CATERPILLAR INC.
Caterpillar Inc.
Table of Contents
Part I. Financial Information
Part II. Other Information
* Item omitted because no answer is called for or item is not applicable.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Caterpillar Inc. Consolidated Statement of Results of Operations (Unaudited) (Dollars in millions except per share data)
Sales and revenues:
March 31 2022 2021
1 Profit attributable to common shareholders. 2 Diluted by assumed exercise of stock-based compensation awards using the treasury stock method. See accompanying notes to Consolidated Financial Statements.
Caterpillar Inc. Consolidated Statement of Comprehensive Income (Unaudited) (Dollars in millions)
Three Months Ended March 31 2022 2021
Profit of consolidated and affiliated companies............................................................................................... $ 1,537 $ 1,531 Other comprehensive income (loss), net of tax (Note 13): Foreign currency translation:............................................................................................................................. (115) (347) Pension and other postretirement benefits:........................................................................................................ (1) (8) Derivative financial instruments:....................................................................................................................... 23 (31) Available-for-sale securities: (64) (16)
Total other comprehensive income (loss), net of tax........................................................................................... (157) (402) Comprehensive income........................................................................................................................................ 1,380 1,129 Less: comprehensive income attributable to the noncontrolling interests............................................................ ? 1 Comprehensive income attributable to shareholders..................................................................................... $ 1,380 $ 1,128
See accompanying notes to Consolidated Financial Statements.
Assets Current assets:
Consolidated Statement of Financial Position (Unaudited) (Dollars in millions)
March 31, 2022
December 31, 2021
Liabilities Current liabilities: Short-term borrowings: Machinery, Energy & Transportation.................................................................................... $ ? $ 9 Financial Products.................................................................................................................. 4,501 5,395 Accounts payable........................................................................................................................... 8,361 8,154 Accrued expenses........................................................................................................................... 3,846 3,757 Accrued wages, salaries and employee benefits............................................................................ 1,275 2,242 Customer advances........................................................................................................................ 1,388 1,087 Dividends payable.......................................................................................................................... ? 595 Other current liabilities.................................................................................................................. 2,355 2,256 Long-term debt due within one year:............................................................................................. Machinery, Energy & Transportation.................................................................................... 127 45 Financial Products.................................................................................................................. 7,679 6,307 Total current liabilities........................................................................................................................ 29,532 29,847
Long-term debt due after one year: Machinery, Energy & Transportation.................................................................................... 9,636 9,746 Financial Products.................................................................................................................. 15,641 16,287 Liability for postemployment benefits................................................................................................ 5,363 5,592 Other liabilities.................................................................................................................................... 5,007 4,805 Total liabilities........................................................................................................................................... 65,179 66,277 Commitments and contingencies (Notes 11 and 14) Shareholders? equity Common stock of $1.00 par value: Authorized shares:2,000,000,000 Issued shares: (3/31/22 and 12/31/21 ?814,894,624) at paid-in amount........................................... 6,281 6,398 Treasury stock (3/31/22 ?281,541,419 shares; 12/31/21 ?279,006,573 shares) at cost................... (28,326) (27,643) Profit employed in the business.......................................................................................................... 40,820 39,282 Accumulated other comprehensive income (loss).............................................................................. (1,710) (1,553) Noncontrolling interests...................................................................................................................... 32 32 Total shareholders? equity....................................................................................................................... 17,097 16,516 Total liabilities and shareholders? equity............................................................................................... $ 82,276 $ 82,793
See accompanying notes to Consolidated Financial Statements.
Caterpillar Inc. Consolidated Statement of Changes in Shareholders? Equity (Unaudited) (Dollars in millions)
Three Months EndedMarch31, 2021
Common stock
Treasury stock
Profit employed in the business
Accumulated other comprehensive income (loss)
Noncontrolling interests Total Balance at December 31, 2020...................................................... $ 6,230 $ (25,178) $ 35,167 $ (888) $ 47 $15,378 Profit of consolidated and affiliated companies.............................. ? ? 1,530 ? 1 1,531 Foreign currency translation, net of tax........................................... ? ? ? (347) ? (347) Pension and other postretirement benefits, net of tax...................... ? ? ? (8) ? (8) Derivative financial instruments, net of tax..................................... ? ? ? (31) ? (31) Available-for-sale securities, net of tax........................................... ? ? ? (16) ? (16) Distribution to noncontrolling interests........................................... ? ? ? ? (2) (2) Common shares issued from treasury stock for stock-based compensation: 2,459,683................................................................. (63) 128 ? ? ? 65 Stock-based compensation expense................................................. 42 ? ? ? ? 42 Other................................................................................................ 6 1 ? ? (2) 5 Balance at March 31, 2021............................................................ $ 6,215 $ (25,049) $ 36,697 $ (1,290) $ 44 $16,617
Three Months EndedMarch31, 2022 Balance at December 31, 2021...................................................... $ 6,398 $ (27,643) $ 39,282 $ (1,553) $ 32 $16,516 Profit of consolidated and affiliated companies.............................. ? ? 1,537 ? ? 1,537 Foreign currency translation, net of tax........................................... ? ? ? (115) ? (115) Pension and other postretirement benefits, net of tax...................... ? ? ? (1) ? (1) Derivative financial instruments, net of tax..................................... ? ? ? 23 ? 23 Available-for-sale securities, net of tax........................................... ? ? ? (64) ? (64) Dividends declared......................................................................... ? ? 1 ? ? 1 Common shares issued from treasury stock for stock-based compensation: 1,037,468................................................................. (65) 37 ? ? ? (28) Stock-based compensation expense................................................. 40 ? ? ? ? 40 Common shares repurchased:3,571,684 1...................................... ? (720) ? ? ? (720) Other................................................................................................ (92) ? ? ? ? (92) Balance at March 31, 2022............................................................ $ 6,281 $ (28,326) $ 40,820 $ (1,710) $ 32 $17,097
1 See Note 12 for additional information.
See accompanying notes to Consolidated Financial Statements.
Cash flow from operating activities:
(Millions of dollars)
Three Months Ended March 31 2022 2021 Profit of consolidated and affiliated companies................................................................... $ 1,537 $ 1,531 Adjustments for non-cash items: Depreciation and amortization...................................................................................... 557 586 Provision (benefit) for deferred income taxes.............................................................. (99) 109 Other............................................................................................................................. (52) (104) Changes in assets and liabilities, net of acquisitions and divestitures: Receivables ? trade and other....................................................................................... (372) (543) Inventories.................................................................................................................... (1,032) (657) Accounts payable.......................................................................................................... 452 733 Accrued expenses......................................................................................................... (74) 84 Accrued wages, salaries and employee benefits........................................................... (965) 191 Customer advances....................................................................................................... 311 58 Other assets ? net.......................................................................................................... 99 56 Other liabilities ? net.................................................................................................... (49) (116) Net cash provided by (used for) operating activities................................................................. 313 1,928
Cash flow from investing activities: Capital expenditures ? excluding equipment leased to others.............................................. (346) (252) Expenditures for equipment leased to others........................................................................ (333) (252) Proceeds from disposals of leased assets and property, plant and equipment...................... 269 309 Additions to finance receivables........................................................................................... (2,988) (2,629) Collections of finance receivables........................................................................................ 2,966 2,770 Proceeds from sale of finance receivables............................................................................ 9 5 Investments and acquisitions (net of cash acquired)............................................................ (8) (386) Proceeds from sale of businesses and investments (net of cash sold).................................. ? 28 Proceeds from sale of securities........................................................................................... 571 126 Investments in securities....................................................................................................... (1,438) (148) Other ? net............................................................................................................................ (15) (48) Net cash provided by (used for) investing activities................................................................. (1,313) (477)
Cash flow from financing activities: Dividends paid...................................................................................................................... (595) (562) Common stock issued, including treasury shares reissued................................................... (28) 65 Common shares repurchased................................................................................................ (820) ? Proceeds from debt issued (original maturities greater than three months): Machinery, Energy & Transportation........................................................................... ? 494 Financial Products........................................................................................................ 2,131 1,779 Payments on debt (original maturities greater than three months): Machinery, Energy & Transportation........................................................................... (6) (644) Financial Products........................................................................................................ (1,381) (2,243) Short-term borrowings ? net (original maturities three months or less)............................... (1,016) 1,659 Other ? net ? (2) Net cash provided by (used for) financing activities................................................................. (1,715) 546 Effect of exchange rate changes on cash................................................................................... (16) (12) Increase (decrease) in cash, cash equivalents and restricted cash...................................... (2,731) 1,985 Cash, cash equivalents and restricted cash at beginning of period............................................ 9,263 9,366 Cash, cash equivalents and restricted cash at end of period...................................................... $ 6,532 $ 11,351
Cash equivalents primarily represent short-term, highly liquid investments with original maturities of generally three months or less.
See accompanying notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. A. Nature of operations
Information in our financial statements and related commentary are presented in the following categories:
Machinery, Energy & Transportation (ME&T) ? We define ME&T 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 our finance and insurance subsidiaries, primarily CaterpillarFinancial ServicesCorporation(Cat Financial)andCaterpillarInsurance HoldingsInc.(Insurance Services). Financial Products? information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.
B. Basis of presentation
In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three months ended March 31, 2022 and 2021, (b) the consolidated comprehensive income for the three months ended March31,2022and2021,(c)the consolidatedfinancial positionat March31,2022andDecember31,2021,(d)the consolidated changes in shareholders? equity for the three months ended March 31, 2022 and 2021 and (e) the consolidatedcashflowforthethreemonthsendedMarch31,2022and2021. Thefinancialstatementshavebeen preparedinconformitywithgenerallyacceptedaccountingprinciplesintheUnitedStatesofAmerica(U.S.GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).
Interim resultsare not necessarilyindicative ofresultsfora full year.The informationincludedinthisForm 10-Q shouldbe readinconjunctionwiththe auditedfinancial statementsandnotestheretoincludedinourcompany?sannual report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K).
The December 31, 2021 financial position data included herein is derived from the audited consolidated financial statementsincludedinthe2021Form10-KbutdoesnotincludealldisclosuresrequiredbyU.S.GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.
Cat Financial has end-user customers that are variable interest entities (VIEs) of which we are not the primary beneficiary. Although we have provided financial support to these entities and therefore have a variable interest, we do not have the powertodirect the activitiesthat most significantlyimpact theireconomic performance.Ourmaximum exposure to loss from our involvement with these VIEs is limited to the credit risk inherently present in the financial support that we have provided. These risks were evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses. See Note 11 for further discussions on a consolidated VIE.
2. New accounting guidance
A. Adoption of new accounting standards
We consider the applicability and impact of all ASUs. We adopted the following ASUs effective January 1, 2022, none of which had a material impact on our financial statements:
ASU Description 2020-06 Debt with conversion and other options and Derivatives and hedging 2021-05 Lessor - Variable lease payments 2021-10 Government assistance
B. Accounting standards issued but not yet adopted
We consider the applicability and impact of all ASUs. We assessed the ASUs and determined that they either were not applicable or were not expected to have a material impact on our financial statements.
3. Sales and revenue contract information
Tradereceivablesrepresentamountsduefromdealersandendusersforthesaleofourproducts. Inaddition,Cat Financial provides wholesale inventory financing for a dealer?s purchase of inventory. We include wholesale inventory receivables in Receivables ? trade and other and Long-term receivables ? trade and other in the Consolidated Statement of Financial Position. We recognize trade receivables from dealers and end users in Receivables ? trade and otherandLong-term receivables?trade andotherinthe ConsolidatedStatement ofFinancial Position.Trade receivablesfrom dealersandenduserswere $7,818million,$7,267millionand$6,310millionasofMarch31,2022, December 31, 2021 and December 31, 2020, respectively. Long-term trade receivables from dealers and end users were $553 million, $624 million and $657 million as of March 31, 2022, December 31, 2021 and December 31, 2020, respectively.
We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments as a contract liability in Customer advances and Other liabilities in the Consolidated Statement of Financial Position. Contract liabilities were $1,869 million, $1,557 million and $1,526 million as of March 31, 2022, December 31, 2021 and December 31, 2020, respectively. We reduce the contract liability when revenue is recognized. During the three monthsendedMarch31,2022and2021,we recognized$437millionand$433million,respectively,ofrevenue that was recorded as a contract liability at the beginning of 2022 and 2021, respectively.
As of March 31, 2022, we have entered into contracts with dealers and end users for which sales have not been recognized as we have not satisfied our performance obligations and transferred control of the products. The dollar amount ofunsatisfiedperformance obligationsforcontractswithanoriginal durationgreaterthanone yearis$7.7 billion, with about one-half of the amount expected to be completed and revenue recognized in the twelve months following March 31, 2022. We have elected the practical expedient not to disclose unsatisfied performance obligationswithanoriginalcontractdurationofoneyearorless. Contractswithanoriginaldurationofoneyearor less are primarily sales to dealers for machinery, engines and replacement parts.
See Note 16 for further disaggregated sales and revenues information.
4. Stock-based compensation
Accountingforstock-basedcompensationrequiresthat the cost resultingfrom all stock-basedpaymentsbe recognized in the financial statements based on the grant date fair value of the award. Our stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs).
Werecognizedpretaxstock-basedcompensationexpenseof$40millionand$42millionforthethreemonthsended March 31, 2022 and 2021, respectively.
The following table illustrates the type and fair value of the stock-based compensation awards granted during the three months ended March 31, 2022 and 2021, respectively:
Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
The following table provides the assumptions used in determining the fair value of the stock-based awards for the three months ended March 31, 2022 and 2021, respectively:
Grant Year
As of March 31, 2022, the total remaining unrecognized compensation expense related to nonvested stock-based compensationawardswas$299million,whichwillbeamortizedovertheweighted-averageremainingrequisite service periods of approximately 1.8 years.
5. Derivative financial instruments and risk management
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices. Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price exposures. Our policy specifies that derivatives are not to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts and commodity forward and option contracts. Our derivativeactivitiesaresubjecttothemanagement,directionandcontrolofourseniorfinancialofficers. Wepresent at least annually to the Audit Committee of the Board of Directors on our risk management practices, including our use of financial derivative instruments.
We recognize all derivatives at their fair value on the Consolidated Statement of Financial Position. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow (cash flow hedge) or (3)anundesignatedinstrument. Werecordincurrentearningschangesinthefairvalueofaderivativethatis qualified,designatedandhighlyeffective asa fairvalue hedge,alongwiththe gainorlossonthe hedgedrecognized asset or liability that is attributable to the hedged risk. We record in Accumulated other comprehensive income (loss) (AOCI) changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge, to the extent effective, on the Consolidated Statement of Financial Position until we reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings. We report changes in the fair value of undesignated derivative instruments in current earnings. We classify cash flows from designated derivative financial instrumentswithinthesamecategoryastheitembeinghedgedontheConsolidatedStatementofCashFlow. We include cashflowsfrom undesignatedderivative financial instrumentsinthe investingcategoryonthe Consolidated Statement of Cash Flow.
We formallydocument all relationshipsbetweenhedginginstrumentsandhedgeditems,aswell asthe risk- managementobjectiveandstrategyforundertakingvarioushedgetransactions. Thisprocessincludeslinkingall derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.
We also formally assess, both at the hedge?s inception and on an ongoing basis, whether the designated derivatives that areusedinhedgingtransactionsarehighlyeffectiveinoffsettingchangesinfairvaluesorcashflowofhedged items. When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longerprobable,wediscontinuehedgeaccountingprospectively,inaccordancewiththederecognitioncriteriafor hedge accounting.
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costsincurredinforeigncurrencies. Movementsinforeigncurrencyratesalsoaffect ourcompetitive positionasthese changesmayaffect businesspracticesand/orpricingstrategiesofnon-U.S.-basedcompetitors. Additionally,we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.
Our ME&T operations purchase, manufacture and sell products in many locations around the world. As we have a diversifiedrevenue andcost base,we manage ourfuture foreigncurrencycashflowexposure ona net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to approximately five years. As of March 31, 2022, the maximum term of these outstanding contracts at inception was approximately 60 months.
We generally designate as cash flow hedges at inception of the contract any forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. We perform designation on a specific exposure basis to support hedge accounting. The remainder of ME&T foreign currency contracts are undesignated.
InmanagingforeigncurrencyriskforourFinancialProductsoperations,ourobjectiveistominimizeearnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions and future transactionsdenominatedinforeigncurrencies. Ourpolicyallowstheuseofforeigncurrencyforward,optionand crosscurrencycontractstooffsettheriskofcurrencymismatchbetweenourassetsandliabilitiesandexchangerate risk associated with future transactions denominated in foreign currencies. Our foreign currency forward and option contractsareprimarilyundesignated. Wedesignatefixed-to-fixedcrosscurrencycontractsascashflowhedgesto protect against movements in exchange rates on foreign currency fixed-rate assets and liabilities.
Interest Rate Risk
Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to interest rate changes.
Our ME&T operations generally use fixed-rate debt as a source of funding. Our objective is to minimize the cost of borrowed funds. Our policy allows us to enter into fixed-to-floating interest rate contracts and forward rate agreementstomeetthatobjective. Wedesignatefixed-to-floatinginterestratecontractsasfairvaluehedgesat inceptionofthe contract,andwe designate certainforwardrate agreementsascashflowhedgesat inceptionofthe contract.
Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixedorfloatingrate andduration)ofCat Financial?sdebt portfoliowiththe interest rate profile ofour receivablesportfoliowithinpredeterminedrangesonanongoingbasis. Inconnectionwiththat policy,we use interest rate derivative instrumentstomodifythe debt structure tomatchassetswithinthe receivablesportfolio. Thismatched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.
Ourpolicyallowsustousefixed-to-floating,floating-to-fixedandfloating-to-floatinginterestratecontractstomeet the match-fundingobjective. We designate fixed-to-floatinginterest rate contractsasfairvalue hedgestoprotect debt againstchangesinfairvalueduetochangesinthebenchmarkinterestrate. Wedesignatemostfloating-to-fixed interest rate contracts as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.
We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at both ME&T and FinancialProducts. Weamortizethegainsorlossesassociatedwiththesecontractsatthetimeofliquidationinto earnings over the original term of the previously designated hedged item.
Commodity Price Risk
Commodity price movements create a degree of risk by affecting the price we must pay for certain raw materials. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.
Our ME&T operations purchase base and precious metals embedded in the components we purchase from suppliers. Our suppliers pass on to us price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.
Ourobjective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five- year horizon. All such commodity forward and option contracts are undesignated.
The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position were as follows:
(Millions of dollars) Fair Value March 31, 2022 December 31, 2021 Assets1 Liabilities2 Assets1 Liabilities2
1Assets are classified on the Consolidated Statement of Financial Position as Receivables - trade and other or Long-term receivables - trade and other.
2Liabilities are classified on the Consolidated Statement of Financial Position as Accrued expenses or Other liabilities.
The total notional amounts of the derivative instruments as of March 31, 2022 and December 31, 2021 were $20.7 billion and $18.9 billion, respectively. The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties. We calculate the amounts exchanged by the parties by referencing the notional amountsandbyothertermsofthe derivatives,suchasforeigncurrencyexchange rates,interest ratesor commodity prices.
Gains (Losses) on derivative instruments are categorized as follows:
(Millions of dollars) Three Months Ended March 31
Fair Value / Undesignated Hedges Cash Flow Hedges
Gains (Losses) Recognized on the Consolidated Statement of Results of Operations1
Gains (Losses) Recognized in AOCI
Gains (Losses) Reclassified from AOCI2 2022 2021 2022 2021 2022 2021 Foreign exchange contracts............. $ (63) $ 78 $ (9) $ 72 $ 26 $ 129 Interest rate contracts....................... 7 7 56 7 (7) (11) Commodity contracts....................... 93 20 ? ? ? ? Total................................................. $ 37 $ 105 $ 47 $ 79 $ 19 $ 118
1Foreign exchange contract and Commodity contract gains (losses) are included in Other income (expense). Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products.
2Foreign exchange contract gains (losses) are primarily included in Sales of Machinery, Energy & Transportation and Other income (expense) in the Consolidated Statement of Results of Operations. Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products in the Consolidated Statement of Results of Operations.
The following amounts were recorded on the Consolidated Statement of Financial Position related to cumulative basis adjustments for fair value hedges:
We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. Themasternettingagreementsgenerallyalsoprovidefornetsettlementofalloutstandingcontractswith a counterparty in the case of an event of default or a termination event.
Collateralisgenerallynotrequiredofthecounterpartiesorofourcompanyunderthemasternettingagreements. As of March 31, 2022 and December 31, 2021, no cash collateral was received or pledged under the master netting agreements.
