Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited financial statements and related notes included elsewhere in this report and our discussion of significant risks to the company’s business under Part I, Item 1A. Risk Factors of the 2020 Form 10-K.

Highlights for the third quarter of 2021 include:

Total sales and revenues for the third quarter of 2021 were $12.397 billion, an increase of $2.516 billion, or 25 percent, compared with $9.881 billion in the third quarter of 2020. Sales were higher across the three primary segments.
Operating profit margin was 13.4 percent for the third quarter of 2021, compared with 10.0 percent for the third quarter of 2020. Adjusted operating profit margin was 13.7 percent for the third quarter of 2021, compared with 11.1 percent for the third quarter of 2020.
Third-quarter 2021 profit per share was $2.60, and excluding the items in the table below, adjusted profit per share was $2.66. Third-quarter 2020 profit per share was $1.22, and excluding the items in the table below, adjusted profit per share was $1.52.
Caterpillar ended the third quarter of 2021 with $9.4 billion of enterprise cash.

Highlights for the nine months ended September 30, 2021 include:

Total sales and revenues were $37.173 billion for the nine months ended September 30, 2021, an increase of $6.660 billion, or 22 percent, compared with $30.513 billion for the nine months ended September 30, 2020.
Operating profit margin was 14.2 percent for the nine months ended September 30, 2021, compared with 10.4 percent for the nine months ended September 30, 2020. Adjusted operating profit margin was 14.5 percent for the nine months ended September 30, 2021, compared with 11.4 percent for the nine months ended September 30, 2020.
Profit per share for the nine months ended September 30, 2021, was $7.94, and excluding the items in the table below, adjusted profit per share was $8.13. Profit per share for the nine months ended September 30, 2020 was $4.05, and excluding the items in the table below, adjusted profit per share was $4.44.
Enterprise operating cash flow was $5.8 billion for the nine months ended September 30, 2021.
In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on page 69.



	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
(Dollars in millions except per share data)	Profit Before Taxes		Profit Per Share		Profit Before Taxes		Profit Per Share		Profit Before Taxes		Profit Per Share		Profit Before Taxes		Profit Per Share
Profit................................................................................	$	1,775	$	2.60	$	863	$	1.22	$	5,642	$	7.94	$	3,054	$	4.05
Restructuring costs........................................................	35		0.06		112		0.18		124		0.19		296		0.48
Remeasurement (gains) losses of pension obligations....	—		—		77		0.12		—		—		(55)		(0.08)
Adjusted profit.................................................................	$	1,810	$	2.66	$	1,052	$	1.52	$	5,766	$	8.13	$	3,295	$	4.44

Overview

Total sales and revenues for the third quarter of 2021 were $12.397 billion, an increase of $2.516 billion, or 25 percent, compared with $9.881 billion in the third quarter of 2020. The increase was primarily due to higher sales volume driven by higher end-user demand for equipment and services and the impact from changes in dealer inventories, along with favorable price realization. Dealers decreased inventories by $600 million during the third quarter of 2020, compared with a decrease of $300 million during the third quarter of 2021. Sales were higher across the three primary segments.

Third-quarter 2021 profit per share was $2.60, compared with $1.22 profit per share in the third quarter of 2020. Profit per share for both quarters included restructuring costs, while the third quarter of 2020 also included a pre-tax net remeasurement loss of $77 million, or $0.12 per share, resulting from the settlements of pension obligations. Profit for the third quarter of 2021 was $1.426 billion, an increase of $758 million, or 113 percent, compared with $668 million for the third quarter of 2020. The increase was primarily due to higher sales volume and favorable price realization.

Sales and revenues were $37.173 billion for the nine months ended September 30, 2021, an increase of $6.660 billion, or 22 percent, compared with $30.513 billion for the nine months ended September 30, 2020. Profit per share for the nine months ended September 30, 2021, was $7.94, an increase of $3.89, or 96 percent, compared with $4.05 for the nine months ended September 30, 2020. Profit per share for both periods included restructuring costs, while the nine months ended September 30, 2020, also included a pre-tax remeasurement net gain of $55 million, or $0.08 per share, resulting from the settlements of pension obligations. Profit for the nine months ended September 30, 2021, was $4.369 billion, an increase of $2.151 billion, or 97 percent, compared with $2.218 billion for the nine months ended September 30, 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 cleaning and disinfecting, social distancing practices and other measures consistent with specific governmental requirements and guidance from health authorities. We’ve offered assistance to some governments and public health authorities in the vaccine distribution process, and as vaccines become available, we are assisting in onsite vaccine distribution for employees in some of our facilities.

We continue to monitor a variety of external factors including the ongoing impact of the COVID-19 pandemic around the world, supply chain disruptions and associated cost and labor pressures. Areas of particular focus include certain components, transportation and raw materials. Transportation shortages have resulted in delays and increased costs. In addition, our suppliers are dealing with availability issues and freight delays, which leads to pressure on production in our facilities. Contingency plans have been developed and continue to be modified to minimize supply chain challenges that may impact our ability to meet increasing customer demand. To help mitigate supply chain challenges, we have proactively redirected components and altered our assembly processes. We continue to assess the environment and are taking appropriate price actions in response to rising costs. We will continue to monitor the situation as conditions remain fluid and evolve, but we expect these pressures to continue into next year.

Notes:

Glossary of terms is included on pages 62 - 64; first occurrence of terms shown in bold italics.
Information on non-GAAP financial measures is included on page 69.
Certain amounts may not add due to rounding.

Consolidated Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2020

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the third quarter of 2020 (at left) and the third quarter of 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees.

Total sales and revenues for the third quarter of 2021 were $12.397 billion, an increase of $2.516 billion, or 25 percent, compared with $9.881 billion in the third quarter of 2020. The increase was primarily due to higher sales volume driven by higher end-user demand for equipment and services and the impact from changes in dealer inventories, along with favorable price realization. Dealers decreased inventories by $600 million during the third quarter of 2020, compared with a decrease of $300 million during the third quarter of 2021.

Sales were higher across the three primary segments.

North America sales increased 31 percent due to higher end-user demand for equipment and services, the impact of changes in dealer inventories and favorable price realization. Dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2021.

Sales increased 77 percent in Latin America due to higher end-user demand for equipment and services across most of the region, the impact of changes in dealer inventories and favorable price realization. Dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2021.

EAME sales increased 24 percent due to higher end-user demand for equipment and services, the impact of changes in dealer inventories, favorable price realization and favorable currency impacts primarily related to the euro and British pound. Dealers decreased inventories during the third quarter of 2020, compared to remaining about flat during the third quarter of 2021.

Asia/Pacific sales increased 8 percent driven by higher end-user demand for equipment and services, partially offset by the impacts from changes in dealer inventories. Dealers decreased inventories during the third quarter of 2021, compared with an increase during the third quarter of 2020.

Dealers decreased inventories by $600 million during the third quarter of 2020, compared with a decrease of $300 million during the third quarter of 2021. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rental rates and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. We do not expect a significant dealer inventory increase in 2021.


Sales and Revenues by Segment
(Millions of dollars)	Third Quarter 2020		Sales Volume		Price Realization		Currency		Inter-Segment / Other		Third Quarter 2021		$ Change		% Change

Construction Industries	$	4,056	$	957	$	218	$	38	$	(14)	$	5,255	$	1,199	30	%
Resource Industries	1,816		522		43		22		3		2,406		590		32	%
Energy & Transportation	4,161		628		(6)		44		250		5,077		916		22	%
All Other Segment	106		10		(1)		1		3		119		13		12	%
Corporate Items and Eliminations	(911)		1		2		—		(242)		(1,150)		(239)
Machinery, Energy & Transportation Sales	9,228		2,118		256		105		—		11,707		2,479		27	%

Financial Products Segment	724		—		—		—		38		762		38		5	%
Corporate Items and Eliminations	(71)		—		—		—		(1)		(72)		(1)
Financial Products Revenues	653		—		—		—		37		690		37		6	%

Consolidated Sales and Revenues	$	9,881	$	2,118	$	256	$	105	$	37	$	12,397	$	2,516	25	%


Sales and Revenues by Geographic Region


	North America				Latin America				EAME				Asia/Pacific				External Sales and Revenues					Inter-Segment				Total Sales and Revenues
(Millions of dollars)	$		% Chg		$		% Chg		$		% Chg		$		% Chg		$			% Chg		$		% Chg		$		% Chg
Third Quarter 2021
Construction Industries	$	2,417	36	%	$	528	130	%	$	1,240	56	%	$	1,076	(13	%)	$	5,261		30	%	$	(6)	(175	%)	$	5,255	30	%
Resource Industries	674		38	%	417		55	%	456		19	%	744		32	%	2,291			34	%	115		3	%	2,406		32	%
Energy & Transportation	1,924		21	%	329		49	%	1,144		3	%	744		34	%	4,141			19	%	936		36	%	5,077		22	%
All Other Segment	18		80	%	—		(100	%)	3		200	%	14		8	%	35			40	%	84		4	%	119		12	%
Corporate Items and Eliminations	(19)				—				—				(2)				(21)					(1,129)				(1,150)
Machinery, Energy & Transportation Sales	5,014		31	%	1,274		77	%	2,843		24	%	2,576		8	%	11,707			27	%	—		—		11,707		27	%

