Caterpillar Financial Services Corporation
3Q 2020 Earnings Release
FOR IMMEDIATE RELEASE
Cat Financial Announces Third-Quarter 2020 Results
Cat Financial reported third-quarter 2020 revenues of $598 million, a decrease of $150 million, or 20%, compared with the third quarter of 2019. Third-quarter 2020 profit was $48 million, an $81 million, or 63%, decrease from the third quarter of 2019.
The decrease in revenues was primarily due to a $76 million unfavorable impact from lower average financing rates and a $40 million unfavorable impact from lower average earning assets.
Third-quarter 2020 profit before income taxes was $96 million, an $88 million, or 48%, decrease from the third quarter of 2019. The decrease was primarily due to a $50 million increase in provision for credit losses, a $29 million decrease in net yield on average earning assets and an $18 million unfavorable impact from lower average earning assets. These unfavorable impacts were partially offset by a $20 million decrease in general, operating and administrative expenses primarily due to lower short-term incentive compensation and employee benefit expenses.
The provision for income taxes reflected an estimated annual tax rate of 33% in the third quarter of 2020 compared with 28% in the third quarter of 2019. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits.
During the third quarter of 2020, retail new business volume was $2.60 billion, a decrease of $329 million, or 11%, from the third quarter of 2019. The decrease was driven by lower volume across all segments with the exception of a slight increase in Asia/Pacific.
At the end of the third quarter of 2020, past dues were 3.81%, compared with 3.19% at the end of the third quarter of 2019. Past dues increased primarily due to the impact of the COVID-19 pandemic, offset by decreases in the Caterpillar Power Finance and Latin American portfolios. Write-offs, net of recoveries, were $125 million for the third quarter of 2020, compared with $103 million for the third quarter of 2019. As of September 30, 2020, the allowance for credit losses totaled $460 million, or 1.74% of finance receivables, compared with $515 million, or 1.92% of finance receivables at June 30, 2020. The decrease in the allowance for credit losses was primarily driven by write-offs of previously reserved accounts in the Caterpillar Power Finance portfolio. The allowance for credit losses at year-end 2019 was $424 million, or 1.50% of finance receivables.
The following information was filed by Caterpillar Financial Services Corp on Tuesday, October 27, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.