Theeffectofthenetsettlementprovisionsofthemasternettingagreementsonourderivativebalancesuponanevent of default or termination event was as follows:
6. Inventories
Inventories (principally using the last-in, first-out (LIFO) method) were comprised of the following:
7. Intangible assets and goodwill
A. Intangible assets
Intangible assets were comprised of the following:
(Millions of dollars) Weighted Amortizable Life (Years)
Gross Carrying Amount
Accumulated Amortization Net Customer relationships............................................................................. 15 $ 2,273 $ (1,601) $ 672 Intellectual property................................................................................. 12 1,473 (1,225) 248 Other........................................................................................................ 16 131 (84) 47 Total finite-lived intangible assets........................................................... 14 $ 3,877 $ (2,910) $ 967
Weighted Amortizable Life (Years)
Gross Carrying Amount
Accumulated Amortization Net Customer relationships............................................................................. 15 $ 2,421 $ (1,709) $ 712 Intellectual property................................................................................. 12 1,472 (1,192) 280 Other........................................................................................................ 14 156 (106) 50 Total finite-lived intangible assets........................................................... 14 $ 4,049 $ (3,007) $ 1,042
AmortizationexpenseforthethreemonthsendedMarch31,2022and2021was$72millionand$77million, respectively. Amortization expense related to intangible assets is expected to be:
B. Goodwill
No goodwill was impaired during the three months ended March 31, 2022 or 2021.
ThechangesincarryingamountofgoodwillbyreportablesegmentforthethreemonthsendedMarch31,2022were as follows:
(Millions of dollars) December 31, 2021
Adjustments1
2022 Construction Industries Goodwill........................................................................................... $ 302 $ (9) $ 293 Impairments...................................................................................... (22) ? (22) Net goodwill...................................................................................... 280 (9) 271 Resource Industries Goodwill........................................................................................... 4,182 2 4,184 Impairments...................................................................................... (1,175) ? (1,175) Net goodwill...................................................................................... 3,007 2 3,009 Energy & Transportation Goodwill........................................................................................... 2,985 (22) 2,963 All Other2 Goodwill........................................................................................... 52 (2) 50 Consolidated total
1 Other adjustments are comprised primarily of foreign currency translation. 2 Includes All Other operating segment (See Note 16).
8. Investments in debt and equity securities
We have investmentsincertaindebt andequitysecurities,whichwe recordat fairvalue andprimarilyinclude inOther assets in the Consolidated Statement of Financial Position.
We classifydebt securitiesprimarilyasavailable-for-sale.We include the unrealizedgainsandlossesarisingfrom the revaluationofavailable-for-sale debt securities,net ofapplicable deferredincome taxes,inequity(AOCIinthe Consolidated Statement of Financial Position). We include the unrealized gains and losses arising from the revaluation oftheequitysecuritiesinOtherincome(expense)intheConsolidatedStatementofResultsofOperations. We generally determine realized gains and losses on sales of investments using the specific identification method for available-for-sale debt and equity securities and include them in Other income (expense) in the Consolidated Statement of Results of Operations.
Thecostbasisandfairvalueofavailable-for-saledebtsecuritieswithunrealizedgainsandlossesincludedinequity (AOCI in the Consolidated Statement of Financial Position) were as follows:
Available-for-sale debt securities March 31, 2022 December 31, 2021
(Millions of dollars)
Pretax Net
Pretax Net
Government debt
Corporate bonds
Available-for-sale debt securities in an unrealized loss position:
(Millions of dollars) Government debt
Less than 12 months1 12 months or more1 Total Other U.S. and non-U.S. government bonds.. $ 24 $ 1 $ ? $ ? $ 24 $ 1
Corporate bonds
(Millions of dollars) Corporate bonds
Less than 12 months1 12 months or more1 Total Corporate bonds............................................... $ 270 $ 4 $ 33 $ 1 $ 303 $ 5
Mortgage-backed debt securities
1Indicates the length of time that individual securities have been in a continuous unrealized loss position.
The unrealizedlossesonourinvestmentsingovernment debt,corporate bondsandmortgage-backeddebt securities relate to changes in interest rates and credit-related yield spreads since time of purchase. We do not intend to sell the investments, and it is not likely that we will be required to sell the investments before recovery of their amortized cost basis. In addition, we did not expect credit-related losses on these investments as of March 31, 2022.
The cost basis and fair value of available-for-sale debt securities at March 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay and creditors may have the right to call obligations.
March 31, 2022
Sales of available-for-sale debt securities:
Three Months Ended March 31 (Millions of dollars) 2022 2021 Proceeds from the sale of available-for-sale securities................................................................... $ 96 $ 100 Gross gains from the sale of available-for-sale securities............................................................... ? ? Gross losses from the sale of available-for-sale securities.............................................................. ? ?
In addition, we had $813 million and $964 million of investments in time deposits classified as held-to-maturity debt securitiesasofMarch31,2022andDecember31,2021,respectively.Alltheseinvestmentsmaturewithinoneyear andwe include them inPrepaidexpensesandothercurrent assetsinthe ConsolidatedStatement ofFinancial Position. We recordheld-to-maturitydebt securitiesat amortizedcost,whichapproximatesfairvalue. We didnot have any unrealized gains or losses on these securities as of March 31, 2022 and December 31, 2021.
For the three months ended March 31, 2022 and 2021, the net unrealized gains (losses) for equity securities held at March 31, 2022 and 2021 were $(12) million and $20 million, respectively.
9. Postretirement benefits
A. Pension and postretirement benefit costs
U.S. Pension Benefits
Non-U.S. Pension Benefits Other Postretirement Benefits (Millions of dollars) March 31 March 31 March 31 2022 2021 2022 2021 2022 2021 For the three months ended: Components of net periodic benefit cost: Service cost.............................................................................. $ ? $ ? $ 13 $ 14 $ 25 $ 25 Interest cost.............................................................................. 100 82 18 14 20 16 Expected return on plan assets................................................ (167) (179) (34) (32) (4) (2) Amortization of prior service cost (credit)............................... ? ? ? ? (1) (10) Net periodic benefit cost (benefit)1......................................... $ (67) $ (97) $ (3) $ (4) $ 40 $ 29
1 TheservicecostcomponentisincludedinOperatingcostsintheConsolidatedStatementofResultsofOperations. Allother components are included in Other income (expense) in the Consolidated Statement of Results of Operations.
Wemade$210millionofcontributionstoourpensionandotherpostretirementplansduringthethreemonthsended March 31, 2022. We currently anticipate full-year 2022 contributions of approximately $357 million.
B. Defined contribution benefit costs
Total company costs related to our defined contribution plans, which are included in Operating Costs in the Consolidated Statement of Results of Operations, were as follows:
Three Months Ended March 31
ThedecreaseintheU.S.definedcontributionbenefitcostsforthethreemonthsendedMarch31,2022wasprimarily due to the fair value adjustments related to our non-qualified deferred compensation plans.
10. Leases
Revenues from finance and operating leases, primarily included in Revenues of Financial Products on the Consolidated Statement of Results of Operations, were as follows:
Three Months Ended March 31
We have dealer performance guarantees and third-party performance guarantees that do not limit potential payment to endusersrelatedtoindemnitiesandothercommercialcontractualobligations. Inaddition,wehaveenteredinto contractsinvolvingindustrystandardindemnificationsthatdonotlimitpotentialpayment. Fortheseunlimited guarantees, we are unable to estimate a maximum potential amount of future payments that could result from claims made.
Nosignificantlosshasbeenexperiencedorisanticipatedunderanyoftheseguarantees. AtMarch31,2022and December 31, 2021, the related recorded liability was $4 million and $5 million respectively. The maximum potential amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees was as follows:
Cat Financial provides guarantees to purchase certain loans of Caterpillar dealers from a special-purpose corporation (SPC) that qualifies as a variable interest entity. The purpose of the SPC is to provide short-term working capital loans to Caterpillar dealers. This SPC issues commercial paper and uses the proceeds to fund its loan program. Cat Financial receives a fee for providing this guarantee. Cat Financial is the primary beneficiary of the SPC as its guarantees result in Cat Financial having both the power to direct the activities that most significantly impact the SPC?s economic performance andthe obligationtoabsorblosses,andtherefore Cat Financial hasconsolidatedthe financial statements oftheSPC. AsofMarch31,2022andDecember31,2021,theSPC?sassetsof$839millionand$888million, respectively, were primarily comprised of loans to dealers, and the SPC?s liabilities of $838 million and $888 million, respectively,wereprimarilycomprisedofcommercialpaper. TheassetsoftheSPCarenotavailabletopayCat Financial?screditors. CatFinancialmaybeobligatedtoperformundertheguaranteeiftheSPCexperienceslosses. No loss has been experienced or is anticipated under this loan purchase agreement.
We determine our product warranty liability by applying historical claim rate experience to the current field population anddealerinventory. Generally,webasehistoricalclaimratesonactualwarrantyexperienceforeachproductby machinemodel/enginesizebycustomerordealerlocation(insideoroutsideNorthAmerica). Wedevelopspecific rates for each product shipment month and update them monthly based on actual warranty claim experience.
The reconciliationofthe change inourproduct warrantyliabilitybalancesforthe quartersendedMarch31wasas follows:
First Three Months
12. Profit per share
Computations of profit per share: Three Months Ended March 31
1Profit attributable to common shareholders. 2Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.
For the three months ended March 31, 2022 and 2021, we excluded 2.1 million and 1.1 million of outstanding stock options, respectively, from the computation of diluted earnings per share because the effect would have been antidilutive.
In July 2018, the Board approved a share repurchase authorization (the 2018 Authorization) of up to $10.0 billion of Caterpillarcommonstockeffective January1,2019,withnoexpiration.AsofMarch31,2022,approximately$1.4 billion remained available under the 2018 Authorization.
For the three months ended March 31, 2022, we repurchased 3.6 million shares of Caterpillar common stock, at an aggregate cost of$720million.Forthe three monthsendedMarch31,2021,we didnot repurchase anysharesof Caterpillar common stock. We made these purchases through a combination of accelerated stock repurchase agreements with third-party financial institutions and open market transactions.
13. Accumulated other comprehensive income (loss)
We present comprehensive income and its components in the Consolidated Statement of Comprehensive Income. Changes in the balances for each component of AOCI were as follows:
Three Months Ended March 31 (Millions of dollars) 2022 2021 Foreign currency translation: Beginning balance.......................................................................................................................... $ (1,508) $ (910) Gains (losses) on foreign currency translation............................................................................. (104) (323) Less: Tax provision /(benefit)...................................................................................................... 11 24 Net gains (losses) on foreign currency translation................................................................. (115) (347) (Gains) losses reclassified to earnings......................................................................................... ? ? Less: Tax provision /(benefit)...................................................................................................... ? ? Net (gains) losses reclassified to earnings................................................................................. ? ? Other comprehensive income (loss), net of tax.............................................................................. (115) (347) Ending balance............................................................................................................................... $ (1,623) $ (1,257)
Pension and other postretirement benefits Beginning balance.......................................................................................................................... $ (62) $ (32) Current year prior service credit (cost)........................................................................................ ? ? Less: Tax provision /(benefit)...................................................................................................... ? ? Net current year prior service credit (cost)............................................................................. ? ? Amortization of prior service (credit) cost.................................................................................. (1) (10) Less: Tax provision /(benefit)...................................................................................................... ? (2) Net amortization of prior service (credit) cost.......................................................................... (1) (8) Other comprehensive income (loss), net of tax.............................................................................. (1) (8) Ending balance............................................................................................................................... $ (63) $ (40)
Derivative financial instruments Beginning balance.......................................................................................................................... $ (3) $ ? Gains (losses) deferred................................................................................................................. 47 79 Less: Tax provision /(benefit)...................................................................................................... 10 16 Net gains (losses) deferred..................................................................................................... 37 63 (Gains) losses reclassified to earnings......................................................................................... (19) (118) Less: Tax provision /(benefit)...................................................................................................... (5) (24) Net (gains) losses reclassified to earnings................................................................................. (14) (94) Other comprehensive income (loss), net of tax.............................................................................. 23 (31) Ending balance............................................................................................................................... $ 20 $ (31)
Available-for-sale securities Beginning balance.......................................................................................................................... $ 20 $ 54 Gains (losses) deferred................................................................................................................. (79) (21) Less: Tax provision /(benefit)...................................................................................................... (15) (5) Net gains (losses) deferred..................................................................................................... (64) (16) (Gains) losses reclassified to earnings......................................................................................... ? ? Less: Tax provision /(benefit)...................................................................................................... ? ? Net (gains) losses reclassified to earnings................................................................................. ? ? Other comprehensive income (loss), net of tax.............................................................................. (64) (16) Ending balance............................................................................................................................... $ (44) $ 38 Total AOCI Ending Balance at March 31....................................................................... $ (1,710) $ (1,290)
14. Environmental and legal matters
The Company is regulated by federal, state and international environmental laws governing its use, transport and disposalofsubstancesandcontrolofemissions.Inadditiontogoverningourmanufacturingandotheroperations, these laws often impact the development of our products, including, but not limited to, required compliance with air emissions standards applicable to internal combustion engines. We have made, and will continue to make, significant research and development and capital expenditures to comply with these emissions standards.
We are engaged in remedial activities at a number of locations, often with other companies, pursuant to federal and state laws. When it is probable we will pay remedial costs at a site, and those costs can be reasonably estimated, we accrue the investigation, remediation, and operating and maintenance costs against our earnings. We accrue costs based on consideration of currently available data and information with respect to each individual site, including available technologies, current applicable laws and regulations, and prior remediation experience. Where no amount within a range of estimates is more likely, we accrue the minimum. Where multiple potentially responsible parties are involved, we consider our proportionate share of the probable costs. In formulating the estimate of probable costs, we do not consider amounts expected to be recovered from insurance companies or others. We reassess these accrued amounts on a quarterly basis. The amount recorded for environmental remediation is not material and is included in Accrued expenses in the Consolidated Statement of Financial Position. We believe there is no more than a remote chance that a material amount for remedial activities at any individual site, or at all the sites in the aggregate, will be required.
On January 7, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requested documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non- U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries). The Company has received additional subpoenas relating to this investigation requesting additional documents and information relating to, among otherthings,the purchase andresale ofreplacement partsbyCaterpillarInc.andnon-U.S.Caterpillarsubsidiaries, dividend distributions of certain non-U.S. Caterpillar subsidiaries, and Caterpillar SARL (CSARL) and related structures. OnMarch2-3,2017,agentswiththe Department ofCommerce,the Federal Deposit Insurance Corporation andthe Internal Revenue Service executedsearchandseizure warrantsat three facilitiesofthe Companyinthe Peoria, Illinois area, including its former corporate headquarters. The warrants identify, and agents seized, documents and informationrelatedto,amongotherthings,the export ofproductsfrom the UnitedStates,the movement ofproducts between the United States and Switzerland, the relationship between Caterpillar Inc. and CSARL, and sales outside the UnitedStates.It isthe Company?sunderstandingthat the warrants,whichconcernbothtaxandexport activities,are related to the ongoing grand jury investigation. The Company is continuing to cooperate with this investigation. The Companyisunabletopredicttheoutcomeorreasonablyestimateanypotentialloss;however,wecurrentlybelieve that this matter will not have a material adverse effect on the Company?s consolidated results of operations, financial position or liquidity.
In addition, we are involved in other unresolved legal actions that arise in the normal course of business. The most prevalent ofthese unresolvedactionsinvolve disputesrelatedtoproduct design,manufacture andperformance liability (including claimed asbestos exposure), contracts, employment issues, environmental matters, intellectual property rights, taxes (other than income taxes) and securities laws. The aggregate range of reasonably possible losses in excess ofaccruedliabilities,ifany,associatedwiththese unresolvedlegal actionsisnot material.Insome cases,we cannot reasonably estimate a range of loss because there is insufficient information regarding the matter. However, we believe there is no more than a remote chance that any liability arising from these matters would be material. Although it is not possible to predict with certainty the outcome of these unresolved legal actions, we believe that these actions will not individually or in the aggregate have a material adverse effect on our consolidated results of operations, financial position or liquidity.
15. Income taxes
The provision for income taxes for the first three months of 2022 reflected an estimated annual tax rate of 24 percent, compared with 26 percent for the first three months of 2021, excluding the discrete items discussed in the following paragraph. The comparative tax rate for full-year 2021 was approximately 23 percent. The increase in the estimated annual tax rate from full-year 2021 was primarily related to changes in the expected geographic mix of profits from a tax perspective for 2022.
Inaddition,adiscretetaxbenefitof$12millionwasrecordedinthefirstthreemonthsof2022,comparedwitha $43 million benefit in the first three months of 2021, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.
In Revenue Agent?s Reports issued at the end of the field examinations of our U.S. income tax returns for 2007 to 2012 including the impact of a loss carryback to 2005, the Internal Revenue Service has proposed to tax in the United States profitsearnedfrom certainpartstransactionsbyCaterpillarSARL (CSARL)basedonthe examinationteam?s application of the ?substance-over-form? or ?assignment-of-income? judicial doctrines. We are vigorously contesting the proposed increases to tax and penalties for these years of approximately $2.3 billion. We believe that the relevant transactions complied with applicable tax laws and did not violate judicial doctrines. We have filed U.S. income tax returnsonthissame basisforyearsafter2012. Basedonthe informationcurrentlyavailable,we donot anticipate a significant change to our unrecognized tax benefits for this position within the next 12 months. We currently believe the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position, liquidity or results of operations.
16. Segment information
A. Basis for segment information
OurExecutive Office iscomprisedofa ChiefExecutive Officer(CEO),fourGroupPresidents,a ChiefFinancial Officer(CFO),aChiefLegalOfficerandGeneralCounselandaChiefHumanResourcesOfficer. TheGroup PresidentsandCFOareaccountableforarelatedsetofend-to-endbusinessesthattheymanage. TheChiefLegal Officer and General Counsel leads the Law, Security and Public Policy Division. The Chief Human Resources Officer leadstheHumanResourcesOrganization. TheCEOallocatesresourcesandmanagesperformanceattheGroup President/CFO level. As such, the CEO serves as our Chief Operating Decision Maker, and operating segments are primarily based on the Group President/CFO reporting structure.
Three ofouroperatingsegments,ConstructionIndustries,Resource IndustriesandEnergy& Transportationare ledby GroupPresidents. Oneoperatingsegment,FinancialProducts,isledbytheCFOwhoalsohasresponsibilityfor Corporate Services. Corporate Services is a cost center primarily responsible for the performance of certain support functions globally and to provide centralized services; it does not meet the definition of an operating segment. One Group President leads one smaller operating segment that is included in the All Other operating segment. The Law, Security and Public Policy Division and the Human Resources Organization are cost centers and do not meet the definition of an operating segment.
Segment information for 2021 has been recast due to a methodology change related to how we assign intersegment salesandsegmentprofitfromourtechnologyproductsandservicestoConstructionIndustries,ResourceIndustries and Energy & Transportation. This methodology change did not have a material impact on our segment results.
B. Description of segments
We have five operating segments, of which four are reportable segments. Following is a brief description of our reportable segments and the business activities included in the All Other operating segment:
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; smallandmediumtrack-typetractors;track-typeloaders;wheelexcavators;compact,smallandmediumwheel loaders; and related parts and work tools. Inter-segment sales are a source of revenue for this segment.
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 includeslarge track-type tractors; large miningtrucks; hardrockvehicles; longwall miners; electric rope shovels; draglines; hydraulic shovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers;wheeldozers;landfillcompactors;soilcompactors;selectworktools;machinerycomponents;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 strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Cat machines and engines. Inter-segment sales are a source of revenue for this segment.
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, development and testing manufacturing, marketing and sales andproduct support.The product andservicesportfolioincludesturbines,centrifugal gascompressors,andturbine- related services; reciprocating engine-powered generator sets; integrated systems and solutions used in the electric powergenerationindustry;reciprocatingengines,drivetrainandintegratedsystemsandsolutionsforthemarineand oil and gas industries; reciprocating engines, drivetrain and integrated systems and solutions 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 includetheremanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies; and product support of on- highway vocational trucks for North America. Inter-segment sales are a source of revenue for this segment.
Financial ProductsSegment: Providesfinancingalternativestocustomersanddealersaroundthe worldfor Caterpillarproductsandservices,aswell asfinancingforvehicles,powergenerationfacilitiesandmarine vesselsthat, 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, extendedservice coverage andmaintenance plansformachinesandengines,anddealerpropertyandcasualty 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 ME&T, but the relatedcostsarenotallocatedtooperatingsegments.FinancialProducts?segmentprofitisdeterminedonapretax basis and includes other income/expense items.
AllOtheroperatingsegment: Primarilyincludesactivitiessuchas:businessstrategy;productmanagementand development; manufacturingandsourcingoffiltersandfluids,undercarriage,ground-engagingtools,fluidtransfer 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 whollyowneddealerinJapan;dealerportfoliomanagementandensuringthemostefficientandeffectivedistribution of machines, engines and parts; brand management and marketing strategy; and digital investments for new customer anddealersolutionsthatintegratedataanalyticswithstate-of-the-artdigitaltechnologieswhiletransformingthe buying experience. Results for the All Other operating segment are included as a reconciling item between reportable segments and consolidated external reporting.