Financial Products Segment	478		7	%	68		8	%	105		5	%	111		(2	%)	762		1	5	%	—		—		762		5	%
Corporate Items and Eliminations	(37)				(13)				(9)				(13)				(72)					—				(72)
Financial Products Revenues	441		7	%	55		4	%	96		7	%	98		(1	%)	690			6	%	—		—		690		6	%

Consolidated Sales and Revenues	$	5,455	28	%	$	1,329	72	%	$	2,939	23	%	$	2,674	8	%	$	12,397		25	%	$	—	—		$	12,397	25	%

Third Quarter 2020
Construction Industries	$	1,781			$	230			$	796			$	1,241			$	4,048				$	8			$	4,056
Resource Industries	487				269				384				564				1,704					112				1,816
Energy & Transportation	1,584				221				1,113				557				3,475					686				4,161
All Other Segment	10				1				1				13				25					81				106
Corporate Items and Eliminations	(22)				(2)				—				—				(24)					(887)				(911)
Machinery, Energy & Transportation Sales	3,840				719				2,294				2,375				9,228					—				9,228

Financial Products Segment	448				63				100				113				724		1			—				724
Corporate Items and Eliminations	(37)				(10)				(10)				(14)				(71)					—				(71)
Financial Products Revenues	411				53				90				99				653					—				653

Consolidated Sales and Revenues	$	4,251			$	772			$	2,384			$	2,474			$	9,881				$	—			$	9,881

1 Includes revenues from Machinery, Energy & Transportation of $87 million and $81 million in the third quarter of 2021 and 2020, respectively.

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the third quarter of 2020 (at left) and the third quarter of 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses.

Operating profit for the third quarter of 2021 was $1.664 billion, an increase of $679 million, or 69 percent, compared with $985 million in the third quarter of 2020. The increase was primarily due to higher sales volume and favorable price realization, partially offset by higher selling, general and administrative (SG&A) and research and development (R&D) expenses as well as higher manufacturing costs.

Unfavorable manufacturing costs reflected higher variable labor and burden, primarily freight, higher period manufacturing and material costs, partially offset by favorable cost absorption and lower warranty expense. Cost absorption was favorable as inventory increased during the third quarter of 2021, compared with remaining about flat during the third quarter of 2020.

The increase in both SG&A/R&D expenses and period manufacturing costs was mainly driven by higher short-term incentive compensation expense, which was reinstated in 2021, and investments aligned with the company's strategy for profitable growth, including acquisition-related expenses.

Short-term incentive compensation expense, which was reinstated in 2021, was about $350 million in the third quarter, compared to no short-term incentive compensation expense recognized in the third quarter of 2020.

Operating profit margin was 13.4 percent for the third quarter of 2021, compared with 10.0 percent for the third quarter of 2020.


Profit (Loss) by Segment
(Millions of dollars)	Third Quarter 2021		Third Quarter 2020		$ Change		% Change
Construction Industries	$	859	$	585	$	274	47	%
Resource Industries	297		167		130		78	%
Energy & Transportation	696		492		204		41	%
All Other Segment	5		27		(22)		(81	%)
Corporate Items and Eliminations	(286)		(346)		60
Machinery, Energy & Transportation	1,571		925		646		70	%

Financial Products Segment	173		142		31		22	%
Corporate Items and Eliminations	(7)		(15)		8
Financial Products	166		127		39		31	%
Consolidating Adjustments	(73)		(67)		(6)
Consolidated Operating Profit	$	1,664	$	985	$	679	69	%

Other Profit/Loss and Tax Items

▪Interest expense excluding Financial Products in the third quarter of 2021 was $114 million, compared with $136 million in the third quarter of 2020. The decrease was due to lower average debt outstanding during the third quarter of 2021, compared with the third quarter of 2020.

▪Other income (expense) in the third quarter of 2021 was income of $225 million, compared with income of $14 million in the third quarter of 2020. The change was primarily due to favorable impacts from foreign currency exchange gains (losses), the absence of remeasurement losses resulting from the settlements of pension obligations that occurred in the third quarter of 2020 and favorable pension and other postemployment benefit (OPEB) plan costs.

The company experienced foreign currency exchange net gains in the third quarter of 2021, primarily due to the euro, compared with net losses in the third quarter of 2020.

▪The provision for income taxes for the third quarter of 2021 reflected a lower estimated annual tax rate of 25 percent, compared with 31 percent for the third quarter of 2020, excluding the discrete items discussed below. The comparative tax rate for full-year 2020 was approximately 28 percent. The decrease in the estimated annual tax rate from full-year 2020 was primarily related to changes in the expected geographic mix of profits from a tax perspective for 2021.

In the third quarter of 2021, the company recorded a $39 million benefit due to the change from the second-quarter estimated annual tax rate of 26 percent. In addition, the company recorded discrete tax benefits of $36 million to reflect changes in estimates related to prior year U.S. taxes in the third quarter of 2021 compared to $80 million in the third quarter of 2020. In the third quarter of 2020, a discrete tax benefit of $13 million was recorded for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense along with a $12 million tax benefit related to the $77 million of remeasurement losses resulting from the settlements of pension obligations.

Construction Industries

Construction Industries’ total sales were $5.255 billion in the third quarter of 2021, an increase of $1.199 billion, or 30 percent, compared with $4.056 billion in the third quarter of 2020. The increase was due to higher sales volume and favorable price realization. The increase in sales volume was driven by higher end-user demand and the impact from changes in dealer inventories. Overall, dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2021.

▪In North America, sales increased due to higher sales volume and favorable price realization. Higher sales volume was driven by higher end-user demand from improving non-residential construction, as well as continued strength in residential construction and the impact from changes in dealer inventories. Dealers decreased inventories more during the third quarter of 2020 than during the third quarter of 2021.

▪Sales increased in Latin America mostly due to higher sales volume led by the impact of changes in dealer inventories and higher end-user demand across the region. Dealers decreased inventories during the third quarter of 2020, compared with an increase during the third quarter of 2021.

▪In EAME, sales increased due to higher sales volume from the impact of changes in dealer inventories and higher end-user demand. Dealers decreased inventories during the third quarter of 2020, compared with an increase during the third quarter of 2021.

▪Sales decreased in Asia/Pacific mainly due to lower sales volume, reflecting the impact of changes in dealer inventory. Dealers decreased inventories during the third quarter of 2021, compared with an increase during the third quarter of 2020. Lower sales in China, driven by lower end-user demand and impacts of changes in dealer inventory, were partially offset by increased sales across the rest of the region.

Construction Industries’ profit was $859 million in the third quarter of 2021, an increase of $274 million, or 47 percent, compared with $585 million in the third quarter of 2020. The increase was mainly due to higher sales volume and favorable price realization, partially offset by unfavorable manufacturing costs, which largely reflected higher variable labor and burden, primarily freight, and material costs.

Construction Industries’ profit as a percent of total sales was 16.3 percent in the third quarter of 2021, compared with 14.4 percent in the third quarter of 2020.

Resource Industries

Resource Industries’ total sales were $2.406 billion in the third quarter of 2021, an increase of $590 million, or 32 percent, compared with $1.816 billion in the third quarter of 2020. The increase was primarily due to higher sales volume driven by higher end-user demand for equipment and aftermarket parts, partially offset by the impacts of changes in dealer inventories.

Dealers decreased inventories more during the third quarter of 2021 than during the third quarter of 2020. End-user demand was higher in both mining and heavy construction and quarry and aggregates.

Resource Industries’ profit was $297 million in the third quarter of 2021, an increase of $130 million, or 78 percent, compared with $167 million in the third quarter of 2020. The increase was mainly due to higher sales volume and favorable price realization, partially offset by unfavorable manufacturing costs. Increased manufacturing costs reflected higher variable labor and burden, primarily freight, and material costs.

Resource Industries’ profit as a percent of total sales was 12.3 percent in the third quarter of 2021, compared with 9.2 percent in the third quarter of 2020.

Energy & Transportation


Sales by Application
(Millions of dollars)	Third Quarter 2021		Third Quarter 2020		$ Change		% Change
Oil and Gas	$	1,088	$	734	$	354	48	%
Power Generation	1,010		1,034		(24)		(2	%)
Industrial	948		730		218		30	%
Transportation	1,095		977		118		12	%
External Sales	4,141		3,475		666		19	%
Inter-segment	936		686		250		36	%
Total Sales	$	5,077	$	4,161	$	916	22	%

Energy & Transportation’s total sales were $5.077 billion in the third quarter of 2021, an increase of $916 million, or 22 percent, compared with $4.161 billion in the third quarter of 2020. Sales increased across all applications and inter-segment sales except Power Generation, which decreased slightly.

Oil and Gas – Sales increased for reciprocating engines aftermarket parts, primarily in North America, turbines and turbine-related services and reciprocating engines used in gas compression.
Power Generation – Sales decreased slightly due to timing of turbines and turbine-related services. Reciprocating engines were about flat compared to the third quarter of 2020, with aftermarket parts slightly higher offset by slightly lower engine sales.
Industrial – Sales were up due to higher demand across all regions.
Transportation – Sales increased in rail services and marine.

Energy & Transportation’s profit was $696 million in the third quarter of 2021, an increase of $204 million, or 41 percent, compared with $492 million in the third quarter of 2020. The increase was due to higher sales volume, partially offset by unfavorable manufacturing costs and higher SG&A/R&D expenses. Increased manufacturing costs were mainly driven by higher variable labor and burden, primarily freight, period manufacturing costs and material, partially offset by the absence of inventory write-downs that occurred in the third quarter of 2020. In addition, segment profit was favorably impacted by other operating income/expense.

