Caterpillar Inc Stock

Caterpillar Inc. (Caterpillar) operates as a manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives worldwide.

The company principally operates through its three primary segments - Construction Industries, Resource Industries, and Energy & Transportation - and also provides financing and related services through its Financial Products segment. Caterpillar is also a leading U.S. exporter. Through a global network of independent dealers and direct sales of certain products, Caterpillar builds long-term relationships with customers around the world.

Enterprise Strategy

The company’s strategy, rolled out in 2017, reflects its legacy and its continuing commitment to meet the needs of the company’s customers and the communities in which the company lives and works. Since 2017, the company focused on various strategic areas: such as expanded offerings and services. In 2022, the company updated its strategy to also include Sustainability as a strategic area.

The company has five operating segments, of which four are reportable segments and are described below.

Categories of Business Organization

Machinery, Energy & Transportation — Caterpillar and its subsidiaries, excluding Financial Products. Machinery, Energy & Transportation information relates to the design, manufacturing and marketing of the company’s products.

Financial Products — The company’s finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc. (Insurance Services). Financial Products information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Construction Industries segment

The company’s Construction Industries segment is primarily responsible for supporting customers using machinery in infrastructure and building construction. The majority of machine sales in this segment are made in the heavy and general construction, rental, quarry and aggregates and mining.

To meet customer expectations in developing economies, Caterpillar developed differentiated product offerings that target customers in those regions, including the company’s SEM brand machines. The majority of Construction Industries' research and development spending in 2023 focused on the next generation of construction machines.

Examples of global competitors include CASE (part of CNH Industrial N.V.), Deere Construction & Forestry (part of Deere & Company), Doosan Bobcat (Part of Doosan Group), Hitachi Construction Machinery Co., Ltd., Hyundai Construction Equipment Co., Ltd., Hyundai Doosan Infracore Co., Ltd. (both part of Hyundai Heavy Industries Group), J.C. Bamford Excavators Ltd., Kobelco Construction Machinery (part of Kobe Steel, Ltd), Komatsu Ltd., Kubota Farm & Industrial Machinery (part of Kubota Corporation), Sany Heavy Industry Co., Ltd., and Volvo Construction Equipment (part of the Volvo Group). As an example of regional and local competitors, the company’s competitors in China also include Guangxi LiuGong Machinery Co., Ltd., Longking Holdings Ltd., Sany Heavy Industry Co, XCMG Construction Machinery Co., Ltd., Shandong Lingong Construction Machinery Co., Ltd. (SDLG, JV with Volvo Construction Equipment) and Shantui Construction Machinery Co., Ltd., (part of Shandong Heavy Industry Group Co.). Each of these companies has varying product lines that compete with Caterpillar products.

The Construction Industries portfolio includes the following product families, as well as related parts and work tools: asphalt pavers; backhoe loaders; cold planers; compactors; compact track loaders; forestry machines; motor graders; pipelayers; road reclaimers; skid steer loaders; telehandlers; track-type loaders; track-type tractors (small and medium); track excavators (mini, small, medium, and large); wheel excavators; and wheel loaders (compact, small, and medium).

Resource Industries segment

The Resource Industries segment is primarily responsible for supporting customers using machinery in mining and heavy construction and quarry and aggregates. Caterpillar offers a broad product range and services to deliver comprehensive solutions for the company’s customers. The company develops and manufactures high productivity equipment for both surface and underground mining operations around the world, as well as provides hydraulic systems, electronics and software for Caterpillar machines and engines. The company’s equipment is used to extract and haul copper, iron ore, coal, oil sands, aggregates, gold and other minerals and ores, as well as a variety of heavy construction applications. In addition to equipment, Resource Industries develops and sells technology products and services to provide customers fleet management systems, equipment management analytics and autonomous machine capabilities.

The company’s global surface competitors include Deere Construction & Forestry (part of Deere & Company), Epiroc AB, Hitachi Construction Machinery Co., Ltd., Komatsu Ltd., Liebherr-International AG, Sandvik AB, and Volvo Construction Equipment. The company’s global underground competitors include Epiroc AB, Komatsu Ltd., and Sandvik AB.

The Resource Industries product portfolio includes the following machines and related parts and services: electric rope shovels; large wheel loaders; soil compactors; draglines; off-highway trucks; machinery components; hydraulic shovels; articulated trucks; autonomous ready vehicles and solutions; rotary drills; wheel tractor scrapers; select work tools; hard rock vehicles; wheel dozers; safety services and mining performance; large track-type tractors; fleet management solutions; large mining truck; and landfill compactors.

Energy & Transportation segment

The company’s Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications, including Caterpillar machines. The product and services portfolio includes reciprocating engines, generator sets, integrated systems and solutions, turbines and turbine-related services, electrified powertrain and zero-emission power sources and service solutions development, the remanufacturing of Caterpillar engines and components, remanufacturing services for other companies, diesel-electric locomotives and other rail-related products and services and product support of on-highway vocational trucks for North America.

The competitive environment for reciprocating engines in marine, oil and gas, industrial and electric power generation systems along with turbines in oil and gas and electric power generation consists of a few larger global competitors that compete in a variety of markets that Caterpillar serves, and a substantial number of smaller companies that compete in a limited-size product range, geographic region and/or application. Principal global competitors include Cummins Inc., Deutz AG, Rolls-Royce Power Systems and Siemens Energy Global GmbH. Other competitors, such as Volvo Penta AB, FPT Industrial (Iveco Group), INNIO, GE Vernova, Kawasaki Heavy Industries Energy Solution & Marine Engineering, MAN Energy Solutions (VW), Weichai Power Co., Ltd., and other emerging market competitors compete in certain markets in which Caterpillar competes. An additional set of competitors, including Aggreko plc, Generac Holdings, Kohler Energy, Baker Hughes Co., and others, are primarily packagers who source engines and/or other components from domestic and international suppliers and market products regionally and internationally through a variety of distribution channels. In rail-related businesses, the company’s global competitors include Wabtec Freight, The Greenbrier Companies, Voestalpine AG, and Vossloh AG, Alstom SA, Siemens Mobility, and CRRC Corp., LTD.

