Cat Financial reported first-quarter revenues of $631 million, a decrease of $50 million, or 7 percent, compared with the first quarter of 2009. First-quarter profit after tax was $53 million, a $2 million increase over the first quarter of 2009.
The decrease in revenues was principally due to a $71 million impact from lower earning assets (finance receivables and operating leases at constant interest rates) and an $11 million unfavorable impact from returned or repossessed equipment, which were partially offset by the absence of a $22 million write-down on retained interests related to the securitized asset portfolio that occurred in the first quarter of 2009 and a $20 million favorable impact from higher interest rates on new and existing finance receivables.
Profit before income taxes was $71 million for the first quarter of 2010, which is unchanged from the first quarter of 2009. First-quarter profit before income taxes improved due to a $26 million improvement in net currency exchange gains and losses compared with the first quarter of 2009, the absence of a $22 million write-down on retained interests related to the securitized asset portfolio that occurred in the first quarter of 2009, a $19 million improvement in net yield on average earning assets and the absence of a $10 million impact from employee separation charges in the first quarter of 2009. These improvements in pre-tax profit were offset by a $25 million unfavorable impact from lower average earning assets, a $16 million unfavorable impact due to the absence of favorable mark-to-market adjustments that were recorded on interest rate derivative contracts in the first quarter of 2009, an $11 million unfavorable impact from returned or repossessed equipment, a $10 million increase in the provision for credit losses, a $10 million increase in general, operating and administrative expense and other miscellaneous items.
The provision for income taxes in the first quarter of 2010 reflects an estimated annual effective tax rate of 22 percent, which is unchanged from the first quarter of 2009.
New retail financing was $1.8 billion, an increase of $241 million, or 15 percent from first quarter of 2009. The increase primarily related to improvement in our North America and Asia-Pacific operating segments.
At the end of the first quarter 2010, past dues were 6.06 percent, which increased from 5.54 percent at the end of the fourth quarter 2009. At the end of the first quarter 2009, past dues were 5.44 percent. The increase in past dues from year end is primarily due to the seasonality impacts typically experienced when comparing year-end results to the first-quarter results. Write-offs, net of recoveries, were $46 million for the first quarter of 2010, down from $86 million in the fourth quarter of 2009 and $47 million in the first quarter of 2009. Annualized losses for the first quarter 2010 were 0.79 percent of first quarter 2010 average retail portfolio compared to 0.74 percent in the first quarter of 2009. This result compares with the peak of 0.69 percent reached in the most recent recession in 2001-2002 and reflects continued challenging economic conditions for our customers, primarily in North America, and to a lesser extent in Europe.
Cat Financial’s allowance for credit losses totaled $394 million as of March 31, 2010, compared to $382 million as of March 31, 2009, which is 1.74 percent of net finance receivables as of March 31, 2010, compared with 1.50 percent as of March 31, 2009. The increase of $12 million in allowance for credit losses resulted from a $54 million increase in the allowance rate, partially offset by a $42 million decrease due to a reduction in the overall net finance receivable portfolio.
"During the first quarter, Cat Financial’s overall portfolio performance continued to reflect challenges associated with the global economic environment. More recently, however, we’ve been encouraged by signs of improving economic conditions and expect that portfolio performance will gradually improve over the balance of the year," said Kent Adams, Cat Financial president and vice president of Caterpillar Inc. "Cat Financial continues to experience favorable liquidity conditions in all key global funding markets and is well positioned to support Caterpillar customers and dealers around the world."
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