Both SG&A/R&D expenses and period manufacturing costs were driven by higher short-term incentive compensation expense and investments aligned with growth initiatives, including acquisition-related expenses.

Energy & Transportation’s profit as a percent of total sales was 13.7 percent in the third quarter of 2021, compared with 11.8 percent in the third quarter of 2020.

Financial Products Segment

Financial Products’ segment revenues were $762 million in the third quarter of 2021, an increase of $38 million, or 5 percent, from the third quarter of 2020.

Financial Products’ segment profit was $173 million in the third quarter of 2021, an increase of $31 million, or 22 percent, compared with $142 million in the third quarter of 2020. The increase was mainly due to a favorable impact from returned or repossessed equipment, lower provision for credit losses at Cat Financial and higher net yield on average earning assets. These favorable impacts were partially offset by an increase in SG&A expenses primarily due to higher short-term incentive compensation expense.

At the end of the third quarter of 2021, past dues at Cat Financial were 2.41 percent, compared with 3.81 percent at the end of the third quarter of 2020. Past dues decreased across all portfolio segments as global markets generally improved. Write-offs, net of recoveries, were $76 million for the third quarter of 2021, compared with $125 million for the third quarter of 2020. As of September 30, 2021, Cat Financial's allowance for credit losses totaled $378 million, or 1.41 percent of finance receivables, compared with $402 million, or 1.46 percent of finance receivables, at June 30, 2021. The allowance for credit losses at year-end 2020 was $479 million, or 1.77 percent of finance receivables.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $293 million in the third quarter of 2021, a decrease of $68 million from the third quarter of 2020. Higher corporate costs were more than offset by lower restructuring costs, favorable impacts of segment methodology differences and a favorable change in fair value adjustments related to deferred compensation plans.

NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2020

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the nine months ended September 30, 2020 (at left) and the nine months ended September 30, 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees.

Total sales and revenues were $37.173 billion for the nine months ended September 30, 2021, an increase of $6.660 billion, or 22 percent, compared with $30.513 billion for the nine months ended September 30, 2020. The increase was primarily due to higher sales volume driven by higher end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories about $1.8 billion during the nine months ended September 30, 2020, compared with remaining about flat during the nine months ended September 30, 2021. Favorable currency impacts related to the euro, Australian dollar and Chinese yuan also contributed to the sales improvement, along with favorable price realization.

Sales were higher in the three primary segments and across all regions.

North America sales increased 21 percent driven by higher end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories more during the nine months ended September 30, 2020, than during the nine months ended September 30, 2021.

Sales increased 57 percent in Latin America due to higher end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories during the nine months ended September 30, 2020, compared with an increase during the nine months ended September 30, 2021.

EAME sales increased 24 percent due to higher end-user demand for equipment and services, the impact from changes in dealer inventories and favorable currency impacts related to a stronger euro and British pound. Dealers increased inventories more during the nine months ended September 30, 2021, than during the nine months ended September 30, 2020.

Asia/Pacific sales increased 17 percent driven by higher end-user demand for equipment and services, the impact from changes in dealer inventories and favorable currency impacts related to a stronger Australian dollar and Chinese yuan. Dealers decreased inventories more during the nine months ended September 30, 2020, than during the nine months ended September 30, 2021.

Dealers decreased inventories about $1.8 billion during the nine months ended September 30, 2020, compared with remaining about flat during the nine months ended September 30, 2021. Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times. Dealers’ demand expectations take into account seasonal changes, macroeconomic conditions, machine rental rates and other factors. Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers. We do not expect a significant dealer inventory increase in 2021.


Sales and Revenues by Segment
(Millions of dollars)	Nine Months Ended September 30, 2020		Sales Volume		Price Realization		Currency		Inter-Segment / Other		Nine Months Ended September 30, 2021		$ Change		% Change

Construction Industries	$	12,410	$	3,134	$	433	$	346	$	47	$	16,370	$	3,960	32	%
Resource Industries	5,726		1,366		(21)		121		9		7,201		1,475		26	%
Energy & Transportation	12,659		1,043		13		229		615		14,559		1,900		15	%
All Other Segment	330		23		(1)		4		21		377		47		14	%
Corporate Items and Eliminations	(2,673)		(52)		1		—		(692)		(3,416)		(743)
Machinery, Energy & Transportation Sales	28,452		5,514		425		700		—		35,091		6,639		23	%

Financial Products Segment	2,301		—		—		—		(4)		2,297		(4)		—	%
Corporate Items and Eliminations	(240)		—		—		—		25		(215)		25
Financial Products Revenues	2,061		—		—		—		21		2,082		21		1	%

Consolidated Sales and Revenues	$	30,513	$	5,514	$	425	$	700	$	21	$	37,173	$	6,660	22	%


Sales and Revenues by Geographic Region


	North America				Latin America				EAME				Asia/Pacific				External Sales and Revenues					Inter-Segment				Total Sales and Revenues
(Millions of dollars)	$		% Chg		$		% Chg		$		% Chg		$		% Chg		$			% Chg		$		% Chg		$		% Chg
Nine Months Ended September 30, 2021
Construction Industries	$	7,041	29	%	$	1,350	91	%	$	3,612	38	%	$	4,302	20	%	$	16,305		32	%	$	65	261	%	$	16,370	32	%
Resource Industries	2,130		26	%	1,309		52	%	1,455		26	%	1,965		17	%	6,859			27	%	342		3	%	7,201		26	%
Energy & Transportation	5,698		11	%	835		25	%	3,433		11	%	1,953		13	%	11,919			12	%	2,640		30	%	14,559		15	%
All Other Segment	42		91	%	1		(75	%)	10		(41	%)	54		42	%	107			32	%	270		8	%	377		14	%
Corporate Items and Eliminations	(89)				(1)				(1)				(8)				(99)					(3,317)				(3,416)
Machinery, Energy & Transportation Sales	14,822		21	%	3,494		57	%	8,509		24	%	8,266		17	%	35,091			23	%	—		—	%	35,091		23	%

Financial Products Segment	1,442		(2	%)	195		1	%	301		1	%	359		4	%	2,297		1	—	%	—		—	%	2,297		—	%
Corporate Items and Eliminations	(99)				(35)				(26)				(55)				(215)					—				(215)
Financial Products Revenues	1,343		1	%	160		(1	%)	275		2	%	304		2	%	2,082			1	%	—		—	%	2,082		1	%

Consolidated Sales and Revenues	$	16,165	19	%	$	3,654	53	%	$	8,784	23	%	$	8,570	17	%	$	37,173		22	%	$	—	—	%	$	37,173	22	%

Nine Months Ended September 30, 2020
Construction Industries	$	5,470			$	707			$	2,618			$	3,597			$	12,392				$	18			$	12,410
Resource Industries	1,690				859				1,158				1,686				5,393					333				5,726
Energy & Transportation	5,138				667				3,095				1,734				10,634					2,025				12,659
All Other Segment	22				4				17				38				81					249				330
Corporate Items and Eliminations	(35)				(5)				(4)				(4)				(48)					(2,625)				(2,673)
Machinery, Energy & Transportation Sales	12,285				2,232				6,884				7,051				28,452					—				28,452

Financial Products Segment	1,466				193				298				344				2,301		1			—				2,301
Corporate Items and Eliminations	(134)				(31)				(28)				(47)				(240)					—				(240)
Financial Products Revenues	1,332				162				270				297				2,061					—				2,061

Consolidated Sales and Revenues	$	13,617			$	2,394			$	7,154			$	7,348			$	30,513				$	—			$	30,513

1 Includes revenues from Machinery, Energy & Transportation of $263 million and $274 million in the nine months ended September 30, 2021 and 2020, respectively.

CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the nine months ended September 30, 2020 (at left) and the nine months ended September 30, 2021 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company’s Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation’s other operating (income) expenses.

Operating profit for the nine months ended September 30, 2021, was $5.267 billion, an increase of $2.094 billion, or 66 percent, compared with $3.173 billion for the nine months ended September 30, 2020. The increase was due to higher sales volume, favorable price realization, lower restructuring expenses (included in other) and higher profit from Financial Products, partially offset by higher SG&A/R&D expenses and unfavorable manufacturing costs.

The increase in SG&A/R&D expenses was driven by higher short-term incentive compensation expense, which was reinstated in 2021.

Unfavorable manufacturing costs reflected increased period manufacturing costs primarily due to higher short-term incentive compensation expense and higher labor-related costs. Higher variable labor and burden, primarily freight, and higher material costs were mostly offset by favorable cost absorption and lower warranty expense. Cost absorption was favorable as inventory increased more during the nine months ended September 30, 2021, than during the nine months ended September 30, 2020.

Short-term incentive compensation expense, which was reinstated in 2021, was $1.1 billion for the nine months ended September 30, 2021, compared to no short-term incentive compensation expense recognized for the nine months ended September 30, 2020. For 2021, short-term incentive compensation expense is expected to be about $1.4 billion, compared to no short-term incentive compensation expense recognized in 2020. Short-term incentive compensation expense is directly related to financial and operational performance, measured against targets set annually.