C. Segment measurement and reconciliations
Thereareseveralmethodologydifferencesbetweenoursegmentreportingandourexternalreporting. Thefollowing is a list of the more significant methodology differences:
? ME&T segment net assets generally include inventories, receivables, property, plant and equipment, goodwill, intangibles, accounts payable and customer advances. We generally manage at the corporate level liabilities other than accounts payable and customer advances, and we do not include these in segment operations. Financial Products Segment assets generally include all categories of assets.
? We value segment inventories and cost of sales using a current cost methodology.
? Weamortizegoodwillallocatedtosegmentsusingafixedamountbasedona20-yearusefullife. This methodologydifference onlyimpactssegment assets.We donot include goodwill amortizationexpense in segment profit. Inaddition,we have allocatedtosegmentsonlya portionofgoodwill forcertainacquisitions made in 2011 or later.
? WegenerallymanagecurrencyexposuresforME&Tatthecorporatelevelanddonotincludeinsegment profit the effects of changes in exchange rates on results of operations within the year. We report the net difference createdinthe translationofrevenuesandcostsbetweenexchange ratesusedforU.S.GAAP reporting and exchange rates used for segment reporting as a methodology difference.
? We do not include stock-based compensation expense in segment profit.
? Postretirementbenefitexpensesaresplit;segmentsaregenerallyresponsibleforservicecosts,withthe remaining elements of net periodic benefit cost included as a methodology difference.
? WedetermineME&Tsegmentprofitonapretaxbasisandexcludeinterestexpenseandmostotherincome/ expense items. We determine Financial Products Segment profit on a pretax basis and include other income/ expense items.
Reconcilingitemsarecreatedbasedonaccountingdifferencesbetweensegmentreportingandourconsolidated external reporting. Please refer to pages 26 to 28 for financial information regarding significant reconciling items. Mostofourreconcilingitemsareself-explanatorygiventheaboveexplanations. Forthereconciliationof profit, we have grouped the reconciling items as follows:
? Corporatecosts: Thesecostsarerelatedtocorporaterequirementsprimarilyforcomplianceandlegal functions for the benefit of the entire organization.
? Restructuringcosts: Mayincludecostsforemployeeseparation,long-livedassetimpairmentsandcontract terminations. These costsare includedinOtheroperating(income)expensesexcept fordefined-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. See Note 20 for more information.
? Methodologydifferences: Seepreviousdiscussionofsignificantaccountingdifferencesbetweensegment reporting and consolidated external reporting.
? Timing: Timingdifferencesintherecognitionofcostsbetweensegmentreportingandconsolidatedexternal reporting. For example, we report certain costs on the cash basis for segment reporting and the accrual basis for consolidated external reporting.
ForthethreemonthsendedMarch31,2022and2021,salesandrevenuesbygeographicregionreconciledtoconsolidatedsales and revenues were as follows:
Sales and Revenues by Geographic Region
(Millions of dollars) North America
Latin America EAME
Asia/ Pacific
External Sales and Revenues
Intersegment Sales and Revenues
Total Sales and Revenues Three Months Ended March 31, 2022 Construction Industries............................... $ 2,720 $ 627 $ 1,277 $ 1,462 $ 6,086 $ 29 $ 6,115 Resource Industries..................................... 1,018 399 594 748 2,759 71 2,830 Energy & Transportation............................ 1,938 310 1,184 600 4,032 1,006 5,038 Financial Products Segment....................... 503 73 96 111 783 1 ? 783 Total sales and revenues from reportable segments.......................................................... 6,179 1,409 3,151 2,921 13,660 1,106 14,766 All Other operating segment....................... 18 ? 5 16 39 79 118 Corporate Items and Eliminations.............. (60) (16) (11) (23) (110) (1,185) (1,295) Total Sales and Revenues.............................. $ 6,137 $ 1,393 $ 3,145 $ 2,914 $ 13,589 $ ? $ 13,589
Three Months Ended March 31, 2021 Construction Industries............................... $ 2,126 $ 392 $ 1,081 $ 1,842 $ 5,441 $ 18 $ 5,459 Resource Industries..................................... 657 405 474 561 2,097 81 2,178 Energy & Transportation............................ 1,782 256 1,093 527 3,658 849 4,507 Financial Products Segment....................... 476 62 100 123 761 1 ? 761 Total sales and revenues from reportable
1 IncludesrevenuesfromConstructionIndustries,ResourceIndustries,Energy&TransportationandAllOtheroperatingsegmentof$100millionand $84 million in the three months endedMarch 31, 2022 and 2021, respectively.
ForthethreemonthsendedMarch31,2022and2021,Energy&Transportationsegmentsalesbyenduserapplicationwereas follows: Energy & Transportation External Sales
Three Months Ended March 31
Reconciliation of Consolidated profit before taxes:
(Millions of dollars) Three Months Ended March 31
2022 2021 Profit from reportable segments: Construction Industries......................................................................................................................... $ 1,057 $ 1,042 Resource Industries............................................................................................................................... 361 312 Energy & Transportation....................................................................................................................... 538 675 Financial Products Segment.................................................................................................................. 238 244 Total profit from reportable segments........................................................................................................ 2,194 2,273 Profit from All Other operating segment................................................................................................... 3 3 Cost centers................................................................................................................................................ 10 21 Corporate costs........................................................................................................................................... (198) (185) Timing........................................................................................................................................................ (98) (66) Restructuring costs..................................................................................................................................... (13) (64) Methodology differences: Inventory/cost of sales........................................................................................................................... 168 ? Postretirement benefit expense.............................................................................................................. 81 68 Stock-based compensation expense...................................................................................................... (40) (42) Financing costs...................................................................................................................................... (100) (130) Currency................................................................................................................................................ 106 186 Other income/expense methodology differences.................................................................................. (81) (49) Other methodology differences............................................................................................................. (33) (18) Total consolidated profit before taxes........................................................................................................ $ 1,999 $ 1,997
Reconciliation of Assets:
Reconciliation of Depreciation and amortization: (Millions of dollars)
Three Months Ended March 31
Reconciliation of Capital expenditures: (Millions of dollars)
Three Months Ended March 31
17. Cat Financial financing activities
Allowance for credit losses
Portfolio segments A portfolio segment is the level at which Cat Financial develops a systematic methodology for determining its allowanceforcreditlosses.CatFinancial'sportfoliosegmentsandrelatedmethodsforestimatingexpectedcredit losses are as follows:
Customer Cat Financial provides loans and finance leases to end-user customers primarily for the purpose of financing new and used Caterpillar machinery, engines and equipment for commercial use, the majority of which operate in construction- related industries. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. The average original term of Cat Financial's customer finance receivable portfolio was approximately 50 months with an average remaining term of approximately 27 months as of March 31, 2022.
Cat Financial typically maintains a security interest in financed equipment and requires physical damage insurance coverage on the financed equipment, both of which provide Cat Financial with certain rights and protections. If Cat Financial'scollectioneffortsfailtobringadefaultedaccountcurrent,CatFinancialgenerallycanrepossessthe financedequipment,aftersatisfyinglocallegalrequirements,andsellitwithintheCaterpillardealernetworkor through third-party auctions.
Cat Financial estimates the allowance for credit losses related to its customer finance receivables based on loss forecast models utilizing probabilities of default and the estimated loss given default based on past loss experience adjusted for current conditions and reasonable and supportable forecasts capturing country and industry-specific economic factors.
DuringthethreemonthsendedMarch31,2022,CatFinancial'sforecastsforthemarketsinwhichitoperatesreflected a continuation of the trend of a growing economy, improved unemployment rates and relatively low delinquencies. However, an increase in inflation, exacerbated by an increase in commodity prices, dampened the expectations of global economic growth. The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long-term trends.
Dealer Cat Financial provides financing to Caterpillar dealers in the form of wholesale financing plans. Cat Financial's wholesale financing plans provide assistance to dealers by financing their mostly new Caterpillar equipment inventory and rental fleets on a secured and unsecured basis. In addition, Cat Financial provides a variety of secured and unsecured loans to Caterpillar dealers.
Cat Financial estimates the allowance for credit losses for dealer finance receivables based on historical loss rates with consideration of current economic conditions and reasonable and supportable forecasts.
In general, Cat Financial's Dealer portfolio segment has not historically experienced large increases or decreases in credit losses based on changes in economic conditions due to its close working relationships with the dealers and their financial strength. Therefore, Cat Financial made no adjustments to historical loss rates during the three months ended March 31, 2022.
Classes of finance receivables Cat Financial further evaluates portfolio segments by the class of finance receivables, which is defined as a level of information (below a portfolio segment) in which the finance receivables have the same initial measurement attribute anda similarmethodforassessingandmonitoringcredit risk. Cat Financial'sclasses,whichalignwithmanagement reporting for credit losses, are as follows:
? North America - Finance receivables originated in the United States and Canada. ? EAME-FinancereceivablesoriginatedinEurope,Africa,theMiddleEastandtheCommonwealthof Independent States. ? Asia/Pacific-FinancereceivablesoriginatedinAustralia,NewZealand,China,Japan,SoutheastAsiaand India. ? Mining - Finance receivables related to large mining customers worldwide. ? Latin America - Finance receivables originated in Mexico and Central and South American countries. ? Caterpillar Power Finance - Finance receivables originated worldwide related to marine vessels with Caterpillar engines and Caterpillar electrical power generation, gas compression and co-generation systems and non-Caterpillar equipment that is powered by these systems.
Receivable balances, including accrued interest, are written off against the allowance for credit losses when, in the judgmentofmanagement,theyareconsidereduncollectible(generallyuponrepossessionofthecollateral).The amount ofthe write-offisdeterminedbycomparingthe fairvalue ofthe collateral,lesscost tosell,tothe amortized cost. Subsequent recoveries, if any, are credited to the allowance for credit losses when received.
An analysis of the allowance for credit losses was as follows:
(Millions of dollars) Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Customer Dealer Total Customer Dealer Total Beginning balance........................ $ 251 $ 82 $ 333 $ 431 $ 44 $ 475 Write-offs.................................. (20) ? (20) (34) ? (34) Recoveries................................. 12 ? 12 10 ? 10
1Included a higher reserve for the Russia and Ukraine portfolios.
Credit quality of finance receivables At origination, Cat Financial evaluates credit risk based on a variety of credit quality factors including prior payment experience,customerfinancialinformation,creditratings,loan-to-valueratios,probabilitiesofdefault, industry trends,macroeconomic factorsandotherinternal metrics.Onanongoingbasis,Cat Financial monitorscredit quality basedonpast-due statusasthere isa meaningful correlationbetweenthe past-due statusofcustomersandthe riskof loss. In determining past-due status, Cat Financial considers the entire finance receivable past due when any installment is over 30 days past due.
Customer ThetablesbelowsummarizetheagingcategoryofCatFinancial'samortizedcostoffinancereceivablesinthe Customer portfolio segment by origination year:
(Millions of dollars) March 31, 2022
North America
EAME
Asia/Pacific
Mining
Latin America
Caterpillar Power Finance
Totals by Aging Category
(Millions of dollars) December 31, 2021
North America
EAME
Asia/Pacific
Mining
Latin America
Caterpillar Power Finance
Totals by Aging Category
Finance receivables in the Customer portfolio segment are substantially secured by collateral, primarily in the form of Caterpillar and other machinery. For those contracts where the borrower is experiencing financial difficulty, repayment of the outstanding amounts is generally expected to be provided through the operation or repossession and sale of the machinery.
Dealer
AsofMarch31,2022,Cat Financial'stotal amortizedcost offinance receivableswithinthe Dealerportfoliosegment wascurrent,withthe exceptionof$74million. Ofthese past due receivables,$73millionwere 91+ dayspast due in Latin America and were originated in 2017. As of December 31, 2021, Cat Financial's total amortized cost of finance receivables within the Dealer portfolio segment was current, with the exception of $78 million that was 91+ days past due in Latin America, all of which was originated in 2017.
Non-accrual finance receivables
Recognitionofincome issuspendedandthe finance receivable isplacedonnon-accrual statuswhenmanagement determinesthatcollectionoffutureincomeisnotprobable.Contractsonnon-accrualstatusaregenerallymorethan 120 days past due or have been restructured in a troubled debt restructuring (TDR). Recognition is resumed and previously suspended income is recognized when collection is considered probable. Payments received while the financereceivableisonnon-accrualstatusareappliedtointerestandprincipalinaccordancewiththecontractual terms. Interest earned but uncollected prior to the receivable being placed on non-accrual status is written off through Provision for credit losses when, in the judgment of management, it is considered uncollectible.
In Cat Financial's Customer portfolio segment, finance receivables which were on non-accrual status and finance receivables over 90 days past due and still accruing income were as follows:
March 31, 2022 December 31, 2021 Amortized Cost Amortized Cost
With an
Therewas$1millionand$3millionofinterestincomerecognizedduringthethreemonthsendedMarch31,2022and 2021, respectively, for customer finance receivables on non-accrual status.
AsofMarch31,2022andDecember31,2021,finance receivablesinCat Financial'sDealerportfoliosegment onnon- accrualstatuswere$73millionand$78million,respectively,allofwhichwasinLatinAmerica. Therewereno finance receivables in Cat Financial's Dealer portfolio segment more than 90 days past due and still accruing income as of March 31, 2022 and December 31, 2021 and no interest income was recognized on dealer finance receivables on non-accrual status during the three months ended March 31, 2022 and 2021.
Troubled debt restructurings
A restructuring of a finance receivable constitutes a TDR when the lender grants a concession it would not otherwise consider to a borrower experiencing financial difficulties. Concessions granted may include extended contract maturities, inclusion of interest only periods, below market interest rates, payment deferrals and reduction of principal and/or accrued interest. Cat Financial individually evaluates TDR contracts and establishes an allowance based on the present value of expected future cash flows discounted at the receivable's effective interest rate, the fair value of the collateral for collateral-dependent receivables or the observable market price of the receivable.
There were no finance receivables modified as TDRs during the three months ended March 31, 2022 and 2021 for the Dealer portfolio segment. Cat Financial?s finance receivables in the Customer portfolio segment modified as TDRs were as follows: (Millions of dollars) Three Months Ended March 31, 2022
March 31, 2021
ThePost-TDRamortizedcostsintheCustomerportfoliosegmentwithapaymentdefault(definedas91+dayspast due) which had been modified within twelve months prior to the default date, were as follows:
(Millions of dollars) Three Months Ended March 31
Customer 2022 2021 North America............................................................................................................... $ ? $ 1 Asia/Pacific.................................................................................................................... ? 4 Mining............................................................................................................................ 5 ? Caterpillar Power Finance.............................................................................................. ? 5 Total................................................................................................................................. $ 5 $ 10
18. Fair value disclosures
A. Fair value measurements
Theguidanceonfairvaluemeasurementsdefinesfairvalueastheexchangepricethatwouldbereceivedforanasset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This guidance also specifies a fair value hierarchy based upon the observabilityofinputsusedinvaluationtechniques. Observable inputs(highest level)reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:
? Level 1 ? Quoted prices for identical instruments in active markets.
? Level2?Quotedpricesforsimilarinstrumentsinactivemarkets;quotedpricesforidenticalorsimilar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
? Level3?Model-derivedvaluationsinwhichoneormoresignificantinputsorsignificantvalue-driversare unobservable.
Whenavailable,weusequotedmarketpricestodeterminefairvalue,andweclassifysuchmeasurementswithinLevel 1. Insomecaseswheremarketpricesarenotavailable,wemakeuseofobservablemarketbasedinputstocalculate fairvalue,inwhichcase the measurementsare classifiedwithinLevel 2. Ifquotedorobservable market pricesare not available, fair value is based upon valuations in which one or more significant inputs are unobservable, including internallydevelopedmodelsthat use,where possible,current market-basedparameterssuchasinterest rates,yield curves and currency rates. These measurements are classified within Level 3.
We classifyfairvalue measurementsaccordingtothe lowest level input orvalue-driverthat issignificant tothe valuation. We may therefore classify a measurement within Level 3 even though there may be significant inputs that are readily observable.
Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that anobligation(eitherbyacounterpartyorCaterpillar)willnotbefulfilled. Forfinancialassetstradedinanactive market(Level1andcertainLevel2),thenonperformanceriskisincludedinthemarketprice. Forcertainother financial assets and liabilities (certain Level 2 and Level 3), our fair value calculations have been adjusted accordingly.
Investments in debt and equity securities Wehaveinvestmentsincertaindebtandequitysecuritiesthatarerecordedatfairvalue. FairvaluesforourU.S. treasury bonds and large capitalization value and smaller company growth equity securities are based upon valuations for identical instruments in active markets. Fair values for other government bonds, corporate bonds and mortgage- backed debt securities are based upon models that take into consideration such market-based factors as recent sales, risk-free yield curves and prices of similarly rated bonds.
We alsohave investmentsintime depositsclassifiedasheld-to-maturitydebt securities.The fairvalue ofthese investmentsisbaseduponvaluationsobservedinlessactive marketsthanLevel 1. These investmentshave a maturity of less than one year and are recorded at amortized costs, which approximate fair value.
In addition, Insurance Services has an equity investment in a real estate investment trust (REIT) which is recorded at fair value based on the net asset value (NAV) of the investment and is not classified within the fair value hierarchy. See Note 8 for additional information on our investments in debt and equity securities. Derivative financial instruments Thefairvalueofinterestratecontractsisprimarilybasedonastandardindustryacceptedvaluationmodelthatutilizes the appropriate market-based forward swap curves and zero-coupon interest rates to determine discounted cash flows. The fair value of foreign currency and commodity forward, option and cross currency contracts is based on standardindustryacceptedvaluationmodelsthat discount cashflowsresultingfrom the differential betweenthe contract price and the market-based forward rate.
See Note 5 for additional information.
AssetsandliabilitiesmeasuredonarecurringbasisatfairvalueincludedinourConsolidatedStatementofFinancial Position as of March 31, 2022 and December 31, 2021 were as follows:
(Millions of dollars)
Measured
Total Assets / Liabilities,
Assets Debt securities Government debt
Corporate bonds
Liabilities
(Millions of dollars)
Measured
Total Assets / Liabilities,
Assets Debt securities Government debt
Corporate bonds
In addition to the amounts above, certain Cat Financial loans are subject to measurement at fair value on a nonrecurring basis and are classified as Level 3 measurements. A loan is measured at fair value when management determines that collection of contractual amounts due is not probable and the loan is individually evaluated. In these cases, an allowance for credit losses may be established based either on the present value of expected future cash flows discounted at the receivables? effective interest rate, the fair value of the collateral for collateral-dependent receivables, ortheobservablemarketpriceofthereceivable. Indeterminingcollateralvalue,CatFinancialestimatesthecurrent fairmarketvalueofthecollaterallesssellingcosts. CatFinancialhadloanscarriedatfairvalueof$108millionand $100 million as of March 31, 2022 and December 31, 2021, respectively.
B. Fair values of financial instruments
In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fairvaluemeasurementssectionabove,weusethefollowingmethodsandassumptionstoestimatethefairvalueof our financial instruments:
Cash and cash equivalents Carryingamountapproximatesfairvalue.WeclassifycashandcashequivalentsasLevel1.SeeConsolidated Statement of Financial Position.
Restricted cash and short-term investments Carrying amount approximates fair value. We include restricted cash and short-term investments in Prepaid expenses and other current assets in the Consolidated Statement of Financial Position. We classify these instruments as Level 1 except for time deposits which are Level 2. See Note 8 for additional information.
Finance receivables We estimate fair value by discounting the future cash flows using current rates, representative of receivables with similar remaining maturities.
Wholesale inventory receivables Weestimatefairvaluebydiscountingthefuturecashflowsusingcurrentrates,representativeofreceivableswith similar remaining maturities.
Short-term borrowings Carryingamountapproximatesfairvalue. Weclassifyshort-termborrowingsasLevel1.SeeConsolidatedStatement of Financial Position.
Long-term debt We estimate fair value for fixed and floating rate debt based on quoted market prices.
Guarantees The fair value of guarantees is based upon our estimate of the premium a market participant would require to issue the same guarantee in a stand-alone arms-length transaction with an unrelated party. If quoted or observable market prices are not available, fair value is based upon internally developed models that utilize current market-based assumptions. We classify guarantees as Level 3. See Note 11 for additional information.
Our financial instruments not carried at fair value were as follows:
March 31, 2022 December 31, 2021
Fair (Millions of dollars) Carrying Amount
Value
Amount
Value
Levels Reference Assets
Liabilities
1 Representsfinanceleasesandfailedsaleleasebacksof$7,895millionand$8,083millionatMarch31,2022and December31,2021, respectively.
19. Other income (expense)
Three Months Ended March 31
20. Restructuring costs
Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, we recognize eligible separation costs at the time of employee acceptance unless the acceptance requires explicitapprovalbythecompany. Forinvoluntaryprograms,werecognizeeligiblecostswhenmanagementhas approved the program, the affected employees have been properly notified and the costs are estimable.
