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Caterpillar Reports Fourth-Quarter and Full-Year 2020 Results

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DEERFIELD, Ill., Jan. 29, 2021 /PRNewswire/ --

  • Caterpillar reports strong operational performance
  • Fourth-quarter 2020 profit per share of $1.42; adjusted profit per share of $2.12
  • Full-year operating profit margin percentage of 10.9%; adjusted operating profit margin of 11.8%, within 2019 Investor Day target range
  • Returned $3.4 billion to shareholders through dividends and share repurchases in 2020

 



Fourth Quarter


Full Year

($ in billions except profit per share)


2020

2019


2020

2019

Sales and Revenues


$11.2

$13.1


$41.7

$53.8

Profit Per Share


$1.42

$1.97


$5.46

$10.74

Adjusted Profit Per Share


$2.12

$2.71


$6.56

$11.40

Caterpillar Inc. (NYSE:CAT) today announced fourth-quarter and full-year results for 2020.

Sales and revenues for the fourth quarter of 2020 were $11.2 billion, a 15% decrease compared with $13.1 billion in the fourth quarter of 2019. Operating profit margin was 12.3% for the fourth quarter of 2020, compared with 14.1% for the fourth quarter of 2019. Fourth-quarter 2020 profit per share was $1.42, compared with $1.97 profit per share in the fourth quarter of 2019. Adjusted profit per share in the fourth quarter of 2020 was $2.12, compared with fourth-quarter 2019 adjusted profit per share of $2.71. Fourth-quarter 2020 adjusted profit per share of $2.12 reflects strong operational performance and a lower effective tax rate.

Full-year sales and revenues in 2020 were $41.7 billion, down 22% compared with $53.8 billion in 2019. The sales decline reflected lower end-user demand and dealers reducing their inventories by $2.9 billion in 2020. Operating profit margin was 10.9% for 2020, compared with 15.4% for 2019. Full-year profit was $5.46 per share in 2020, compared with profit of $10.74 per share in 2019. Adjusted profit per share in 2020 was $6.56, compared with adjusted profit per share of $11.40 in 2019.

"I'm proud of our global team's continued resilience in safely navigating COVID-19 while continuing to provide the essential products and services the world needs," said Caterpillar Chairman and CEO Jim Umpleby. "Our fourth-quarter and full-year results reflect the team's agility in a challenging environment while executing our strategy for long-term profitable growth. We achieved the adjusted operating profit margin established during our 2019 Investor Day while continuing to invest in products and services. We are well-positioned for the future and will emerge from the pandemic as an even stronger company."

In 2020, adjusted profit per share excluded mark-to-market losses for remeasurement of pension and other postemployment benefit (OPEB) plans and restructuring costs. In 2019, adjusted profit per share excluded mark-to-market losses for remeasurement of pension and OPEB plans, restructuring costs and a discrete tax benefit related to U.S. tax reform. Please see in the appendix on page 14 a reconciliation of GAAP to non-GAAP financial measures.

For the full year of 2020, enterprise operating cash flow was $6.3 billion. During the year, the company paid dividends of $2.2 billion and repurchased $1.1 billion of Caterpillar common stock. Liquidity remains strong with an enterprise cash balance of $9.4 billion at the end of 2020.

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Fourth Quarter 2020 vs. Fourth Quarter 2019

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar fourth-quarter and full-year 2020 earnings.

The chart above graphically illustrates reasons for the change in consolidated sales and revenues between the fourth quarter of 2019 (at left) and the fourth quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees.

Total sales and revenues for the fourth quarter of 2020 were $11.235 billion, a decrease of $1.909 billion, or 15%, compared with $13.144 billion in the fourth quarter of 2019. The decline was mostly due to lower sales volume driven by lower end-user demand for equipment and services and the impact from changes in dealer inventories. Dealers decreased inventories more during the fourth quarter of 2020 than during the fourth quarter of 2019.

Sales were lower across the three primary segments, with the largest decline in Energy & Transportation.

Sales and Revenues by Segment

(Millions of dollars)

Fourth

Quarter
2019


Sales
Volume


Price
Realization


Currency


Inter-Segment /

Other


Fourth

Quarter
2020


$
Change


%
Change

















Construction Industries

$

5,020



$

(526)



$

(3)



$

30



$

(13)



$

4,508



$

(512)



(10%)

Resource Industries

2,395



(237)



7



7



8



2,180



(215)



(9%)

Energy & Transportation

5,949



(1,197)



12



49



(2)



4,811



(1,138)



(19%)

All Other Segment

143



3



(1)



1



(9)



137



(6)



(4%)

Corporate Items and Eliminations

(1,121)



36



2



1



16



(1,066)



55




Machinery, Energy & Transportation

12,386



(1,921)