Operating profit margin was 14.2 percent for the nine months ended September 30, 2021, compared with 10.4 percent for the nine months ended September 30, 2020.


Profit by Segment
(Millions of dollars)	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020		$ Change		% Change
Construction Industries	$	2,918	$	1,743	$	1,175	67	%
Resource Industries	986		623		363		58	%
Energy & Transportation	2,093		1,718		375		22	%
All Other Segment	(2)		31		(33)		n/a
Corporate Items and Eliminations	(1,107)		(1,100)		(7)
Machinery, Energy & Transportation	4,888		3,015		1,873		62	%

Financial Products Segment	660		395		265		67	%
Corporate Items and Eliminations	(55)		(6)		(49)
Financial Products	605		389		216		56	%
Consolidating Adjustments	(226)		(231)		5
Consolidated Operating Profit	$	5,267	$	3,173	$	2,094	66	%

Other Profit/Loss and Tax Items

▪Interest expense excluding Financial Products for the nine months ended September 30, 2021, was $376 million, compared with $384 million for the nine months ended September 30, 2020. The decrease was due to lower average debt outstanding during the nine months ended September 30, 2021, compared with the nine months ended September 30, 2020.

▪Other income/expense for the nine months ended September 30, 2021, was income of $751 million, compared with income of $265 million for the nine months ended September 30, 2020. The change was primarily due to favorable impacts from foreign currency exchange gains (losses), favorable OPEB plan costs and favorable impacts from unrealized gains (losses) on marketable securities.

The company experienced foreign currency exchange net gains in the nine months ended September 30, 2021, compared with net losses in the nine months ended September 30, 2020. The favorable impact of unrealized gains (losses) on marketable securities was due to unrealized gains in the nine months ended September 30, 2021, compared with unrealized losses in the nine months ended September 30, 2020.

▪The provision for income taxes for the nine months ended September 30, 2021 reflected an estimated annual tax rate of 25 percent, compared with 31 percent for the nine months ended September 30, 2020, excluding the discrete items discussed in the following paragraph. The comparative tax rate for full-year 2020 was approximately 28 percent. The decrease in the estimated annual tax rate from full-year 2020 was primarily related to changes in the expected geographic mix of profits from a tax perspective for 2021.

In addition, we recorded a discrete tax benefit of $61 million for the nine months ended September 30, 2021, compared with $21 million for the nine months ended September 30, 2020, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. The company also recorded a discrete tax benefit of $36 million to reflect changes in estimates related to prior year U.S. taxes for the nine months ended September 30, 2021, compared to $80 million for the nine months ended September 30, 2020. Finally, we recorded a $10 million tax charge related to the $55 million of remeasurement net gain resulting from the settlements of pension obligations for the nine months ended September 30, 2020.

Construction Industries

Construction Industries’ total sales were $16.370 billion for the nine months ended September 30, 2021, an increase of $3.960 billion, or 32 percent, compared with $12.410 billion for the nine months ended September 30, 2020. The increase was due to higher sales volume, favorable price realization and favorable currency impacts related to the euro, Chinese yuan and Australian dollar. The increase in sales volume was driven by higher end-user demand for equipment and aftermarket parts and the impact from changes in dealer inventories. Dealers decreased inventories during the nine months ended September 30, 2020, compared with an increase during the nine months ended September 30, 2021.

In North America, sales increased due to higher end-user demand, the impact from changes in dealer inventories and favorable price realization. Dealers decreased inventories more during the nine months ended September 30, 2020, than during the nine months ended September 30, 2021.
Sales increased in Latin America primarily due to the impact from changes in dealer inventories and higher end-user demand. Dealers decreased inventories during the nine months ended September 30, 2020, compared with an increase during the nine months ended September 30, 2021.
In EAME, sales increased due to higher end-user demand, the impact from changes in dealer inventories and favorable currency impacts from a stronger euro and British pound. Dealers increased inventories more during the nine months ended September 30, 2021, than during the nine months ended September 30, 2020.
Sales increased in Asia/Pacific due to higher end-user demand for equipment and aftermarket parts, favorable currency impacts related to the Chinese yuan and Australian dollar and the impact from changes in dealer inventories. Dealers decreased inventories more during the nine months ended September 30, 2020, than during the nine months ended September 30, 2021.

Construction Industries’ profit was $2.918 billion for the nine months ended September 30, 2021, an increase of $1.175 billion, or 67 percent, compared with $1.743 billion for the nine months ended September 30, 2020. The increase was mainly due to higher sales volume and favorable price realization, partially offset by unfavorable manufacturing costs and higher SG&A/R&D expenses.

Unfavorable manufacturing costs reflected higher period manufacturing costs and material. The increase in period manufacturing costs was driven by higher short-term incentive compensation expense and higher labor costs. Higher SG&A/R&D expenses were driven primarily by higher short-term incentive compensation expense, partially offset by other cost reductions.

Construction Industries’ profit as a percent of total sales was 17.8 percent for the nine months ended September 30, 2021, compared with 14.0 percent for the nine months ended September 30, 2020.

Resource Industries

Resource Industries’ total sales were $7.201 billion for the nine months ended September 30, 2021, an increase of $1.475 billion, or 26 percent, compared with $5.726 billion for the nine months ended September 30, 2020. The increase was due to higher sales volume driven by higher end-user demand for equipment and aftermarket parts and the impact from changes in dealer inventories. Dealers decreased inventories more during the nine months ended September 30, 2020, than during the nine months ended September 30, 2021. End-user demand was higher in mining, as well as heavy construction and quarry and aggregates.

Resource Industries’ profit was $986 million for the nine months ended September 30, 2021, an increase of $363 million, or 58 percent, compared with $623 million for the nine months ended September 30, 2020. The increase was mainly due to higher sales volume, partially offset by higher SG&A/R&D expenses. The increase in SG&A/R&D expenses was driven by higher short-term incentive compensation expense.

Resource Industries’ profit as a percent of total sales was 13.7 percent for the nine months ended September 30, 2021, compared with 10.9 percent for the nine months ended September 30, 2020.

Energy & Transportation


Sales by Application
(Millions of dollars)	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020		$ Change		% Change
Oil and Gas	$	3,140	$	2,622	$	518	20	%
Power Generation	3,025		2,783		242		9	%
Industrial	2,660		2,209		451		20	%
Transportation	3,094		3,020		74		2	%
External Sales	11,919		10,634		1,285		12	%
Inter-Segment	2,640		2,025		615		30	%
Total Sales	$	14,559	$	12,659	$	1,900	15	%

Energy & Transportation’s total sales were $14.559 billion for the nine months ended September 30, 2021, an increase of $1.900 billion, or 15 percent, compared with $12.659 billion for the nine months ended September 30, 2020. Sales increased across all applications.

Oil and Gas – Sales increased mainly due to higher sales of reciprocating engine aftermarket parts in all regions as well as higher sales in turbines and turbine related services.
Power Generation – Sales increased due to higher sales in large reciprocating engines, primarily datacenters, and aftermarket parts. Sales also increased due to favorable currency impacts.
Industrial – Sales were up due to higher demand across all regions.
Transportation – Sales increased slightly due to favorable currency impacts and marine. The increase was partially offset by lower sales of locomotives and related services.

Energy & Transportation’s profit was $2.093 billion for the nine months ended September 30, 2021, an increase of $375 million, or 22 percent, compared with $1.718 billion for the nine months ended September 30, 2020. The increase was due to higher sales volume, partially offset by higher SG&A/R&D expenses and unfavorable manufacturing costs. Increased manufacturing costs were mainly driven by higher period manufacturing costs and higher variable labor and burden, primarily freight, partially offset by the absence of inventory write-downs that occurred in the third quarter of 2020. In addition, segment profit was favorably impacted by other operating income/expense.

The increase in both SG&A/R&D expenses and period manufacturing costs was primarily due to higher short-term incentive compensation expense and acquisition-related expenses.

Energy & Transportation’s profit as a percent of total sales was 14.4 percent for the nine months ended September 30, 2021, compared with 13.6 percent for the nine months ended September 30, 2020.

Financial Products Segment

Financial Products’ segment revenues were $2.297 billion for the nine months ended September 30, 2021, a decrease of $4 million from the nine months ended September 30, 2020.

Financial Products’ segment profit was $660 million for the nine months ended September 30, 2021, an increase of $265 million, or 67 percent, compared with $395 million for the nine months ended September 30, 2020. The increase was primarily due to lower provision for credit losses at Cat Financial, a favorable impact from equity securities in Insurance Services, a favorable impact from returned or repossessed equipment and higher net yield on average earning assets. These favorable impacts were partially offset by an increase in SG&A expenses primarily due to higher short-term incentive compensation expense.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $1.162 billion in the nine months ended September 30, 2021, an increase of $56 million from the nine months ended September 30, 2020. Favorable impacts of segment reporting methodology differences and lower restructuring costs were more than offset by higher corporate costs, higher expenses due to timing differences and an unfavorable change in fair value adjustments related to deferred compensation plans.

RESTRUCTURING COSTS

We expect to incur from $150 million to $200 million of restructuring costs in 2021. We expect that prior restructuring actions will result in an incremental benefit to operating costs, primarily Cost of goods sold and SG&A expenses of about $200 million in 2021 compared with 2020.

Additional information related to restructuring costs is included in Note 20 - "Restructuring Costs" of Part I, Item 1 "Financial Statements".