Restructuring costs for the three months ended March 31, 2022 and 2021 were as follows:
(Millions of dollars)
March 31 2022 2021 Employee separations1........................................................................................................................... $ 5 $ 45 Long-lived asset impairments1.............................................................................................................. ? 11 Other 2..................................................................................................................................................... 8 8 Total restructuring costs......................................................................................................................... $ 13 $ 64
1Recognized in Other operating (income) expenses.
2Represents costs related to our restructuring programs, primarily for accelerated depreciation, project management, equipment relocation and inventory write-downs, all of which are primarily included in Cost of goods sold.
ForboththethreemonthsendedMarch31,2022and2021,therestructuringcostswereprimarilyrelatedtoactions across the company including strategic actions to address a small number of products.
In 2022 and 2021, all restructuring costs are excluded from segment profit.
The following table summarizes the 2022 and 2021 employee separation activity:
(Millions of dollars) Three Months Ended March 31 2022 2021 Liability balance, beginning of period........................................................................................ $ 61 $ 164 Increase in liability (separation charges)................................................................................ 5 45 Reduction in liability (payments)........................................................................................... (19) (55) Liability balance, end of period................................................................................................... $ 47 $ 154
Most of the liability balance at March 31, 2022 is expected to be paid in 2022.
Item 2. Management?s Discussion and Analysis of Financial Condition and Results of Operations
ThefollowingManagement?sDiscussionandAnalysisofFinancialConditionandResultsofOperations(MD&A)isintended toprovideinformationthatwillassistthereaderinunderstandingthecompany?sConsolidatedFinancialStatements,the changesincertainkeyitemsinthosefinancialstatementsbetweenselectperiodsandtheprimaryfactorsthataccountedfor those changes. Inaddition,we discusshowcertainaccountingprinciples,policiesandcritical estimatesaffect ourConsolidated Financial Statements. Our discussion also contains certain forward-looking statements related to future events and expectations. This MD&A should be read in conjunction with our discussion of cautionary statements and significant risks to the company?s business under Part I, Item 1A. Risk Factors of the 2021 Form 10-K.
Highlights for the first quarter of 2022 include: ? Totalsalesandrevenuesforthefirstquarterof2022were$13.589billion,anincreaseof$1.702billion,or14percent, compared with $11.887 billion in the first quarter of 2021. Sales were higher across the three primary segments. ? Operatingprofitmarginwas13.7percentforthefirstquarterof2022,comparedwith15.3percentforthefirstquarterof 2021.Adjustedoperatingprofitmarginwas13.7percentforthefirstquarterof2022,comparedwith15.8percentforthe first quarter of 2021. ? First-quarter2022profitpersharewas$2.86,andexcludingtheitemsinthetablebelow,adjustedprofitpersharewas $2.88.First-quarter2021profitpersharewas$2.77,andexcludingtheitemsinthetablebelow,adjustedprofitpershare was $2.87. ? Inorderforourresultstobemoremeaningfultoourreaders,wehaveseparatelyquantifiedtheimpactofseveral significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on page 53. Three Months Ended March 31, 2022
March 31, 2021
? Enterpriseoperatingcashflowwas$0.3billioninthefirstquarterof2022.Caterpillarendedthefirstquarterof2022with $6.5 billion of enterprise cash.
Overview
Totalsalesandrevenuesforthefirstquarterof2022were$13.589billion,anincreaseof$1.702billion,or14percent, compared with $11.887 billion in the first quarter of 2021. The increase was due to higher sales volume and favorable price realization, partially offset by unfavorable currency impacts primarily related to the euro, Australian dollar and Japanese yen. The increase in sales volume was driven by higher end-user demand for equipment and services and the impact from changes in dealerinventories.Dealersincreasedinventoriesby$1.3billionduringthefirstquarterof2022,comparedwithanincreaseof $700 million during the first quarter of 2021. Sales were higher across the three primary segments.
First-quarter 2022 profit per share was $2.86, compared with $2.77 profit per share in the first quarter of 2021. Profit per share for both quarters included restructuring costs. Profit for the first quarter of 2022 was $1.537 billion, which was about flat compared with $1.530 billion for the first quarter of 2021. Unfavorable manufacturing costs and higher selling, general and administrative (SG&A) and research and development (R&D) expenses were offset by favorable price realization and higher sales volume. Unfavorable manufacturing costs primarily reflected higher material and freight costs. The increase in SG&A/ R&D expenses was mainly driven by investments aligned with the company's strategy for profitable growth.
Global Business Conditions:
WecontinuetomonitoravarietyofexternalfactorsincludingtheongoingimpactoftheCOVID-19pandemicaroundthe world,supplychaindisruptionsandassociatedcost andlaborpressures.Areasofparticularfocusinclude certaincomponents, 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. 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 throughout the year.
Notes:
? Glossary of terms is included on pages 47 - 49; first occurrence of terms shown in bold italics.
? Information on non-GAAP financial measures is included on page 53.
? Certain amounts may not add due to rounding.
Consolidated Results of Operations
THREE MONTHS ENDED MARCH 31, 2022 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2021
CONSOLIDATED SALES AND REVENUES
Thechartabovegraphicallyillustratesreasonsforthechangeinconsolidatedsalesandrevenuesbetweenthefirstquarterof2021(atleft)andthefirstquarter of 2022 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company?s Board of Directors and employees.
Totalsalesandrevenuesforthefirstquarterof2022were$13.589billion,anincreaseof$1.702billion,or14percent, compared with $11.887 billion in the first quarter of 2021. The increase was due to higher sales volume and favorable price realization, partially offset by unfavorable currency impacts primarily related to the euro, Australian dollar and Japanese yen. The increase in sales volume was driven by higher end-user demand for equipment and services and the impact from changes in dealerinventories.Dealersincreasedinventoriesby$1.3billionduringthefirstquarterof2022,comparedwithanincreaseof $700 million during the first quarter of 2021.
Sales were higher across the three primary segments.
North America sales increased 25 percent due to higher end-user demand for equipment and services, favorable price realization and the impact of changes in dealer inventories. Dealers increased inventories more during the first quarter of 2022 than during the first quarter of 2021.
Sales increased 27 percent in Latin America due to the impact of changes in dealer inventories, favorable price realization and higher end-user demand for equipment and services across most of the region. Dealers increased inventories during the first quarter of 2022, compared with a decrease during the first quarter of 2021.
EAME sales increased 15 percent due to higher end-user demand for equipment and services, the impact of changes in dealer inventoriesandfavorablepricerealization,partiallyoffsetbyunfavorablecurrencyimpactsprimarilyrelatedtotheeuro. Dealers increased inventories more during the first quarter of 2022 than during the first quarter of 2021.
Asia/Pacific sales decreased 4 percent driven by lower end-user demand for equipment and services and unfavorable currency impacts related to the Australian dollar and Japanese yen, partially offset by favorable price realization and the impact of changesindealerinventories.Dealersincreasedinventoriesmoreduringthefirstquarterof2022thanduringthefirstquarterof 2021. Lower sales in China were partially offset by increased sales across the majority of the region.
Dealers increased inventories by $1.3 billion during the first quarter of 2022, compared with an increase of $700 million during the first quarterof2021.Dealersare independent,andthe reasonsforchangesintheirinventorylevelsvary,includingtheir expectations of future demand and product delivery times. Dealers? demand expectations take into account seasonal changes, macroeconomicconditions,machinerentalratesandotherfactors.Deliverytimescanvarybasedonavailabilityofproduct from Caterpillar factories and product distribution centers. We do not expect a significant increase in dealer inventory in 2022.
Sales and Revenues by Geographic Region
% $
1Includes revenues from Machinery, Energy & Transportation of $100 million and $84 million in the first quarter of 2022 and 2021, respectively.
CONSOLIDATED OPERATING PROFIT
Thechartabovegraphicallyillustratesreasonsforthechangeinconsolidatedoperatingprofitbetweenthefirstquarterof2021(atleft)andthefirstquarterof 2022 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company?s Board of Directors and employees. The bar titled Other includesconsolidating adjustmentsand Machinery, Energy & Transportation other operating (income) expenses.
Operating profit for the first quarter of 2022 was $1.855 billion, an increase of $41 million, or 2 percent, compared with $1.814 billion in the first quarter of 2021. Unfavorable manufacturing costs and higher selling, general and administrative (SG&A) and researchanddevelopment(R&D)expensesweremorethanoffsetbyfavorablepricerealizationandhighersalesvolume.For 2022, price realization is expected to more than offset manufacturing cost increases.
Unfavorable manufacturingcostsprimarilyreflectedhighermaterial andfreight costs.The increase inSG&A/R&Dexpenses was mainly driven by investments aligned with the company's strategy for profitable growth.
Short-term incentive compensation expense was about $340 million in the first quarter of 2022, compared to about $300 million in the first quarter of 2021. For 2022, short-term incentive compensation expense is expected to be about $1.3 billion, about flat compared to 2021.
Operating profit margin was 13.7 percent for the first quarter of 2022, compared with 15.3 percent for the first quarter of 2021.
Other Profit/Loss and Tax Items
? InterestexpenseexcludingFinancialProductsinthefirstquarterof2022was$109million,comparedwith$142millionin thefirstquarterof2021.Thedecreasewasduetoloweraveragedebtoutstandingduringthefirstquarterof2022, compared with the first quarter of 2021.
? Otherincome(expense)inthefirstquarterof2022wasincomeof$253million,comparedwithincomeof$325millionin the first quarterof2021.Favorable impactsfrom highergainsoncommodityhedgeswere more thanoffset bythe unfavorable impacts from lower foreign currency exchange net gains, lower pension and other postemployment benefit (OPEB) plan income and the unfavorable impacts from unrealized gains (losses) on marketable securities.
? Theprovisionforincometaxesforthefirstquarterof2022reflectedanestimatedannualtaxrateof24percent,compared with26percentforthefirstquarterof2021,excludingthediscreteitemsdiscussedbelow.Thecomparativetaxratefor full-year 2021 was approximately 23 percent. The increase in the estimated annual tax rate from full-year 2021 was primarily related to changes in the expected geographic mix of profits from a tax perspective for 2022.
In addition, a discrete tax benefit of $12 million was recorded in the first quarter of 2022, compared with a $43 million benefit in the first quarter of 2021, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.
Construction Industries
Construction Industries? total sales were $6.115 billion in the first quarter of 2022, an increase of $656 million, or 12 percent, compared with $5.459 billion in the first quarter of 2021. The increase was due to favorable price realization and higher sales volume,partiallyoffset byunfavorable currencyimpactsrelatedtothe euro,Japanese yenandAustraliandollar.The increase in sales volume was driven by the impact from changes in dealer inventories and higher end-user demand for aftermarket parts. Across all regions, dealers increased inventories more during the first quarter of 2022 than during the first quarter of 2021.
? InNorthAmerica,salesincreasedduetohighersalesvolumeandfavorablepricerealization.Highersalesvolumewas drivenbyhigherend-userdemandforequipmentandaftermarketpartsfromimprovingnon-residentialconstruction, as well as continued strength in residential construction and the impact from changes in dealer inventories.
? SalesincreasedinLatinAmericaprimarilyduetohighersalesvolume,ledbyhigherend-userdemandacrossthe region and the impact from changes in dealer inventories, as well as favorable price realization.
? InEAME,salesincreasedduetohighersalesvolumeandfavorablepricerealization,partiallyoffsetbyunfavorable currency impacts related to a weaker euro. Higher sales volume was driven by higher end-user demand for equipment and aftermarket parts and the impact from changes in dealer inventories.
? SalesdecreasedinAsia/Pacificmainlyduetolowersalesvolumeandunfavorablecurrencyimpactsdrivenbya weaker Japanese yen and Australian dollar, partially offset by favorable price realization. Lower sales volume was drivenbylowerend-userdemand,partiallyoffset bythe impact from changesindealerinventories.Lowersalesin China primarilydrivenbylowerend-userdemandwere partiallyoffset byincreasedsalesacrossthe majorityofthe region.
ConstructionIndustries?profit was$1.057billioninthe first quarterof2022,anincrease of$15million,or1percent,compared with $1.042 billion in the first quarter of 2021. Unfavorable manufacturing costs were more than offset by favorable price realization and higher sales volume. Unfavorable manufacturing costs largely reflected higher material and freight costs.
Construction Industries? profit as a percent of total sales was 17.3 percent in the first quarter of 2022, compared with 19.1 percent in the first quarter of 2021.
Resource Industries
Resource Industries?total saleswere $2.830billioninthe first quarterof2022,anincrease of$652million,or30percent, compared with $2.178 billion in the first quarter of 2021. The increase was primarily due to higher sales volume and favorable price realization. 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. End-user demand was higher in heavy construction and quarry and aggregates as well as mining. Dealers increased inventories during the first quarter of 2022, compared to remaining about flat during the first quarter of 2021.
Resource Industries? profit was $361 million in the first quarter of 2022, an increase of $49 million, or 16 percent, compared with $312 million in the first quarter of 2021. Unfavorable manufacturing costs and higher SG&A/R&D expenses were more than offset by higher sales volume and favorable price realization. Unfavorable manufacturing costs largely reflected higher freight and material costs. The increase in SG&A/R&D expenses was driven by investments aligned with growth initiatives.
ResourceIndustries?profitasapercentoftotalsaleswas12.8percentinthefirstquarterof2022,comparedwith14.3percent in the first quarter of 2021.
Energy & Transportation Sales by Application
(Millions of dollars)
First Quarter 2022
First Quarter 2021
$ Change
% Change Oil and Gas..................................................................................................................... $ 948 $ 915 $ 33 4% Power Generation........................................................................................................... 1,012 963 49 5% Industrial......................................................................................................................... 1,020 813 207 25% Transportation................................................................................................................ 1,052 967 85 9% External Sales............................................................................................................... 4,032 3,658 374 10% Inter-segment.................................................................................................................. 1,006 849 157 18% Total Sales..................................................................................................................... $ 5,038 $ 4,507 $ 531 12%
Energy & Transportation?s total sales were $5.038 billion in the first quarter of 2022, an increase of $531 million, or 12 percent, compared with $4.507 billion in the first quarter of 2021. Sales increased across all applications and inter-segment sales.
? OilandGas?Salesincreasedforreciprocatingengines,primarilyaftermarketparts,partiallyoffsetbylowersalesfor turbines and turbine-related services.
? PowerGeneration?Salesroseduetohighersalesvolumeinsmallreciprocatingengineapplications,partiallyoffset by lower sales in turbines and turbine-related services.
? Industrial ? Sales were up due to higher demand across all regions.
? Transportation ? Sales increased in reciprocating engines, primarily aftermarket parts and marine applications.
Energy & Transportation?s profit was $538 million in the first quarter of 2022, a decrease of $137 million, or 20 percent, compared with $675 million in the first quarter of 2021. The decrease was mainly due to unfavorable manufacturing costs and higher SG&A/R&D expenses, partially offset by higher sales volume and favorable price realization. Unfavorable manufacturingcostslargelyreflectedhigherfreight andmaterial costs.The increase inSG&A/R&Dexpenseswasdrivenby investments aligned with growth initiatives.
Energy & Transportation?s profit as a percent of total sales was 10.7 percent in the first quarter of 2022, compared with 15.0 percent in the first quarter of 2021.
Financial Products Segment
Financial Products? segment revenues were $783 million in the first quarter of 2022, an increase of $22 million, or 3 percent, from the first quarter of 2021. The increase was mostly in North America, driven by a favorable impact from returned or repossessed equipment and higher average earning assets, partially offset by lower average financing rates.
FinancialProducts?segmentprofitwas$238millioninthefirstquarterof2022,adecreaseof$6million,or2percent, comparedwith$244millioninthefirstquarterof2021.Thedecreasewasmainlyduetohigherprovisionforcreditlossesat Cat Financial and an increase in SG&A expenses, partially offset by a favorable impact from returned or repossessed equipment. The impact of lower average financing rates was mostly offset by lower interest expense.
Attheendofthefirstquarterof2022,pastduesatCatFinancialwere2.05percent,comparedwith2.90percentattheendof the first quarter of 2021. The decrease in past dues was mostly driven by the North America, Caterpillar Power Finance and EAME portfolios. Write-offs, net of recoveries, were $8 million for the first quarter of 2022, compared with $24 million for the first quarter of 2021. As of March 31, 2022, Cat Financial's allowance for credit losses totaled $357 million, or 1.29 percent of finance receivables, compared with $337 million, or 1.22 percent of finance receivables at December 31, 2021. The increase in allowance for credit losses included a higher reserve for the Russia and Ukraine portfolios.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $261 million in the first quarter of 2022, a decrease of $126 million from the first quarter of 2021, primarily due to favorable impacts of segment reporting methodology differences and a favorable change in fair value adjustments related to deferred compensation plans.
RESTRUCTURING COSTS
In2022,we expect toincurabout $600millionofrestructuringcostsprimarilyrelatedtostrategic actionstoaddressa small number of products. 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 $75 million in 2022 compared with 2021.
AdditionalinformationrelatedtorestructuringcostsisincludedinNote20-"RestructuringCosts"ofPartI,Item1"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 restructuring costs.
3. AllOtherSegment?Primarilyincludesactivitiessuchas:businessstrategy;productmanagementanddevelopment; 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; brandmanagement andmarketingstrategy; anddigital investmentsfornewcustomeranddealersolutionsthat integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.
4. ConsolidatingAdjustments?EliminationoftransactionsbetweenMachinery,Energy&TransportationandFinancial Products.
5. ConstructionIndustries?Asegmentprimarilyresponsibleforsupportingcustomersusingmachineryininfrastructure 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; 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?Withrespecttosalesandrevenues,currencyrepresentsthetranslationimpactonsalesresultingfromchanges 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 line 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 optioncontractsenteredintobythecompanytoreducetheriskoffluctuationsinexchangerates(hedging)andthenet 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?AgeographicregionincludingEurope,Africa,theMiddleEastandtheCommonwealthofIndependentStates (CIS).
10. EarningAssets?Assetsconsistingprimarilyoftotalfinancereceivablesnetofunearnedincome,plusequipmenton operating leases, less accumulated depreciation at Cat Financial.
11. Energy&Transportation?Asegmentprimarilyresponsibleforsupportingcustomersusingreciprocatingengines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial andTransportationapplications,includingmarine-andrail-relatedbusinesses.Responsibilitiesinclude business strategy, product design, product management, development and testing 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 and solutions used in the electric power generation industry; reciprocatingengines,drivetrainandintegratedsystemsandsolutionsforthe marine andoil andgasindustries; reciprocating engines, drivetrain and integrated systems and solutions 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. FinancialProducts?ThecompanydefinesFinancialProductsasourfinanceandinsurancesubsidiaries,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. FinancialProductsSegment?ProvidesfinancingalternativestocustomersanddealersaroundtheworldforCaterpillar productsandservices,aswell asfinancingforvehicles,powergenerationfacilitiesandmarine vesselsthat,inmost cases, incorporate Caterpillar products. Financing plans include operating and finance leases, installment sale contracts, repair/ rebuildfinancing,workingcapital loansandwholesale financingplans.The segment alsoprovidesinsurance andrisk management productsandservicesthat helpcustomersanddealersmanage theirbusinessrisk.Insurance andrisk managementproductsofferedincludephysicaldamageinsurance,inventoryprotectionplans,extendedservicecoverage andmaintenance plansformachinesandengines,anddealerpropertyandcasualtyinsurance.The variousformsof financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillarequipment.ThesegmentalsoearnsrevenuesfromMachinery,Energy&Transportation,buttherelatedcosts are not allocatedtooperatingsegments.Financial Products?segment profit isdeterminedona pretaxbasisandincludes other income/expense items.
14. Latin America ? A geographic region including Central and South American countries and Mexico.
15. Machinery,Energy&Transportation(ME&T)?ThecompanydefinesME&TasCaterpillarInc.anditssubsidiaries, excluding Financial Products. ME&T?s information relates to the design, manufacturing and marketing of its products.
16. Machinery,Energy&TransportationOtherOperating(Income)Expenses?Comprisedprimarilyofgains/losseson disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals.
17. ManufacturingCosts?Manufacturingcostsexcludetheimpactsofcurrencyandrepresentthevolume-adjustedchange forvariablecostsandtheabsolutedollarchangeforperiodmanufacturingcosts.Variablemanufacturingcostsaredefined as having a direct relationship with the volume of production. This includes material costs, direct labor and other costs that varydirectlywithproductionvolume,suchasfreight,powertooperate machinesandsuppliesthat are consumedinthe 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. PensionandOtherPostemploymentBenefits(OPEB)?Thecompany?sdefined-benefitpensionandpostretirement benefit plans.
20. PriceRealization?Theimpactofnetpricechangesexcludingcurrencyandnewproductintroductions.Pricerealization includes geographic mix of sales, which is the impact of changes in the relative weighting of sales prices between geographic regions.