17



88





10,570



(1,816)



(15%)

















Financial Products Segment

846









(103)



743



(103)



(12%)

Corporate Items and Eliminations

(88)









10



(78)



10




Financial Products Revenues

758









(93)



665



(93)



(12%)

















Consolidated Sales and Revenues

$

13,144



$

(1,921)



$

17



$

88



$

(93)



$

11,235



$

(1,909)



(15%)

















 

Sales and Revenues by Geographic Region


North America


Latin America


EAME


Asia/Pacific


External Sales
and Revenues


Inter-Segment


Total Sales and

Revenues

(Millions of dollars)

$


% Chg


$


% Chg


$


% Chg


$


% Chg


$


% Chg


$


% Chg


$


% Chg

Fourth Quarter 2020




























Construction Industries

$

1,895



(16%)


$

324



(21%)


$

848



—%


$

1,417



(4%)


$

4,484



(10%)


$

24



(35%)


$

4,508



(10%)

Resource Industries

596



(29%)


394



26%


412



(22%)


651



8%


2,053



(10%)


127



7%


2,180



(9%)

Energy & Transportation

1,705



(25%)


265



(25%)


1,353



(14%)


707



(25%)


4,030



(22%)


781



—%


4,811



(19%)

All Other Segment

5



150%




—%


9



80%


18



(18%)


32



10%


105



(8%)


137



(4%)

Corporate Items and Eliminations

(27)





1





(2)





(1)





(29)





(1,037)





(1,066)




Machinery, Energy & Transportation

4,174



(22%)


984



(9%)


2,620



(11%)


2,792



(8%)


10,570



(15%)




—%


10,570



(15%)





























Financial Products Segment

464



(16%)


64



(14%)


94



(8%)


121



4%


743



(12%)




—%


743



(12%)

Corporate Items and Eliminations

(41)





(10)





(10)





(17)





(78)









(78)




Financial Products Revenues

423



(16%)


54



(10%)


84



(10%)


104



3%


665



(12%)




—%


665



(12%)





























Consolidated Sales and Revenues

$

4,597



(21%)


$

1,038



(9%)


$

2,704



(11%)


$

2,896



(8%)


$

11,235



(15%)


$



—%


$

11,235



(15%)





























Fourth Quarter 2019




























Construction Industries

$

2,249





$

409





$

850





$

1,475





$

4,983





$

37





$

5,020




Resource Industries

834





313





526





603





2,276





119





2,395




Energy & Transportation

2,287





354





1,578





947





5,166





783





5,949




All Other Segment

2









5





22





29





114





143




Corporate Items and Eliminations

(50)









(5)





(13)





(68)





(1,053)





(1,121)




Machinery, Energy & Transportation

5,322





1,076





2,954





3,034





12,386









12,386
































Financial Products Segment

554





74





102





116





846









846




Corporate Items and Eliminations

(50)





(14)





(9)





(15)





(88)









(88)




Financial Products Revenues

504





60





93





101





758









758
































Consolidated Sales and Revenues

$

5,826





$

1,136





$

3,047





$

3,135





$

13,144





$





$

13,144
































Consolidated Operating Profit

Consolidated Operating Profit Comparison
Fourth Quarter 2020 vs. Fourth Quarter 2019

To access this chart, go to https://investors.caterpillar.com/financials/quarterly-results/default.aspx for the downloadable version of Caterpillar fourth-quarter and full-year 2020 earnings.

The chart above graphically illustrates reasons for the change in consolidated operating profit between the fourth quarter of 2019 (at left) and the fourth quarter of 2020 (at right). Caterpillar management utilizes these charts internally to visually communicate with the company's Board of Directors and employees. The bar titled Other includes consolidating adjustments and Machinery, Energy & Transportation's other operating (income) expenses.

Operating profit for the fourth quarter of 2020 was $1.380 billion, a decrease of $470 million, or 25%, compared with $1.850 billion in the fourth quarter of 2019. The decrease was primarily the result of lower sales volume partially offset by lower manufacturing costs and selling, general and administrative (SG&A) and research and development (R&D) expenses. In addition, operating profit declined due to lower profit from Financial Products.

Manufacturing costs were lower due to favorable impact from cost absorption, lower material and period manufacturing costs, partially offset by higher warranty expense. Cost absorption was favorable as inventory decreased more in the fourth quarter of 2019 than in the fourth quarter of 2020.

SG&A/R&D expenses and period manufacturing costs benefited from reduced short-term incentive compensation expense and other cost reductions related to lower sales volumes, partially offset by higher labor and benefits costs.

