Caterpillar Financial Services Corporation

11/04/2026 | Press release | Distributed by Public on 11/04/2026 10:00

Quarterly Report for Quarter Ending 9/30/2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information that will assist the reader in understanding the Company's Consolidated Financial Statements, the changes in certain key items in those financial statements between select periods and the primary factors that accounted for those changes. In addition, we discuss how certain accounting principles, policies and critical estimates affect our Consolidated Financial Statements. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the Company's business under Item 1A. Risk Factors of the 2025 Form 10-K.
THREE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2025
Overview
(Millions of dollars)
Three Months Ended
September 30,
2026 2025 Change
Retail revenue $ 499 $ 474 $ 25
Operating lease revenue 241 231 10
Wholesale revenue 230 184 46
Other revenue, net 51 37 14
Total revenues $ 1,021 $ 926 $ 95
Profit before income taxes $ 194 $ 184 $ 10
Profit attributable to Caterpillar Financial Services Corporation $ 145 $ 134 $ 11
Revenues
We reported third-quarter 2026 revenues of $1.02 billion, an increase of $95 million, or 10 percent, compared with $926 million in the third quarter of 2025. The increase in revenues was primarily due to a favorable impact from higher average earning assets of $125 million, partially offset by an unfavorable impact from lower average financing rates of $38 million.
Retail revenue for the third quarter of 2026 was $499 million, an increase of $25 million from the same period in 2025. The increase was primarily due to a favorable impact from higher average earning assets of $30 million, partially offset by an unfavorable impact from lower average financing rates on retail finance receivables of $5 million. For the quarter ended September 30, 2026, retail average earning assets were $26.64 billion, an increase of $1.49 billion from the same period in 2025. The annualized average yield was 7.49 percent for the third quarter of 2026, compared with 7.54 percent for the third quarter of 2025.
Operating lease revenue for the third quarter of 2026 was $241 million, an increase of $10 million from the same period in 2025. The increase was primarily due to a favorable impact from higher average earning assets of $15 million, partially offset by an unfavorable impact from lower rental rates on operating leases of $5 million.
Wholesale revenue for the third quarter of 2026 was $230 million, an increase of $46 million from the same period in 2025. The increase was due to a favorable impact from higher average earning assets of $86 million, partially offset by an unfavorable impact from lower average financing rates on wholesale finance receivables of $40 million. For the quarter ended September 30, 2026, wholesale average earning assets were $9.05 billion, an increase of $2.97 billion from the same period in 2025. The annualized average yield was 10.19 percent for the third quarter of 2026, compared with 12.07 percent for the third quarter of 2025.
Other revenue, net items were as follows:
(Millions of dollars)
Three Months Ended
September 30,
2026 2025 Change
Finance receivable and operating lease fees (including late charges) $ 19 $ 18 $ 1
Net gain on returned or repossessed equipment 15 7 8
Interest income on Notes receivable from Caterpillar 8 6 2
Miscellaneous other revenue, net 9 6 3
Total Other revenue, net $ 51 $ 37 $ 14
There was a favorable impact from currency translation on revenues of $5 million in the third quarter of 2026. Currency translation represents the net impact from converting the results of our subsidiaries to U.S. dollar reporting currency and is included in all financial statement line items.
Consolidated Profit Before Income Taxes
(1) Analysis excludes $3 million related to property taxes on operating leases for third quarter 2026 and 2025.
The chart above graphically illustrates reasons for the change in consolidated profit before income taxes between third quarter 2025 (at left) and third quarter 2026 (at right). Management utilizes these charts internally to visually communicate results.
Third-quarter 2026 profit before income taxes was $194 million, an increase of $10 million, or 5 percent, compared with $184 million profit for the third quarter of 2025. The increase was mainly driven by a favorable impact from higher average earning assets of $52 million and a favorable impact from returned or repossessed equipment of $8 million, partially offset by higher provision for credit losses of $34 million and an unfavorable impact from margin of $19 million.
There was a favorable impact from currency translation on profit before income taxes of $3 million in the third quarter of 2026. Currency translation represents the net impact from converting the results of our subsidiaries to U.S. dollar reporting currency and is included in all financial statement line items.
NINE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2025
Overview
(Millions of dollars)
Nine Months Ended
September 30,
2026 2025 Change
Retail revenue $ 1,476 $ 1,374 $ 102
Operating lease revenue 718 686 32
Wholesale revenue 621 507 114
Other revenue, net 144 118 26
Total revenues $ 2,959 $ 2,685 $ 274
Profit before income taxes $ 595 $ 541 $ 54
Profit attributable to Caterpillar Financial Services Corporation $ 434 $ 401 $ 33
Revenues
Revenues for the first nine months of 2026 were $2.96 billion, an increase of $274 million, or 10 percent, compared with $2.69 billion in the same period in 2025. The increase in revenues was primarily due to a favorable impact from higher average earning assets.