21. ResourceIndustries?Asegmentprimarilyresponsibleforsupportingcustomersusingmachineryinmining,heavy constructionandquarryandaggregates.Responsibilitiesincludebusinessstrategy,productdesign,productmanagement and development, manufacturing, marketing and sales and product support. The product portfolio includes large track-type tractors;largeminingtrucks;hardrockvehicles;longwallminers;electricropeshovels;draglines;hydraulicshovels; rotary drills; large wheel loaders; off-highway trucks; articulated trucks; wheel tractor scrapers; wheel dozers; landfill compactors;soilcompactors;selectworktools;machinerycomponents;electronicsandcontrolsystemsandrelatedparts. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customersfleet management,equipment management analytics,autonomousmachine capabilities,safetyservicesand mining performance solutions. Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Cat machines and engines.
22. RestructuringCosts?Mayincludecostsforemployeeseparation,long-livedassetimpairmentsandcontractterminations. ThesecostsareincludedinOtheroperating(income)expensesexceptfordefined-benefitplancurtailmentlossesand 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-relatedproduct updates.Withrespect tooperatingprofit,salesvolume representsthe impact ofchangesinthe quantitiessoldforMachinery,Energy& Transportationcombinedwithproduct mixaswell asthe net operatingprofit impact of new product introductions, including emissions-related product updates. Product mix represents the net operating profit impact ofchangesinthe relative weightingofMachinery,Energy& Transportationsaleswithrespect tototal sales. The impact of sales volume on segment profit includes inter-segment sales.
24. Services?Enterpriseservicesinclude,butarenotlimitedto,aftermarketparts,FinancialProductsrevenuesandother 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?operationsarefundedprimarilyfromcommercialpaper,termdebtissuancesandcollectionsfromitsexisting portfolio. On a consolidated basis, we had positive operating cash flow in the first three months of 2022 and ended the first quarter with $6.53 billion of cash, a decrease of $2.72 billion from year-end 2021. In addition, ME&T has invested in available- for-sale debt securities and bank time deposits with varying maturity dates within one year that are considered highly liquid and areavailableforcurrentoperations.ThesesecuritiesareincludedinPrepaidexpensesandothercurrentassetsandOtherassets intheConsolidatedStatementofFinancialPositionandwere$1.73billionattheendofMarch31,2022. Weintendto maintain a strong cash and liquidity position.
Consolidated operating cash flow for the first three months of 2022 was $313 million, down $1.62 billion compared to the same periodayearago.Thedecreasewasprimarilyduetopaymentsforshort-termincentivecompensationinthefirstquarterof 2022.Inaddition,therewereincreasedworkingcapitalrequirementsduringthefirstthreemonthsof2022comparedtothe same period last year. Within working capital, changes in inventory, accounts payable and accrued expenses unfavorably impacted cash flow but were partially offset by favorable changes in customer advances and accounts receivable.
Total debt as of March 31, 2022 was $37.58 billion, a decrease of $205 million from year-end 2021. Debt related to ME&T decreased $35 million in the first three months of 2022 while debt related to Financial Products decreased $168 million.
As of March 31, 2022, 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 March 31, 2022 was $2.75 billion. Information on our Credit Facility is as follows:
? The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires on September 1, 2022.
? The three-year facility, as amended and restated in September 2021, of $2.73 billion (of which $715 million is available to ME&T) expires in September 2024.
? The five-year facility, as amended and restated in September 2021, of $4.62 billion (of which $1.21 billion is available to ME&T) expires in September 2026.
At March 31, 2022, Caterpillar?s consolidated net worth was $17.16 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 March 31, 2022, Cat Financial?s covenant interest coverage ratio was 2.56 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 March 31, 2022, Cat Financial?s six-month covenant leverage ratio was 7.53 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 March 31, 2022, there were no borrowings under the Credit Facility.
Our total credit commitments and available credit as of March 31, 2022 were:
(Millions of dollars)
Credit lines available:
Consolidated
Machinery, Energy & Transportation
Financial Products Global credit facilities......................................................................................... $ 10,500 $ 2,750 $ 7,750 Other external...................................................................................................... 3,376 182 3,194 Total credit lines available...................................................................................... 13,876 2,932 10,944 Less: Commercial paper outstanding..................................................................... (4,044) ? (4,044) Less: Utilized credit................................................................................................ (666) ? (666) Available credit....................................................................................................... $ 9,166 $ 2,932 $ 6,234
The otherexternal consolidatedcredit lineswithbanksasofMarch31,2022totaled$3.38billion.These committedand uncommittedcreditlines,whichmaybeeligibleforrenewalatvariousfuturedatesorhavenospecifiedexpirationdate,are usedprimarilybyoursubsidiariesforlocal fundingrequirements.CaterpillarorCat Financial mayguarantee 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 marketsbecomesunavailable,ME&T?soperationswouldrelyoncashflowfrom operations,use ofexistingcashbalances, 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 $942 million and $822 million at March 31, 2022 and December 31, 2021, respectively. The amounts settled through the Programs and paid to participating financial institutions were $1.2 billion and $845 million during the first three months of 2022 and 2021, 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 used by operating activities was $78 million in the first three months of 2022, compared with net cash provided of $1.92 billion for the same period in 2021. The decrease was primarily due to payments for short-term incentive compensation in the first quarter of 2022. In addition, there were increased working capital requirements during the first three months of 2022 compared to the same period last year. Within working capital, changes in inventory, accounts payable, accounts receivable and accrued expenses unfavorably impacted cash flow but were partially offset by favorable changes in customer advances.
Netcashusedbyinvestingactivitiesinthefirstthreemonthsof2022was$1.09billion,comparedwithnetcashprovidedof $427millioninthe first three monthsof2021.The change wasprimarilydue todecreasedactivityrelatedtointercompany lending with Financial Products and increases in investment activity. During the first quarter of 2022, we had net investment activity of $796 million which included $944 million of investments in debt securities and proceeds related to maturing time deposits of $150 million.
Net cash used for financing activities during the first three months of 2022 was $1.57 billion, compared with net cash used of $659 million in the same period of 2021. The change was primarily due to the repurchase of $820 million of Caterpillar common stock during the first three months of 2022.
Whileourshort-termprioritiesfortheuseofcashmayvaryfromtimetotimeasbusinessneedsandconditionsdictate,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:
Strongfinancialposition ? 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.
Operationalexcellenceandcommitments?Capitalexpenditureswere$348millionduringthefirstthreemonthsof 2022, compared to $255 million for the same period in 2021. We expect ME&T?s capital expenditures in 2022 to be about $1.5 billion. We made $210 million of contributions to our pension and other postretirement benefit plans during the first three monthsof2022.We currentlyanticipate full-year2022contributionsofapproximately$357million.In comparison, we made $106 million of contributions to our pension and other postretirement benefit plans during the first three months of 2021.
Fundstrategicgrowthinitiativesandreturncapitaltoshareholders?We intendtoutilize ourliquidityanddebt 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 plancontributionslesscapitalexpenditures.Agoalofourcapitalallocationstrategyistoreturnsubstantiallyall ME&T free cash flow to shareholders over time 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 first three months of 2022, we repurchased $0.82 billion of Caterpillar common stock, with $1.37 billion remaining under the 2018 Authorization as of March 31, 2022. Our basic shares outstanding as of March 31, 2022 were approximately 533 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 April 2022, 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 $595 million in the first three months of 2022.
Financial Products
Financial Products operating cash flow was $393 million in the first three months of 2022, compared with $369 million for the same period a year ago. Net cash used for investing activities was $221 million for the first three months of 2022, compared with net cash used of $261 million for the same period in 2021. The change was primarily due to portfolio related activity. Net cash used for financing activities was $142 million for the first three months of 2022 compared with net cash provided of $205 million for the same period in 2021. The change was primarily due to lower portfolio funding requirements related to net intercompany purchased receivables.
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 2021 Annual Report on Form 10-K. There have been no significant changes to our critical accounting estimates since our 2021 Annual Report on Form 10-K.
OTHER MATTERS
InformationrelatedtolegalproceedingsappearsinNote14?EnvironmentalandLegalMattersofPartII,Item8?Financial Statements and Supplementary Data.?
Order Backlog
Attheendofthefirstquarterof2022,thedollaramountofbacklogbelievedtobefirmwasapproximately$26.5billion,about $3.4 billion higher than the fourth quarter of 2021. The order backlog increased across the three primary segments, with the largest increase inEnergy& Transportation.Ofthe total backlogat March31,2022,approximately$4.5billionwasnot expected to be filled in the following twelve months.
NON-GAAP FINANCIAL MEASURES
We provide the followingdefinitionsforthe non-GAAPfinancial measuresusedinthisreport.These non-GAAPfinancial 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.
Webelieveitisimportanttoseparatelyquantifytheprofitimpactofonesignificantiteminorderforourresultstobe meaningful to our readers. This item consists of (i) restructuring costs, which were incurred to generate longer-term benefits. We do not consider this item 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)
ReconciliationsofME&TfreecashflowtothemostdirectlycomparableGAAPmeasure,netcashprovidedbyoperating activities are as follows:
(Millions of dollars) Three Months Ended March 31
1See reconciliation of ME&T net cash provided by operating activities to consolidated net cash provided by operating activities on pages 59 - 60.
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.
Pages55to60reconcileME&TandFinancialProductstoCaterpillarInc.consolidatedfinancialinformation.Certainamounts 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 March 31, 2022 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Sales and revenues:
Consolidated Energy & Transportation
Products
Adjustments Sales of Machinery, Energy & Transportation.......................... $ 12,886 $ 12,886 $ ? $ ? Revenues of Financial Products................................................. 703 ? 813 (110)1 Total sales and revenues............................................................ 13,589 12,886 813 (110)
Operating costs: Cost of goods sold...................................................................... 9,559 9,560 ? (1)2 Selling, general and administrative expenses............................ 1,346 1,182 172 (8)2 Research and development expenses......................................... 457 457 ? ? Interest expense of Financial Products...................................... 106 ? 106 ? Other operating (income) expenses........................................... 266 (28) 314 (20)2 Total operating costs.................................................................. 11,734 11,171 592 (29) Operating profit.............................................................................. 1,855 1,715 221 (81) Interest expense excluding Financial Products.......................... 109 109 ? ? Other income (expense)............................................................. 253 157 15 81 3 Consolidated profit before taxes.................................................... 1,999 1,763 236 ? Provision (benefit) for income taxes.......................................... 469 412 57 ? Profit of consolidated companies............................................... 1,530 1,351 179 ?
Equity in profit (loss) of unconsolidated affiliated companies.. 7 8 ? (1)4
Profit of consolidated and affiliated companies........................... 1,537 1,359 179 (1) Less: Profit (loss) attributable to noncontrolling interests................ ? ? 1 (1)5 Profit 6.............................................................................................. $ 1,537 $ 1,359 $ 178 $ ?
1 Elimination of Financial Products? revenues earned from ME&T. 2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination 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. 4 Elimination of equity profit (loss) earned from Financial Products? subsidiaries partially owned by ME&T subsidiaries. 5 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 6 Profit attributable to common shareholders.
Caterpillar Inc. Supplemental Data for Results of Operations For the Three Months Ended March 31, 2021 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Sales and revenues:
Consolidated Energy & Transportation
Products
Adjustments
1 Elimination of Financial Products? revenues earned from ME&T. 2 Elimination of net expenses recorded by ME&T paid to Financial Products. 3 Elimination 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. 4 Elimination of equity profit (loss) earned from Financial Products? subsidiaries partially owned by ME&T subsidiaries. 5 Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. 6 Profit attributable to common shareholders.
Caterpillar Inc. Supplemental Data for Financial Position At March 31, 2022 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Assets Current assets:
Consolidated Energy & Transportation
Products
Adjustments
2
2
Liabilities Current liabilities:
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, 2021 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Assets Current assets:
Consolidated Energy & Transportation
Products
Adjustments
2
2
Liabilities Current liabilities:
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 Cash Flow For the Three Months Ended March 31, 2022 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Cash flow from operating activities:
Consolidated Energy & Transportation
Products
Adjustments
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.
Caterpillar Inc. Supplemental Data for Cash Flow For the Three Months Ended March 31, 2021 (Unaudited) (Millions of dollars)
Supplemental Consolidating Data Machinery,
Cash flow from operating activities:
Consolidated Energy & Transportation
Products
Adjustments
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.
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, 2021, as such factors may be updated from time to time in Caterpillar's periodic filings with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The informationrequiredbythisItem isincorporatedbyreference from Note 5??Derivative financial instrumentsandrisk management? included in Part I, Item 1 and Management?s Discussion and Analysis included in Part I, Item 2 of this Form 10- Q.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision and with the participation of the company?s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the company?sdisclosurecontrolsandprocedures,asthattermisdefinedinRule13a-15(e)undertheSecuritiesExchangeActof 1934, as amended, as of the end of the period covered by this quarterly report. Based on that evaluation, the CEO and CFO concluded that the company?s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in internal control over financial reporting
Duringthefirstquarterof2022,therehasbeennochangeinthecompany?sinternalcontroloverfinancialreportingthathas materially affected, or is reasonably likely to materially affect, the company?s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
TheinformationrequiredbythisItemisincorporatedbyreferencefromNote14??Environmentalandlegalmatters?included in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
TherehavebeennomaterialchangestotheriskfactorswepreviouslydisclosedinourAnnualReportonForm10-Kforthe year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased2,3
Average Price Paid per Share2,3
Total Number of Shares Purchased as Part of Publicly Announced Program
(in billions)1 January 1-31, 2022 405,023 $ 210.71 405,023 $ 2.013 February 1-28, 2022 2,724,039 $ 203.19 2,724,039 $ 1.460 March 1-31, 2022 442,622 $ 193.89 442,622 $ 1.374 Total 3,571,684 $ 202.89 3,571,684
1In July 2018, the Board approved a share repurchase authorization of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration (the 2018 Authorization). As of March 31, 2022, approximately $1.4 billion remained available under the 2018 Authorization. 2 During the first quarter of 2022, we entered into an ASR with a third-party financial institution to purchase $500 million of our common stock. In February 2022, upon payment of the $500 million to the financial institution, we received 2.0 million shares. In April 2022, upon final settlement of the ASR, we received an additional 0.4 million shares. In total, we repurchased 2.4 million shares under this ASR at an average price per share of $206.37. 3 In January, February and March of 2022, we repurchased 0.4 million, 0.8 million and 0.4 million shares respectively, for an aggregate of $320 million in open market transactions at an average price per share of $210.71, $195.00 and $193.89, respectively.
Non-U.S. Employee Stock Purchase Plans
As of March 31, 2022, we had 28 employee stock purchase plans (the ?EIP Plans?) that are administered outside the United Statesforournon-U.S.employees,whichhadapproximately13,000activeparticipantsintheaggregate. Duringthefirst quarter of 2022, approximately 72,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.
Item 5. Other Information
Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934
During the first quarter ended March 31, 2022, Caterpillar Eurasia LLC, one of our affiliates, engaged in limited transactions or dealings with the Federal Security Service of Russia (the ?FSB?). Specifically, Caterpillar Eurasia LLC, from time to time, directly or indirectly, makes required submissions to and receives regulatory authorizations from the FSB related to the importation of software used in the on-board telematics and control systems of Caterpillar machines that are imported into Russia. Caterpillar Eurasia LLC did not generate any net revenue or net profits from such approval activity and does not make any sales to or have other dealings with the FSB. Caterpillar Eurasia LLC plans to continue these activities as long as it remains lawful to do so.
Item 6. Exhibits
10.1 Form of Restricted Stock Unit Award pursuant to the 2014 Long-Term Incentive Plan*
10.2 Form of Restricted Stock Unit Award for Directors pursuant to the 2014 Long-Term Incentive Plan*
10.3 Form of Nonqualified Stock Options Award pursuant to the 2014 Long-Term Incentive Plan*
10.4 Form of Performance-Based Restricted Stock Unit Award pursuant to the 2014 Long-Term Incentive Plan*
31.1 Certification of Chief Executive Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2 Certification of Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32 Certification of Chief Executive Officer of Caterpillar Inc. and Chief Financial Officer of Caterpillar Inc., as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101)
*ManagementcontractsandcompensatoryplansandarrangementsrequiredtobefiledasexhibitspursuanttoItem6of this report.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CATERPILLAR INC.
May 4, 2022 /s/ D. James Umpleby III Chairman of the Board & Chief Executive Officer D. James Umpleby III
May 4, 2022 /s/ Andrew R.J. Bonfield Chief Financial Officer Andrew R.J. Bonfield
May 4, 2022 /s/ Suzette M. Long Chief Legal Officer and General Counsel Suzette M. Long
May 4, 2022 /s/ William E. Schaupp Chief Accounting Officer William E. Schaupp Exhibit 10.1
Caterpillar Inc. 2014 Long-Term Incentive Plan Restricted Stock Unit Award Notice
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Grant Date: %%OPTION_DATE,'Month DD, YYYY'%-% Grant Number: %%OPTION_NUMBER%-% Units Granted: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
The Board of Directors of Caterpillar Inc. (the ?Company?) has granted you the number of restricted stock units (?RSUs?) specified above on the date specified above (the ?Grant Date?) pursuant to, and subject to the restrictions, terms and conditions set forth in, the Caterpillar Inc. 2014 Long-Term Incentive Plan (the ?Plan?). This Award Notice and the Plan specify the material terms and provisions applicable to such restricted stock unit award (the ?RSU Award?). Capitalized terms not defined herein shall have the meanings specified in the Plan.
Vesting Except to the extent the RSUs are forfeited upon your termination of employment as provided below, the RSUs will become vested in the amounts and on the vesting date(s) specified below (each such date, a ?Vesting Date?).
Vesting Date Units Vesting %%VEST_DATE_PERIOD1,'Month DD, YYYY'%-% %%SHARES_PERIOD1%-% %%VEST_DATE_PERIOD2,'Month DD, YYYY'%-% %%SHARES_PERIOD2%-% %%VEST_DATE_PERIOD3,'Month DD, YYYY'%-% %%SHARES_PERIOD3%-%
As soon as administratively practicable, but not later than 60 days, after the applicable Vesting Date, the Company shall issue or deliver to you, subject to the conditions of this Award Notice, unrestricted shares of Common Stock equal to the number of RSUs that become vested, rounded up or down to the nearest whole number, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements.
If you terminate employment prior to the date the RSUs have become fully vested for any reason other than Long- Service Separation, death or in connection with a Change in Control (as described more fully below), the unvested RSUs will be forfeited. Your RSU Award is also subject to certain additional forfeiture conditions set forth in Sections 5.16 and 5.17 of the Plan and in the Post-Employment Restrictions section of this Award Notice.
Voting Rights During the period between the Grant Date and the date any RSUs become vested and the shares subject to such RSUs are issued or delivered to you (the ?Restriction Period?), you are not entitled to any voting rights with respect to such RSUs. From and after the date shares are actually issued or delivered, you then will have full voting rights with respect to those shares.
Dividend Equivalents; Dividends OneachdatethatacashdividendispaidtoholdersofCommonStock,anamountequaltothecashdividendthat is paid on each share of Common Stock, multiplied by the number of RSUs that remain unvested and outstanding asofthedividendpaymentdate(the?Dividend Equivalent Amount?)shallbecreditedforyourbenefit.Unless otherwise determined by the Board or Committee in its discretion, the aggregate Dividend Equivalent Amount, if any, credited to you shall be converted into an additional number of RSUs determined by dividing the Dividend Equivalent Amount by the Fair Market Value of a share of Common Stock on the dividend payment date (the ?DividendEquivalentRSUs?). TheDividendEquivalentRSUs,ifany,willvestonthesameVestingDate correspondingtotheunderlyingRSUswithrespecttowhichtheDividendEquivalentRSUswerecredited,and will otherwise be subject to the same conditions applicable to the underlying RSUs, including, without limitation, theprovisionsgoverningtimeandformofsettlement; providedhowever,thatDividendEquivalentRSUswillnot accrue on Dividend Equivalent RSUs. Unless expressly provided otherwise, as used elsewhere in this Agreement ?RSUs?shallincludeanyDividendEquivalentRSUsthathavebeencreditedtoyou. Fromandafterthedate sharesofCommonStockareactuallyissuedordelivereduponsettlementoftheRSUs,youthenwillhave dividend rights with respect to those shares.