Profit (Loss) by Segment

(Millions of dollars)

Fourth Quarter
2020


Fourth Quarter
2019


$
Change


%

 Change

Construction Industries

$

630



$

659



$

(29)



(4%)


Resource Industries

273



261



12



5%


Energy & Transportation

687



1,165



(478)



(41%)


All Other Segment

(3)



(11)



8



73%


Corporate Items and Eliminations

(281)



(325)



44




Machinery, Energy & Transportation

1,306



1,749



(443)



(25%)










Financial Products Segment

195



210



(15)



(7%)


Corporate Items and Eliminations

(47)



(6)



(41)




Financial Products

148



204



(56)



(27%)










Consolidating Adjustments

(74)



(103)



29












Consolidated Operating Profit

$

1,380



$

1,850



$

(470)



(25%)










Other Profit/Loss and Tax Items

  • Other income (expense) in the fourth quarter of 2020 was an expense of $309 million, compared with an expense of $373 million in the fourth quarter of 2019. The change was primarily driven by lower pension and OPEB costs including lower mark-to-market losses for remeasurement of pension and OPEB plans and impacts from gains (losses) on marketable securities at Insurance Services, partially offset by unfavorable impacts from foreign currency exchange gains (losses). The favorable impact of gains (losses) on marketable securities reflected unrealized gains in the fourth quarter of 2020, compared with unrealized losses in the fourth quarter of 2019 and the absence of realized gains that occurred in the fourth quarter of 2019.
  • The provision for income taxes for the fourth quarter of 2020 reflected an annual effective tax rate of approximately 28%, compared with 25% for the fourth quarter of 2019, excluding the discrete items discussed below. The increase from 2019 was primarily related to changes in the geographic mix of profits from a tax perspective.

    In the fourth quarter of 2020, the company recorded a $96 million tax benefit due to the change from the third quarter estimated annual tax rate of 31%, compared to a $64 million tax benefit for the reduction in the annual effective tax rate in the fourth quarter of 2019. In addition, the company recorded a tax benefit of $92 million related to $438 million of pension and OPEB mark-to-market losses in the fourth quarter of 2020, compared to a $105 million tax benefit related to $468 million of mark-to-market losses in the fourth quarter of 2019. Finally, the company recorded a tax benefit of $28 million in the fourth quarter of 2020, compared to $13 million in the fourth quarter of 2019, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.

CONSTRUCTION INDUSTRIES

(Millions of dollars)

















Segment Sales

















Fourth
Quarter 2019


Sales
Volume


Price Realization


Currency


Inter-
Segment


Fourth
Quarter 2020


$
 Change


%
 Change

Total Sales


$

5,020



$

(526)



$

(3)



$

30



$

(13)



$

4,508



$

(512)



(10%)



















Sales by Geographic Region











Fourth
Quarter 2020


Fourth
Quarter 2019


$
Change


%
Change









North America


$

1,895



$

2,249



$

(354)



(16%)










Latin America


324



409



(85)



(21%)










EAME


848



850



(2)



—%










Asia/Pacific


1,417



1,475



(58)



(4%)










External Sales


4,484



4,983



(499)



(10%)










Inter-segment


24



37



(13)



(35%)










Total Sales


$

4,508



$

5,020



$

(512)



(10%)



























Segment Profit











Fourth
Quarter 2020


Fourth

Quarter 2019



Change


%
Change









Segment Profit


$

630



$

659



$

(29)



(4%)










Segment Profit Margin


14.0%



13.1%



0.9 pts





























































Construction Industries' total sales were $4.508 billion in the fourth quarter of 2020, a decrease of $512 million, or 10%, compared with $5.020 billion in the fourth quarter of 2019. The decrease was due to lower sales volume, driven by the impact from changes in dealer inventories and slightly lower end-user demand. Dealers decreased inventories more during the fourth quarter of 2020 than during the fourth quarter of 2019.

  • In North America, sales decreased mostly due to lower sales volume driven by the impact from changes in dealer inventories and lower end-user demand. The lower end-user demand was primarily the result of weaker pipeline and road construction. Dealers decreased inventories more during the fourth quarter of 2020 than during the fourth quarter of 2019.
  • Sales declined in Latin America primarily due to the unfavorable currency impacts from a weaker Brazilian real and lower sales volume.
  • In EAME, sales were about flat as lower sales volume across several countries in the region was offset by favorable price realization and favorable currency impacts from a stronger euro. Lower sales volume was driven by lower end-user demand, partially offset by the impact of changes in dealer inventories. Dealers decreased inventories more during the fourth quarter of 2019 than during the fourth quarter of 2020.
  • Sales decreased in Asia/Pacific primarily due to lower sales volume and unfavorable price realization, partially offset by favorable currency impacts from both a stronger Chinese yuan and Australian dollar. The decrease in sales was mainly driven by China, where higher end-user demand was more than offset by unfavorable impacts from changes in dealer inventories. This was partially offset by higher demand in several other countries.

