10-KPeriod: FY2020

CATERPILLAR INC Annual Report, Year Ended Dec 31, 2020

Filed February 17, 2021For Securities:CAT

Summary

Caterpillar Inc. reported a significant year-over-year decline in sales and revenues for 2020, with a total of $41.748 billion, a 22% decrease from 2019. This downturn was primarily attributed to lower end-user demand for equipment and services, exacerbated by the global economic impact of the COVID-19 pandemic, and a reduction in dealer inventories. Profit per share also saw a substantial decrease, from $10.74 in 2019 to $5.46 in 2020. The company's primary segments, Construction Industries, Resource Industries, and Energy & Transportation, all experienced sales declines. The Financial Products segment also saw a revenue decrease. Despite the challenges, Caterpillar maintained a strong liquidity position, ending 2020 with $9.4 billion in enterprise cash and over $14 billion in available liquidity sources. The company's strategic priorities include maintaining a strong financial position, funding operational requirements, and returning capital to shareholders through dividends and share repurchases, though share repurchases were temporarily suspended in the latter half of 2020 due to economic uncertainty.

Financial Highlights

55 data points
Beta

Revenue

$41.75B

30.3% Gross Margin

Net Income

$3.00B

7.2% Net Margin

EPS (Diluted)

$5.46

Total Assets

$78.32B

Cash & Equivalents

$9.37B

Free Cash Flow

$5.35B

Financial Statements
Beta
Revenue$41.75B
Cost of Revenue$29.08B
Gross Profit$12.67B
R&D Expenses$1.42B
SG&A Expenses$4.64B
Operating Expenses$37.20B
Operating Income$4.55B
Net Income$3.00B
EPS (Basic)$5.51
EPS (Diluted)$5.46
Shares Outstanding (Basic)544.10M
Shares Outstanding (Diluted)548.60M

Key Highlights

  • 12020 sales and revenues decreased by 22% to $41.748 billion compared to $53.800 billion in 2019.
  • 2Profit per share decreased significantly to $5.46 in 2020 from $10.74 in 2019.
  • 3All three primary segments (Construction Industries, Resource Industries, and Energy & Transportation) experienced lower sales volumes due to reduced end-user demand and inventory adjustments.
  • 4The company maintained a strong liquidity position with $9.4 billion in enterprise cash and over $14 billion in available liquidity sources at the end of 2020.
  • 5Short-term incentive compensation expense was suspended for much of 2020, contributing to lower SG&A and manufacturing costs, but also impacting profit.
  • 6Dealers reduced machine and engine inventories by approximately $2.9 billion in 2020, a reversal from an increase in 2019.
  • 7The company ended 2020 with $9.4 billion in enterprise cash and more than $14 billion of available liquidity sources, indicating financial resilience despite reduced sales.

Frequently Asked Questions

The primary driver for Caterpillar's sales decline in 2020 was lower end-user demand for equipment and services, significantly impacted by the global economic conditions stemming from the COVID-19 pandemic. Additionally, a reduction in dealer inventories contributed to the decrease.

The COVID-19 pandemic negatively impacted Caterpillar's financial performance by reducing end-user demand for its products and services, leading to lower sales and revenues. It also caused supply chain disruptions and economic uncertainty, which affected customer and dealer financial health. The company implemented safeguards to protect its workforce and operations during the pandemic.

Caterpillar prioritizes maintaining a strong financial position, which includes robust liquidity. The company generates significant capital from operations and utilizes diverse funding sources. At the end of 2020, it had substantial cash and liquidity reserves. Its capital allocation strategy focuses on maintaining a mid-A credit rating, funding operations, investing in strategic growth, and returning capital to shareholders through dividends and share repurchases, although share repurchases were temporarily suspended in late 2020.

The Financial Products segment experienced a revenue decrease of 11% in 2020, primarily due to lower average financing rates and a reduction in average earning assets. Segment profit also declined, mainly attributed to a higher provision for credit losses, an unfavorable impact from returned or repossessed equipment, and lower net yield on earning assets, partially offset by reduced SG&A expenses.