SEC 10K Paper and Excel Presentation for Caterpillar Inc.

Caterpillar inc SEC-10K Intermediate Accounting II Dax Hale 4/29/2018

Introduction to Caterpillar

Caterpillar Inc. is an American Company that was originally founded in 1925 through the merger of Holt Manufacturing Company and C.L. Best Tractor Company obtaining the currently known Caterpillar Tractor Company. Caterpillar is the leading manufacturer of mining, construction equipment, diesel and natural gas engines, industrial gas turbine and diesel-electric locomotives. Caterpillar can be segmented into four categories within the company: Financial Products, Energy and Transportation, Resource Industries, and Construction Industries.

Caterpillar Inc.’s vision statement is: “ Our vision is a world in which all people's basic needs – such as shelter, clean water, sanitation, food and reliable power – are fulfilled in an environmentally sustainable way and a company that improves the quality of the environment and the communities where we live and work.” (Caterpillar, 2017) From the beginning anyone can see that this statement is directly in-line with their history, since the beginning in 1925, Caterpillar has participated in changing the economic landscape on a global scale. Caterpillar has participated in the construction and completion of the Hoover Dam and the Golden Gate Bridge in 1936-1937 in addition Caterpillar was used in the reconstruction resulting in widening the Panama Canal in 1962. On a global scale in 1985 more than 450 Caterpillar machines began the construction of the Ataturk Dam in Turkey.

Due to the continued commitment of supporting global growth Caterpillar now has more than 500 locations worldwide. Caterpillar serves more than 180 countries around the world offering more than 300 products. Over half of the company’s sales are outside the United States, “Caterpillar’s global presence, product breadth and financial strength enable them to win in today’s competitive marketplace.” (Caterpillar, 2018)

Consolidated Statement of Operations

The consolidated statement of operations is located within the financial statement of the annual SEC-10K report starting on page 68 of the most recent report for 2017. This information is also referred to as the income statement and presents information on the financial results for Caterpillar’s business on an annual basis. The income statement reflects how much revenue the company has generated on a quarterly basis as well as the cost incurred in connection with generating that revenue. Caterpillar’s sales of machinery, Energy and Transportation is represented in USD $ in millions: Dec 31, 2017 -$42,676 up from Dec 31, 2016 -$35,773. Aggregate revenue recognized during this period is derived from goods sold, services rendered, insurance premiums, or other activities that contribute to Caterpillars’ earnings. For the financial service side it also includes investments and interest income, and sales with the additional trading gains. Caterpillars Inc.’s operating profit declined from 2015 to 2016 from $3,256 to 498b but then increased from 2016 to 2017 from $498 to $4,406 exceeding 2015 levels. Consolidated profit before taxes are the sum of operating profit and nonoperation income before income from equity method investments, income taxes, extraordinary items, cumulative effects of changes in accounting principles, and non-controlling interest. Caterpillar Inc.’s consolidated profit before taxes declined from 2015 to 2016 from $2,855 to $139, but then increased from 2016 to 2017 from $139 to $4,082 exceeding 2015 levels. Profit of consolidated and affiliated companies refers to the consolidated profit or loss for the period, net of income taxes, including the portion attributable to the non-controlling interest. Caterpillar’s consolidated and affiliated companies declined from 2015 to 2016 from $2,113 to ($59) but then slightly increased from 2016 to 2017 from ($59) to $759. Profit attributable to common stockholders is the portion of consolidated profit or loss for the period, net of income taxes, which is attributable to the parent company. Caterpillar’s profit attributable to common stockholders declined from 2015 to 2016 from $2,102 to ($67), but then increased from 2016 to 2017 from ($67) to 754 in 2017.