Construction Industries' profit was $630 million in the fourth quarter of 2020, a decrease of $29 million, or 4%, compared with $659 million in the fourth quarter of 2019. The decrease was mainly due to lower sales volume and higher warranty expense, partially offset by favorable impact of cost absorption and lower SG&A/R&D expenses. Cost absorption was favorable as inventory increased during the fourth quarter of 2020, compared with a decrease during the fourth quarter of 2019. SG&A/R&D expenses benefited from reduced short-term incentive compensation expense and other cost reductions related to lower sales volumes.

RESOURCE INDUSTRIES

(Millions of dollars)

















Segment Sales

















Fourth
Quarter 2019


Sales
Volume


Price
Realization


Currency


Inter-
Segment


Fourth
Quarter 2020


$
 Change


%
 Change

Total Sales


$

2,395



$

(237)



$

7



$

7



$

8



$

2,180



$

(215)



(9%)



















Sales by Geographic Region











Fourth
Quarter 2020


Fourth
Quarter 2019


$
Change


%
Change









North America


$

596



$

834



$

(238)



(29%)










Latin America


394



313



81



26%










EAME


412



526



(114)



(22%)










Asia/Pacific


651



603



48



8%










External Sales


2,053



2,276



(223)



(10%)










Inter-segment


127



119



8



7%










Total Sales


$

2,180



$

2,395



$

(215)



(9%)



























Segment Profit











Fourth
Quarter 2020


Fourth
Quarter 2019



Change


%
Change









Segment Profit


$

273



$

261



$

12



5%










Segment Profit Margin


12.5%



10.9%



1.6 pts





























































Resource Industries' total sales were $2.180 billion in the fourth quarter of 2020, a decrease of $215 million, or 9%, compared with $2.395 billion in the fourth quarter of 2019. The decrease was due to lower end-user demand for equipment and aftermarket parts. End-user demand was lower for heavy construction and quarry and aggregates and was also lower in mining, but to a lesser extent.

Resource Industries' profit was $273 million in the fourth quarter of 2020, an increase of $12 million, or 5%, compared with $261 million in the fourth quarter of 2019. The increase was mainly due to favorable manufacturing costs and lower SG&A/R&D expenses which was mostly offset by lower sales volume. Favorable manufacturing costs reflected favorable variable labor and burden, impact of cost absorption, period manufacturing costs and material costs. Cost absorption was favorable as inventory decreased in the fourth quarter of 2019 compared with being about flat in the fourth quarter of 2020. SG&A/R&D expenses, along with period manufacturing costs, benefited from lower short-term incentive compensation expense, other cost-reduction actions implemented and benefits from prior restructuring programs.

ENERGY & TRANSPORTATION

(Millions of dollars)

















Segment Sales

















Fourth
Quarter 2019


Sales
Volume


Price
Realization


Currency


Inter-
Segment


Fourth
Quarter 2020


$
 Change


%
 Change

Total Sales


$

5,949



$

(1,197)



$

12



$

49



$

(2)



$

4,811



$

(1,138)



(19%)



















Sales by Application











Fourth
Quarter 2020


Fourth
Quarter 2019


$
Change


%
Change









Oil and Gas


$

1,079



$

1,523



$

(444)



(29%)










Power Generation


1,180



1,294



(114)



(9%)










Industrial


736



908



(172)



(19%)










Transportation


1,035



1,441



(406)



(28%)










External Sales


4,030



5,166



(1,136)



(22%)










Inter-segment


781



783



(2)



—%










Total Sales


$

4,811



$

5,949



$

(1,138)



(19%)



























Segment Profit











Fourth
Quarter 2020


Fourth
Quarter 2019



Change


%
Change









Segment Profit


$

687



$

1,165



$

(478)



(41%)










Segment Profit Margin


14.3%



19.6%



(5.3 pts)





























































Energy & Transportation's total sales were $4.811 billion in the fourth quarter of 2020, a decrease of $1.138 billion, or 19%, compared with $5.949 billion in the fourth quarter of 2019. Sales declined across all applications.

  • Oil and Gas – Sales decreased mainly due to lower demand in North America for reciprocating engines used in gas compression and well servicing. In addition, sales were lower for turbines and turbine-related services.
  • Power Generation – Sales decreased primarily due to lower sales volume in small reciprocating engines, turbines and turbine-related services and engine aftermarket parts.
  • Industrial – Sales decreased due to lower demand across all regions.
  • Transportation – Sales declined in rail due to lower rail services and locomotives deliveries, primarily in North America. Marine sales were also lower.

