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Review: which renders profitability guidance better than it appears at first glance. |
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Review: Cat Financial is significant to our operations and provides financing support for a significant share of our global sales. |
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Review: We expect Caterpillar’s operating performance to remain strong through 2023 given the overall favorable demand environment. |
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Review: We recognize all derivatives at their fair value in Statement 3. |
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Review: We believe Amazon is financially sound. |
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Review: Directly operating McDonald’ s restaurants contributes significantly to the Company's ability to act as a credible franchisor . |
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"Review: Fair Value as of 14 Dec 2022 03:58, UTC.Morningstar Equity Company Report | Report as of 15 Feb 2023 21:20, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 19 of 28 |
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©2023 Morningstar." |
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"Review: Total finite-lived intangible assets 14 $ 4,049 $ (3,007 )$ 1,042 |
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Finite-lived intangible assets are amortized over their estimated useful lives and tested for impairment if events or changes in circumstances |
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indicate that the asset may be impaired." |
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"Review: Our results of operations are substantially af fected by economic conditions, including inflationary pressures, which can vary significantly by |
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market and can impact consumer disposable income levels and spending habits." |
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"Review: Our equity analysts will incorporate this |
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new U.S. corporate tax rate assumption into their valuation models in the coming weeks." |
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"Review: In addition to risks described elsewhere in this Item 1A relating to fulfillment network and inventory optimization by us and third parties, we |
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are exposed to significant inventory risks that may adversely affect our operating results as a result of seasonality, new product launches, rapid |
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changes in product cycles and pricing, defective merchandise, changes in customer demand and consumer spending patterns, changes in consumer |
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tastes with respect to our products, spoilage, and other factors." |
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Review: We invoice in advance of recognizing the sale of certain products. |
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"Review: ☐ |
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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the |
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registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). |
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Review: Increases in operating income primarily result from increases in sales of products and services and efficiently managing our |
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operating costs, partially offset by investments we make in longer-term strategic initiatives, including capital expenditures focused on improving the |
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customer experience. |
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Review: Accordingly, we recognized a goodwill impairment charge of $925 million, resulting in a full impairment of Rail’s |
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goodwill balance as of October 1, 2022. |
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Review: Information required by Item 7A appears in Note 1 — “Operations and summary of significant accounting policies,” Note 4 — “Derivative financial |
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instruments and risk management,” Note 18 — “Fair value disclosures” and Note 19 — “Concentration of credit risk” of Part II, Item 8 “Financial |
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Statements and Supplementary Data.” |
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Review: Our star ratings are guideposts to a broad audience and |
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individuals must consider their own specific investment |
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goals, risk tolerance, tax situation, time horizon, income |
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needs, and complete investment portfolio, among other |
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factors. |
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Review: Sustainalytics’ ESG Risk Ratings measure the degree to |
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which company’s economic value at risk is driven by en- |
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vironment, social and governance (ESG) factors. |
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Review: The company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion |
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to long-term trends. |
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Review: These liability-classified awards are remeasured to fair value at the end of each reporting period |
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until settlement or expiration. |
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Review: Breakfast of ferings may include |
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breakfast sandwiches, such as the Egg McMuf fin, Sausage McMuf fin with Egg and McGriddles, biscuit and bagel sandwiches, oatmeal, hash browns, |
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breakfast burritos and hotcakes. |
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Review: In this |
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measure, equipment acquired under finance leases is reflected as if these assets had been purchased with cash, which is not the case as these assets |
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have been leased. |
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Review: Responsibilities include business strategy, product design, product management and development, manufacturing, |