GLOSSARY OF TERMS

1.Adjusted Operating Profit Margin – Operating profit excluding restructuring costs as a percent of sales and revenues.

2.Adjusted Profit Per Share – Profit per share excluding remeasurement gains/losses resulting from the settlements of pension obligations in 2020 and restructuring costs.

3.All Other Segment – Primarily includes activities such as: business strategy; product management and development; manufacturing and sourcing of filters and fluids, undercarriage, ground-engaging tools, fluid transfer products, precision seals, rubber sealing and connecting components primarily for Cat® products; parts distribution; integrated logistics solutions; distribution services responsible for dealer development and administration, including a wholly owned dealer in Japan; dealer portfolio management and ensuring the most efficient and effective distribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.

4.Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products.

5.Construction Industries – A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes asphalt pavers; backhoe loaders; compactors; cold planers; compact track and multi-terrain loaders; mini, small, medium and large track excavators; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; small and medium track-type tractors; track-type loaders; utility vehicles; wheel excavators; compact, small and medium wheel loaders; and related parts and work tools.

6.Corporate Items and Eliminations – Includes corporate-level expenses, timing differences (as some expenses are reported in segment profit on a cash basis), methodology differences between segment and consolidated external reporting, certain restructuring costs, and inter-segment eliminations.

7.Currency – With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency exchange rates versus the U.S. dollar. With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S. dollar. Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation lines of business; currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses. With respect to other income/expense, currency represents the effects of forward and option contracts entered into by the company to reduce the risk of fluctuations in exchange rates (hedging) and the net effect of changes in foreign currency exchange rates on our foreign currency assets and liabilities for consolidated results (translation).

8.Dealer Inventories – Represents dealer machine and engine inventories, excluding aftermarket parts.

9.EAME – A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS).

10.Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases, less accumulated depreciation at Cat Financial.

11.Energy & Transportation – A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services; reciprocating engine-powered generator sets; integrated systems used in the electric power generation industry; reciprocating engines and integrated systems and solutions for the marine and oil and gas industries; reciprocating engines supplied to the industrial industry as well as Cat machinery; and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing. Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies; and product support of on-highway vocational trucks for North America.

12.Financial Products – The company defines Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

13.Financial Products Segment – Provides financing alternatives to customers and dealers around the world for Caterpillar products, as well as financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans. The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk. Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance. The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment. The segment also earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to operating segments. Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items.

14.Latin America – A geographic region including Central and South American countries and Mexico.

15.Machinery, Energy & Transportation (ME&T) – The company defines ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of its products.

16.Machinery, Energy & Transportation Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements, and accruals.

17.Manufacturing Costs – Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs. Variable manufacturing costs are defined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that vary directly with production volume, such as freight, power to operate machines and supplies that are consumed in the manufacturing process. Period manufacturing costs support production but are defined as generally not having a direct relationship to short-term changes in volume. Examples include machinery and equipment repair, depreciation on manufacturing assets, facility support, procurement, factory scheduling, manufacturing planning and operations management.

18.Mark-to-market gains/losses – Represents the net gain or loss of actual results differing from the company’s assumptions and the effects of changing assumptions for our defined benefit pension and OPEB plans. These gains and losses are immediately recognized through earnings upon the annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

19.Pension and Other Postemployment Benefit (OPEB) – The company’s defined-benefit pension and postretirement benefit plans.

20.Price Realization – The impact of net price changes excluding currency and new product introductions. Price realization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions.

21.Resource Industries – A segment primarily responsible for supporting customers using machinery in mining, heavy construction and quarry and aggregates. Responsibilities include business strategy, product design, product management and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors; large mining trucks; hard rock vehicles; longwall miners; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors; soil compactors; select work tools; machinery components; electronics and control systems and related parts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including integrated manufacturing, research and development for drivetrains, hydraulic systems, electronics and software for Cat machines and engines.

22.Restructuring Costs – May include costs for employee separation, long-lived asset impairments and contract terminations. These costs are included in Other operating (income) expenses except for defined-benefit plan curtailment losses and special termination benefits, which are included in Other income (expense). Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.

23.Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including emissions-related product updates. With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales. The impact of sales volume on segment profit includes inter-segment sales.

24.Services – Enterprise services include, but are not limited to, aftermarket parts, Financial Products revenues and other service-related revenues. Machinery, Energy & Transportation segments exclude most Financial Products revenues.

LIQUIDITY AND CAPITAL RESOURCES

Sources of funds

We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations. Funding for these businesses is also available from commercial paper and long-term debt issuances. Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio. We had positive operating cash flow in the first nine months of 2021 within both our ME&T and Financial Products' operations. On a consolidated basis, we ended the first nine months of 2021 with $9.45 billion of cash, an increase of $94 million from year-end 2020. We intend to maintain a strong cash and liquidity position.

Consolidated operating cash flow for the first nine months of 2021 was $5.79 billion, up $1.53 billion compared to the same period last year. The increase was primarily due to higher profit before taxes adjusted for non-cash items, including higher accruals for short-term incentive compensation. In addition, lower payments for short-term incentive compensation favorably impacted cash flow. Partially offsetting these items were increased working capital requirements during the first nine months of 2021 compared to the same period last year. Within working capital, changes in inventory and accounts receivable unfavorably impacted cash flow but were partially offset by favorable changes in accounts payable and accrued expenses.

Total debt as of September 30, 2021 was $36.78 billion, a decrease of $379 million from year-end 2020. Debt related to ME&T decreased $1.37 billion in the first nine months of 2021 due to the repayment of debt. In addition, during the first quarter of 2021, we issued $500 million of ten-year bonds at 1.9 percent and utilized the net proceeds to redeem all of our $500 million 2.6 percent notes due in 2022. Debt related to Financial Products increased $993 million, primarily due to an increase in commercial paper due to short term funding needs.

As of September 30, 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 Cat Financial for general liquidity purposes. Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of September 30, 2021 was $2.75 billion. Information on our Credit Facility is as follows:

In September 2021, we entered into a new 364-day facility. The 364-day facility of $3.15 billion (of which $824 million is available to ME&T) expires in September 2022.
In September 2021, we amended and restated the three-year facility (as amended and restated, the "three-year facility"). The three-year facility of $2.73 billion (of which $715 million is available to ME&T) expires in September 2024.
In September 2021, we amended and restated the five-year facility (as amended and restated, the "five-year facility"). The five-year facility of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2026.

At September 30, 2021, Caterpillar’s consolidated net worth was $16.75 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’ equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).

At September 30, 2021, Cat Financial’s covenant interest coverage ratio was 2.31 to 1. This was above the 1.15 to 1 minimum ratio calculated as (1) profit excluding income taxes, interest expense and net gain (loss) from interest rate derivatives to (2) interest expense calculated at the end of each calendar quarter for the rolling four quarter period then most recently ended, required by the Credit Facility.

In addition, at September 30, 2021, Cat Financial’s six-month covenant leverage ratio was 7.06 to 1. This was below the maximum ratio of debt to net worth of 10 to 1, calculated (1) on a monthly basis as the average of the leverage ratios determined on the last day of each of the six preceding calendar months and (2) at each December 31, required by the Credit Facility.

In the event Caterpillar or Cat Financial does not meet one or more of their 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 Cat Financial’s 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, 2021, there were no borrowings under the Credit Facility.

Our total credit commitments and available credit as of September 30, 2021 were:


	September 30, 2021
(Millions of dollars)	Consolidated		Machinery, Energy & Transportation		Financial Products
Credit lines available:
Global credit facilities	$	10,500	$	2,750	$	7,750
Other external	3,278		184		3,094
Total credit lines available	13,778		2,934		10,844
Less: Commercial paper outstanding	(2,619)		—		(2,619)
Less: Utilized credit	(669)		—		(669)
Available credit	$	10,490	$	2,934	$	7,556

The other external consolidated credit lines with banks as of September 30, 2021 totaled $3.28 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 subsidiaries for local funding requirements. Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines.

We receive debt ratings from the major credit rating agencies. Moody’s, Fitch and S&P maintain a “mid-A” debt rating. A downgrade of our credit ratings by any of the major credit rating agencies would result in increased borrowing costs and could make access to certain credit markets more difficult. In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities. Our Financial Products’ operations would rely on cash flow from its existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities of Cat Financial, and potential borrowings from Caterpillar. In addition, we maintain a support agreement with Cat Financial, which requires Caterpillar to remain the sole owner of Cat Financial and may, under certain circumstances, require Caterpillar to make payments to Cat Financial should Cat Financial fail to maintain certain financial ratios.

We facilitate voluntary supply chain finance programs (the “Programs”) through participating financial institutions. The Programs are available to a wide range of suppliers and allows them the option to manage their cash flow. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the Programs. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the Programs. The amounts payable to participating financial institutions for suppliers who voluntarily participate in the Programs and included in Accounts payable in the Consolidated Statement of Financial Position were $725 million and $533 million at September 30, 2021 and December 31, 2020, respectively. The amounts settled through the Programs and paid to participating financial institutions were $2.9 billion and $2.4 billion during the first nine months of 2021 and 2020, respectively. We account for payments made under the Programs, the same as our other Accounts payable, as a reduction to our cash flows from operations. We do not believe that changes in the availability of supply chain financing will have a significant impact on our liquidity.

