Cat Financial reported third-quarter revenues of $640 million, a decrease of $36 million, or 5 percent, compared with the third quarter of 2009. Third-quarter profit after tax was $73 million, a $3 million decrease from the third quarter of 2009.
The decrease in revenues was principally due to a $46 million impact from lower earning assets (finance receivables and operating leases at constant interest rates) and a $13 million unfavorable impact from lower interest rates on new and existing finance receivables, partially offset by a $24 million favorable change from returned or repossessed equipment.
Profit before income taxes was $89 million for the third quarter of 2010, compared to $80 million for the third quarter of 2009. The increase was principally due to a $24 million favorable change from returned or repossessed equipment, an $8 million decrease in the provision for credit losses and a $6 million increase in other miscellaneous revenue items. These increases in pre-tax profit were partially offset by a $17 million unfavorable impact from lower average earning assets and a $10 million increase in general, operating and administrative expense.
The provision for income taxes in the third quarter reflects an estimated annual effective tax rate of 24 percent, reduced by a benefit of $12 million related to a prior year. The estimated annual tax rate of 24 percent is up from 20 percent in the third quarter of 2009 and 22 percent in the second quarter of 2010.
New retail financing was $2.5 billion, an increase of $706 million, or 40 percent, from the third quarter of 2009. The increase was primarily related to improvement in North America, Europe and Asia-Pacific operating segments.
At the end of the third quarter of 2010, past dues were 4.88 percent, down from 5.33 percent at the end of the second quarter and 5.54 percent at the end of 2009. At the end of the third quarter of 2009, past dues were 5.79 percent. The reduction in past dues from year-end is primarily due to the general improvement in global economic conditions.
Bad debt write-offs, net of recoveries, were $78 million for the third quarter of 2010, up $13 million from the third quarter of 2009. The increase in write-offs reflects the lingering effect the economic downturn has had on some of our customers, most notably U.S. and European customers in the housing and general construction industries. Third-quarter year-to-date 2010 annualized losses were 1.03 percent of the average retail portfolio, compared to 0.90 percent for the same period in 2009 and 1.03 percent for the full-year 2009.
At the end of the third quarter of 2010, Cat Financial’s allowance for credit losses was 1.61 percent of net finance receivables, decreasing from 1.64 percent on Dec. 31, 2009, and 1.62 percent at the end of the third quarter of 2009. At the end of the third quarter of 2010, the allowance for credit losses totaled $367 million, compared with $377 million on Dec. 31, 2009, and $381 million at the end of the third quarter of 2009. The decrease of $14 million in allowance for credit losses year over year reflected an $11 million decrease due to a reduction in the overall net finance receivable portfolio and a $3 million decrease associated with the
lower allowance rate.
"Portfolio performance continued to strengthen during the third quarter," said Kent Adams, Cat Financial president and vice president of Caterpillar Inc. "Pretax profitability increased $9 million as this improvement more than offset the impact of lower average earning assets. Our past dues have decreased to the lowest level since 2008 and our third quarter new retail financing is up 40 percent from last year. As business continues to improve, we’ll maintain our focus on serving our Caterpillar customers and dealers, managing the portfolio and ensuring we have ample
liquidity."
For over 25 years, Cat Financial, a wholly-owned subsidiary of Caterpillar Inc., has been providing a wide range of financing alternatives to customers and Caterpillar dealers for Caterpillar machinery and engines, solar gas turbines and other equipment and marine vessels. Cat Financial has offices and subsidiaries located throughout the Americas, Asia, Australia and Europe, with headquarters in Nashville, Tenn.
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