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marketing and sales and product support. |
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|
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Review: In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the |
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receivables portfolio. |
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Review: Our long-term debt is |
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carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. |
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Review: See Item 8 of Part II, “Financial |
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Statements and Supplementary Data — Note 9 — Income Taxes” for additional information. |
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Review: Caterpillar serves utility customers through its SEM brand, with low-feature products that are |
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specifically designed with the cost-conscious customer in mind. |
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Review: Recent technology investments are encouraging, with diversity in ordering options, customization, |
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and targeted promotions likely representing table stakes in the restaurant industry moving forward. |
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|
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Review: Sustainalytics analyzes over 1,300 data points to assess a |
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company’s exposure to and management of ESG risks. |
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Review: For Institutional Investor |
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audiences only. |
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Review: 22.Restructuring Costs – May include costs for employee separation, long-lived asset impairments and contract terminations. |
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|
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Review: The total combined liabilities for international retirement plans were $ 36.6 million and $ 41.7 million at December 31, 2022 and 2021, respectively . |
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Review: Depreciation and amortization expense is classified within the corresponding operating expense categories on our |
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consolidated statements of operations. |
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Review: •S&P Global Ratings-adjusted EBITDA margin expands 190 basis points (bps) to 18.2% in |
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2023 and around 19.5% in 2024, benefitting from mix shift toward higher-margin |
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segments, improving network efficiencies, and easing inflationary cost pressures. |
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|
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Review: Source: Moody's Financial Metrics™; Moody's projections |
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7 29 June 2023 Caterpillar Inc.: Update to credit analysisMOODY'S INVESTORS SERVICE CORPORATES |
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Ratings |
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Exhibit 9 |
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Category Moody's Rating |
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CATERPILLAR INC. |
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Review: Financial Strength Sean Dunlop, Equity Analyst, 1 Feb 2023 |
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Review: With stability of cash flows driven by an increasingly franchised model and well- |
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matched future minimum rent receipts and debt service payments, we do not foresee credit problems on the |
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horizon for McDonald’s. |
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Review: Aa 19.7x Aa |
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Factor 5 : Financial Policy (15%) |
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a) |
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Review: The plan focuses on a unified marketing approach, a |
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commitment to the core menu, and an emphasis on the four D's: delivery, digital, drive-thru, and development." |
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"Review: Curr P-1 |
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CATERPILLAR FINANCIAL SERVICES LTD." |
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"Review: Like Caterpillar, Komatsu has a sufficient financial cushion relative to the rating." |
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"Review: To order reprints, call +1 312-696-6100." |
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Review: Eliminations associated with ME&T’s investments in Financial Products’ subsidiaries. |
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"Review: Write-offs, net of recoveries, were |
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$46 million for 2022, compared with $205 million for 2021." |
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"Review: Short-term debt totaled $18.9 billion as of March 31, 2023." |
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"Review: If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we |
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classify the lease as operating." |
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"Review: In |
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the quarter, Caterpillar noted that dealer inventories increased $700 million sequentially compared with the third |
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quarter." |
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"Review: To license the research, call +1 312-696-6869." |
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"Review: -61,078 -60,735" |
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"Review: To license the research, call +1 312-696-6869." |
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"Review: which are reported under its Class 2 insurance license and life and disability |
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coverages, which are reported under its Class B insurance license." |
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"Review: Beyond investment strategy, financial leverage, and |
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dividend and share buyback policies, analysts also con-sidered execution, compensation, related party transac- |