Retail revenue for the first nine months of 2026 was $1.48 billion, an increase of $102 million from the same period in 2025. The increase was primarily due to a favorable impact from higher average earning assets. For the nine months ended September 30, 2026, retail average earning assets were $26.40 billion, an increase of $1.88 billion from the same period in 2025. The annualized average yield was 7.45 percent for the first nine months of 2026, compared with 7.47 percent for the same period in 2025.
Operating lease revenue for the first nine months of 2026 was $718 million, an increase of $32 million from the same period in 2025. The increase was primarily due to a favorable impact from higher average earning assets of $44 million, partially offset by an unfavorable impact from lower rental rates on operating leases of $12 million.
Wholesale revenue for the first nine months of 2026 was $621 million, an increase of $114 million from the same period in 2025. The increase was due to a favorable impact from higher average earning assets of $187 million, partially offset by an unfavorable impact from lower average financing rates on wholesale finance receivables of $73 million. For the nine months ended September 30, 2026, wholesale average earning assets were $7.85 billion, an increase of $2.11 billion from the same period in 2025. The annualized average yield was 10.55 percent for the first nine months of 2026, compared with 11.78 percent for the same period in 2025.
Other revenue, net items were as follows:
(Millions of dollars)
Nine Months Ended
September 30,
2026 2025 Change
Finance receivable and operating lease fees (including late charges) $ 60 $ 52 $ 8
Net gain on returned or repossessed equipment 39 28 11
Interest income on Notes receivable from Caterpillar 23 19 4
Miscellaneous other revenue, net 22 19 3
Total Other revenue, net $ 144 $ 118 $ 26
There was a favorable impact from currency translation on revenues of $44 million in the first nine months of 2026. Currency translation represents the net impact from converting the results of our subsidiaries to U.S. dollar reporting currency and is included in all financial statement line items and each of the items included in the above analysis.
Consolidated Profit Before Income Taxes
(1) Analysis excludes $11 million related to property taxes on operating leases for the first nine months of 2026 and 2025.
The chart above graphically illustrates reasons for the change in consolidated profit before income taxes between September 2025 YTD (at left) and September 2026 YTD (at right). Management utilizes these charts internally to visually communicate results.
Profit before income taxes was $595 million for the first nine months of 2026, an increase of $54 million, or 10 percent, compared with $541 million for the same period in 2025. The increase was mainly driven by a favorable impact from higher average earning assets of $137 million, partially offset by higher provision for credit losses of $56 million.
There was a favorable impact from currency translation on profit before income taxes of $22 million in the first nine months of 2026. Currency translation represents the net impact from converting the results of our subsidiaries to U.S. dollar reporting currency and is included in all financial statement line items and each of the items included in the above analysis.
PROVISION FOR INCOME TAXES
As of September 30, 2026 and 2025, the estimated annual tax rate was 29 percent and 24 percent, respectively. The increase in the estimated annual tax rate was primarily due to changes in the geographic mix of profits. The provision for income taxes for the nine months ended September 30, 2026 included a tax benefit of $11 million to reflect changes in estimates related to prior years. The provision for income taxes for the nine months ended September 30, 2025 included a $10 million expense for a valuation allowance against the deferred tax assets of a non-U.S. subsidiary.
FINANCE RECEIVABLES AND EQUIPMENT ON OPERATING LEASES
New Business Volume
(Millions of dollars) Nine Months Ended
September 30,
2026 2025 Change
New retail financing $ 9,928 $ 9,294 $ 634
New retail operating lease activity 1,029 899 130
New wholesale financing 53,620 41,592 12,028
Total $ 64,577 $ 51,785 $ 12,792
New retail financing increased due to higher volume across all segments. The increase in new retail operating lease activity was mainly driven by higher rentals of Caterpillar equipment in Mining, North America, and EAME. New wholesale financing increased primarily due to higher purchases of trade receivables from Caterpillar.
