Transportation Sales    4,509        834            2,344         2,227        9,914         -            9,914 
.......... 
Financial Products      525          70             102           117          814 1         -            814 
Segment....... 
Corporate Items and     (54)         (12)           (9)           (18)         (93)          -            (93) 
Eliminations.. 
Financial Products      471          58             93            99           721           -            721 
Revenues.... 
Consolidated Sales and  USD 4,980      USD 892          USD 2,437       USD 2,326      USD 10,635      USD -          USD 10,635 
Revenues..

1 Includes revenues from Machinery, Energy & Transportation of USD84 million and USD105 million in the first quarter of 2021 and 2020, respectively.

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CONSOLIDATED OPERATING PROFIT

The chart above graphically illustrates reasons for the change in consolidated operating profit between the first quarter of 2020 (at left) and the first 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 first quarter of 2021 was USD1.814 billion, an increase of USD410 million, or 29 percent, compared with USD1.404 billion in the first quarter of 2020. The increase was primarily due to higher sales volume and higher profit from Financial Products, partially offset by higher SG&A/R&D expenses, unfavorable price realization and higher 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 were driven by higher short-term incentive compensation expense, partially offset by favorable material costs and lower warranty expense.

Short-term incentive compensation expense was about USD300 million in the first quarter of 2021, compared to no short-term incentive compensation expense recognized in the first quarter of 2020. For 2021, short-term incentive compensation expense is expected to be about USD1.3 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. In the first quarter of 2020, in response to the continued global economic uncertainty due to the COVID-19 pandemic, Caterpillar suspended 2020 short-term incentive compensation plans for many employees and all senior executives.

Operating profit margin was 15.3 percent for the first quarter of 2021, compared with 13.2 percent for the first quarter of 2020. 


Profit (Loss) by Segment 
                                                                                           USD            % 
(Millions of dollars)                              First Quarter 2021 First Quarter 2020   Change       Change 
Construction Industries.........................   USD 1,035            USD 640              USD        395          62% 
Resource Industries...........................     328                304                         24           8% 
Energy & Transportation........................    666                602                         64           11% 
All Other Segment............................      3                  7                           (4)          (57%) 
Corporate Items and Eliminations.................. (368)              (212)                       (156) 
Machinery, Energy & Transportation..............   1,664              1,341                       323          24% 
Financial Products Segment......................   244                105                         139          132% 
Corporate Items and Eliminations.................. (19)               47                          (66) 
Financial Products...........................      225                152                         73           48% 
Consolidating Adjustments......................    (75)               (89)                        14 
Consolidated Operating Profit...................   USD 1,814            USD 1,404            USD        410          29%

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Other Profit/Loss and Tax Items ? Interest expense excluding Financial Products in the first quarter of 2021 was USD142 million, compared with USD113

million in the first quarter of 2020. The increase was due to higher average debt outstanding during the first

quarter of 2021, compared with the first quarter of 2020. ? Other income (expense) in the first quarter of 2021 was income of USD325 million, compared with income of USD222

million in the first quarter of 2020. The change was due to the absence of a remeasurement gain resulting from the

settlement of a non-U.S. pension obligation that occurred in the first quarter of 2020, which was more than offset

by the favorable impacts from foreign currency exchange gains (losses), unrealized gains (losses) on marketable

securities at Insurance Services, gains (losses) on commodity hedges and favorable pension and other postemployment

benefit (OPEB) plan costs.

The company experienced foreign currency exchange net gains in the first quarter of 2021 across several currencies, compared with net losses in the first quarter of 2020. The favorable impact of unrealized gains (losses) on marketable securities was due to unrealized losses in the first quarter of 2020, compared with unrealized gains in the first quarter of 2021. The company experienced net losses in commodity hedges in the first quarter of 2020, compared with net gains in the first quarter of 2021. ? The provision for income taxes for the first quarter of 2021 reflected a lower estimated annual tax rate of 26

percent, compared with 31 percent for the first 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 is primarily related to changes in the expected geographic mix of profits from a tax

perspective for 2021.

In addition, a discrete tax benefit of USD43 million was recorded in the first quarter of 2021, compared with an USD8 million benefit in the first quarter of 2020, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense. A USD43 million tax charge was also recorded in the first quarter of 2020 related to the USD254 million remeasurement gain resulting from the settlement of a non-U.S. pension obligation.

Construction Industries

Construction Industries' total sales were USD5.459 billion in the first quarter of 2021, an increase of USD1.153 billion, or 27 percent, compared with USD4.306 billion in the first quarter of 2020. The increase was due to higher sales volume driven by higher end-user demand and the impact from changes in dealer inventories. Overall, dealers increased inventories more during the first quarter of 2021 than during the first quarter of 2020. ? In North America, sales increased slightly due to higher end-user demand partially offset by the impact from

changes in dealer inventories and unfavorable price realization. The higher end-user demand was driven primarily by

residential construction. Dealers increased inventories more during the first quarter of 2020 than during the first

quarter of 2021. ? Sales increased in Latin America mostly due to higher sales volume driven by higher end-user demand across the

region and the impact of changes in dealer inventories, partially offset by unfavorable currency impacts from a

weaker Brazilian real. Dealers decreased inventories during the first quarter of 2020, compared with an increase

during the first quarter of 2021. ? In EAME, sales increased due to higher sales volume and favorable currency impacts from a stronger euro. Higher

sales volume was driven by higher end-user demand and the impact from changes in dealer inventories. Dealers

increased inventories more during the first quarter of 2021 than during the first quarter of 2020. ? Sales increased in Asia/Pacific primarily due to higher sales volume and favorable currency impacts from a stronger

Chinese yuan. The increase in sales was primarily due to higher end-user demand across the region driven mainly by

China, reflecting the impact of the pandemic in the first quarter of 2020, and the impact from changes in dealer

inventories. Dealers increased inventories during the first quarter of 2021, compared with a decrease during the

first quarter of 2020 due to the timing of Chinese New Year.

Construction Industries' profit was USD1.035 billion in the first quarter of 2021, an increase of USD395 million, or 62 percent, compared with USD640 million in the first quarter of 2020. The increase was mainly due to higher sales volume.

Construction Industries' profit as a percent of total sales was 19.0 percent in the first quarter of 2021, compared with 14.9 percent in the first quarter of 2020.

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Resource Industries' total sales were USD2.216 billion in the first quarter of 2021, an increase of USD132 million, or 6 percent, compared with USD2.084 billion in the first quarter of 2020. The increase was due to higher sales volume driven by the impacts of changes in dealer inventories, higher end-user demand for equipment and aftermarket parts and favorable currency impact from the Australian dollar, partially offset by unfavorable price realization. Dealers decreased inventories during the first quarter of 2020, compared to remaining about flat during the first quarter of 2021. End-user demand was higher in mining, offset by lower end-user demand in heavy construction and quarry and aggregates.

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