Termination of Employment YourterminationofemploymentwiththeCompanypriortothedatetheRSUsbecomefullyvestedwillimpact the unvested RSUs as follows:
? Long-Service Separation If your employment with the Company terminates at least six months after the Grant Date by reason of Long-Service Separation (as defined below), your unvested RSUs will continue to become vested as of each Vesting Date as though your employment with the Company had continued through the last scheduled Vesting Date, and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the applicable Vesting Date. For purposesofthisRSUAward,?Long-ServiceSeparation?meansterminationofemploymentforany reason other than for Cause after attainment of age 55 with 5 or more years of continuous service with the Company, as determined by the Company in its sole discretion. ? Death If your employment with the Company terminates by reason of death, your unvested RSUs will become fully vested and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to your beneficiary or your estate (as applicable), as soon as administratively practicable, but not later than 2½ months, following the date of your death. ? Change in Control In the event of a Change in Control prior to the end of the Restriction Period pursuant to which your RSU Award is effectively continued, assumed or replaced by the surviving or acquiring corporation in such Change in Control (with appropriate adjustments to the number and kind of shares, in each case, that preservethematerialtermsandconditionsoftheoutstandingRSUAwardasineffectimmediatelyprior to the Change in Control) and your employment is terminated either by the Company or its successor without Cause or by you for Good Reason, as defined in the Plan, within the 24?month period commencing on the date of the Change in Control, your unvested RSUs will immediately become fully vestedandsharesofCommonStock,lessanyshareswithheldtosatisfyanyapplicableincomeand payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following (1) the applicable Vesting Date; or (2) the date which is six months after the date of your termination of employment, if such date is earlier than the applicable VestingDate; providedthatifyouareorwillbecomeeligibleforLong-ServiceSeparationduringthe Restriction Period and the Change in Control is not a ?change in control event,? within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (?Code Section 409A?), then the unvested RSUs will immediately become fully vested, as provided above, but the shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements,willbeissuedordeliveredtoyouassoonasadministrativelypracticable,butnotlaterthan 60 days following the applicable Vesting Date. In the event of a vesting acceleration event upon a ChangeinControlpursuanttoSection 5.9(a)(ii) or (iii) of the Plan, the shares of Common Stock (or cash amount, as applicable), less any shares (or cash amount, as applicable) withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the date of the Change in Control, provided that if the RSUs are non-qualified deferred compensation subject to Code Section 409A and the Change in Control is not a ?change in control event? within the meaning of U.S. Treas. Reg. §1.409A-3(i)(5), the RSUs will vest in accordance with Section 5.9(a)(ii) of the Plan, but the vested portion of the RSUs shall instead be settled in cash (in an amount calculated consistent with the methodology described in Section 5.9(a)(iii)), less any amount withheld to satisfy any applicable income and payroll tax withholding requirements, as soon as administratively practicable, but not later than 60 days following the applicable Vesting Date. ? Other IfyouremploymentwiththeCompany terminates prior to the date the RSUs become fully vested for any reasonotherthanLong-ServiceSeparation,Disability,deathorinconnectionwithaChangeinControl, all unvested RSUs subject to this RSU Award will lapse and shall be immediately forfeited.
ForpurposesofthisRSUAward,referencestoemploymentwiththeCompanyshallalsomeanemploymentwith aSubsidiary. Theextenttowhichyoushallbeconsideredemployedduringanyperiodsduringwhichyouareon a leave of absence shall be determined in accordance with Company policy.
Disability Upon a determination by the Company?s Director of Total Rewards that you have a Disability (as defined below), yourunvestedRSUswillbecomefullyvestedandsharesofCommonStock,lessanyshareswithheldtosatisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the date of such determination. For purposes of this RSU Award, ?Disability? means that you are unable to engage in any substantial gainful business activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or whichhaslastedorcanbeexpectedtolastforacontinuousperiodofnotlessthan12months,asdeterminedby the Company?s Director of Total Rewards, based upon medical evidence.
Transferability of Award Subject to certain exceptions set forth in the Plan, the RSU Award may not be assigned, transferred, pledged or hypothecatedinanyway. TheRSUAwardisnotsubjecttoexecution,attachmentorsimilarprocess. Any attempt at such, contrary to the provisions of the Plan, will be null and void and without effect. Note that once RSUs vest and shares of Common Stock are actually issued or delivered, you will have the ability to transfer those shares.
Designation of Beneficiary You may designate a beneficiary (or beneficiaries) to whom any shares of Common Stock that are issued to your stock plan account with the Company?s stock plan administrator upon the vesting of the RSUs will be paid upon your death. If you do not designate a beneficiary, such shares will be paid to your estate or to such other payee determined in accordance with procedures established by the Company?s stock plan administrator.
Administration of the Plan The RSU Award shall at all times be subject to the terms and provisions of the Plan and the Plan shall be administered in accordance with the terms of, and as provided in, the Plan. In the event of conflict between the termsandprovisionsofthisAwardNoticeandthetermsandprovisionsofthePlan,theprovisionsofthePlan shall control.
Code Section 409A It is intended that this Award Notice and the administration of the RSU Award comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated, and other official guidance issued thereunder (?Code Section 409A?), to the extent applicable. The Plan and this Award Notice shall be interpreted and construed on a basis consistent with such intent. Notwithstanding anything contained herein to the contrary, no shares may be issued or delivered unless in compliance with Code Section 409A to the extent that Code Section 409A applies. To the extent this Award Notice provides for the RSU Award to be settled by reference to your termination of employment, your employment shall be deemed to have terminated upon your ?separation from service,? within the meaning of Code Section 409A. The Committee reserves the right (includingtherighttodelegatesuchright)tounilaterallyamendthisAwardNotice(andthusthetermsofthe RSU Award) without your consent solely in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A. Your acceptance of this RSU Award constitutes acknowledgement and consent to such rights of the Committee. This provision does not create an obligation on the part of the Company to modify the terms of this Award Notice or the Plan and does not guarantee that this RSU Award or the delivery of shares of Common Stock upon settlement of the RSU Award will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. Nothing in this Award Notice shall provide a basisforanypersontotakeanyactionagainsttheCompanyoranyofitsSubsidiariesoraffiliatesbasedon matters covered by Code Section 409A, including the tax treatment of any amounts paid under this Award Notice, and neither the Company nor any of its Subsidiaries or affiliates will have any liability under any circumstances to you or any other party if the RSU Award, the delivery of shares of Common Stock upon vesting/settlement of the RSU Award or other payment or tax event hereunder that is intended to be exempt from, or compliant with, Code Section 409A, is not so exempt or compliant or for any action taken by the Committee with respect thereto.
Tax Impact Please refer to the Plan prospectus and support materials for a general description of the tax consequences of an RSU Award. You may also wish to consult with your personal tax advisor regarding how the RSU Award impacts your individual tax situation. Nothing contained in this Award Notice or in the Plan prospectus shall be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this Award Notice.
Withholding ThedistributionofsharesofCommonStockinconnectionwiththevestingoftheRSUAwardisataxableevent in many taxing jurisdictions. In some countries, including the United States, the Company is required to withhold taxesuponthetaxableevent.Tosatisfythiswithholdingobligation,youherebyauthorizetheCompanyto withholdthatnumberofsharesthatwouldsatisfythewithholdingobligationfromthesharesotherwisetobe issued or delivered to you under the RSU Award. The following conditions apply to such withholding: (a) the value of the shares of Common Stock withheld must equal the minimum withholding obligation; and (b) the value of the shares of Common Stock withheld shall be the Fair Market Value determined as of the date the RSUs becomevested.Forthispurposeandforallpurposes of this RSU Award, Fair Market Value shall mean the mean between the high and low prices at which a share of Common Stock of the Company is traded on the New York StockExchange. Alternatively, by your acceptance of this RSU Award, you hereby authorize the Company(or your employer), or their respective agents, to select any of the following methods to satisfy withholding obligations upon a taxable event applicable to your RSU Award (i) a cash payment by you to the Company, (ii) your delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously issued whole shares of Common Stock having an aggregate Fair Market Value equal to the amount necessary to satisfy any such obligation, or (iii) any other method of withholding determined by the Company and permittedbyapplicablelawsandthePlan;provided,however,thatifyouaresubjecttoSection16ofthe Exchange Act, you shall be permitted to select among the methods set forth in (i) through (iii) above in lieu of the netsharewithholdingmethodsetforthintheimmediatelyprecedingsentence. Notwithstandingtheforegoing, the net share withholding method described above will not be used for social security, FICA or other employment tax-related withholding obligations that become payable in a year prior to the year that shares are issued or delivered to you and, instead, you authorize the Company (or your employer) to use a method determined appropriate by the Company and permitted by applicable laws and the Plan.
Compliance with Securities Laws TheRSUAwardissubjecttotheconditionthatifthelisting,registrationorqualificationofthesharesof Common Stock subject to the RSU Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of shares hereunder, the shares of Common Stock subject to the RSU Award shall not be issued or delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
Adjustment of Shares Provisions are made within the Plan covering the effect of stock dividends, stock splits, changes in par value, changes in kind of stock, sale, merger, recapitalization, reorganization, etc.
Awards Subject to Forfeiture, Clawback and Setoff The RSU Award is subject to certain forfeiture conditions set forth in the Plan, which in the event such conditions are determined to have occurred, may result in immediate forfeiture and cancellation of your outstanding RSU AwardoranobligationtorepaytheCompanythetotalamountofawardgainrealizeduponsettlementofyour RSUAward.Also,theCompanygenerallymaydeductfromandsetoffagainstanyamountstheCompanyowes to you, including amounts payable in connection with this RSU Award, such amounts you may owe to the Company.
Effect on Other Benefits The RSU Award is not intended to and shall not impact the coverage of or the amount of any other employee benefit plans in which you participate that are sponsored by the Company or any of its Subsidiaries or affiliates.
Award Confers No Rights to Continued Employment InnoeventshallthegrantingoftheRSUAwardoritsacceptancebyyou,oranyprovisionoftheAwardNotice or the Plan, give or be deemed to give you any right to continued employment by the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate your employment at any time.
Decisions of Board or Committee The Board or the Committee shall have the right to resolve all questions which may arise in connection with the RSU Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this RSU Award shall be final, binding and conclusive.
Successors This Award Notice shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Notice or the Plan.
Severability The invalidity or unenforceability of any particular provision of this Award Notice shall not affect the other provisions hereof and this Award Notice shall be construed in all respects as if such invalid or unenforceable provision was omitted.
Governing Law & Venue This Award Notice, the RSU Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware andconstruedinaccordancetherewithwithoutgivingeffecttoprinciplesofconflictsoflaws. Youexpressly consent to the exclusive jurisdiction of the federal and state courts serving Deerfield, Illinois for all lawsuits and actions arising out of or relating to the RSU Award and this Award Notice, and you expressly waive any defense that such courts lack personal jurisdiction over you. All such lawsuits and actions shall be tried in the federal or state courts serving Deerfield, Illinois to the exclusion of all other courts.
Entire Agreement This Award Notice and the Plan constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof, and except as provided herein, may not be modified adversely to your interest except by means of a writing signed by you and the Company.
Acceptance of Award You are required to electronically accept this Award Notice within your stock plan account with the Company?s stock plan administrator according to the procedures then in effect in order to receive the RSU Award. Your acceptance of this Award Notice constitutes acknowledgement of receipt of the Plan and this RSU Award and consenttothetermsofthePlanandthisAwardNoticeasdescribedinthePlanandthisAwardNotice.Youhave at least 14 calendar days to consider this Award Notice before accepting it, but you may voluntarily waive this period and accept sooner. Please be advised that you may consult with an attorney of your own choosing to seek independentadvicebeforeacceptingthisRSUAward. ByacceptingthisAwardNotice,youacknowledgethat you have accepted it knowingly and voluntarily and with the full knowledge and understanding of its provisions after being given the opportunity to consult with counsel. Notices All notices, requests or other communications provided for in this Award Notice shall be made, if to the Company, to Caterpillar Inc., Equity Compensation Administration, 100 N.E. Adams Street, Peoria, IL 61629-4440 (or, if applicable, to any updated address provided by the Company for such purposes), and if to you, to your last known mailing address on file with the Company?s stock plan administrator. All notices, requests or other communications provided for in this Award Notice shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mail or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitledtheretoifbyUnitedStatesmailorexpresscourierservice; provided,however,thatifanotice,requestor other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
Post-Employment Restrictions By accepting this RSU Award, you agree that until 12 months following your termination of employment you will not directly or indirectly, without the prior written consent of Caterpillar Inc., do any of the following:
i. solicit any business competitive with any Company business from any person or entity who: (a) was a provider or customer to the Company within the 18 months before your termination of employment date and (b) with whom you had contact to further the Company?s business or for whom you performed services, or supervised the provision of services for, during your employment; ii. hire, employ, recruit or solicit any employee of or consultant to the Company who possesses confidential information of the Company; iii. induce or influence any employee, consultant, customer or provider to the Company to terminate his, her or its employment or other relationship with the Company; iv. engage or participate in, or in any way render services or assistance to, any business that competes, directly or indirectly, with any Company product or service that you participated in, engaged in, or had confidential information regarding, in any geographic territory over which you had responsibilities, during the 18 months before your termination of employment date; or v. assist anyone in any of the activities listed above.
For purposes of the preceding, ?Company? also includes each and all of the Company?s parents, Subsidiaries, and affiliates. If you reside or work in the State of California, only subsection (ii) above is applicable to you.
If you engage in any of the activities listed above without the prior written consent of Caterpillar Inc. within the first 12 months following your termination of employment, all unvested RSUs subject to this RSU Award will lapse and shall be immediately forfeited. For avoidance of doubt, any RSUs that would have continued to vest following your termination of employment due to Long Service Separation shall be forfeited and no further shares of Common Stock associated with this RSU Award will be issued or delivered to you.
Further Information For more detailed information about the Plan, please refer to the Plan prospectus or the Plan itself. Copies of these documentscanbeobtainedontheDocuments&FormstabintheExecutiveCompensationportalon cat@work.If you have any questions regarding the administration of Caterpillar?s equity compensation program, please contact executivecompensation@cat.com Exhibit 10.2
Caterpillar Inc. 2014 Long-Term Incentive Plan Restricted Stock Unit Award Notice
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Grant Date: %%OPTION_DATE,'Month DD, YYYY'%-% Grant Number: %%OPTION_NUMBER%-% Units Granted: %%TOTAL_SHARES_GRANTED,'999,999,999'%-% Vesting Date: %%VEST_DATE_PERIOD1,'Month DD, YYYY'%-%
The Board of Directors of Caterpillar Inc. (the ?Company?) has granted you the number of restricted stock units (?RSUs?) specified above on the date specified above (the ?Grant Date?) pursuant to, and subject to the restrictions, terms and conditions set forth in, the Caterpillar Inc. 2014 Long-Term Incentive Plan (the ?Plan?). This Award Notice and the Plan specify the material terms and provisions applicable to such restricted stock unit award (the ?RSU Award?). Capitalized terms not defined herein shall have the meanings specified in the Plan.
Vesting The RSU Award will become fully vested on the vesting date specified above (the ?Vesting Date?). As soon as administratively practicable, but not later than 60 days, after the Vesting Date, the Company shall issue or deliver to you, subject to the conditions of this Award Notice, unrestricted shares of Common Stock equal to the number of RSUs that become vested, rounded up or down to the nearest whole number, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements.
With limited exception as described more fully below, if your service on the Caterpillar Inc. Board of Directors (the ?Board?) terminates prior to the Vesting Date, the RSU Award will be forfeited. Your RSU Award is also subject to certain additional forfeiture conditions set forth in Sections 5.16 and 5.17 of the Plan.
Voting Rights During the period between the Grant Date and the date the shares subject to such RSUs are issued or delivered to you (the ?Restriction Period?), you are not entitled to any voting rights with respect to such RSUs. From and after the date shares are actually issued or delivered, you then will have full voting rights with respect to those shares.
Dividend Equivalents; Dividends OneachdatethatacashdividendispaidtoholdersofCommonStock,anamountequaltothecashdividendthat is paid on each share of Common Stock, multiplied by the number of RSUs that remain unvested and outstanding asofthedividendpaymentdate(the?Dividend Equivalent Amount?)shallbecreditedforyourbenefit.Unless otherwise determined by the Board or Committee in its discretion, the aggregate Dividend Equivalent Amount, if any, credited to you shall be converted into an additional number of RSUs determined by dividing the Dividend Equivalent Amount by the Fair Market Value of a share of Common Stock on the dividend payment date (the ?DividendEquivalentRSUs?). TheDividendEquivalentRSUs,ifany,willvestonthesameVestingDate correspondingtotheunderlyingRSUswithrespecttowhichtheDividendEquivalentRSUswerecredited,and will otherwise be subject to the same conditions applicable to the underlying RSUs, including, without limitation, theprovisionsgoverningtimeandformofsettlement; providedhowever,thatDividendEquivalentRSUswillnot accrue on Dividend Equivalent RSUs. Unless expressly provided otherwise, as used elsewhere in this Agreement ?RSUs? shall include any Dividend Equivalent RSUs that have been credited to you. From and after the date sharesofCommonStockareactuallyissuedordelivereduponsettlementoftheRSUs,youthenwillhave dividend rights with respect to those shares.
Termination of Service as Director Your termination of service on the Board prior to the Vesting Date will impact the unvested RSUs as follows:
? Six-Month Continuous Service Period IfyourserviceontheBoardterminatesatleastsixmonthsaftertheGrantDate,theRSUAwardwill continuetobecomevestedasoftheVestingDateasthoughyourserviceontheBoardhadcontinued through the Vesting Date, and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the Vesting Date. ? Death If your service on the Board terminates by reason of death, the RSU Award will become fully vested and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to your beneficiary or your estate (as applicable), as soon as administratively practicable, but not later than 2½ months, following the date of your death. ? Change in Control In the event of a Change in Control prior to the end of the Restriction Period pursuant to which your RSU Award is effectively continued, assumed or replaced by the surviving or acquiring corporation in such Change in Control (with appropriate adjustments to the number and kind of shares, in each case, that preservethematerialtermsandconditionsoftheoutstandingRSUAwardasineffectimmediatelyprior totheChangeinControl)andyourserviceontheBoardceasesinconnectionwithsuchChangein Control, the RSU Award will immediately become fully vested and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the VestingDate.IntheeventofavestingaccelerationeventuponaChangeinControlpursuanttoSection 5.9(a)(ii) or (iii) of the Plan, the shares of Common Stock (or cash amount, as applicable), less any shares (or cash amount, as applicable) withheld to satisfy any applicable income and payroll tax withholding requirements,willbeissuedordeliveredtoyouassoonasadministrativelypracticable,butnotlaterthan 60 days, following the date of the Change in Control, provided that if the RSUs are non-qualified deferred compensation subject to Code Section 409A and the Change in Control is not a ?change in control event? withinthemeaningofU.S.Treas.Reg.§1.409A-3(i)(5),theRSUswillvestinaccordancewithSection 5.9(a)(ii) of the Plan, but the vested portion of the RSUs shall instead be settled in cash (in an amount calculated consistent with the methodology described in Section 5.9(a)(iii)), less any amount withheld to satisfy any applicable income and payroll tax withholding requirements, as soon as administratively practicable, but not later than 60 days following the applicable Vesting Date. ? Other If your service on the Board terminates prior to the Vesting Date for any reason other than as described above, all unvested RSUs subject to this RSU Award will lapse and shall be immediately forfeited.
Disability Upon a determination by the Company?s Director of Total Rewards that you have a Disability (as defined below), the RSU Award will become fully vested and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than 60 days, following the date of such determination. For purposes of this RSU Award, ?Disability? means that you are unable to engage in any substantial gainful business activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or whichhaslastedorcanbeexpectedtolastforacontinuousperiodofnotlessthan12months,asdeterminedby the Company?s Director of Total Rewards, based upon medical evidence.
Transferability of Award Subject to certain exceptions set forth in the Plan, the RSU Award may not be assigned, transferred, pledged or hypothecatedinanyway. TheRSUAwardisnotsubjecttoexecution,attachmentorsimilarprocess. Any attempt at such, contrary to the provisions of the Plan, will be null and void and without effect. Note that once RSUs vest and shares of Common Stock are actually issued or delivered, you will have the ability to transfer those shares.
Designation of Beneficiary You may designate a beneficiary (or beneficiaries) to whom any shares of Common Stock that are issued to your stock plan account with the Company?s stock plan administrator upon the vesting of the RSUs will be paid upon your death. If you do not designate a beneficiary, such shares will be paid to your estate or to such other payee determined in accordance with procedures established by the Company?s stock plan administrator.
Administration of the Plan The RSU Award shall at all times be subject to the terms and provisions of the Plan and the Plan shall be administered in accordance with the terms of, and as provided in, the Plan. In the event of conflict between the termsandprovisionsofthisAwardNoticeandthetermsandprovisionsofthePlan,theprovisionsofthePlan shall control.
Code Section 409A It is intended that this Award Notice and the administration of the RSU Award comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated, and other official guidance issued thereunder (?Code Section 409A?), to the extent applicable. The Plan and this Award Notice shall be interpreted and construed on a basis consistent with such intent. Notwithstanding anything contained herein to the contrary, no shares may be issued or delivered unless in compliance with Code Section 409A to the extent that Code Section 409A applies. To the extent this Award Notice provides for the RSU Award to be settled by reference to your termination of service, your service shall be deemed to have terminated upon your ?separation from service,? within the meaning of Code Section 409A. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Notice (and thus the terms of the RSU Award) without your consent solely in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section409A.YouracceptanceofthisRSUAwardconstitutesacknowledgementandconsenttosuchrightsof the Committee. This provision does not create an obligation on the part of the Company to modify the terms of this Award Notice or the Plan and does not guarantee that this RSU Award or the delivery of shares of Common Stock upon settlement of the RSU Award will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. Nothing in this Award Notice shall provide a basis for any person to take any action against the Company or any of its Subsidiaries or affiliates based on matters covered by Code Section 409A, including the tax treatment of any amounts paid under this Award Notice, and neither the Company nor any of its Subsidiaries or affiliates will have any liability under any circumstances to you or any other party if the RSU Award, the delivery of shares of Common Stock upon vesting/settlement of the RSU Award or other payment or tax event hereunder that is intended to be exempt from, or compliant with, Code Section 409A, is not so exempt or compliant or for any action taken by the Committee with respect thereto.