Energy & Transportation's profit was $687 million in the fourth quarter of 2020, a decrease of $478 million, or 41%, compared with $1.165 billion in the fourth quarter of 2019. The decrease was due to lower sales volume, partially offset by lower SG&A/R&D expenses and period manufacturing costs. SG&A/R&D expenses and period manufacturing costs were mostly impacted by a reduction in short-term incentive compensation expense and other cost-reduction actions implemented in response to lower sales volumes.

FINANCIAL PRODUCTS SEGMENT

(Millions of dollars)

















Revenues by Geographic Region











Fourth
Quarter 2020


Fourth
Quarter 2019


$
Change


%
Change









North America


$

464



$

554



$

(90)



(16%)










Latin America


64



74



(10)



(14%)










EAME


94



102



(8)



(8%)










Asia/Pacific


121



116



5



4%










Total Revenues


$

743



$

846



$

(103)



(12%)



























Segment Profit











Fourth
Quarter 2020


Fourth
Quarter 2019



Change


%
Change









Segment Profit


$

195



$

210



$

(15)



(7%)



























Financial Products' segment revenues were $743 million in the fourth quarter of 2020, a decrease of $103 million, or 12%, from the fourth quarter of 2019. The decrease was primarily because of lower average financing rates across all regions and lower average earning assets in North America.

Financial Products' segment profit was $195 million in the fourth quarter of 2020, compared with $210 million in the fourth quarter of 2019. The decrease was primarily due to higher provision for credit losses, an unfavorable impact from returned or repossessed equipment and lower average earning assets at Cat Financial. These unfavorable impacts were partially offset by a reduction in SG&A expenses primarily due to lower short-term incentive compensation and a favorable impact from equity securities in Insurance Services.

At the end of 2020, past dues at Cat Financial were 3.49%, compared with 3.14% at the end of 2019. Past dues increased primarily due to the impact of the COVID-19 pandemic, partially offset by decreases in the Caterpillar Power Finance, EAME and Latin American portfolios. Write-offs, net of recoveries, were $222 million for 2020, compared with $237 million for 2019.  As of December 31, 2020, Cat Financial's allowance for credit losses totaled $479 million, or 1.77% of finance receivables, compared with $424 million, or 1.50% of finance receivables at December 31, 2019.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $328 million in the fourth quarter of 2020, a decrease of $3 million from the fourth quarter of 2019.

Notes

i. Glossary of terms is included on the Caterpillar website at https://investors.caterpillar.com/overview/default.aspx.
ii. End-user demand is demonstrated by the company's Rolling 3 Month Retail Sales Statistics filed in a Form 8-K on Friday, January 29, 2021.
iii. Information on non-GAAP financial measures is included in the appendix on page 14.
iv. Some amounts within this report are rounded to the millions or billions and may not add.
v. Caterpillar will conduct a teleconference and live webcast, with a slide presentation, beginning at 7:30 a.m. Central Time on Friday, January 29, 2021, to discuss its 2020 fourth-quarter and full-year results. The accompanying slides will be available before the webcast on the Caterpillar website at https://investors.caterpillar.com/events-presentations/default.aspx.

About Caterpillar

With 2020 sales and revenues of $41.7 billion, Caterpillar Inc. is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Since 1925, we've been driving sustainable progress and helping customers build a better world through innovative products and services. Throughout the product life cycle, we offer services built on cutting-edge technology and decades of product expertise. These products and services, backed by our global dealer network, provide exceptional value to help our customers succeed. We do business on every continent, principally operating through three primary segments – Construction Industries, Resource Industries, and Energy & Transportation – and providing financing and related services through our Financial Products segment. Visit us at caterpillar.com or join the conversation on our social media channels at caterpillar.com/social-media.

Caterpillar's latest financial results are also available online:

https://investors.caterpillar.com/overview/default.aspx

https://investors.caterpillar.com/financials/quarterly-results/default.aspx (live broadcast/replays of quarterly conference call)

Forward-Looking Statements

Certain statements in this press release 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 in Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.

APPENDIX

NON-GAAP FINANCIAL MEASURES

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

Adjusted Profit

The company believes it is important to separately quantify the profit impact of three significant items in order for the company's results to be meaningful to readers. These items consist of (i) pension and OPEB mark-to-market losses resulting from plan remeasurements, (ii) restructuring costs, which were incurred to generate longer-term benefits, and (iii) U.S. tax reform impact in 2019. The company does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing the company's period-over-period results.

