 2017May 5, 2021/s/David T. Walton
David T. Walton, President, Director and Chief Executive

Officer


Date:November 1, 2017May 5, 2021/s/James A. DuensingPatrick T. McCartan
James A. Duensing,Patrick T. McCartan, Executive Vice President and Chief

Financial Officer


Date:November 1, 2017May 5, 2021/s/Leslie S. ZmuggJennifer K. Schott
Leslie S. Zmugg,Jennifer K. Schott, Secretary


Date:November 1, 2017May 5, 2021/s/Jeffry D. Everett
Jeffry D. Everett, Controller





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