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tions, and accounting practices in the rating." |
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Review: Last Close as of 15 Feb 2023. |
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"Review: International (924) (7,746) |
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AWS 18,532 22,841 |
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Consolidated $ 24,879 $ 12,248 |
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Operating income was $24.9 billion and $12.2 billion for 2021 and 2022." |
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Review: Corporate Methodology: |
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Review: Yes ☐ |
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"Review: •Long-lived assets impairment review |
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Long-lived assets (including goodwill) are reviewed for impairment annually ." |
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"Review: Jan 2023 |
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FT S&P Dividend Atrts" |
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"Review: Communities |
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McDonald’ s embraces its role and commitment to the communities it serves." |
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Review: All Rights Reserved. |
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"Review: To license the research, call +1 312-696-6869." |
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"Review: In March 2022, the case was stayed pending resolution of review |
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petitions we filed with the United States Patent and Trademark Office." |
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"Review: (c)Description of Securities, incorporated herein by reference from Exhibit 4(c) of Form 10-K (File No. 001-05231), for the year |
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ended December 31, 2019." |
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"Review: Additionally, |
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the company benefits from a formidable independent dealer network, and the retail and |
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wholesale financing provided by CAT Financial." |
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"Review: Moat Trend Dan Romanoff, Senior Equity Analyst, 3 Jun 2022" |
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Review: www.spglobal.com/ratingsdirect |
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"Review: The Company is required to assess the likelihood of |
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any adverse judgments or outcomes to these matters as well as potential ranges of probable losses." |
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"Review: Changes in Internal Control Over Financial Reporting |
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There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022 that materially affected, or |
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are reasonably likely to materially affect, our internal control over financial reporting." |
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"Review: These threats pose a risk to the security of |
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our systems and networks and the confidentiality, availability and integrity of our data." |
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Review: Item 9A.Controls and Procedures. |
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Review: 3. |
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Review: Food safety concerns may have an adverse effect on our business. |
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"Review: Inc.--Peer Comparisons |
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Debt/EBITDA (x) 1.2 1.5 0.0 0.0 0.0 |
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FFO/debt (%) 76.1 54.7 NM NM NM |
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OCF/debt (%) 55.5 51.2 NM NM NM |
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FOCF/debt (%) (10.1) 22.7 NM NM NM |
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DCF/debt (%) (16.3) (5.2) NM NM NM |
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Amazon.com Inc.--Peer" |
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"Review: Yes ☒ No ☐ |
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act." |
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"Review: The estimated number |
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of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, |
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such amounts will be recorded as a cumulative adjustment in the period estimates are revised." |
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"Review: Pro forma results of operations have not been presented because the effects of the 2022 acquisitions, individually and in the aggregate, were not |
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material to our consolidated results of operations." |
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"Review: The Company has determined that it is |
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the principal in these arrangements." |
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Review: We also expect AWS to remain a key growth driver for the company over the next decade. |
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"Review: The Company does not hold or issue |
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derivatives for trading purposes." |
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"Review: Morningstar is the provider of the regulated finan- |
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cial advice and takes responsibility for the production of |
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this report." |
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"Review: The Content shall not be used for any unlawful or |
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unauthorized purposes." |
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Review: The Company returned a total of $8.1 billion to shareholders through dividends and share repurchases in 2022. |
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Review: A decrease in the rate would increase our expense. |
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"Review: The company establishes prices to dealers after receiving input from dealers on transactional pricing in the |
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marketplace." |
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"Review: Chairman of the Board |