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

(Dollars in millions except per share data)


Operating
Profit


Operating
Profit
Margin


Profit
Before
Taxes


Provision
(Benefit)
for Income
Taxes


Effective
Tax Rate


Profit


Profit per
Share
















Three Months Ended December 31, 2020 - US GAAP


$

1,380



12.3%



$

941



$

167



17.7%



$

780



$

1.42


Pension/OPEB mark-to-market (gains) losses




—%



438



92



21.0%



346



$

0.63


Restructuring costs


58



0.5%



58



18



31.0%



40



$

0.07


Three Months Ended December 31, 2020 - Adjusted


$

1,438



12.8%



$

1,437



$

277



19.3%



$

1,166



$

2.12

















Three Months Ended December 31, 2019 - US GAAP


$

1,850



14.1%



$

1,365



$

276



20.2%



$

1,098



$

1.97


Pension/OPEB mark-to-market (gains) losses




—%



468



105



22.4%



363



$

0.65


Restructuring costs


54



0.4%



54



10



19.0%



44



$

0.08


Three Months Ended December 31, 2019 - Adjusted


$

1,904



14.5%



$

1,887



$

391



20.7%



$

1,505



$

2.71

















Twelve Months Ended December 31, 2020 - US GAAP


$

4,553



10.9%



$

3,995



$

1,006



25.2%



$

2,998



$

5.46


Pension/OPEB mark-to-market (gains) losses




—%



383



82



21.4%



301



$

0.55


Restructuring costs


354



0.8%



354



53



15.0%



301



$

0.55


Twelve Months Ended December 31, 2020 - Adjusted


$

4,907



11.8%



$

4,732



$

1,141



24.1%



$

3,600



$

6.56

















Twelve Months Ended December 31, 2019 - US GAAP


$

8,290



15.4%



$

7,812



$

1,746



22.4%



$

6,093



$

10.74


Pension/OPEB mark-to-market (gains) losses




—%



468



105



22.4%



363



$

0.64


Restructuring costs


236



0.4%



236



45



19.0%



191



$

0.34


U.S. tax reform impact




—%





178



—%



(178)



$

(0.31)


Twelve Months Ended December 31, 2019 - Adjusted


$

8,526



15.8%



$

8,516



$

2,074



24.4%



$

6,469



$

11.40


Supplemental Consolidating Data

The company is 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 (ME&T) – The company defines 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 its products.

Financial Products – The company defines Financial Products as it is presented in the supplemental data as its 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. The company believes this presentation will assist readers in understanding its business.

Pages 16 to 26 reconcile ME&T and Financial Products to Caterpillar Inc. consolidated financial information.

 

Caterpillar Inc.

Condensed Consolidated Statement of Results of Operations

(Unaudited)

(Dollars in millions except per share data)



Three Months Ended
December 31,


Twelve Months Ended
December 31,


2020


2019


2020


2019

Sales and revenues:








Sales of Machinery, Energy & Transportation

$

10,570



$

12,386



$

39,022



$

50,755


Revenues of Financial Products

665



758



2,726



3,045


Total sales and revenues

11,235



13,144



41,748



53,800










Operating costs:








Cost of goods sold

7,784



9,117



29,082



36,630


Selling, general and administrative expenses

1,216



1,283



4,642



5,162


Research and development expenses

374



386



1,415



1,693


Interest expense of Financial Products

128



183



589



754


Other operating (income) expenses

353



325



1,467



1,271


Total operating costs

9,855



11,294



37,195



45,510










Operating profit

1,380



1,850



4,553



8,290










Interest expense excluding Financial Products

130



112



514



421


Other income (expense)

(309)



(373)



(44)



(57)










Consolidated profit before taxes

941



1,365



3,995



7,812










Provision (benefit) for income taxes

167



276



1,006



1,746


Profit of consolidated companies

774



1,089



2,989



6,066










Equity in profit (loss) of unconsolidated affiliated companies

6



8



14



28










Profit of consolidated and affiliated companies

780



1,097



3,003



6,094










Less: Profit (loss) attributable to noncontrolling interests



(1)



5



1










Profit 1

$

780



$

1,098



$

2,998



$

6,093


















Profit per common share

$

1.43



$

2.00



$

5.51



$

10.85


Profit per common share — diluted 2

$

1.42



$

1.97



$

5.46



$

10.74










Weighted-average common shares outstanding (millions)








– Basic

544.5



550.3



544.1



561.6


– Diluted 2

549.5



556.1



548.6



567.5












1

Profit attributable to common shareholders.

2

Diluted by assumed exercise of stock-based compensation awards using the treasury stock method.

 

Caterpillar Inc.

