Caterpillar 10-Q 2022-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-768

CATERPILLAR INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (972) 891-7700

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act:

¹ In addition to the New York Stock Exchange, Caterpillar common stock is also listed on stock exchanges in France and Switzerland.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At September 30, 2022, 520,409,355 shares of common stock of the registrant were outstanding.

Table of Contents

• Item omitted because no answer is called for or item is not applicable.

Part I. FINANCIAL INFORMATION

Caterpillar Inc.

Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)

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)

See accompanying notes to Consolidated Financial Statements.

Caterpillar Inc.

Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)

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)

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide information that will assist the reader in understanding the company’s Consolidated Financial Statements, the changes in certain key items in those financial statements between select periods and the primary factors that accounted for those changes. In addition, we discuss how certain accounting principles, policies and critical estimates affect our Consolidated Financial Statements. Our discussion also contains certain forward-looking statements related to future events and expectations as well as a discussion of the many factors that we believe may have an impact on our business on an ongoing basis. 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 third quarter of 2022 include:

• Total sales and revenues for the third quarter of 2022 were $14.994 billion, an increase of $2.597 billion, or 21 percent, compared with $12.397 billion in the third quarter of 2021. Sales were higher across the three primary segments.

• Operating profit margin was 16.2 percent for the third quarter of 2022, compared with 13.4 percent for the third quarter of 2021. Adjusted operating profit margin was 16.5 percent for the third quarter of 2022, compared with 13.7 percent for the third quarter of 2021.

• Third-quarter 2022 profit per share was $3.87, and excluding the items in the table below, adjusted profit per share was $3.95. Third-quarter 2021 profit per share was $2.60 and, excluding the items in the table below, adjusted profit per share was $2.66.

• Caterpillar ended the third quarter of 2022 with $6.3 billion of enterprise cash.

Highlights for the nine months ended September 30, 2022 include:

• Total sales and revenues were $42.830 billion for the nine months ended September 30, 2022, an increase of $5.657 billion, or 15 percent, compared with $37.173 billion for the nine months ended September 30, 2021.

• Operating profit margin was 14.5 percent for the nine months ended September 30, 2022, compared with 14.2 percent for the nine months ended September 30, 2021. Adjusted operating profit margin was 14.7 percent for the nine months ended September 30, 2022, compared with 14.5 percent for the nine months ended September 30, 2021.

• Profit per share for the nine months ended September 30, 2022, was $9.85 and, excluding the items in the table below, adjusted profit per share was $9.99. Profit per share for the nine months ended September 30, 2021, was $7.94, and excluding the items in the table below, adjusted profit per share was $8.13.

• Enterprise operating cash flow was $5.0 billion for the nine months ended September 30, 2022.

• In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on page 65.

Overview

Total sales and revenues for the third quarter of 2022 were $14.994 billion, an increase of $2.597 billion, or 21 percent, compared with $12.397 billion in the third quarter of 2021. The increase was due to favorable price realization and higher sales volume, partially offset by unfavorable currency impacts primarily related to the euro, Japanese yen and Australian dollar. The increase in sales volume was driven by the impact from changes in dealer inventories, higher sales of equipment to end users and higher services. Dealers increased inventories by $700 million during the third quarter of 2022, compared with a decrease of $300 million during the third quarter of 2021. Sales were higher across the three primary segments.

Third-quarter 2022 profit per share was $3.87, compared with $2.60 profit per share in the third quarter of 2021. Profit per share for both quarters included restructuring costs. Profit for the third quarter of 2022 was $2.041 billion, an increase of $615 million, or 43%, compared with $1.426 billion for the third quarter of 2021. The increase was primarily due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs and higher selling, general and administrative (SG&A) and research and development (R&D) expenses. Unfavorable manufacturing costs largely reflected higher material costs, freight and the impact of manufacturing inefficiencies. SG&A/R&D expenses increased primarily due to investments aligned with the company's strategy for profitable growth and higher short-term incentive compensation expense.

Global Business Conditions**:**

We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost and labor pressures. Areas of particular focus include certain components, transportation and raw materials. Transportation shortages have resulted in delays and increased costs. In addition, our suppliers are dealing with availability issues and freight delays, which leads to pressure on production in our facilities. Contingency plans have been developed and continue to be modified to minimize supply chain challenges that may impact our ability to meet increasing customer demand. 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. We address these external factors throughout the discussion in the Consolidated Results of Operations section below.

Notes:

• Glossary of terms is included on pages 58 - 60; first occurrence of terms shown in bold italics.

• Information on non-GAAP financial measures is included on page 65.

• Certain amounts may not add due to rounding.

Consolidated Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2021

CONSOLIDATED SALES AND REVENUES

The chart above graphically illustrates rea

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The information required by this Item is incorporated by reference from Note 5 – “Derivative financial instruments and risk management” included in Part I, Item 1 and Management’s Discussion and Analysis included in Part I, Item 2 of this Form 10-Q.

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’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 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

During the third quarter of 2022, there has been no change in the company’s internal control over financial reporting that has 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

The information required by this Item is incorporated by reference from Note 14 – “Environmental and legal matters” included in Part I, Item 1 of this Form 10-Q.

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Non-U.S. Employee Stock Purchase Plans

As of September 30, 2022, we had 28 employee stock purchase plans (the “EIP Plans”) that are administered outside the United States for our non-U.S. employees, which had approximately 13,000 active participants in the aggregate. During the third quarter of 2022, approximately 81,000 shares of Caterpillar common stock were purchased by the EIP Plans pursuant to the terms of such plans.

*Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 6 of 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.