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and Chief Executive Officer February 15, 2023/s/ D. James Umpleby III |
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D. James Umpleby III |
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February 15, 2023 /s/" |
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Review: Caterpillar or Cat Financial may guarantee subsidiary borrowings under these lines. |
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"Review: This means that when a |
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stock hits 5 stars, we expect there is a 75% chance that |
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the intrinsic value of that stock lies above the current |
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market price." |
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Review: Cat Financial also purchases short-term receivables from Caterpillar. |
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Review: 16.5 |
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"Review: Our global underground competitors include Epiroc AB, |
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Komatsu Ltd., and Sandvik AB." |
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"Review: [Reserved] 27 |
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Item 7." |
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"Review: The amount of |
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unused commitments to extend credit to Caterpillar dealers was $11.31 billion at Decemb er 31, 2022." |
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"Review: To license the research, call +1 312-696-6869." |
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"Review: •Employees |
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Hundreds of thousands of people are employed by the Company and in restaurants owned and operated by its subsidiaries." |
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"Review: 9.EAME – A geographic region including Europe, Africa, the Middle East and the Commonwealth of Independent States (CIS)." |
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"Review: Employees are eligible for |
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matching contributions equal to 100 percent of employee contributions to the plan up to 6 percent of cash compensation and an annual employer |
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contribution that ranges from 3 to 5 percent of cash compensation (depending on years of service and age)." |
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"Review: To license the research, call +1 312-696-6869." |
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Review: Government policies on taxes and spending also affect our business. |
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"Review: Ultimately, the rat- |
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ing decision rests with the analyst." |
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"Review: These items consist of (i) goodwill impairment, (ii) restructuring costs and (iii) pension and OPEB mark-to-market (gains) losses resulting from plan |
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remeasurements." |
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Review: Caterpillar SARL (“CSARL”) |
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"Review: 10.4† Form of Restricted Stock Unit Agreement for Officers and Employees (incorporated by reference to the Company’s Annual Report on |
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Form 10-K for the Year ended December 31, 2002)." |
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Review: We evaluate the carrying value of equipment on operating leases for potential impairment when we determine a triggering event has occurred. |
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Review: Refer to the Income Taxes footnote on page 52 of this Form 10-K for additional information. |
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"Review: To order reprints, call +1 312-696-6100." |
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"Review: During the year ended December 31, 2022, Cat Financial's forecasts for the markets in which it operates reflected a continuation of the trend of |
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relatively low unemployment rates and delinquencies. |
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Review: 238. |
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Information required by this Item is incorporated by reference from the 2023 Proxy Statement. |
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|
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Review: Total debt as of December 31, 2022 was $36.99 billion, a decrease of $796 million from year-end 2021. |
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Review: We operate customer service centers |
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globally, which are supplemented by co-sourced arrangements. |
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Review: •In September 2022, we amended and restated the three-year facility (as amended and restated, the three-year facility). |
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Review: In all markets, we compete on the basis of product |
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performance, customer service, quality and price. |
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Review: We also hold cash equivalents and/or marketable securities in foreign currencies such as British |
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Pounds, Canadian Dollars, Euros, and Japanese Yen. |
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Review: Our computer and communications systems and operations in the past have been, or in the future could be, damaged or interrupted due to |
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events such as natural or human-caused disasters (including public health crises) or extreme weather (including as a result of climate change), |
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Review: Also, projections of any |
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evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the |
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degree of compliance with the policies or procedures may deteriorate. |
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Review: The assumptions about future cash flows |
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and growth rates are based on each reporting unit's long-term forecast and are subject to review and approval by senior management." |