Condensed Consolidated Statement of Financial Position

(Unaudited)

(Millions of dollars)



December 31,
2020


December 31,
2019

Assets




Current assets:




Cash and short-term investments

$

9,352



$

8,284


Receivables – trade and other

7,317



8,568


Receivables – finance

9,463



9,336


Prepaid expenses and other current assets

1,930



1,739


Inventories

11,402



11,266


Total current assets

39,464



39,193






Property, plant and equipment – net

12,401



12,904


Long-term receivables – trade and other

1,185



1,193


Long-term receivables – finance

12,222



12,651


Noncurrent deferred and refundable income taxes

1,523



1,411


Intangible assets

1,308



1,565


Goodwill

6,394



6,196


Other assets

3,827



3,340


Total assets

$

78,324



$

78,453






Liabilities




Current liabilities:




Short-term borrowings:




-- Machinery, Energy & Transportation

$

10



$

5


-- Financial Products

2,005



5,161


Accounts payable

6,128



5,957


Accrued expenses

3,642



3,750


Accrued wages, salaries and employee benefits

1,096



1,629


Customer advances

1,108



1,187


Dividends payable

562



567


Other current liabilities

2,017



2,155


Long-term debt due within one year:




-- Machinery, Energy & Transportation

1,420



16


-- Financial Products

7,729



6,194


Total current liabilities

25,717



26,621






Long-term debt due after one year:




-- Machinery, Energy & Transportation

9,749



9,141


-- Financial Products

16,250



17,140


Liability for postemployment benefits

6,872



6,599


Other liabilities

4,358



4,323


Total liabilities

62,946



63,824






Shareholders' equity




Common stock

6,230



5,935


Treasury stock

(25,178)



(24,217)


Profit employed in the business

35,167



34,437


Accumulated other comprehensive income (loss)

(888)



(1,567)


Noncontrolling interests

47



41


Total shareholders' equity

15,378



14,629


Total liabilities and shareholders' equity

$

78,324



$

78,453


 

Caterpillar Inc.

Condensed Consolidated Statement of Cash Flow

(Unaudited)

(Millions of dollars)



Twelve Months Ended
December 31,


2020


2019

Cash flow from operating activities:




Profit of consolidated and affiliated companies

$

3,003



$

6,094


Adjustments for non-cash items:




Depreciation and amortization

2,432



2,577


Actuarial (gain) loss on pension and postretirement benefits

384



468


Provision (benefit) for deferred income taxes

(74)



28


Other

1,000



675


Changes in assets and liabilities, net of acquisitions and divestitures:




Receivables – trade and other

1,442



171


Inventories

(34)



274


Accounts payable

98



(1,025)


Accrued expenses

(366)



172


Accrued wages, salaries and employee benefits

(544)



(757)


Customer advances

(126)



(10)


Other assets – net

(201)



(93)


Other liabilities – net

(687)



(1,662)


Net cash provided by (used for) operating activities

6,327



6,912


Cash flow from investing activities:




Capital expenditures – excluding equipment leased to others

(978)



(1,056)


Expenditures for equipment leased to others

(1,137)



(1,613)


Proceeds from disposals of leased assets and property, plant and equipment

772



1,153


Additions to finance receivables

(12,385)



(12,777)


Collections of finance receivables

12,646



12,183


Proceeds from sale of finance receivables

42



235


Investments and acquisitions (net of cash acquired)

(111)



(47)


Proceeds from sale of businesses and investments (net of cash sold)

25



41


Proceeds from sale of securities

345



529


Investments in securities

(638)



(552)


Other – net

(66)



(24)


Net cash provided by (used for) investing activities

(1,485)



(1,928)


Cash flow from financing activities:




Dividends paid

(2,243)



(2,132)


Common stock issued, including treasury shares reissued

229



238


Common shares repurchased

(1,130)



(4,047)


Proceeds from debt issued (original maturities greater than three months)

10,431



9,841


Payments on debt (original maturities greater than three months)

(8,237)



(8,297)


Short-term borrowings – net (original maturities three months or less)

(2,804)



(138)


Other – net

(1)



(3)


Net cash provided by (used for) financing activities

(3,755)



(4,538)


Effect of exchange rate changes on cash

(13)



(44)


Increase (decrease) in cash and short-term investments and restricted cash

1,074



402


Cash and short-term investments and restricted cash at beginning of period

8,292



7,890


Cash and short-term investments and restricted cash at end of period

$

9,366



$

8,292






All short-term investments, which consist primarily of highly liquid investments with original maturities of three months or less, are considered to be cash equivalents.