Machinery, Energy & Transportation

Net cash provided by operating activities was $4.90 billion in the first nine months of 2021, compared with $2.07 billion for the same period in 2020. The increase was primarily due to higher profit before taxes adjusted for non-cash items, including higher accruals for short-term incentive compensation. In addition, lower payments for short-term incentive compensation favorably impacted cash flow. Partially offsetting these items were increased working capital requirements during the first nine months of 2021 compared to the same period last year. Within working capital, changes in inventory and accounts receivable unfavorably impacted cash flow but were partially offset by favorable changes in accounts payable and accrued expenses.

Net cash used by investing activities in the first nine months of 2021 was $487 million, compared with net cash used of $66 million in the first nine months of 2020. The change was primarily due to increased investment activity mostly offset by increased activity related to intercompany lending with Financial Products. During 2021, we invested $543 million in bank time deposits with varying maturity dates within one year. We also acquired the Oil & Gas division of the Weir Group PLC for $361 million, net of cash acquired, in February 2021.

Net cash used for financing activities during the first nine months of 2021 was $4.67 billion, compared with net cash used of $742 million in the same period of 2020. The change was primarily due to the repayment of debt and lower proceeds from debt issuances. In addition, during the first nine months of 2021, we repurchased $1.62 billion of Caterpillar common stock compared with $1.13 billion during the same period a year ago.

While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities. Our top priority is to maintain a strong financial position in support of a mid-A rating. Next, we intend to fund operational requirements and commitments. Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases. Additional information on cash deployment is as follows:

Strong financial position – Our top priority is to maintain a strong financial position in support of a mid-A rating. We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies.

Operational excellence and commitments – Capital expenditures were $693 million during the first nine months of 2021, compared to $685 million for the same period in 2020. We expect ME&T’s capital expenditures in 2021 to be about $1.0 billion to $1.1 billion. We made $229 million of contributions to our pension and other postretirement benefit plans during the first nine months of 2021. We currently anticipate full-year 2021 contributions of approximately $310 million. In comparison, we made $217 million of contributions to our pension and other postretirement benefit plans during the first nine months of 2020.

Fund strategic growth initiatives and return capital to shareholders – We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings and services, including acquisitions.

As part of our capital allocation strategy, ME&T free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases. We define ME&T free cash flow as cash from ME&T operations excluding discretionary pension and other postretirement benefit plan contributions less capital expenditures. A goal of our capital allocation strategy is to return substantially all ME&T free cash flow to shareholders through the cycles in the form of dividends and share repurchases, while maintaining our mid-A rating.

Our share repurchase plans are subject to the company’s cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company and the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on market conditions and investing priorities. In July 2018, the Board of Directors approved an authorization to repurchase up to $10 billion of Caterpillar common stock (the 2018 Authorization) effective January 1, 2019, with no expiration. In the second quarter of 2021, we resumed our share repurchase program under the 2018 Authorization. In the first nine months of 2021, we repurchased $1.62 billion of Caterpillar common stock, with $3.1 billion remaining under the 2018 Authorization as of September 30, 2021. Our basic shares outstanding as of September 30, 2021 were approximately 541 million.

Each quarter, our Board of Directors reviews the company’s dividend for the applicable quarter. The Board evaluates the financial condition of the company and considers the economic outlook, corporate cash flow, the company’s liquidity needs, and the health and stability of global credit markets to determine whether to maintain or change the quarterly dividend. In October 2021, the Board of Directors approved maintaining our quarterly dividend at $1.11 per share and we continue to expect our strong financial position to support the dividend. Dividends paid totaled $1.73 billion in the first nine months of 2021.

Financial Products

Financial Products operating cash flow was $1.10 billion in the first nine months of 2021, compared with $1.04 billion for the same period a year ago. Net cash used for investing activities was $468 million for the first nine months of 2021, compared with net cash provided of $885 million for the same period in 2020. The change was primarily due to portfolio related activity. Net cash used for financing activities was $289 million for the first nine months of 2021 compared with $2.10 billion for the same period in 2020. The change was primarily due to higher portfolio funding requirements.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - “New accounting guidance”.

CRITICAL ACCOUNTING ESTIMATES

For a discussion of the company’s critical accounting estimates, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates since our 2020 Annual Report on Form 10-K.

OTHER MATTERS

Information related to legal proceedings appears in Note 14—Environmental and Legal Matters of Part II, Item 8 “Financial Statements and Supplementary Data.”

Retirement Benefits

We recognize mark-to-market gains and losses immediately through earnings upon the remeasurement of our pension and OPEB plans. Mark-to-market gains and losses represent the effects of actual results differing from our assumptions and the effects of changing assumptions. We will record the annual mark-to-market adjustment as of the measurement date, December 31, 2021. The discount rates for our U.S. pension plans were 2.8 percent and 2.4 percent as of September 30, 2021 and December 31, 2020, respectively. Asset returns as of September 30, 2021 for our U.S. pension plans were 1.5 percent compared to an expected return on plan assets for 2021 of 4.2 percent. It is difficult to predict the December 31, 2021 adjustment amount, as it is dependent on several factors including discount rate, actual returns on plan assets and other actuarial assumptions.

Order Backlog

At the end of the third quarter of 2021, the dollar amount of backlog believed to be firm was approximately $20.6 billion, about $2.2 billion higher than the second quarter of 2021. The order backlog increased across the three primary segments, with the largest increase in Resource Industries. Of the total backlog at September 30, 2021, approximately $3.9 billion was not expected to be filled in the following twelve months.

NON-GAAP FINANCIAL MEASURES

We provide the following definitions for the non-GAAP financial measures used in this report. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

We believe it is important to separately quantify the profit impact of two significant items in order for our results to be meaningful to our readers. These items consist of (i) restructuring costs, which were incurred to generate longer-term benefits and (ii) remeasurement (gains) losses resulting from the settlements of pension obligations in 2020. We do not consider these items indicative of earnings from ongoing business activities and believe the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing our period-over-period results. In addition, we provide a calculation of ME&T free cash flow as we believe it is an important measure for investors to determine the cash generation available for financing activities including debt repayments, dividends and share repurchases.

Reconciliations of adjusted results to the most directly comparable GAAP measures are as follows:


(Dollars in millions except per share data)	Operating Profit		Operating Profit Margin		Profit Before Taxes		Provision (Benefit) for Income Taxes		Effective Tax Rate		Profit		Profit per Share

Three Months Ended September 30, 2021 - U.S. GAAP	$	1,664	13.4	%	$	1,775	$	368	20.7	%	$	1,426	$	2.60
Restructuring costs	35		0.3	%	35		6		15.0	%	29		$	0.06
Three Months Ended September 30, 2021 - Adjusted	$	1,699	13.7	%	$	1,810	$	374	20.7	%	$	1,455	$	2.66

Three Months Ended September 30, 2020 - U.S. GAAP	$	985	10.0	%	$	863	$	187	21.7	%	$	668	$	1.22
Restructuring costs	112		1.1	%	112		13		12.0	%	99		$	0.18
Remeasurement (gains) losses of pension obligations	—		—	%	77		12		15.6	%	65		$	0.12
Three Months Ended September 30, 2020 - Adjusted	$	1,097	11.1	%	$	1,052	$	212	20.2	%	$	832	$	1.52

Nine Months Ended September 30, 2021 - U.S. GAAP	$	5,267	14.2	%	$	5,642	$	1,313	23.3	%	$	4,369	$	7.94
Restructuring costs	124		0.3	%	124		19		15.0	%	105		$	0.19
Nine Months Ended September 30, 2021 - Adjusted	$	5,391	14.5	%	$	5,766	$	1,332	23.1	%	$	4,474	$	8.13

Nine Months Ended September 30, 2020 - U.S. GAAP	$	3,173	10.4	%	$	3,054	$	839	27.5	%	$	2,218	$	4.05
Restructuring costs	296		1.0	%	296		35		12.0	%	261		$	0.48
Remeasurement (gains) losses of pension obligations	—		—	%	(55)		(10)		18.2	%	(45)		$	(0.08)
Nine Months Ended September 30, 2020 - Adjusted	$	3,469	11.4	%	$	3,295	$	864	26.2	%	$	2,434	$	4.44

Reconciliations of ME&T free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities are as follows:



(Millions of dollars)	Nine Months Ended September 30
		2021		2020
ME&T net cash provided by operating activities 1		$	4,899	$	2,065

ME&T capital expenditures		$	(693)	$	(685)
ME&T free cash flow		$	4,206	$	1,380
1 See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 77 - 78.

Supplemental Consolidating Data

We are providing supplemental consolidating data for the purpose of additional analysis. The data has been grouped as follows:

Consolidated – Caterpillar Inc. and its subsidiaries.

Machinery, Energy & Transportation – We define ME&T as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of our products.

Financial Products – We define Financial Products as it is presented in the supplemental data as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Consolidating Adjustments – Eliminations of transactions between ME&T and Financial Products.

The nature of the ME&T and Financial Products businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We believe this presentation will assist readers in understanding our business.