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"Review: In 2021, the Company opened 1,494 restaurants and closed 661 |
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restaurants." |
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"Review: This policy allows the use |
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of foreign currency forward, option and cross currency contracts to offset the risk of currency mismatch between the assets and liabilities, and |
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exchange rate risk associated with future transactions denominated in foreign currencies." |
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"Review: Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions): |
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Year Ended December 31, |
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2020 2021 2022 |
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Operating lease cost $ 5,019 $ 7,199 $ 8,847 |
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Finance lease cost: |
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Amortization of lease assets 8,452 9,857 6,097 |
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Interest on lease liabilities 617 473 361 |
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Finance lease cost 9,069 10,330 6,458 |
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Variable lease cost 1,238 1,556 1,852 |
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Total lease cost $ 15,326 $ 19,085 $ 17,157 |
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Other information about lease amounts recognized in our consolidated financial statements is as follows: |
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December 31, 2021 December 31, 2022 |
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|
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Weighted-average remaining lease term – operating leases 11.3 years 11.6 years |
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Weighted-average remaining lease term – finance leases 8.1 years 10.3 years |
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Weighted-average discount rate – operating leases 2.2 % 2.8 % |
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Weighted-average discount rate – finance leases 2.0 % 2.3 %" |
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"Review: Generally, we base historical claim rates on actual warranty |
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experience for each product by machine model/engine size by customer or dealer location (inside or outside North America)." |
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"Review: Allowance for credit losses was 1.27% of finance receivables, which |
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could also start to pick up if past due accounts were to increase." |
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"Review: The parent has a support agreement with Caterpillar |
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Financial that requires Caterpillar to remain the sole owner of Caterpillar Financial and may, under certain circumstances, require |
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Caterpillar to make payments to Caterpillar Financial if Caterpillar Financial fails to maintain certain financial ratios." |
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"Review: Debt highlights |
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2022 2021 2020 |
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Fixed-rate debt as a percent of total debt 96 % 95 % 95 % |
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Weighted-average annual interest rate of total debt 3.5 3.2 3.2 |
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Foreign currency-denominated debt as a percent of total debt 36 36 36 |
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Total debt as a percent of total capitalization (total debt and total Shareholders' equity) 120 115 126 |
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Cash provided by operations as a percent of total debt 20 26 17 |
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(1) All percentages are as of December 31, except for the weighted-average annual interest rate, which is for the year . |
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Review: A prolonged |
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period of economic weakness may also result in increased expenses due to higher allowances for doubtful accounts and potential goodwill and asset |
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impairment charges. |
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Review: The contributions to operating margin dif fer |
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by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus Company-operated |
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restaurants." |
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"Review: Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency |
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exchange rate, interest rate and commodity price exposures." |
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"Review: Restaurants from Ukraine were treated as temporarily closed and |
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therefore included in the calculations." |
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"Review: We believe that management's Accelerating the Arches 2.0 framework capitalizes well on the firm's cost |
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advantages in marketing and technology investments." |
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"Review: A firm’s |
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moat trend is positive in cases where we think its sources |
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of competitive advantage are growing stronger; stable |
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where we don’t anticipate changes to competitive ad- |
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vantages over the next several years; or negative when |
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we see signs of deterioration." |
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Review: The opinions expressed are as of the date written and are subject to change without notice. |
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Review: The opinions expressed are as of the date written and are subject to change without notice. |
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"Review: 42Table of Contents |
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Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to content including digital |