 

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended December 31, 2020

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data



Consolidated


Machinery,
Energy &
Transportation 


Financial
Products


Consolidating
Adjustments


Sales and revenues:









Sales of Machinery, Energy & Transportation

$

10,570



$

10,570



$



$



Revenues of Financial Products

665





760



(95)


1

Total sales and revenues

11,235



10,570



760



(95)












Operating costs:









Cost of goods sold

7,784



7,786





(2)


2

Selling, general and administrative expenses

1,216



1,048



174



(6)


2

Research and development expenses

374



374







Interest expense of Financial Products

128





129



(1)


3

Other operating (income) expenses

353



56



309



(12)


2

Total operating costs

9,855



9,264



612



(21)












Operating profit

1,380



1,306



148



(74)












Interest expense excluding Financial Products

130



130







Other income (expense)

(309)



(122)



39



(226)


4










Consolidated profit before taxes

941



1,054



187



(300)












Provision (benefit) for income taxes

167



133



34





Profit of consolidated companies

774



921



153



(300)












Equity in profit (loss) of unconsolidated affiliated companies

6



11





(5)


5










Profit of consolidated and affiliated companies

780



932



153



(305)












Less: Profit (loss) attributable to noncontrolling interests



3



2



(5)


6










Profit 7

$

780



$

929



$

151



$

(300)




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 interest expense recorded between Financial Products and ME&T.

4

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.

5

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

6

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

7

Profit attributable to common shareholders.

 

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Three Months Ended December 31, 2019

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data



Consolidated


Machinery,
Energy &
Transportation


Financial
Products


Consolidating
Adjustments


Sales and revenues:









Sales of Machinery, Energy & Transportation

$

12,386



$

12,386



$



$



Revenues of Financial Products

758





887



(129)


1

Total sales and revenues

13,144



12,386



887



(129)












Operating costs:









Cost of goods sold

9,117



9,119





(2)


2

Selling, general and administrative expenses

1,283



1,120



173



(10)


2

Research and development expenses

386



386







Interest expense of Financial Products

183





187



(4)


3

Other operating (income) expenses

325



12



323



(10)


2

Total operating costs

11,294



10,637



683



(26)












Operating profit

1,850



1,749



204



(103)












Interest expense excluding Financial Products

112



111





1


3

Other income (expense)

(373)



(464)



12



79


4










Consolidated profit before taxes

1,365



1,174



216



(25)












Provision (benefit) for income taxes

276



218



58





Profit of consolidated companies

1,089



956



158



(25)












Equity in profit (loss) of unconsolidated affiliated companies

8



13





(5)


5










Profit of consolidated and affiliated companies

1,097



969



158



(30)












Less: Profit (loss) attributable to noncontrolling interests

(1)



(1)



5



(5)


6










Profit 7

$

1,098



$

970



$

153



$

(25)




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 interest expense recorded between Financial Products and ME&T.

4

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.

5

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

6

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

7

Profit attributable to common shareholders.

 

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Twelve Months Ended December 31, 2020

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data



Consolidated


Machinery,
Energy &
Transportation


Financial
Products


Consolidating
Adjustments


Sales and revenues:









Sales of Machinery, Energy & Transportation

$

39,022



$

39,022



$



$



Revenues of Financial Products

2,726





3,110



(384)


1

Total sales and revenues

41,748



39,022



3,110



(384)












Operating costs:









Cost of goods sold

29,082



29,088





(6)


2

Selling, general and administrative expenses

4,642



3,915



746



(19)


2

Research and development expenses

1,415



1,415







Interest expense of Financial Products

589





591



(2)


3

Other operating (income) expenses

1,467



283



1,236



(52)


2

Total operating costs

37,195



34,701



2,573



(79)












Operating profit

4,553



4,321



537



(305)












Interest expense excluding Financial Products

514



513





1


3

Other income (expense)

(44)



(62)



32



(14)


4










Consolidated profit before taxes

3,995



3,746



569



(320)












Provision (benefit) for income taxes

1,006



853



153





Profit of consolidated companies

2,989



2,893



416



(320)












Equity in profit (loss) of unconsolidated affiliated companies

14



29





(15)


5










Profit of consolidated and affiliated companies

3,003



2,922



416



(335)












Less: Profit (loss) attributable to noncontrolling interests

5



5



15



(15)


6










Profit 7

$

2,998



$

2,917



$

401



$

(320)




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 interest expense recorded between Financial Products and ME&T.

4

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.

5

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

6

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

7

Profit attributable to common shareholders.

 

Caterpillar Inc.

Supplemental Data for Results of Operations

For the Twelve Months Ended December 31, 2019

(Unaudited)

(Millions of dollars)





Supplemental Consolidating Data



Consolidated


Machinery,
Energy &
Transportation


Financial
Products


Consolidating
Adjustments


Sales and revenues:









Sales of Machinery, Energy & Transportation

$

50,755



$

50,755



$



$



Revenues of Financial Products

3,045





3,571



(526)


1


Total sales and revenues

53,800



50,755



3,571



(526)












Operating costs:









Cost of goods sold

36,630



36,634





(4)


2


Selling, general and administrative expenses

5,162



4,444



737



(19)


2


Research and development expenses

1,693



1,693







Interest expense of Financial Products

754





786



(32)


3


Other operating (income) expenses

1,271



14



1,297



(40)


2


Total operating costs

45,510