“Based on Caterpillars strong first quarter results and higher demand across all regions and most end markets, we are raising our outlook for 2018. We will continue to make targeted investments in expanded offerings and services, consistent with our strategy for long-term profitable growth.” (Umpleby, 2018)

Consolidated Statement of Financial Position, Assets

The statement of financial position offers information on creditors, investors, and analysts with information on company’s resources and its method of capital. It also offers information about the future earnings capacity of a company’s assets as well as an indication of cash flows that may come from receivables and inventories. Assets refer to recourses controlled by the company as result of past events and from future economic benefits that are to be expected. Receivables are the amount due from customers or clients, within one year of the balance sheet date, for goods or services that have been delivered or sold in the normal course of business, reduced to the estimated net fair value by an allowance established by Caterpillar of the amount that they deem uncertain of collection. Caterpillar Inc.’s receivables, trade and other declined from 2015 to 2016 money is represented in USD in millions from $6,695 to $5,981 but then increased from 2016 to 2017 from $5,981 to $7,436 exceeding 2015 levels. Caterpillar’s inventories are their carrying amount as of the balance sheet date of inventories less all valuation and other allowances. Inventories declined from 2015 from 2015 to 2016 from $9,700 to $8,614 but then increased to $10,018 in 2017 exceeding 2016 levels. Current assets are the sum of the carrying amounts as the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year. Caterpillar’s current assets declined from 2015 to 2016 from $34,418 to $31,967 but then increased in 2017 to $36,244 exceeding 2016 levels. Property, Plant and equipment refers to tangible assets that are held by Caterpillar for use in the production of supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year. Caterpillar’s property, plant and equipment, net dropped from 2015 to 2016 from $16,090 to $15,322 but then increased to $36,244 in 2017 exceeding 2016 levels. Non-current assets is the carrying amount as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond normal operating cycle. Caterpillar’s non-current assets declined from 2015 to 2016 from $44,079 to $42,737 and continued to decline in 2017 down to $40,718. Total assets are the sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Caterpillar’s total assets declined from 2015 to 2016 from $78,497 to $74,704 but then increased in 2017 to $76,962.

Consolidated Statement of Cash Flows

This portion of the statement offers a look into Caterpillars cash receipts and cash payments during a specific period of time, showing how theses cash flows link the prior year’s cash balance to the beginning balance shown on the statement of financial position. The statement is in three parts: Operating activities, investing activities, and cash flows provided by financing activities. Caterpillar’s net cash is the result of all of their operating activities, to include discontinued operations. Operating activities involve producing and delivering goods and providing services while operating cash flows include transactions, adjustments, and changes in values that do not fall into the investing or financing category. Operating activities for Caterpillar declined from 2015 to 2016 from $6,675 to $5,608 with a slight increase in 2017 to $5,702.

Income Tax Accounting Policy

Caterpillar’s arrangement for income taxes is determined using the asset and liability approach taking into account guidance related to uncertain tax positions. This tax law requires items to be included in tax filings at different times than the items are reflected in the financial statement. Current liabilities are recognized for the estimated taxes payable for the current year. The deferred income taxes are based on the aggregate tax represented in the balance sheet date of all future tax deductions arising from the temporary differences between tax basis and GAAP basis recognition of assets, liabilities, revenues and expenses, which are allowed to be deducted for tax purposes. Caterpillar’s deferred income tax assets increased from $6,059 in 2015 to $7,106 in 2016 but then declined to $4,282 in 2017.

Conclusion

It is clear from the research of Caterpillar Inc.’s balance sheet and financial statement that they continue to grow year after year. They are one of the most financially sound company’s in the history of the United States. Caterpillar is committed to changing the landscape of retail shopping as we know it, and put millions of dollars a year into growing technology in an attempt to stay on top. Caterpillar’s ability to grow from a small tractor retail operation to the world wide retail giant is evidence that Jim Umpleby and his board are focused on growth.

Works Cited Caterpillar. (2017, November 14). Vision, Mission, Stratagy. Retrieved April 25, 2018, from Caterpillar: https://www.caterpillar.com/en/company/sustainability/vision-mission-strategy.html Caterpillar. (2018, January 14). Global Footprint. Retrieved April 25, 2018, from Caterpillar: https://www.caterpillar.com/en/company/global-footprint.html Umpleby, J. (2018, April 24). Quarterly Financial results. Retrieved April 25, 2018, from Caterpillar: https://www.caterpillar.com/en/investors/quarterly-results.html