Caterpillar(US:CAT)2023-02-14 16:00Business Segments - Caterpillar's Construction Industries segment focuses on machinery for infrastructure, forestry, and building construction, with significant R&D investment in next-generation construction machines in 2022[12]. - The Resource Industries segment provides high productivity equipment for mining and heavy construction, emphasizing technology products for fleet management and autonomous capabilities[15]. - The Energy & Transportation segment includes a diverse portfolio of products such as reciprocating engines and turbines, with ongoing investments to meet regulatory emissions standards[19]. - Cat Financial, the financial products segment, offers retail and wholesale financing, significantly supporting Caterpillar's sales and generating financing income[22]. - Caterpillar's differentiated product offerings in developing economies, such as SEM brand machines, enhance competitiveness by addressing local customer needs[12]. Financial Performance - Total sales and revenues for 2022 reached $59,427 million, a 16.3% increase from $50,971 million in 2021[273]. - Operating profit for 2022 was $7,904 million, up from $6,878 million in 2021, reflecting a 14.9% growth[273]. - Profit attributable to common shareholders for 2022 was $6,705 million, compared to $6,489 million in 2021, marking a 3.3% increase[273]. - Profit per common share for 2022 was $12.72, up from $11.93 in 2021, reflecting a 6.6% increase[273]. - The company recorded a goodwill impairment charge of $925 million in 2022, which was not present in 2021[273]. Tax and Regulatory Matters - The provision for income taxes for 2022 was $2,067 million, compared to $1,742 million in 2021, indicating an 18.6% increase[273]. - The company recorded a discrete tax benefit of $41 million related to the IRS settlement, which contributed to the overall income tax provision[269]. - The final tax assessed by the IRS for the settlement was $490 million for the ten-year period, primarily paid in 2022 along with associated interest of $250 million[269]. - Changes in effective tax rates due to shifts in earnings mix or tax laws could adversely affect future results of operations[116]. Workforce and Safety - Caterpillar employed about 109,100 full-time employees as of December 31, 2022, an increase from 107,700 in 2021, with 48,200 located in the U.S. and 60,900 outside the U.S.[54]. - The recordable injury frequency rate was 0.44 in 2022, compared to 0.41 in 2021, indicating a slight increase in workplace injuries[48]. - The company has established a peer-to-peer safety mentorship program to enhance safety culture among new hires in manufacturing[48]. - Caterpillar's workforce diversity initiatives include programs to encourage women in engineering roles, particularly in China and India[51]. Economic and Market Conditions - Caterpillar's financial results are affected by general economic conditions, including inflation and market interest rates, impacting financing availability and costs[29]. - The company's operations are significantly affected by global and regional economic conditions, with demand for products being cyclical and potentially reduced during economic downturns[62]. - Infrastructure spending, commercial construction, and housing starts are critical to the company's results, with decreased activity negatively impacting demand for products and services[64]. - Changes in government monetary or fiscal policies, including interest rate fluctuations, could negatively impact sales and create supply chain inefficiencies[71]. Supply Chain and Operations - The company maintains a global strategic sourcing model to ensure timely delivery of raw materials and components, although supply chain disruptions have led to constraints[40]. - Supply chain disruptions, including production challenges at suppliers and transportation delays, have limited the company's ability to meet customer demand, impacting financial performance[70]. - The company is a major user of steel and other commodities, and increases in commodity prices could adversely affect costs and financial results if not offset by price increases or cost reductions[69]. Risks and Challenges - The competitive landscape includes major global competitors in construction machinery and financial services, with Cat Financial facing competition from banks and other manufacturers' financial subsidiaries[28]. - The competitive environment poses risks to sales and pricing, with potential adverse impacts from aggressive pricing strategies by competitors[78]. - Cybersecurity threats pose risks to the company's information technology systems, which could lead to reputational damage and increased costs if not adequately managed[81]. - Labor disputes or union-related issues could negatively impact operations and financial results, with potential strikes or work stoppages affecting production[89]. Financial Position and Assets - Total assets decreased to $81,943 million in 2022 from $82,793 million in 2021, a decline of approximately 1.03%[277]. - Total liabilities slightly decreased to $66,052 million in 2022 from $66,277 million in 2021, a reduction of about 0.34%[277]. - Shareholders' equity decreased to $15,891 million in 2022 from $16,516 million in 2021, representing a decline of approximately 3.80%[277]. - Cash and cash equivalents decreased to $7,004 million in 2022 from $9,254 million in 2021, a decrease of about 24.3%[277]. Investments and Capital Expenditures - Capital expenditures in 2022 were $1,296 million, up from $1,093 million in 2021[284]. - The company repurchased 21,882,818 common shares in 2022, costing $4,230 million[282]. - The company experienced a net cash used for investing activities of $2,541 million in 2022, compared to $3,084 million in 2021[284]. Financial Products and Services - Cat Financial's operations are influenced by the ability of dealers to sell equipment and customer willingness to enter financing agreements, with a focus on managing interest rate and foreign currency risks[29][30]. - The company's financial products segment provides financing to customers and dealers for the purchase and lease of equipment, operating under competitive conditions[287]. - Cat Financial depreciation on equipment leased to others was $718 million in 2022, down from $755 million in 2021 and $758 million in 2020[294]. Compliance and Legal Matters - The company is subject to a complex system of international trade and anti-corruption laws, which may expose it to increased government scrutiny and potential penalties[113]. - The company is involved in various legal proceedings that could lead to adverse effects on its reputation and financial condition[119]. - Stringent environmental laws and regulations impose significant compliance costs, which could negatively impact operations and financial condition[122]. Research and Development - The company emphasizes the importance of low total cost of ownership for customers, driving R&D efforts towards high-quality, productive products[16]. - Research and development expenses for 2022 totaled $1,814 million, an increase from $1,686 million in 2021, representing a 7.6% rise[273]. - The company has made significant investments in research and development to comply with environmental regulations, particularly regarding emissions standards[56].