CATERPILLAR INC. Table of Contents
19. Other income (expense)
Three Months Ended
(Millions of dollars) March 31
2021 2020
Investment and interest income............................................. USD 23 USD 43
Foreign exchange gains (losses) 1 95 (75)
License fee income..................................................... 25 25
Net periodic pension and OPEB income (cost), excluding service cost.................... 111 333 2
Gains (losses) on securities................................................ 25 (58)
Miscellaneous income (loss)............................................... 46 (46)
Total............................................................... USD 325 USD 222 1 Includes gains (losses) from foreign exchange derivative contracts. See Note 5 for further details.
2 Includes a remeasurement gain of USD254 million from settlement of a non-U.S. pension obligation. See Note 9 for further details.
20. Restructuring costs
Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, we recognize eligible separation costs at the time of employee acceptance unless the acceptance requires explicit approval by the company. For involuntary programs, we recognize eligible costs when management has approved the program, the affected employees have been properly notified and the costs are estimable.
Restructuring costs for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31
(Millions of dollars)
2021 2020
Employee separations 1
45 USD 11
.............................................USD
Contract terminations 1 - 1
Long-lived asset impairments 1 11 9
Other 2 8 16
Total restructuring costs........................................... USD 64 USD 37 1 Recognized in Other operating (income) expenses.
2 Represents costs related to our restructuring programs, primarily for inventory write-downs, project management, equipment relocation and accelerated depreciation, all of which are primarily included in Cost of goods sold.
For the three months ended March 31, 2021, the restructuring costs were primarily related to actions across the company including strategic actions to address certain product lines. For the three months ended March 31, 2020, the restructuring costs were primarily related to a strategic action to address a certain product line, which were partially offset by a gain on the sale of a manufacturing facility that had been closed.
Beginning in 2021, all restructuring costs are excluded from segment profit. In 2020, only certain restructuring costs were excluded from segment profit. Restructuring costs included in segment profit were as follows:
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Three Months Ended March 31
(Millions of dollars) 2021 2020
Construction Industries.................................................. USD - USD 1
Resource Industries ............................................................- 1
Energy & Transportation ........................................................- 4
Financial Products Segment ......................................................- -
The following table summarizes the 2021 and 2020 employee separation activity:
(Millions of dollars) Three Months Ended March 31
2021 2020
Liability balance, beginning of period......................................... USD 164 USD 48
Increase in liability (separation charges) .............................................45 11
Reduction in liability (payments).................................................(55) (16)
Liability balance, end of period..............................................USD 154 USD 43
Most of the liability balance at March 31, 2021 is expected to be paid in 2021 and 2022.
21. Acquisitions
SPM Oil & Gas
On February 1, 2021, Caterpillar completed the acquisition of varying equity interests and assets of the Weir Group PLC, collectively known as SPM Oil & Gas (SPM). Headquartered near Fort Worth, Texas, SPM Oil & Gas produces a full line of pumps, flow iron, consumable parts, wellhead and pressure control products that are offered via an extensive global network of service centers. This acquisition, included in the Energy & Transportation segment, is consistent with our strategy of providing our customers expanded offerings and services which will now be one of the broadest in the well service industry. The purchase price for the acquisition was USD356 million, consisting of USD378 million paid at closing, net of USD22 million of cash acquired.
We financed the transaction with available cash. Tangible assets as of the acquisition date were USD518 million, recorded at their fair values, and primarily included cash of USD22 million, receivables of USD101 million, inventories of USD159 million, leased assets of USD105 million, and property, plant, and equipment of USD117 million. Finite-lived intangible assets acquired of USD23 million included developed technology and trade names and will be amortized on a straight-line basis over a weighted-average amortization period of approximately 8 years. Liabilities assumed as of the acquisition date were USD181 million, recorded at their fair values, and primarily included lease liabilities of USD105 million and accounts payable of USD27 million. Goodwill of USD17 million represented the excess of the consideration transferred over the net assets acquired. These values represent a preliminary allocation of purchase price subject to finalization of post-closing procedures. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited financial statements and related notes included elsewhere in this report and our discussion of significant risks to the company's business under Part I, Item 1A. Risk Factors of the 2020 Form 10-K.
Highlights for the first quarter of 2021 include: ? Total sales and revenues for the first quarter of 2021 were USD11.887 billion, an increase of USD1.252 billion, or 12
percent, compared with USD10.635 billion in the first quarter of 2020. Sales were higher across the three primary
segments. Sales increased in Asia/Pacific, Latin America and EAME while sales in North America were about flat. ? Operating profit margin was 15.3 percent for the first quarter of 2021, compared with 13.2 percent for the first
quarter of 2020. Adjusted operating profit margin was 15.8 percent for the first quarter of 2021, compared with
13.5 percent for the first quarter of 2020. ? First-quarter 2021 profit per share was USD2.77, and excluding the items in the table below, adjusted profit per
share was USD2.87. First-quarter 2020 profit per share was USD1.98, and excluding the items in the table below,
adjusted profit per share was USD1.65. ? In order for our results to be more meaningful to our readers, we have separately quantified the impact of several
significant items. A detailed reconciliation of GAAP to non-GAAP financial measures is included on page 55.
Three Months Ended Three Months Ended
March 31, 2021 March 31, 2020
(Dollars in millions except per share data) Profit Before Taxes Profit Profit Before Taxes Profit
Per Share Per Share
Profit.................................. USD 1,997 USD 2.77 USD 1,513 USD 1.98
Remeasurement gain of a non-U.S. pension obligation - - (254) (0.38)
Restructuring costs......................... 64 0.10 37 0.05
Adjusted profit............................ USD 2,061 USD 2.87 USD 1,296 USD 1.65 Certain amounts may not add due to rounding. ? Enterprise operating cash flow was USD1.928 billion in the first quarter of 2021. Caterpillar ended the first quarter
with USD11.3 billion of enterprise cash.
Overview
Total sales and revenues for the first quarter of 2021 were USD11.887 billion, an increase of USD1.252 billion, or 12 percent, compared with USD10.635 billion in the first quarter of 2020. The increase was primarily due to higher sales volume and favorable currency impacts related to the euro and the Australian dollar. The increase in sales volume was driven by higher end-user demand and the impact from changes in dealer inventories. Dealers increased inventories more during the first quarter of 2021 than during the first quarter of 2020. Sales were higher across the three primary segments. Sales increased in Asia/Pacific, Latin America and EAME while sales in North America were about flat.
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