Total Managed Portfolio
We define total portfolio as Finance receivables, net plus Equipment on operating leases, net. We also manage and service receivables and leases that have been sold by us to third parties with limited or no recourse in order to mitigate our concentration of credit risk with certain customers. These assets are not available to pay our creditors. Total managed portfolio was as follows:
(Millions of dollars) September 30,
2026 		December 31,
2025 		Change
Finance receivables, net $ 35,971 $ 32,815 $ 3,156
Equipment on operating leases, net 2,993 2,927 66
Total portfolio $ 38,964 $ 35,742 $ 3,222
Retail loans $ 199 $ 99 $ 100
Retail leases 27 27 -
Operating leases 6 8 (2)
Total off-balance sheet managed assets $ 232 $ 134 $ 98
Total managed portfolio $ 39,196 $ 35,876 $ 3,320
Total Portfolio Metrics
At the end of the third quarter of 2026, past dues were 1.31 percent, compared with 1.47 percent at the end of the third quarter of 2025. Total non-performing finance receivables, which represent finance receivables currently on non-accrual status, were $168 million and $163 million at September 30, 2026 and at December 31, 2025, respectively. Total non-performing finance receivables as a percentage of our finance receivables were less than 1 percent at September 30, 2026 and December 31, 2025.
Write-offs, net of recoveries, were $28 million for the third quarter of 2026, compared with $40 million for the third quarter of 2025.
Our allowance for credit losses as of September 30, 2026 was $332 million, or 0.91 percent of finance receivables, compared with $284 million, or 0.86 percent, as of December 31, 2025. The allowance is subject to an ongoing evaluation based on many quantitative and qualitative factors, including past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of underlying collateral and economic forecasts. We believe our allowance is sufficient to provide for losses over the remaining life of our finance receivables portfolio as of September 30, 2026.
Global Business Conditions
Caterpillar continues to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary costs, labor pressures and the impact of trade policies. We are monitoring the potential downstream impacts from these factors on our business, while remaining focused on portfolio health and continuing to provide qualified customers and dealers with new financing to support their current and future business needs.
LIQUIDITY AND CAPITAL RESOURCES
Maintaining and managing adequate capital and liquidity resources includes management of funding sources and their utilization based on current, future and contingent needs. Throughout the third quarter of 2026, we experienced favorable liquidity conditions. We ended the third quarter of 2026 with $662 million of cash, an increase of $129 million from year-end 2025. Our cash balances are held in numerous locations throughout the world with approximately $200 million held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use and could be used in the U.S. without incurring significant additional U.S. taxes. We expect to meet our U.S. funding needs without repatriating undistributed profits that are indefinitely reinvested outside the U.S.
Borrowings
Borrowings consist primarily of medium-term notes and commercial paper, the combination of which is used to manage interest rate risk and funding requirements.
We receive debt ratings from the major credit rating agencies. Fitch and Moody's maintain a "high-A" debt rating, while S&P maintains a "mid-A" debt rating. A downgrade of our credit ratings by any of the major credit rating agencies could 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, we would rely on cash flows from our existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities, and potential borrowings from Caterpillar. In addition, Caterpillar maintains a support agreement with us, which requires Caterpillar to remain our sole owner and may, under certain circumstances, require Caterpillar to make payments to us should we fail to maintain certain financial ratios.
Total borrowings outstanding as of September 30, 2026 were $36.08 billion, an increase of $2.44 billion from December 31, 2025. Outstanding borrowings were as follows:
(Millions of dollars)
 		September 30,
2026 		December 31,
2025
Medium-term notes, net $ 28,958 $ 26,437
Commercial paper, net of unamortized discount 4,717 5,408
Bank borrowings - long-term 737 665
Bank borrowings - short-term 138 106
Notes payable to Caterpillar 1,526 1,024
Other 1 1
Total outstanding borrowings $ 36,077 $ 33,641
Medium-term notes
We issue medium-term unsecured notes through securities dealers or underwriters in the U.S., Europe and other international capital markets. These notes are offered in several currencies and with a variety of maturities. These notes are senior unsecured obligations of the Company. Medium-term notes issued totaled $10.02 billion and redeemed totaled $7.12 billion for the nine months ended September 30, 2026. Medium-term notes, net outstanding as of September 30, 2026 mature as follows:
(Millions of dollars)
2026 $ 1,378
2027 8,664
2028 9,918
2029 7,189
2030 448
Thereafter 1,494
Fair value adjustments (133)
Total $ 28,958
Commercial paper
We issue unsecured commercial paper in the U.S., Europe and other international capital markets. These short-term promissory notes are issued on a discounted basis and are payable at maturity.
Revolving credit facilities
As of September 30, 2026, we had three global credit facilities with a syndicate of banks totaling $11.50 billion (Credit Facility) available in the aggregate to both Caterpillar and us 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 us as of September 30, 2026 was $8.63 billion. Information on our Credit Facility is as follows:
•In August 2026, we entered into a new 364-day facility of $3.50 billion (of which $2.63 billion is available to us), which expires in August 2027.
•In August 2026, we amended and extended the three-year facility (as amended and restated, the "three-year facility"). The three-year facility of $3.00 billion (of which $2.25 billion is available to us) expires in August 2029.