Pages 71 to 78 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information. Certain amounts for prior periods have been reclassified to conform to the current period presentation.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended September 30, 2021

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	11,707	$	11,707	$	—	$	—
Revenues of Financial Products	690		—		787		(97)		1
Total sales and revenues	12,397		11,707		787		(97)

Operating costs:
Cost of goods sold	8,617		8,618		—		(1)		2
Selling, general and administrative expenses	1,340		1,147		200		(7)		2
Research and development expenses	427		427		—		—
Interest expense of Financial Products	111		—		111		—
Other operating (income) expenses	238		(56)		310		(16)		2
Total operating costs	10,733		10,136		621		(24)

Operating profit	1,664		1,571		166		(73)

Interest expense excluding Financial Products	114		114		—		—
Other income (expense)	225		143		9		73		3

Consolidated profit before taxes	1,775		1,600		175		—

Provision (benefit) for income taxes	368		331		37		—
Profit of consolidated companies	1,407		1,269		138		—

Equity in profit (loss) of unconsolidated affiliated companies	21		23		—		(2)		4


Profit of consolidated and affiliated companies	1,428		1,292		138		(2)

Less: Profit (loss) attributable to noncontrolling interests	2		1		3		(2)		5

Profit 6	$	1,426	$	1,291	$	135	$	—

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Nine Months Ended September 30, 2021

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	35,091	$	35,091	$	—	$	—
Revenues of Financial Products	2,082		—		2,371		(289)		1
Total sales and revenues	37,173		35,091		2,371		(289)

Operating costs:
Cost of goods sold	25,510		25,515		—		(5)		2
Selling, general and administrative expenses	3,943		3,471		483		(11)		2
Research and development expenses	1,247		1,247		—		—
Interest expense of Financial Products	352		—		352		—
Other operating (income) expenses	854		(30)		931		(47)		2
Total operating costs	31,906		30,203		1,766		(63)

Operating profit	5,267		4,888		605		(226)

Interest expense excluding Financial Products	376		376		—		—
Other income (expense)	751		819		56		(124)		3

Consolidated profit before taxes	5,642		5,331		661		(350)

Provision (benefit) for income taxes	1,313		1,158		155		—
Profit of consolidated companies	4,329		4,173		506		(350)

Equity in profit (loss) of unconsolidated affiliated companies	44		52		—		(8)		4


Profit of consolidated and affiliated companies	4,373		4,225		506		(358)

Less: Profit (loss) attributable to noncontrolling interests	4		3		9		(8)		5

Profit 6	$	4,369	$	4,222	$	497	$	(350)

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	9,228	$	9,228	$	—	$	—
Revenues of Financial Products	653		—		740		(87)		1
Total sales and revenues	9,881		9,228		740		(87)

Operating costs:
Cost of goods sold	6,919		6,921		—		(2)		2
Selling, general and administrative expenses	1,126		943		189		(6)		2
Research and development expenses	344		344		—		—
Interest expense of Financial Products	137		—		137		—
Other operating (income) expenses	370		95		287		(12)		2
Total operating costs	8,896		8,303		613		(20)

Operating profit	985		925		127		(67)

Interest expense excluding Financial Products	136		136		—		—
Other income (expense)	14		(62)		9		67		3

Consolidated profit before taxes	863		727		136		—

Provision (benefit) for income taxes	187		133		54		—
Profit of consolidated companies	676		594		82		—

Equity in profit (loss) of unconsolidated affiliated companies	(5)		(4)		—		(1)		4


Profit of consolidated and affiliated companies	671		590		82		(1)

Less: Profit (loss) attributable to noncontrolling interests	3		—		4		(1)		5

Profit 6	$	668	$	590	$	78	$	—

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

4Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

5Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

6Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Nine Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Sales and revenues:
Sales of Machinery, Energy & Transportation	$	28,452	$	28,452	$	—	$	—
Revenues of Financial Products	2,061		—		2,350		(289)		1
Total sales and revenues	30,513		28,452		2,350		(289)

Operating costs:
Cost of goods sold	21,298		21,302		—		(4)		2
Selling, general and administrative expenses	3,426		2,867		572		(13)		2
Research and development expenses	1,041		1,041		—		—
Interest expense of Financial Products	461		—		462		(1)		3
Other operating (income) expenses	1,114		227		927		(40)		2
Total operating costs	27,340		25,437		1,961		(58)

Operating profit	3,173		3,015		389		(231)

Interest expense excluding Financial Products	384		383		—		1		3
Other income (expense)	265		60		(7)		212		4

Consolidated profit before taxes	3,054		2,692		382		(20)

Provision (benefit) for income taxes	839		720		119		—
Profit of consolidated companies	2,215		1,972		263		(20)

Equity in profit (loss) of unconsolidated affiliated companies	8		18		—		(10)		5


Profit of consolidated and affiliated companies	2,223		1,990		263		(30)

Less: Profit (loss) attributable to noncontrolling interests	5		2		13		(10)		6

Profit 7	$	2,218	$	1,988	$	250	$	(20)

1Elimination of Financial Products’ revenues earned from ME&T.

2Elimination of net expenses recorded by ME&T paid to Financial Products.

3Elimination of interest expense recorded between Financial Products and ME&T.

4Elimination of discount recorded by ME&T on receivables sold to Financial Products and of interest earned between ME&T and Financial Products as well as dividends paid by Financial Products to ME&T.

5Elimination of equity profit (loss) earned from Financial Products’ subsidiaries partially owned by ME&T subsidiaries.

6Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries.

7Profit attributable to common shareholders.

Caterpillar Inc.

Supplemental Data for Financial Position

At September 30, 2021

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and cash equivalents	$	9,446	$	8,554	$	892	$	—
Receivables – trade and other	7,647		3,175		430		4,042		1,2
Receivables – finance	8,919		—		13,095		(4,176)		2

Prepaid expenses and other current assets	2,215		1,831		425		(41)		3
Inventories	13,666		13,666		—		—
Total current assets	41,893		27,226		14,842		(175)

Property, plant and equipment – net	11,904		7,957		3,947		—
Long-term receivables – trade and other	1,273		389		215		669		1,2
Long-term receivables – finance	12,605		—		13,301		(696)		2


Noncurrent deferred and refundable income taxes	1,744		2,279		105		(640)		4
Intangible assets	1,121		1,121		—		—
Goodwill	6,353		6,353		—		—
Other assets	3,891		3,233		1,869		(1,211)		5
Total assets	$	80,784	$	48,558	$	34,279	$	(2,053)

Liabilities
Current liabilities:
Short-term borrowings	$	3,247	$	—	$	3,247	$	—

Accounts payable	7,218		7,112		240		(134)		6
Accrued expenses	3,579		3,234		345		—
Accrued wages, salaries and employee benefits	2,075		2,031		44		—
Customer advances	1,155		1,155		—		—

Other current liabilities	2,319		1,694		689		(64)		4,7
Long-term debt due within one year	6,383		48		6,335		—
Total current liabilities	25,976		15,274		10,900		(198)

Long-term debt due after one year	27,154		9,786		17,395		(27)		8
Liability for postemployment benefits	6,395		6,394		1		—
Other liabilities	4,564		3,905		1,371		(712)		4
Total liabilities	64,089		35,359		29,667		(937)
Commitments and contingencies
Shareholders’ equity
Common stock	6,352		6,352		919		(919)		9
Treasury stock	(26,608)		(26,608)		—		—
Profit employed in the business	38,361		34,138		4,212		11		9
Accumulated other comprehensive income (loss)	(1,440)		(715)		(725)		—
Noncontrolling interests	30		32		206		(208)		9
Total shareholders’ equity	16,695		13,199		4,612		(1,116)
Total liabilities and shareholders’ equity	$	80,784	$	48,558	$	34,279	$	(2,053)

1 Elimination of receivables between ME&T and Financial Products.

2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.

4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5 Elimination of other intercompany assets between ME&T and Financial Products.

6 Elimination of payables between ME&T and Financial Products.

7 Elimination of prepaid insurance in Financial Products’ other liabilities.

8 Elimination of debt between ME&T and Financial Products.

9 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.

Supplemental Data for Financial Position

At December 31, 2020

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Assets
Current assets:
Cash and cash equivalents	$	9,352	$	8,822	$	530	$	—
Receivables – trade and other	7,317		3,846		397		3,074		1,2
Receivables – finance	9,463		—		13,681		(4,218)		2

Prepaid expenses and other current assets	1,930		1,376		624		(70)		3
Inventories	11,402		11,402		—		—
Total current assets	39,464		25,446		15,232		(1,214)

Property, plant and equipment – net	12,401		8,309		4,092		—
Long-term receivables – trade and other	1,185		363		164		658		1,2
Long-term receivables – finance	12,222		—		12,895		(673)		2


Noncurrent deferred and refundable income taxes	1,523		2,058		110		(645)		4
Intangible assets	1,308		1,308		—		—
Goodwill	6,394		6,394		—		—
Other assets	3,827		3,158		1,871		(1,202)		5
Total assets	$	78,324	$	47,036	$	34,364	$	(3,076)

Liabilities
Current liabilities:
Short-term borrowings	$	2,015	$	10	$	2,005	$	—
Short-term borrowings with consolidated companies	—		—		1,000		(1,000)		6
Accounts payable	6,128		6,060		212		(144)		7
Accrued expenses	3,642		3,099		543		—
Accrued wages, salaries and employee benefits	1,096		1,081		15		—
Customer advances	1,108		1,108		—		—
Dividends payable	562		562		—		—
Other current liabilities	2,017		1,530		580		(93)		4,8
Long-term debt due within one year	9,149		1,420		7,729		—
Total current liabilities	25,717		14,870		12,084		(1,237)

Long-term debt due after one year	25,999		9,764		16,250		(15)		6
Liability for postemployment benefits	6,872		6,872		—		—
Other liabilities	4,358		3,691		1,385		(718)		4
Total liabilities	62,946		35,197		29,719		(1,970)
Commitments and contingencies
Shareholders’ equity
Common stock	6,230		6,230		919		(919)		9
Treasury stock	(25,178)		(25,178)		—		—
Profit employed in the business	35,167		31,091		4,065		11		9
Accumulated other comprehensive income (loss)	(888)		(352)		(536)		—
Noncontrolling interests	47		48		197		(198)		9
Total shareholders’ equity	15,378		11,839		4,645		(1,106)
Total liabilities and shareholders’ equity	$	78,324	$	47,036	$	34,364	$	(3,076)

1 Elimination of receivables between ME&T and Financial Products.

2 Reclassification of ME&T’s trade receivables purchased by Financial Products and Financial Products’ wholesale inventory receivables.