Tax Impact Please refer to the Plan prospectus and support materials for a general description of the tax consequences of an RSU Award. You may also wish to consult with your personal tax advisor regarding how the RSU Award impacts your individual tax situation. Nothing contained in this Award Notice or in the Plan prospectus shall be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this Award Notice.
Withholding ThedistributionofsharesofCommonStockinconnectionwiththevestingoftheRSUAwardisataxableevent inmanytaxingjurisdictions. Atyourelection,theCompanymaywithholdtaxesuponthetaxableevent. To satisfy this withholding obligation, you hereby authorize the Company to withhold that number of shares that would satisfy the withholding obligation from the shares otherwise to be issued or delivered to you under the RSU Award.Thefollowingconditionsapplytosuchwithholding:(a)thevalueofthesharesofCommonStock withheld must equal the minimum withholding obligation; and (b) the value of the shares of Common Stock withheld shall be the Fair Market Value determined as of the date the RSUs become vested. For this purpose and for all purposes of this RSU Award, Fair Market Value shall mean the mean between the high and low prices at whichashareof CommonStockoftheCompany is traded on the New York Stock Exchange. Alternatively, you mayselectanyofthefollowingmethodstosatisfywithholdingobligationsuponataxableeventapplicableto your RSU Award in lieu of the net share withholding method described in the immediately preceding sentence: (i) a cash payment by you to the Company, (ii) your delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously issued whole shares of Common Stock having an aggregateFairMarketValueequaltotheamountnecessarytosatisfyanysuchobligation,or(iii)anyother method of withholding determined by the Company and permitted by applicable laws and the Plan. Notwithstanding the foregoing, the net share withholding method described above will not be used for any tax- relatedwithholdingobligationsthatbecomepayableinayearpriortotheyearthatsharesareissuedordelivered to you and, instead, you authorize the Company (or your employer) to use a method determined appropriate by the Company and permitted by applicable laws and the Plan.
Compliance with Securities Laws TheRSUAwardissubjecttotheconditionthatifthelisting,registrationorqualificationofthesharesof Common Stock subject to the RSU Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of shares hereunder, the shares of Common Stock subject to the RSU Award shall not be issued or delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
Adjustment of Shares Provisions are made within the Plan covering the effect of stock dividends, stock splits, changes in par value, changes in kind of stock, sale, merger, recapitalization, reorganization, etc.
Awards Subject to Forfeiture, Clawback and Setoff The RSU Award is subject to certain forfeiture conditions set forth in the Plan, which in the event such conditions are determined to have occurred, may result in immediate forfeiture and cancellation of your outstanding RSU AwardoranobligationtorepaytheCompanythetotalamountofawardgainrealizeduponsettlementofyour RSUAward.Also,theCompanygenerallymaydeductfromandsetoffagainstanyamountstheCompanyowes to you, including amounts payable in connection with this RSU Award, such amounts you may owe to the Company.
Effect on Other Benefits TheRSUAwardisnotintendedtoandshallnotimpactthecoverageofortheamountofanyotherbenefitplans in which you participate that are sponsored by the Company or any of its Subsidiaries or affiliates.
Award Confers No Rights to Continued Service on the Board InnoeventshallthegrantingoftheRSUAwardoritsacceptancebyyou,oranyprovisionoftheAwardNotice or the Plan, give or be deemed to give you any right to continued service on the Board.
Decisions of Board or Committee The Board or the Committee shall have the right to resolve all questions which may arise in connection with the RSU Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this RSU Award shall be final, binding and conclusive.
Successors This Award Notice shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Notice or the Plan.
Severability The invalidity or unenforceability of any particular provision of this Award Notice shall not affect the other provisions hereof and this Award Notice shall be construed in all respects as if such invalid or unenforceable provision was omitted.
Governing Law & Venue This Award Notice, the RSU Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. You expressly consent to the exclusive jurisdiction of the federal and state courts serving Deerfield, Illinois for all lawsuits and actionsarisingoutoforrelatingtotheRSUAwardandthisAwardNotice,andyouexpresslywaiveanydefense that such courts lack personal jurisdiction over you. All such lawsuits and actions shall be tried in the federal or state courts serving Deerfield, Illinois to the exclusion of all other courts.
Entire Agreement This Award Notice and the Plan constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof, and except as provided herein, may not be modified adversely to your interest except by means of a writing signed by you and the Company.
Acceptance of Award You are required to accept this Award Notice within your stock plan account with the Company?s stock plan administrator according to the procedures then in effect. Your acceptance of this Award Notice constitutes acknowledgement of receipt of the Plan and this RSU Award and consent to the terms of the Plan and this Award Notice as described in the Plan and this Award Notice.
Notices All notices, requests or other communications provided for in this Award Notice shall be made, if to the Company, to Caterpillar Inc., Equity Compensation Administration, 100 N.E. Adams Street, Peoria, IL 61629-4440 (or, if applicable, to any updated address provided by the Company for such purposes), and if to you, to your last known mailing address on file with the Company?s stock plan administrator. All notices, requests or other communications provided for in this Award Notice shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mail or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitledtheretoifbyUnitedStatesmailorexpresscourierservice; provided,however,thatifanotice,requestor other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
Further Information For more detailed information about the Plan, please refer to the Plan prospectus or the Plan itself. If you have any questions regarding the administration of Caterpillar?s equity compensation program, please reach out to your Executive Compensation contact at Caterpillar or e-mail executivecompensation@cat.com. Exhibit 10.3
Caterpillar Inc. 2014 Long-Term Incentive Plan Nonqualified Stock Option Award Notice
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Grant Date: %%OPTION_DATE,'Month DD, YYYY'%-% Grant Number: %%OPTION_NUMBER%-% Units Granted: %%TOTAL_SHARES_GRANTED,'999,999,999'%-% Option Price: %%OPTION_PRICE,'$999,999,999.99'%-% Expiration Date: %%EXPIRE_DATE_PERIOD1,'Month DD, YYYY'%-%
The Board of Directors of Caterpillar Inc. (the ?Company?) has granted you the number of nonqualified stock options (?NQSOs?) specified above on the date specified above (the ?Grant Date?) pursuant to, and subject to the restrictions, terms and conditions set forth in, the Caterpillar Inc. 2014 Long-Term Incentive Plan (the ?Plan?) at thepricespecifiedabovepershare,whichistheclosingtransactionpriceofashareofCompanyCommonStock as reported on the New York Stock Exchange on the Grant Date. This Award Notice and the Plan specify the material terms and provisions applicable to such nonqualified stock option award (the ?Option Award?). Capitalized terms not defined herein shall have the meanings specified in the Plan.
Vesting Except to the extent the NQSOs are forfeited upon your termination of employment, as provided below, the NQSOs will become vested in the amounts and on the vesting date(s) specified below (each such date, a ?VestingDate?).
Vesting Date NQSOs Vesting %%VEST_DATE_PERIOD1,'Month DD, YYYY'%-% %%SHARES_PERIOD1%-% %%VEST_DATE_PERIOD2,'Month DD, YYYY'%-% %%SHARES_PERIOD2%-% %%VEST_DATE_PERIOD3,'Month DD, YYYY'%-% %%SHARES_PERIOD3%-%
If you terminate employment prior to the date the NQSOs have become fully vested for any reason other than Long-Service Separation, Disability, death or in connection with a Change in Control (as described more fully below), the unvested NQSOs will be forfeited. Your Option Award is also subject to certain additional forfeiture conditions set forth in Sections 5.16 and 5.17 of the Plan and in the Post-Employment Restrictions section of this Award Notice.
Exercise of Award The Option Award may only be exercised through the Plan?s designated administrator, currently E*TRADE, or throughsuchothermeansastheCompanymaydesignate.YoumayexercisetheOptionAwardbyproviding notice of exercise, in a manner specified by the Company, setting forth the number of shares to be exercised, accompanied by full payment for the shares. The exercise price shall be payable at your election by: (1) tendering cash, (2) tendering previously acquired shares of Company Common Stock, (3) except as may be prohibited by applicable law, a broker-dealer, acceptable to the Company and to whom you submitted an irrevocable notice of exercise, tendering cash, (4) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered, or (5) any combination of (1), (2), (3) and (4).
The Option Award will expire unless exercised by the expiration date specified above (the ?Expiration Date?), the tenth anniversary of the Grant Date. If the Expiration Date occurs during any period in which you are prohibited from trading Company Common Stock pursuant to the Company?s insider trading policy or during a period when the exercise of the Option Award would violate applicable securities law (a ?Blackout Period?), then the Option Award will not expire on the Expiration Date. Instead, the Option Award will not expire until the date that is 30 days after the expiration of the Blackout Period. Voting Rights During the period between the Grant Date and the date you exercise your vested NQSOs and the shares subject to suchNQSOsareissuedordeliveredtoyou(the?RestrictionPeriod?),youarenotentitledtoanyvotingrights withrespecttosuchNQSOs.Fromandafterthedatesharesareactuallyissuedordelivered,youthenwillhave full voting rights with respect to those shares.
Dividends and Other Distributions During the Restriction Period, you will not receive or be credited with dividends or any other distributions (e.g., dividend equivalents) with respect to the NQSOs. From and after the date shares are actually issued or delivered, you then will have dividend rights with respect to those shares.
Termination of Employment YourterminationofemploymentwiththeCompany prior to the date the NQSOs become fully vested will impact the unvested NQSOs as follows:
? Long-Service Separation If your employment with the Company terminates at least six months after the Grant Date by reason of Long-Service Separation (as defined below), your unvested NQSOs will continue to become vested and exercisableasofeachVestingDateasthoughyouremploymentwiththeCompanyhadcontinued through the last scheduled Vesting Date. In such event, your Option Award will remain exercisable until the Expiration Date. For purposes of this Option Award, ?Long-Service Separation? means termination of employment after attainment of age 55 with 5 or more years of continuous service with the Company, as determined by the Company in its sole discretion. ? Disability If your employment with the Company terminates by reason of Disability (as defined below), your unvestedNQSOswillbecomefullyvested.Insuchevent,yourOptionAwardwillremainexercisable until the Expiration Date. For purposes of this Option Award, ?Disability? means, unless otherwise provided for in an employment, change in control or similar agreement in effect between you and the Company or a Subsidiary, qualifying for long-term disability benefits under any long-term disability programsponsoredbytheCompanyoraSubsidiaryinwhichyouparticipateor,ifyoudonotparticipate in any such program, your inability to engage in any substantial gainful business activity by reason of any medicallydeterminablephysicalormentalimpairmentthatcanbeexpectedtoresultindeath,orwhich has lasted or can be expected to last for a continuous period of not less than 12 months, as determined by the Company?s Director of Total Rewards, based upon medical evidence. ? Death IfyouremploymentwiththeCompanyterminatesbyreasonofdeath,yourunvestedNQSOswillbecome fully vested and your estate or your beneficiary (as applicable) will have until the Expiration Date to exercise the Option Award. If you die after your termination of employment when the Option Award is otherwise exercisable, the Option Award will remain exercisable by your estate or your beneficiary (as applicable) until: (a) the Expiration Date if your termination of employment was due to Long-Service Separation, Disability or in connection with a Change in Control; or (b) the earlier of: (1) the Expiration Date or (2) 38 months following your termination of employment if your termination of employment was for any reason other than Long-Service Separation, Disability or in connection with a Change in Control. ? Change in Control IntheeventofaChangeinControlpriortothedatetheNQSOsbecomefullyvestedpursuanttowhich your Option Award is effectively continued, assumed or replaced by the surviving or acquiring corporation in such Change in Control (with appropriate adjustments to the number and kind of shares, in each case, that preserve the material terms and conditions of the outstanding Option Award as in effect immediately prior to the Change in Control) and your employment is terminated either by the Company without Cause or by you for Good Reason, as defined in the Plan, within the 24?month period commencing on the date of the Change in Control, your unvested NQSOs will immediately become fully vested. In such event, your Option Award will remain exercisable until the Expiration Date. ? Cause If your employment with the Company is terminated for Cause (as defined in the Plan), all of your unexercised NQSOs associated with the Option Award (whether vested or non-vested) shall expire immediately and all rights thereunder cease upon such termination. ? Other IfyouremploymentwiththeCompanyterminatespriortothedatetheNQSOsbecomefullyvestedfor anyreasonotherthanLong-ServiceSeparation,Disability,death,CauseorinconnectionwithaChange in Control, all unvested NQSOs associated with this Option Award shall be immediately forfeited to the Company.Insuchevent,withrespecttovestedNQSOs,youwillhaveuntiltheearlierof(1)the ExpirationDateor(2)thedatewhich is 60 days following the date of your termination of employment to exercise the Option Award. ForpurposesofthisOptionAward,referencestoemploymentwiththeCompanyshallalsomeanemployment withaSubsidiary.Theextenttowhichyoushallbeconsideredemployedduringanyperiodsduringwhichyou are on a leave of absence shall be determined in accordance with Company policy.
Transferability of Award Subject to certain exceptions set forth in the Plan, the Option Award is only exercisable by you (or your beneficiary,estateorrepresentative,asapplicable) and may not be assigned, transferred, pledged or hypothecated in any way. The Option Award is not subject to execution, attachment or similar process. Any attempt at such, contrary to the provisions of the Plan, will be null and void and without effect. Note that once your Option Award is exercised and shares of Common Stock are actually issued or delivered, you will have the ability to transfer those shares.
Designation of Beneficiary AnyvestedandunexercisedNQSOswilltransfertoyourestateuponyourdeath. Ifyouwishtodesignatea beneficiary for the NQSOs, contact executivecompensation@cat.com for additional information. You may designate a beneficiary (or beneficiaries) to whom any shares of Common Stock issued to your stock plan account with the Company?s stock plan administrator upon the exercise of the NQSOs will be paid upon your death. If you do not designate a beneficiary, such shares will be paid to your estate or to such other payee determined in accordance with procedures established by the Company?s stock plan administrator.
Administration of the Plan The Option Award shall, at all times, be subject to the terms and provisions of the Plan and the Plan shall be administered in accordance with the terms of, and as provided in, the Plan. In the event of conflict between the termsandprovisionsofthisAwardNoticeandthetermsandprovisionsofthePlan,theprovisionsofthePlan shall control.
Code Section 409A ItisintendedthatthisAwardNoticeandtheadministrationoftheOptionAwardwillbeexemptfromSection 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated and other official guidance issued thereunder (?Code Section 409A?). The Plan and this Award Notice shall be interpreted and construed on a basis consistent with such intent. Notwithstanding anything contained herein to the contrary, the Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Notice (and thus the terms of the Option Award) without your consent solely in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A. Your acceptance of this Option Award constitutes acknowledgement and consent to such rights of the Committee. This provision does not create an obligation on the part of the Company to modify the terms of this Award Notice or the Plan and does not guarantee that this Option Award or the delivery of shares of Common Stock upon exercise of the Option Award willnotbesubjecttotaxes,interestandpenaltiesoranyotheradversetaxconsequencesunderCodeSection 409A. Nothing in this Award Notice shall provide a basis for any person to take any action against the Company or any of its Subsidiaries or affiliates based on matters covered by Code Section 409A, including the tax treatment ofanyamountspaidunderthisAwardNotice,andneithertheCompanynoranyofitsSubsidiariesoraffiliates will have any liability under any circumstances to you or any other party if the Option Award, the delivery of sharesofCommonStockuponexerciseoftheOptionAwardorotherpaymentortaxeventhereunderthatis intendedtobeexemptfrom,orcompliantwith,CodeSection409A,isnotsoexemptorcompliantorforany action taken by the Committee with respect thereto.
Tax Impact Please refer to the Plan prospectus and support materials for a general description of the tax consequences of an Option Award. You may also wish to consult with your personal tax advisor regarding how the Option Award impacts your individual tax situation. Nothing contained in this Award Notice or in the Plan prospectus shall be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this Award Notice.
Withholding The exercise of an NQSO is a taxable event in many taxing jurisdictions. In some countries, including the United States, the Company is required to withhold taxes upon the taxable event. To satisfy this withholding obligation, you hereby authorize the Company to withhold that number of shares that would satisfy the withholding obligation from the shares otherwise to be issued or delivered to you under the Option Award. The following conditions apply to such withholding: (a) the value of the shares of Common Stock withheld must equal the minimum withholding obligation; and (b) the value of the shares of Common Stock withheld shall be the Fair MarketValuedeterminedasoftheexercisedate. ForthispurposeandforallotherpurposesofthisOption Award except the Option price as described above, Fair Market Value shall mean the mean between the high and low prices at which a share of Common Stock of the Company is traded on the New York Stock Exchange. Alternatively,byyouracceptanceofthisOptionAward,youherebyauthorizetheCompany(oryouremployer), or their respective agents, to select any of the following methods to satisfy withholding obligations upon a taxable event applicable to your Option Award (i) a cash payment by you to the Company, (ii) your delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously issued whole sharesofCommonStockhavinganaggregateFairMarketValueequaltotheamountnecessarytosatisfyany such obligation, or (iii) any other method of withholding determined by the Company and permitted by applicable laws and the Plan; provided, however, that if you are subject to Section 16 of the Exchange Act, you shall be permitted to select among the methods set forth in subsection (i) through (iii) in lieu of the net share withholding method set forth in the immediately preceding sentence.
Compliance with Securities Laws The Company will take steps required to achieve compliance with all applicable United States federal and state securities laws (and other laws, including registration requirements) and with the rules and practices of the stock exchanges upon which the stock of the Company is listed and the Option Award is subject to the requirements of suchlawsandrules. TheOptionAwardissubjecttotheconditionthatifthelisting,registrationorqualification ofthesharesofCommonStocksubjecttotheOptionAwarduponanysecuritiesexchangeorunderanylaw,or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of shares hereunder, the shares of Common Stock subject to the Option Award shall not be issued or delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
Adjustment of Shares Provisions are made within the Plan covering the effect of stock dividends, stock splits, changes in par value, changes in kind of stock, sale, merger, recapitalization, reorganization, etc.
Awards Subject to Forfeiture, Clawback and Setoff The Option Award (and its exercise) is subject to certain forfeiture conditions set forth in the Plan which, in the eventsuchconditionsaredeterminedtohaveoccurred,mayresultinimmediateforfeitureandcancellationof your outstanding Option Award or an obligation to repay the Company the total amount of award gain realized uponexerciseofyourOptionAward. Also,theCompanygenerallymaydeductfromandsetoffagainstany amounts the Company owes to you, including amounts payable in connection with this Option Award, such amounts you may owe to the Company. Effect on Other Benefits The Option Award is not intended to and shall not impact the coverage of or the amount of any other employee benefit plans in which you participate that are sponsored by the Company or any of its Subsidiaries or affiliates.
Award Confers No Rights to Continued Employment In no event shall the granting of the Option Award or its acceptance by you, or any provision of the Award Notice or the Plan, give or be deemed to give you any right to continued employment by the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate your employment at any time.
Decisions of Board or Committee The Board or the Committee shall have the right to resolve all questions which may arise in connection with the Option Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Option Award shall be final, binding and conclusive.
Successors This Award Notice shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Notice or the Plan.
Severability The invalidity or unenforceability of any particular provision of this Award Notice shall not affect the other provisions hereof and this Award Notice shall be construed in all respects as if such invalid or unenforceable provision was omitted.
Governing Law & Venue This Award Notice, the Option Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. You expressly consent to the exclusive jurisdiction of the federal and state courts serving Deerfield, Illinois for all lawsuits and actionsarisingoutoforrelatingtotheOptionAwardandthisAwardNotice,andyouexpresslywaiveany defense that such courts lack personal jurisdiction over you. All such lawsuits and actions shall be tried in the federal or state courts serving Deerfield, Illinois to the exclusion of all other courts.
Entire Agreement This Award Notice and the Plan constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof, and except as provided herein, may not be modified adversely to your interest except by means of a writing signed by you and the Company.
Acceptance of Award You are required to electronically accept this Award Notice within your stock plan account with the Company?s stock plan administrator according to the procedures then in effect in order to receive the Option Award. Your acceptance of this Award Notice constitutes acknowledgement of receipt of the Plan and this Option Award and consenttothetermsofthePlanandthisAwardNoticeasdescribedinthePlanandthisAwardNotice.Youhave at least 14 calendar days to consider this Award Notice before accepting it, but you may voluntarily waive this period and accept sooner. Please be advised that you may consult with an attorney of your own choosing to seek independent advice before accepting this Option Award. By accepting this Award Notice, you acknowledge that you have accepted it knowingly and voluntarily and with the full knowledge and understanding of its provisions after being given the opportunity to consult with counsel.