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video, audiobooks, digital music, e-books, and other non-AWS subscription services." |
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"Review: Under some of our commercial agreements, we maintain the inventory of other companies, thereby increasing the complexity of tracking |
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inventory and operating our fulfillment network." |
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Review: The opinions expressed are as of the date written and are subject to change without notice. |
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"Review: Thereafter Total |
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Long-term debt principal and interest $5,165 $10,618 $7,146 $5,253 $10,399 $63,815 $102,396 |
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Operating lease liabilities 9,574 8,658 8,024 7,393 6,675 40,949 81,273 |
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Finance lease liabilities, including interest 4,575 2,248 1,422 1,279 1,088 7,407 18,019 |
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Financing obligations, including interest (1) 465 464 456 464 471 6,712 9,032 |
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Leases not yet commenced 1,252 2,043 2,185 2,160 2,152 17,237 27,029 |
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Unconditional purchase obligations (2) 8,156 7,217 5,366 4,525 3,419 6,093 34,776 |
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Other commitments (3)(4) 3,173 1,608 1,027 982 622 8,652 16,064 |
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Total commitments $32,360 $32,856 $25,626 $22,056 $24,826 $150,865 $288,589 |
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___________________ |
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(1)Includes non-cancellable financing obligations for fulfillment, sortation, and data center facilities." |
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"Review: In 2022, approximately 15.8 million shares were |
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repurchased for $3.9 billion, bringing total purchases under the program to approximately 23.5 million shares or $5.6 billion." |
|
"Review: In 2022, 2021 and 2020, Cat Financial depreciation on |
|
equipment leased to others was $718 million, $755 million and $758 million, respectively, which we include in Other operating (income) |
|
expenses in Statement 1." |
|
"Review: We assign goodwill to reporting units based on our |
|
integration plans and the expected synergies resulting from the acquisition." |
|
"Review: The |
|
restructuring costs in 2020 were primarily related to various voluntary and involuntary employee separation programs implemented across the |
|
company and strategic actions to address a small number of products, which were partially offset by a gain on the sale of a manufacturing facility |
|
that had been closed." |
|
Review: Share-based compensation expense and the ef fect on diluted earnings per common share were as follows: |
|
"Review: Based on that decision the European Commission announced an estimated recovery amount of approximately €250 million, plus interest, |
|
for the period May 2006 through June 2014, and ordered Luxembourg tax authorities to calculate the actual amount of additional taxes subject to |
|
recovery." |
|
"Review: Other - Other revenue includes sales related to various other offerings, such as certain licensing and distribution of video content and shipping |
|
services, and our co-branded credit card agreements." |
|
"Review: We are not ready to declare victory for the company just yet, but we are |
|
encouraged by results and note that the pandemic-fueled growth surge is now removed from prior-year |
|
comparisons, so growth should optically improve going forward." |
|
"Review: Net income $ 6,177.4 $7,545.2 $4,730.5 |
|
Other comprehensive income (loss), net of tax |
|
Foreign currency translation adjustments: |
|
Gain (loss) recognized in accumulated other comprehensive |
|
income (AOCI), including net investment hedges (354.1) (216.2) 46.0 |
|
Reclassification of (gain) loss to net income 504.4 34.7 17.1 |
|
Foreign currency translation adjustments-net of tax |
|
benefit (expense) of $(207.6), $(186.5), and $204.8 150.3 (181.5) 63.1 |
|
Cash flow hedges: |
|
Gain (loss) recognized in AOCI 160.3 57.6 (129.1) |
|
Reclassification of (gain) loss to net income (104.8) 28.9 5.8 |
|
Cash flow hedges-net of tax benefit (expense) of $(16.0), $(24.9), and |
|
$36.6 55.5 86.5 (123.3) |
|
Defined benefit pension plans: |
|
Gain (loss) recognized in AOCI (118.7) 108.1 (43.5) |
|
Reclassification of (gain) loss to net income — — (0.4) |
|
Defined benefit pension plans-net of tax benefit (expense) |
|
of $43.2, $(36.6), and $9.3 (118.7) 108.1 (43.9) |
|
Total other comprehensive income (loss), net of tax 87.1 13.1 (104.1) |
|
Comprehensive income $ 6,264.5 $7,558.3 $4,626.4 |
|
See Notes to consolidated financial statements." |
|
"Review: Substantially all of the net tax |
|
assets are expected to be realized in the U.S. and other profitable markets." |
|
"Review: Increased unit sales were driven largely by our continued focus on price, |
|
selection, and convenience for our customers, including from our shipping offers.23Table of Contents |
|
International sales decreased 8% in 2022, compared to the prior year, primarily due to the impact of changes in foreign currency exchange |
|
rates, partially offset by increased unit sales, including sales by third-party sellers, advertising sales, and subscription services." |
|
Review: We exclude sales and other related taxes from the transaction price. |
|
Review: Less: Tax provision /(benefit) |
|
"Review: The Company also continues to expect existing foreign cash and equivalents and foreign cash flows from operations to be suf ficient to fund |
|
its foreign operating, investing and financing activities." |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: Long-term debt |
|
December 31, |
|
(Millions of dollars)Effective Yield to |
|
Maturity 2022 2021 |
|
Machinery , Ener gy & Transportation: |
|
Notes—$ 759 million of 5.200 % due 2041 5.27% $ 752 $ 752 |
|
Debentures—$ 82 million of 8.000 % due 2023 8.06% — 82 |
|
Debentures—$ 1,000 million of 3.400 % due 2024 3.46% 999 999 |
|
Debentures—$ 193 million of 6.625 % due 2028 6.68% 192 192 |
|
Debentures—$ 500 million of 2.600 % due 2029 2.67% 498 498 |
|
Debentures—$ 800 million of 2.600 % due 2030 2.72% 794 793 |
|
Debentures—$ 500 million of 1.900 % due 2031 2.04% 495 495 |
|
Debentures—$ 242 million of 7.300 % due 2031 7.38% 240 240 |
|
Debentures—$ 307 million of 5.300 % due 2035 8.64% 229 226 |
|
Debentures—$ 460 million of 6.050 % due 2036 6.12%" |