•In August 2026, we amended and extended the five-year facility (as amended and restated, the "five-year facility"). The five-year facility of $5.00 billion (of which $3.75 billion is available to us) expires in August 2031.
At September 30, 2026, Caterpillar's consolidated net worth was $21.55 billion, which was above the $9.00 billion required covenant in the Credit Facility. The consolidated net worth is defined in the Credit Facility as Caterpillar's consolidated shareholders' equity including preferred stock but excluding the pension and other postretirement benefits balance within Accumulated other comprehensive income (loss).
At September 30, 2026, our covenant interest coverage ratio was 1.53 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 fiscal quarter for the prior four consecutive fiscal quarter period, required in the Credit Facility.
In addition, at September 30, 2026, our six-month covenant leverage ratio was 8.01 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 in the Credit Facility.
In the event that either Caterpillar or we do not meet one or more of our respective financial covenants under the Credit Facility in the future (and are unable to obtain a consent or waiver), the syndicate of banks may terminate the commitments allocated to the party that does not meet its covenants. Additionally, in such event, certain of our other lenders under other loan agreements where similar financial covenants or cross default provisions are applicable, may, at their election, choose to pursue remedies under those loan agreements, including accelerating the repayment of outstanding borrowings. At September 30, 2026, there were no borrowings under the Credit Facility.
The aforementioned financial covenants are being reported as calculated under the Credit Facility and not pursuant to U.S. GAAP. Please refer to the credit agreements governing the Credit Facility filed as exhibits to our periodic reports for further information related to the calculation thereof. For risks related to our indebtedness and compliance with these covenants, please refer to the risk factor "Restrictive covenants in our debt agreements could limit our financial and operating flexibility" set forth in Part I, Item 1A of our 2025 Form 10-K.
Bank borrowings
Available credit lines with banks as of September 30, 2026 totaled $3.39 billion. These committed and uncommitted credit lines, which may be eligible for renewal at various future dates or have no specified expiration date, are used primarily by our non-U.S. subsidiaries for local funding requirements. We may guarantee subsidiary borrowings under these lines. As of September 30, 2026, we were in compliance with all debt covenants under these credit lines.
Notes receivable from/payable to Caterpillar
Under our variable amount and term lending agreements with Caterpillar, we may borrow up to $3.56 billion from Caterpillar and Caterpillar may borrow up to $2.33 billion from us. Most variable amount lending agreements are in effect for indefinite periods of time and may be changed or terminated by either party with 30 days' notice. The term lending agreements have remaining maturities ranging up to approximately eight years.
Off-Balance Sheet Arrangements
We are a party to certain off-balance sheet arrangements, primarily in the form of guarantees. Please refer to Note 7 of Notes to Consolidated Financial Statements for further information.
Cash Flows
Net cash provided by operating activities was $772 million in the first nine months of 2026, compared with $724 million for the same period in 2025. Net cash used for investing activities was $3.43 billion in the first nine months of 2026, compared with $2.03 billion for the same period in 2025. The change was primarily due to portfolio-related activity. Net cash provided by financing activities was $2.78 billion in the first nine months of 2026, compared with $1.41 billion for the same period in 2025. The change was due to increased external borrowing activity, partially offset by decreased borrowings from Caterpillar.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, see Part I, Item 1. Note 2 - New Accounting Pronouncements.
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 2025 Form 10-K. There have been no significant changes to our critical accounting estimates since our 2025 Form 10-K.
CAUTIONARY STATEMENT REGARDING 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," "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.
Cat Financial'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) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (ii) 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; (iii) changes in interest rates, currency fluctuations or market liquidity conditions; (iv) an increase in delinquencies, repossessions or net losses of our customers; (v) used equipment values and estimated residual values of leased equipment; (vi) our compliance with financial and other restrictive covenants in debt agreements; (vii) government monetary or fiscal policies; (viii) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (ix) demand for Caterpillar products; (x) marketing, operational or administrative support received from Caterpillar; (xi) our ability to develop, produce and market quality products that meet our customers' needs; (xii) information technology security threats and computer crime; (xiii) alleged or actual violations of trade or anti-corruption laws and regulations; (xiv) new regulations or changes in financial services regulations; (xv) additional tax expense or exposure; (xvi) changes in accounting guidance; (xvii) catastrophic events, including global pandemics such as the COVID-19 pandemic; and (xviii) other factors described in more detail under the section entitled "Part I - Item 1A. Risk Factors" of Cat Financial's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as such factors may be updated from time to time in Cat Financial's periodic filings with the Securities and Exchange Commission.
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