Notices All notices, requests or other communications provided for in this Award Notice shall be made, if to the Company, to Caterpillar Inc., Equity Compensation Administration, 100 N.E. Adams Street, Peoria, IL 61629-4440(or,ifapplicable,toanyupdatedaddressprovidedbytheCompanyforsuchpurposes),andiftoyou, to your last known mailing address on file with the Company?s stock plan administrator. All notices, requests or other communications provided for in this Award Notice shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mail or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitledtheretoifbyUnitedStatesmailorexpresscourierservice; provided,however,thatifanotice,requestor other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
Post-Employment Restrictions By accepting this Option Award, you agree that until 12 months following your termination of employment, you will not directly or indirectly, without the prior written consent of Caterpillar Inc., do any of the following:
i. solicit any business competitive with any Company business from any person or entity who: (a) was a provider or customer to the Company within the 18 months before your termination of employment date and (b) with whom you had contact to further the Company?s business or for whom you performed services, or supervised the provision of services for, during your employment; ii. hire, employ, recruit or solicit any employee of or consultant to the Company who possesses confidential information of the Company; iii. induce or influence any employee, consultant, customer or provider to the Company to terminate his, her or its employment or other relationship with the Company; iv. engage or participate in, or in any way render services or assistance to, any business that competes, directly or indirectly, with any Company product or service that you participated in, engaged in, or had confidential information regarding, in any geographic territory over which you had responsibilities, during the 18 months before your termination of employment date; or v. assist anyone in any of the activities listed above.
For purposes of the preceding, ?Company? also includes each and all of the Company?s parents, Subsidiaries, and affiliates. If you reside or work in the State of California, only subsection (ii) above is applicable to you.
If you engage in any of the activities listed above without the prior written consent of Caterpillar Inc. within the first 12 months following your termination of employment, all of your unexercised NQSOs associated with the Option Award (whether vested or non-vested) shall expire immediately and all rights thereunder cease upon such termination.
Further Information For more detailed information about the Plan, please refer to the Plan prospectus or the Plan itself. Copies of these documentscanbeobtainedontheDocuments&FormstabintheExecutiveCompensationportalon cat@work. If you have any questions regarding the administration of Caterpillar?s equity compensation program, please contact executivecompensation@cat.com.
Caterpillar Inc. 2014 Long-Term Incentive Plan Performance-Based Restricted Stock Unit Award Notice
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Grant Date: %%OPTION_DATE,'Month DD, YYYY'%-% Grant Number: %%OPTION_NUMBER%-% Units Granted: %%TOTAL_SHARES_GRANTED,'999,999,999'%-% Vesting Date: %%VEST_DATE_PERIOD1,'Month DD, YYYY'%-%
The Board of Directors of Caterpillar Inc. (the ?Company?) has granted you the number of restricted stock units (?RSUs?) specified above on the date specified above (the ?Grant Date?) pursuant to, and subject to the restrictions, terms and conditions set forth in, the Caterpillar Inc. 2014 Long-Term Incentive Plan (the ?Plan?). This Award Notice and the Plan specify the material terms and provisions applicable to such restricted stock unit award (the ?RSU Award?). Capitalized terms not defined herein shall have the meanings specified in the Plan.
Vesting Except to the extent the RSUs are forfeited upon your termination of employment as provided below, the RSU Award will vest as of the vesting date specified above (the ?Vesting Date?) if the Company achieves the performance goal(s) established by the Committee (the ?Performance Goals?) for the performance period below (the ?Performance Period?), as set forth in Appendix A hereto.
Performance Period Start Date: %%GRANT_USER_DEFINED_FIELD_11%-% Performance Period End Date: %%GRANT_USER_DEFINED_FIELD_12%-%
As soon as administratively practicable, but not later than two and one-half months, after the Performance Period End Date specified above, the Company shall issue or deliver to you, subject to the achievement of the Performance Goals and the other conditions of this Award Notice, unrestricted shares of Common Stock equal to the number of RSUs that become vested, rounded up or down to the nearest whole number, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements.
If you terminate employment prior to the date the RSUs have become fully vested for any reason other than Long- ServiceSeparation,Disability,deathorinconnectionwithaChangeinControl(asdescribedmorefullybelow), all of the unvested RSUs will be forfeited. Your RSU Award is also subject to certain additional forfeiture conditions set forth in Sections 5.16 and 5.17 of the Plan and in the Post-Employment Restrictions section of this Award Notice.
Voting Rights During the period between the Grant Date and the date the RSUs become vested and the shares subject to such RSUs are issued or delivered to you (the ?Restriction Period?), you are not entitled to any voting rights with respecttosuchRSUs.Fromandafterthedatesharesareactuallyissuedordelivered,youthenwillhavefull voting rights with respect to those shares.
Dividend Equivalents; Dividends OneachdatethatacashdividendispaidtoholdersofCommonStock,anamountequaltothecashdividendthat is paid on each share of Common Stock, multiplied by the number of RSUs that remain unvested and outstanding asofthedividendpaymentdate(the?Dividend Equivalent Amount?)shallbecreditedforyourbenefit.Unless otherwise determined by the Board or Committee in its discretion, the aggregate Dividend Equivalent Amount, if any, credited to you shall be converted into an additional number of RSUs determined by dividing the Dividend Equivalent Amount by the Fair Market Value of a share of Common Stock on the dividend payment date (the ?Dividend Equivalent RSUs?). The Dividend Equivalent RSUs, if any, will vest on the same Vesting Date correspondingtotheunderlyingRSUswithrespecttowhichtheDividendEquivalentRSUswerecredited,and willotherwisebesubjecttothesameconditionsapplicabletotheunderlyingRSUs,including,withoutlimitation,
theprovisionsgoverningtimeandformofsettlement; providedhowever,thatDividendEquivalentRSUswillnot accrue on Dividend Equivalent RSUs. Unless expressly provided otherwise, as used elsewhere in this Agreement ?RSUs?shallincludeanyDividendEquivalentRSUsthathavebeencreditedtoyou.Fromandafterthedate sharesofCommonStockareactuallyissuedordelivereduponsettlementoftheRSUs,youthenwillhave dividend rights with respect to those shares.
Termination of Employment IfyouremploymentwiththeCompanyterminatespriortotheVestingDate,allunvestedRSUssubjecttothis RSU Award will lapse and shall be immediately forfeited, except as follows:
? Long-Service Separation IfyouremploymentwiththeCompanyterminatesatleastsixmonthsaftertheGrantDatebyreasonof Long-Service Separation (as defined below), the RSU Award will remain outstanding and the RSUs will becomevestedifandtotheextentthePerformanceGoalsforthefullPerformancePeriodareachieved. For purposes of this RSU Award, ?Long-Service Separation? means termination of employment for any reason other than for Cause after attainment of age 55 with 5 or more years of continuous service with the Company, as determined by the Company in its sole discretion. ? Disability IfyouremploymentwiththeCompanyterminatesbyreasonofDisability,theRSUAwardwillremain outstandingandtheRSUswillbecomevestedifandtotheextentthePerformanceGoalsareachieved. For purposes of this RSU Award, ?Disability? means, unless otherwise provided for in an employment, change in control or similar agreement in effect between you and the Company or a Subsidiary, qualifying for long-term disability benefits under any long-term disability program sponsored by the CompanyoraSubsidiaryinwhichyou participate or, if you do not participate in any such program, your inability to engage in any substantial gainful business activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months, as determined by the Company?s Director of Total Rewards, based upon medical evidence. ? Death IfyouremploymentwiththeCompanyterminatesbyreasonofdeath,yourunvestedRSUswillbecome fully vested and shares of Common Stock, less any shares withheld to satisfy any applicable income and payroll tax withholding requirements, will be issued or delivered to your beneficiary or your estate (as applicable), as soon as administratively practicable, but not later than 2½ months, following the date of your death. ? Change in Control IntheeventofaChangeinControlpriortotheendoftheRestrictionPeriodpursuanttowhichyourRSU Award is effectively continued, assumed or replaced by the surviving or acquiring corporation in such Change in Control (with appropriate adjustments to the number and kind of shares, in each case, that preservethematerialtermsandconditionsoftheoutstandingRSUAwardasineffectimmediatelyprior to the Change in Control) and your employment is terminated either by the Company or its successor without Cause or by you for Good Reason, as defined in the Plan, within the 24?month period commencing on the date of the Change in Control, all of the RSUs will immediately become fully vested andshares of Common Stock, less any shares withheld to satisfy any applicable income and payrolltax withholding requirements, will be issued or delivered to you as soon as administratively practicable, but not later than two and one-half months, after your termination of employment.
ForpurposesofthisRSUAward,referencestoemploymentwiththeCompanyshallalsomeanemploymentwith a Subsidiary. The extent to which you shall be considered employed during any periods during which you are on a leave of absence shall be determined in accordance with Company policy.
Transferability of Award Subject to certain exceptions set forth in the Plan, the RSU Award may not be assigned, transferred, pledged or hypothecatedinanyway.TheRSUAwardisnotsubjecttoexecution,attachmentorsimilarprocess.Anyattempt
at such, contrary to the provisions of the Plan, will be null and void and without effect. Note that once RSUs vest and shares of Common Stock are actually issued or delivered, you will have the ability to transfer those shares.
Designation of Beneficiary You may designate a beneficiary (or beneficiaries) to whom any shares of Common Stock that are issued to your stock plan account with the Company?s stock plan administrator upon the vesting of the RSUs will be paid upon your death. If you do not designate a beneficiary, such shares will be paid to your estate or to such other payee determined in accordance with procedures established by the Company?s stock plan administrator.
Administration of the Plan The RSU Award shall, at all times, be subject to the terms and provisions of the Plan and the Plan shall be administered in accordance with the terms of, and as provided in, the Plan. In the event of conflict between the termsandprovisionsofthisAwardNoticeandthetermsandprovisionsofthePlan,theprovisionsofthePlan shall control.
Code Section 409A It is intended that this Award Notice and the administration of the RSU Award comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated, and other official guidance issued thereunder (?Code Section 409A?), to the extent applicable. The Plan and this Award Notice shall be interpreted and construed on a basis consistent with such intent. Notwithstanding anything contained herein to the contrary, no shares may be issued or delivered unless in compliance with Code Section 409A to the extent that Code Section 409A applies. To the extent this Award Notice provides for the RSU Award to be settled by reference to your termination of employment, your employment shall be deemed to have terminated upon your ?separation from service,? within the meaning of Code Section 409A. The Committee reserves the right (includingtherighttodelegatesuchright)tounilaterallyamendthisAwardNotice(andthusthetermsofthe RSU Award) without your consent solely in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A. Your acceptance of this RSU Award constitutes acknowledgement and consent to such rights of the Committee. This provision does not create an obligation on the part of the Company to modify the terms of this Award Notice or the Plan and does not guarantee that this RSU Award or the delivery of shares of Common Stock upon settlement of the RSU Award will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. Nothing in this Award Notice shall provide a basisforanypersontotakeanyactionagainsttheCompanyoranyofitsSubsidiariesoraffiliatesbasedon matters covered by Code Section 409A, including the tax treatment of any amounts paid under this Award Notice, and neither the Company nor any of its Subsidiaries or affiliates will have any liability under any circumstances to you or any other party if the RSU Award, the delivery of shares of Common Stock upon vesting/settlement of the RSU Award or other payment or tax event hereunder that is intended to be exempt from, or compliant with, Code Section 409A, is not so exempt or compliant or for any action taken by the Committee with respect thereto.
Tax Impact Please refer to the Plan prospectus and support materials for a general description of the tax consequences of an RSU Award. You may also wish to consult with your personal tax advisor regarding how the RSU Award impacts your individual tax situation. Nothing contained in this Award Notice or in the Plan prospectus shall be construed as a guarantee of any particular tax effect for any benefits or amounts deferred or paid pursuant to this Award Notice.
Withholding ThedistributionofsharesofCommonStockinconnectionwiththevestingoftheRSUAwardisataxableevent in many taxing jurisdictions. In some countries, including the United States, the Company is required to withhold taxesuponthetaxableevent.Tosatisfythiswithholdingobligation,youherebyauthorizetheCompanyto withholdthatnumberofsharesthatwouldsatisfythewithholdingobligationfromthesharesotherwisetobe issued or delivered to you under the RSU Award. The following conditions apply to such withholding: (a) the value of the shares of Common Stock withheld must equal the minimum withholding obligation; and (b) the value of the shares of Common Stock withheld shall be the Fair Market Value determined as of the date the RSUs becomevested.Forthispurposeandforallpurposes of this RSU Award, Fair Market Value shall mean the mean betweenthehighandlowpricesatwhichashareofCommonStockoftheCompanyistradedontheNewYork
StockExchange. Alternatively, by your acceptance of this RSU Award, you hereby authorize the Company(or your employer), or their respective agents, to select any of the following methods to satisfy withholding obligations upon a taxable event applicable to your RSU Award (i) a cash payment by you to the Company, (ii) your delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously issued whole shares of Common Stock having an aggregate Fair Market Value equal to the amount necessary to satisfy any such obligation, or (iii) any other method of withholding determined by the Company and permittedbyapplicablelawsandthePlan;provided,however,thatifyouaresubjecttoSection16ofthe Exchange Act, you shall be permitted to select among the methods set forth in (i) through (iii) above in lieu of the net share withholding method set forth in the immediately preceding sentence. Notwithstanding the foregoing, the netsharewithholdingmethoddescribedabovewillnotbeusedforsocialsecurity,FICAorotheremployment tax-related withholding obligations that become payable in a year prior to the year that shares are issued or delivered to you and, instead, you authorize the Company (or your employer) to use a method determined appropriate by the Company and permitted by applicable laws and the Plan.
Compliance with Securities Laws TheRSUAwardissubjecttotheconditionthatifthelisting,registrationorqualificationofthesharesof Common Stock subject to the RSU Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of shares hereunder, the shares of Common Stock subject to the RSU Award shall not be issued or delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
Adjustment of Shares Provisions are made within the Plan covering the effect of stock dividends, stock splits, changes in par value, changes in kind of stock, sale, merger, recapitalization, reorganization, etc.
Awards Subject to Forfeiture, Clawback and Setoff The RSU Award is subject to certain forfeiture conditions set forth in the Plan, which in the event such conditions are determined to have occurred, may result in immediate forfeiture and cancellation of your outstanding RSU AwardoranobligationtorepaytheCompanythetotalamountofawardgainrealizeduponsettlementofyour RSUAward.Also,theCompanygenerallymaydeductfromandsetoffagainstanyamountstheCompanyowes to you, including amounts payable in connection with this RSU Award, such amounts you may owe to the Company.
Effect on Other Benefits The RSU Award is not intended to and shall not impact the coverage of or the amount of any other employee benefit plans in which you participate that are sponsored by the Company or any of its Subsidiaries or affiliates.
Award Confers No Rights to Continued Employment InnoeventshallthegrantingoftheRSUAwardoritsacceptancebyyou,oranyprovisionoftheAwardNotice or the Plan, give or be deemed to give you any right to continued employment by the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate your employment at any time.
Decisions of Board or Committee The Board or the Committee shall have the right to resolve all questions which may arise in connection with the RSU Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this RSU Award shall be final, binding and conclusive.
Successors This Award Notice shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Notice or the Plan.
Severability The invalidity or unenforceability of any particular provision of this Award Notice shall not affect the other provisions hereof and this Award Notice shall be construed in all respects as if such invalid or unenforceable provision was omitted.
Governing Law & Venue This Award Notice, the RSU Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws. You expressly consent to the exclusive jurisdiction of the federal and state courts serving Deerfield, Illinois for all lawsuits and actions arising out of or relating to the RSU Award and this Award Notice, and you expressly waive any defense that such courts lack personal jurisdiction over you. All such lawsuits and actions shall be tried in the federal or state courts serving Deerfield, Illinois to the exclusion of all other courts.
Entire Agreement This Award Notice and the Plan constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements between you and the Company with respect to the subject matter hereof, and except as provided herein, may not be modified adversely to your interest except by means of a writing signed by you and the Company.
Acceptance of Award You are required to electronically accept this Award Notice within your stock plan account with the Company?s stock plan administrator according to the procedures then in effect in order to receive the RSU Award. Your acceptance of this Award Notice constitutes acknowledgement of receipt of the Plan and this RSU Award and consenttothetermsofthePlanandthisAwardNoticeasdescribedinthePlanandthisAwardNotice.Youhave at least 14 calendar days to consider this Award Notice before accepting it, but you may voluntarily waive this period and accept sooner. Please be advised that you may consult with an attorney of your own choosing to seek independentadvicebeforeacceptingthisRSUAward. ByacceptingthisAwardNotice,youacknowledgethat you have accepted it knowingly and voluntarily and with the full knowledge and understanding of its provisions after being given the opportunity to consult with counsel.
Notices All notices, requests or other communications provided for in this Award Notice shall be made, if to the Company, to Caterpillar Inc., Equity Compensation Administration, 100 N.E. Adams Street, Peoria, IL 61629-4440 (or, if applicable, to any updated address provided by the Company for such purposes), and if to you, to your last known mailing address on file with the Company?s stock plan administrator. All notices, requests or other communications provided for in this Award Notice shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mail or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitledtheretoifbyUnitedStatesmailorexpresscourierservice; provided,however,thatifanotice,requestor other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
Post-Employment Restrictions ByacceptingthisRSUAward,youagreethatuntil12monthsfollowingyourterminationofemployment,you will not directly or indirectly, without the prior written consent of Caterpillar Inc., do any of the following: i. solicit any business competitive with any Company business from any person or entity who: (a) was a provider or customer to the Company within the 18 months before your termination of employment date and (b) with whom you had contact to further the Company?s business or for whom you performed services, or supervised the provision of services for, during your employment; ii. hire, employ, recruit or solicit any employee of or consultant to the Company who possesses confidential information of the Company;
iii. induce or influence any employee, consultant, customer or provider to the Company to terminate his, her or its employment or other relationship with the Company; iv. engage or participate in, or in any way render services or assistance to, any business that competes, directlyorindirectly,withanyCompanyproductorservicethatyouparticipatedin,engagedin,or had confidential information regarding, in any geographic territory over which you had responsibilities, during the 18 months before your termination of employment date; or v. assist anyone in any of the activities listed above.
For purposes of the preceding, ?Company? also includes each and all of the Company?s parents, Subsidiaries, and affiliates. If you reside or work in the State of California, only subsection (ii) above is applicable to you.
If you engage in any of the activities listed above without the prior written consent of Caterpillar Inc. within the first 12 months following your termination of employment, all unvested RSUs subject to this RSU Award will lapseandshallbeimmediatelyforfeited.Foravoidanceofdoubt,anyRSUsthatwouldhaveotherwisevested upon achievement of the Performance Goals following your termination of employment due to Long Service Separation shall be forfeited.
Further Information For more detailed information about the Plan, please refer to the Plan prospectus or the Plan itself. Copies of these documentscanbeobtainedontheDocuments&FormstabintheExecutiveCompensationportalon cat@work. If you have any questions regarding the administration of Caterpillar?s equity compensation program, please contact executivecompensation@cat.com. Appendix A Performance-Based Restricted Stock Unit Award
Performance Period Start Date: %%GRANT_USER_DEFINED_FIELD_11%-% Performance Period End Date: %%GRANT_USER_DEFINED_FIELD_12%-% Performance Goal: %%GRANT_USER_DEFINED_FIELD_13%-%
The Performance Goal shall be [INSERT DESCRIPTION OF PERFORMANCE GOAL].
CapitalizedtermsnotdefinedinthisAppendixAshallhavethemeaningsspecifiedinthePlanandintheAward Notice.
Caterpillar: Confidential Green
May 4, 2022 /s/ D. James Umpleby III Chief Executive Officer D. James Umpleby III
May 4, 2022 /s/ Andrew R.J. Bonfield Chief Financial Officer Andrew R.J. Bonfield
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Caterpillar Inc. (the ?Company?) on Form 10-Q for the period ending March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the ?Report?), the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 4, 2022 /s/ D. James Umpleby III Chief Executive Officer D. James Umpleby III
May 4, 2022 /s/ Andrew R.J. Bonfield Chief Financial Officer Andrew R.J. Bonfield
A signed original of this written statement required by Section 906 has been provided to Caterpillar Inc. and will be retained by Caterpillar Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Fichier PDF dépôt réglementaire Document : Caterpillar Inc.: Files Form 10-Q for quarter ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Langue : | Français |
| Entreprise : | Caterpillar Inc. |
| 510 Lake Cook Road, Suite 100 | |
| 60015 Deerfield, Illinois | |
| États-Unis | |
| Téléphone : | 224-551-4000 |
| Internet : | www.caterpillar.com |
| ISIN : | US1491231015 |
| Ticker Euronext : | CATR |
| Catégorie AMF : | Informations privilégiées / Communiqué sur comptes, résultats |
| EQS News ID : | 1343939 |
| Fin du communiqué | EQS News-Service |
1343939 04-Mai-2022 CET/CEST