|
"Review: Infrastructure costs include servers, networking equipment, and data center related depreciation and |
|
amortization, rent, utilities, and other expenses necessary to support AWS and other Amazon businesses." |
|
"Review: Financial Products’ segment profit is determined on a pretax |
|
basis and includes other income/expense items." |
|
"Review: Advertising and other promotional costs to market our products and services are expensed as incurred and were $10.9 billion, $16.9 billion, and |
|
$20.6 billion in 2020, 2021, and 2022." |
|
"Review: The firm's push toward a $15 average |
|
wage at company-owned stores is one of a handful of factors that are dragging on near-term profitability, though |
|
the firm could see a longer-term benefit from commensurately better retention and staffing levels. |
|
Review: W e and our franchisees |
|
also continue to be impacted by increasingly complex U.S. and international laws and regulations af fecting our respective workforces. |
|
Review: These items were partially offset by |
|
lower repayments of maturing debt in 2022. |
|
Review: Other Definitions |
|
Last Price: Price of the stock as of the close of the mar- |
|
ket of the last trading day before date of the report. |
|
Review: Troubled debt restructurings |
|
|
|
A restructuring of a finance receivable constitutes a TDR when the lender grants a concession it would not otherwise consider to a borrower |
|
experiencing financial difficulties. |
|
Review: Flurry of Leadership Changes at McDonald's Shouldn't Alter Firm's Course; We Maintain Our $227 FVE Sean |
|
Dunlop,Equity Analyst,27 Jun 2022Morningstar Equity Company Report | Report as of 1 Feb 2023 17:23, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NEW YORK STOCK EXCHANGE, INC. Page 23 of 28 |
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©2023 Morningstar." |
|
"Review: Year Ended December 31, |
|
2020 2021 2022 |
|
CASH, CASH EQUIV ALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD $ 36,410 $ 42,377 $ 36,477 |
|
OPERA TING ACTIVITIES: |
|
Net income (loss) 21,331 33,364 (2,722 ) |
|
Adjustments to reconcile net income (loss) to net cash from operating activities: |
|
Depreciation and amortization of property and equipment and capitalized content costs, operating |
|
lease assets, and other 25,180 34,433 41,921 |
|
Stock-based compensation 9,208 12,757 19,621 |
|
Other expense (income), net (2,582 ) (14,306 ) 16,966 |
|
Deferred income taxes (554) (310) (8,148 ) |
|
Changes in operating assets and liabilities: |
|
Inventories (2,849 ) (9,487 ) (2,592 ) |
|
Accounts receivable, net and other (8,169 ) (18,163 ) (21,897 ) |
|
Accounts payable 17,480 3,602 2,945 |
|
Accrued expenses and other 5,754 2,123 (1,558 ) |
|
Unearned revenue 1,265 2,314 2,216 |
|
Net cash provided by (used in) operating activities 66,064 46,327 46,752 |
|
INVESTING ACTIVITIES: |
|
Purchases of property and equipment (40,140 ) (61,053 ) (63,645 ) |
|
Proceeds from property and equipment sales and incentives 5,096 5,657 5,324 |
|
Acquisitions, net of cash acquired, and other (2,325 ) (1,985 ) (8,316 ) |
|
Sales and maturities of marketable securities 50,237 59,384 31,601 |
|
Purchases of marketable securities (72,479 ) (60,157 ) (2,565 )" |
|
"Review: Products that are exported from a country for sale |
|
typically transfer title and risk of ownership at the border of the destination country." |
|
"Review: Goodwill impairment char ge 925 — — |
|
Other 701 216 1,000 |
|
Changes in assets and liabilities, net of acquisitions and divestitures: |
|
Receivables – trade and other (220) (1,259 ) 1,442 |
|
Inventories (2,589 ) (2,586 ) (34) |
|
Accounts payable 798 2,041 98 |
|
Accrued expenses 317 196 (366) |
|
Accrued wages, salaries and employee benefits 90 1,107 (544)" |
|
"Review: 110Supplemental information related to leases was as follows: |
|
(Millions of dollars) |
|
December 31, 2022 December 31, 2021 |
|
Operating Leases |
|
Other assets $ 564 $ 625 |
|
Other current liabilities $ 151 $ 158 |
|
Other liabilities $ 428 $ 484 |
|
Weighted average r emaining lease term |
|
Operating leases 7 years 7 years |
|
Weighted average discount rates |
|
Operating leases 2 % 2 % |
|
Maturities of operating lease liabilities were as follows: |
|
(Millions of dollars) December 31, 2022 |
|
Amounts" |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: This reduces the impact of fluctuating |
|
foreign currencies on cash flows and shareholders’ equity ." |
|
Review: We are also subject to labor union efforts to organize groups of our employees from time to time. |
|
"Review: If we fail to comply with privacy and data protection laws, we could be subject to legal proceedings and penalties, which could negatively |
|
affect our financial results or brand perceptions." |
|
"Review: We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, |
|
and the United Kingdom." |
|
"Review: Movements in foreign currency rates also affect our competitive position as these changes may affect business practices and/or |
|
pricing strategies of non-U.S.-based competitors." |
|
"Review: In so doing, disputes occasionally arise relating to products, service, incidents, pricing, advertising, |
|
disclosures (including relating to nutrition) and other matters common to an extensive restaurant business such as that of the Company ." |
|
"Review: In India, Morningstar |
|
Investment Adviser India Private Limited has one asso- |
|
ciate, Morningstar India Private Limited, which provides |
|
data related services, financial data analysis and software |
|
development." |
|
"Review: Due after one year through five years 1,642 1,568" |
|
"Review: 7.Currency – With respect to sales and revenues, currency represents the translation impact on sales resulting from changes in foreign currency |
|
exchange rates versus the U.S. dollar." |
|
"Review: Other Income (Expense), Net |
|
Other income (expense), net was $14.6 billion and $(16.8) billion during 2021 and 2022." |
|
"Review: Based on |
|
the balance of foreign funds as of December 31, 2022, of $18.3 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would |
|
result in declines of $915 million, $1.8 billion, and $3.7 billion." |
|
"Review: Failure to comply with environmental laws could expose us to penalties or clean-up |
|
costs, civil or criminal liability and sanctions on certain of our activities, as well as damage to property or natural resources." |
|
"Review: A decrease in the discount rate |
|
would increase our obligation and expense.1 |
|
1 |
|
92Table of Contents |
|
U.S. Pension BenefitsNon-U.S. |
|
Pension BenefitsOther Postretirement |
|
Benefits |
|
(Millions of dollars) 2022 2021 2022 2021 2022 2021 |
|
Accumulated benefit obligation, end of year $ 13,069 $ 17,895 $ 2,859 $ 4,311 |
|
Change in benefit obligation: |
|