3 Elimination of ME&T’s insurance premiums that are prepaid to Financial Products.

4 Reclassification reflecting required netting of deferred tax assets/liabilities by taxing jurisdiction.

5 Elimination of other intercompany assets between ME&T and Financial Products.

6 Elimination of debt between ME&T and Financial Products.

7 Elimination of payables between ME&T and Financial Products.

8 Elimination of prepaid insurance in Financial Products’ other liabilities.

9 Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Nine Months Ended September 30, 2021

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	4,373	$	4,225	$	506	$	(358)	1, 5
Adjustments for non-cash items:
Depreciation and amortization	1,766		1,162		604		—



Provision (benefit) for deferred income taxes	(321)		(255)		(66)		—
Other	102		104		(135)		133		2
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	(326)		(338)		40		(28)		2, 3
Inventories	(2,195)		(2,194)		—		(1)		2
Accounts payable	1,232		1,194		28		10		2
Accrued expenses	46		117		(71)		—
Accrued wages, salaries and employee benefits	934		905		29		—
Customer advances	39		39		—		—
Other assets – net	138		133		24		(19)		2
Other liabilities – net	(2)		(193)		144		47		2
Net cash provided by (used for) operating activities	5,786		4,899		1,103		(216)

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(673)		(670)		(11)		8		2
Expenditures for equipment leased to others	(1,014)		(23)		(997)		6		2
Proceeds from disposals of leased assets and property, plant and equipment	877		71		818		(12)		2
Additions to finance receivables	(9,603)		—		(10,292)		689		3
Collections of finance receivables	9,221		—		9,946		(725)		3
Net intercompany purchased receivables	—		—		100		(100)		3
Proceeds from sale of finance receivables	44		—		44		—
Net intercompany borrowings	—		1,000		3		(1,003)		4
Investments and acquisitions (net of cash acquired)	(449)		(449)		—		—
Proceeds from sale of businesses and investments (net of cash sold)	23		23		—		—
Proceeds from sale of securities	424		44		380		—
Investments in securities	(934)		(542)		(392)		—
Other – net	(8)		59		(67)		—
Net cash provided by (used for) investing activities	(2,092)		(487)		(468)		(1,137)

Cash flow from financing activities:
Dividends paid	(1,733)		(1,733)		(350)		350		5
Common stock issued, including treasury shares reissued	122		122		—		—
Common shares repurchased	(1,622)		(1,622)		—		—

Net intercompany borrowings	—		(3)		(1,000)		1,003		4
Proceeds from debt issued (original maturities greater than three months)	6,931		494		6,437		—
Payments on debt (original maturities greater than three months)	(8,620)		(1,910)		(6,710)		—
Short-term borrowings – net (original maturities three months or less)	1,324		(10)		1,334		—
Other – net	(4)		(4)		—		—
Net cash provided by (used for) financing activities	(3,602)		(4,666)		(289)		1,353
Effect of exchange rate changes on cash	(9)		(14)		5		—
Increase (decrease) in cash, cash equivalents and restricted cash	83		(268)		351		—
Cash, cash equivalents and restricted cash at beginning of period	9,366		8,822		544		—
Cash, cash equivalents and restricted cash at end of period	$	9,449	$	8,554	$	895	$	—

1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4 Elimination of net proceeds and payments to/from ME&T and Financial Products.

5 Elimination of dividend activity between Financial Products and ME&T.

Caterpillar Inc.

Supplemental Data for Cash Flow

For the Nine Months Ended September 30, 2020

(Unaudited)

(Millions of dollars)


			Supplemental Consolidating Data
	Consolidated		Machinery, Energy & Transportation		Financial Products		Consolidating Adjustments
Cash flow from operating activities:
Profit of consolidated and affiliated companies	$	2,223	$	1,990	$	263	$	(30)	1,5
Adjustments for non-cash items:
Depreciation and amortization	1,815		1,217		598		—

Net gain on remeasurement of pension obligations	(55)		(55)		—		—
Provision (benefit) for deferred income taxes	(38)		(5)		(33)		—
Other	919		494		167		258		2
Changes in assets and liabilities, net of acquisitions and divestitures:
Receivables – trade and other	1,473		616		(54)		911		2, 3
Inventories	(139)		(130)		—		(9)		2
Accounts payable	(596)		(599)		(6)		9		2
Accrued expenses	(286)		(314)		28		—
Accrued wages, salaries and employee benefits	(547)		(512)		(35)		—
Customer advances	13		13		—		—
Other assets – net	(15)		(136)		26		95		2
Other liabilities – net	(512)		(514)		83		(81)		2
Net cash provided by (used for) operating activities	4,255		2,065		1,037		1,153

Cash flow from investing activities:
Capital expenditures – excluding equipment leased to others	(686)		(687)		(11)		12		2
Expenditures for equipment leased to others	(805)		2		(823)		16		2
Proceeds from disposals of leased assets and property, plant and equipment	550		119		451		(20)		2
Additions to finance receivables	(9,278)		—		(10,234)		956		3
Collections of finance receivables	9,656		—		10,822		(1,166)		3
Net intercompany purchased receivables	—		—		971		(971)		3
Proceeds from sale of finance receivables	37		—		37		—
Net intercompany borrowings	—		599		6		(605)		4
Investments and acquisitions (net of cash acquired)	(93)		(93)		—		—
Proceeds from sale of businesses and investments (net of cash sold)	13		13		—		—
Proceeds from sale of securities	239		17		222		—
Investments in securities	(512)		(15)		(497)		—
Other – net	(80)		(21)		(59)		—
Net cash provided by (used for) investing activities	(959)		(66)		885		(1,778)

Cash flow from financing activities:
Dividends paid	(1,683)		(1,683)		(20)		20		5
Common stock issued, including treasury shares reissued	110		110		—		—
Common shares repurchased	(1,130)		(1,130)		—		—

Net intercompany borrowings	—		(6)		(599)		605		4
Proceeds from debt issued (original maturities greater than three months)	9,418		1,991		7,427		—
Payments on debt (original maturities greater than three months)	(6,789)		(18)		(6,771)		—
Short-term borrowings – net (original maturities three months or less)	(2,138)		(5)		(2,133)		—
Other – net	(1)		(1)		—		—
Net cash provided by (used for) financing activities	(2,213)		(742)		(2,096)		625
Effect of exchange rate changes on cash	(56)		(47)		(9)		—
Increase (decrease) in cash, cash equivalents and restricted cash	1,027		1,210		(183)		—
Cash, cash equivalents and restricted cash at beginning of period	8,292		7,302		990		—
Cash, cash equivalents and restricted cash at end of period	$	9,319	$	8,512	$	807	$	—

1 Elimination of equity profit earned from Financial Products' subsidiaries partially owned by ME&T subsidiaries.

2 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.

3 Reclassification of Financial Products’ cash flow activity from investing to operating for receivables that arose from the sale of inventory.

4 Elimination of net proceeds and payments to/from ME&T and Financial Products.

5 Elimination of dividend activity between Financial Products and ME&T.

Forward-looking Statements

Certain statements in this Form 10-Q relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “forecast,” “target,” “guide,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.

Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers’ needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) inventory management decisions and sourcing practices of our dealers and our OEM customers; (x) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xi) union disputes or other employee relations issues; (xii) adverse effects of unexpected events; (xiii) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xiv) 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; (xv) our Financial Products segment’s risks associated with the financial services industry; (xvi) changes in interest rates or market liquidity conditions; (xvii) an increase in delinquencies, repossessions or net losses of Cat Financial’s customers; (xviii) currency fluctuations; (xix) our or Cat Financial’s compliance with financial and other restrictive covenants in debt agreements; (xx) increased pension plan funding obligations; (xxi) alleged or actual violations of trade or anti-corruption laws and regulations; (xxii) additional tax expense or exposure, including the impact of U.S. tax reform; (xxiii) significant legal proceedings, claims, lawsuits or government investigations; (xxiv) new regulations or changes in financial services regulations; (xxv) compliance with environmental laws and regulations; (xxvi) the duration and geographic spread of, business disruptions caused by, and the overall global economic impact of, the COVID-19 pandemic; and (xxvii) other factors described in more detail under the section entitled "Part I - Item 1A. Risk Factors" of Caterpillar's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as such factors may be updated from time to time in Caterpillar's periodic filings with the Securities and Exchange Commission.

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