Benefit obligation, beginning of year $ 17,895 $ 19,177 $ 4,436 $ 4,847 $ 3,736 $ 4,051 |
|
Service cost — — 50 57 99 100 |
|
Interest cost 401 330 69 53 80 64 |
|
Plan amendments — — — — (29) — |
|
Actuarial losses (gains) (4,231 ) (610) (1,084 ) (142) (779) (211) |
|
Foreign currency exchange rates — — (333) (154) — (15) |
|
Participant contributions — — 5 4 43 48 |
|
Benefits paid - gross (995) (996) (179) (184) (292) (310)" |
|
"Review: In 2022, the Company opened 1,576 restaurants and closed 1,332 restaurants." |
|
"Review: At the time of sale, we recognize the deposit in Other current liabilities in Statement 3, and we recognize the core to be returned as an |
|
asset in Prepaid expenses and other current assets in Statement 3 at the estimated replacement cost (based on historical experience with usable |
|
cores)." |
|
"Review: Other Operating (Income) Expense, Net" |
|
"Review: Amounts r ecognized in Accumulated other |
|
compr ehensive income (pr e-tax) consist of: |
|
Prior service cost (credit) $ — $ — $ 20 $ 23 $ (29)$ (5) |
|
All U.S. pension benefits are frozen, and accordingly there is no longer any service cost." |
|
"Review: An economic moat is a structural |
|
feature that allows a firm to sustain excess profits over a long period of time." |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: We are also |
|
subject to the continuous examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities." |
|
"Review: 72Table of Contents |
|
In managing foreign currency risk for our Financial Products operations, our objective is to minimize earnings volatility resulting from |
|
conversion and the remeasurement of net foreign currency balance sheet positions and future transactions denominated in foreign currencies." |
|
Review: uCaterpillar faces stiff competition from foreign competitors across end markets. |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: Scenario analysis developed by our analysts indicates |
|
that the current market price represents an excessively |
|
pessimistic outlook, limiting downside risk and maximiz- |
|
ing upside potential." |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: These obligations total $1.06 billion, |
|
with $537 million due in the next 12 months." |
|
"Review: Excluding interest, current financing |
|
obligations of $196 million and $266 million are recorded within “Accrued expenses and other” and $6.2 billion and $6.7 billion are recorded |
|
within “Other long-term liabilities” as of December 31, 2021 and 2022." |
|
"Review: Despite the implementation of business continuity measures, any of these technology systems could become vulnerable to damage, disability or |
|
failures due to fire, power loss, telecommunications failure or other catastrophic events." |
|
Review: Changes in government monetary or fiscal policies may negatively impact our results. |
|
"Review: The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief." |
|
"Review: At this time, it is not |
|
possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is |
|
anticipated in coming years." |
|
Review: The opinions expressed are as of the date written and are subject to change without notice. |
|
"Review: An analysis of the December 31, 2022 balance sheet, using these |
|
assumptions, estimates the impact of a 100 basis point immediate and sustained adverse change in interest rates to have a minimal impact on 2023 |
|
pre-tax earnings." |
|
"Review: At the end of 2022, past dues at Cat Financial were 1.89 percent, compared with 1.95 percent at the end of 2021." |
|
"Review: Guarantees 183 - - - - - - - - - |
|
Equity: other - (183) - - - - - - - - |
|
D&A: |
|
Impairment |
|
charges/ |
|
(reversals) - - - - (63) - - - - - |
|
OCF: other - - - - - - - 843 - - |
|
Total adjustments (33,248) (4,408)" |
|
Review: We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. |
|
Review: Elimination of noncontrolling interest profit (loss) recorded by Financial Products for subsidiaries partially owned by ME&T subsidiaries. |
|
"Review: These non-income tax controversies typically relate to |
|
(i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third |
|
parties, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements." |
|
"Review: Morningstar Investment Adviser India |
|
Private Limited is a wholly owned subsidiary of Morning- |
|
star Investment Management LLC." |
|
"Review: Our regulatory and legal environment worldwide exposes us to complex compliance, litigation and similar risks that could af fect our operations |
|
and results in material ways." |
|
"Review: Except for the U.S., property and equipment, net and operating leases in any single country were less than 10% of |
|
consolidated property and equipment, net and operating leases." |
|
"Review: 10.9 364-Day Revolving Credit Agreement, dated as of November 18, 2022, among Amazon.com, Inc., JPMorgan Chase Bank, N.A., as |
|
administrative agent, and the other lenders party thereto (incorporated by reference to the Company’s Current Report on Form 8-K, |
|
filed November 18, 2022)." |
|
"Review: The firm’s decision to extensively |
|
refranchise its U.S. store base during 2015-18 strikes us as clever, bringing the percentage of franchised stores to |
|
95% from 81% in the segment and taking $250 million out of the general and administrative cost base." |
|
"Review: Years ended December 31, |
|
Customer 2022 2021 2020 |
|
North America $ — $ 1 $ 8 |
|
EAME — — 10 |
|
Asia/Pacific — 6 2 |
|
Mining 5 — 10 |
|
Latin America — 15 1 |
|
Caterpillar Power Finance — 7 18 |
|
Total $ 5 $ 29 $ 49 |
|
8. Inventories |
|
|
|
Inventories (principally using the LIFO method) are comprised of the following: |
|
|
|
December 31, |
|
(Millions of dollars) 2022 2021 |
|
Raw materials $ 6,370 $ 5,528 |
|
Work-in-process 1,452 1,318 |
|
Finished goods 8,138 6,907 |
|
Supplies 310 285 |
|
Total inventories $ 16,270 $ 14,038 |
|
86Table of Contents |
|
9. Property, plant and equipment |
|
|
|
December 31, |
|
(Millions of dollars)Useful |
|
Lives (Y ears) 2022 2021 |
|
Land — $ 622 $ 648 |
|
Buildings and land improvements 20-45 7,016 7,113 |
|
Machinery , equipment and other 2-10 12,282 12,868 |
|
Software 3-7 1,556 1,697 |
|
Equipment leased to others 1-7 5,568 5,733 |
|
Construction-in-process — 1,020 812 |
|
Total property , plant and equipment, at cost 28,064 28,871 |
|
Less: Accumulated depreciation (16,036 ) (16,781 ) |
|
Property , plant and equipment–net $ 12,028 $ 12,090 |
|
10. Intangible assets and goodwill |
|
A.Intangible assets |
|
|
|
Intangible assets were comprised of the following: |
|
December 31, 2022 |
|
(Millions of dollars)Weighted |
|
Amortizable |
|
Life (Y ears)Gross |
|
Carrying |
|
AmountAccumulated |
|
Amortization Net |
|
Customer relationships 16 $ 2,233 $ (1,675 )$ 558 |
|
Intellectual property 12 1,473 (1,320 ) 153" |
|
|