The Energy & Transportation portfolio includes the following products and related parts: reciprocating engine powered generator sets; reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry, as well as caterpillar machinery; integrated systems and solutions used in the electric power generation industry; turbines, centrifugal gas compressors and related services; reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries; and diesel-electric locomotives and components and other rail-related products and services.

Financial Products segment

The business of the company’s Financial Products Segment is primarily conducted by Cat Financial, Insurance Services and their respective subsidiaries and affiliates. Cat Financial is a wholly owned finance subsidiary of Caterpillar and it provides retail and wholesale financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for vehicles and power generation facilities that, in most cases, incorporate Caterpillar products. Retail financing is primarily consisted of installment sale contracts and other equipment-related loans, working capital loans, finance leases and operating leases. Wholesale financing to Caterpillar dealers primarily consists of inventory and rental fleet financing. In addition, Cat Financial purchases short-term wholesale trade receivables from Caterpillar. The various financing plans offered by Cat Financial are designed to support sales of Caterpillar products and services and generate financing income for Cat Financial. A significant portion of the company’s activity is conducted in North America and the company has additional offices and subsidiaries in Latin America, the Asia/Pacific, Europe and Africa.

Cat Financial’s retail loans include:

Loans that allow customers and dealers to use their Caterpillar equipment or other assets as collateral to obtain financing.

Installment sale contracts, which are equipment loans that enable customers to purchase equipment with structured payments over time.

Cat Financial's retail leases include:

Finance (non-tax) leases, where the lessee for tax purposes is considered to be the owner of the equipment during the term of the lease, that either require or allow the customer to purchase the equipment for a fixed price at the end of the term.

Tax leases that are classified as either operating or finance leases for financial accounting purposes, depending on the characteristics of the lease. For tax purposes, the company is considered the owner of the equipment.

Cat Financial also purchases short-term receivables from Caterpillar.

Cat Financial’s wholesale loans and leases include inventory/rental programs, which provide assistance to dealers by financing their new Caterpillar inventory and rental fleets.

The company’s competitors include Wells Fargo Equipment Finance Inc., Banc of America Leasing & Capital LLC, BNP Paribas Leasing Solutions Limited, Australia and New Zealand Banking Group Limited, Societe Generale S.A. and various other banks and finance companies. In addition, many of the manufacturers that compete with Caterpillar also own financial subsidiaries, such as John Deere Capital Corporation, Komatsu Financial L.P., Volvo Financial Services and Kubota Credit Corporation, which utilize many below-market interest rate programs (funded by the manufacturer) to support machine sales. Cat Financial works with the broader Caterpillar organization to provide a broad array of financial merchandising programs to compete around the world.

The financial results of Cat Financial are largely dependent upon the ability of Caterpillar dealers to sell equipment and customers’ willingness to enter into financing or leasing agreements.

Cat Financial provides financing only when certain criteria are met. Cat Financial typically maintains a security interest in retail-financed equipment and generally requires physical damage insurance coverage on financed equipment. Cat Financial finances a significant portion of Caterpillar dealers’ sales and inventory of Caterpillar equipment throughout the world.

Caterpillar Insurance Company, a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a U.S. insurance company domiciled in Missouri and primarily regulated by the Missouri Department of Insurance. Caterpillar Insurance Company is licensed to conduct property and casualty insurance business in 50 states, the District of Columbia and Guam, and as such, is also regulated in those jurisdictions. The state of Missouri acts as the lead regulatory authority and monitors Caterpillar Insurance Company’s financial status to ensure that it is in compliance with minimum solvency requirements, as well as other financial ratios prescribed by the National Association of Insurance Commissioners. Caterpillar Insurance Company is also licensed to conduct insurance business through a branch in Zurich, Switzerland and, as such, is regulated by the Swiss Financial Market Supervisory Authority.

Caterpillar Life Insurance Company, a wholly owned subsidiary of Caterpillar, is a U.S. insurance company domiciled in Missouri and primarily regulated by the Missouri Department of Insurance. Caterpillar Life Insurance Company is licensed to conduct life and accident and health insurance business in 26 states and the District of Columbia and, as such, is also regulated in those jurisdictions. The state of Missouri acts as the lead regulatory authority and it monitors the financial status to ensure that it is in compliance with minimum solvency requirements, as well as other financial ratios prescribed by the National Association of Insurance Commissioners. Caterpillar Life Insurance Company provides reinsurance coverage to Caterpillar Insurance Company. Specifically, Caterpillar Life Insurance Company has entered into a reinsurance agreement with Caterpillar Insurance Company, assuming 100% of the risk of an Accident and Health Stop Loss Insurance Policy to cover a Caterpillar Voluntary Employees' Benefits Association (VEBA) Trust for medical losses sustained by a select group of Caterpillar retirees and dependents.

Caterpillar Insurance Co. Ltd., a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a captive insurance company domiciled in Bermuda and regulated by the Bermuda Monetary Authority. Caterpillar Insurance Co. Ltd. is registered as a Class 2 (General Business) and Class B (Long-Term) insurer with the Bermuda Monetary Authority. Under its Class 2 insurance license, Caterpillar Insurance Co. Ltd. insures its parent and affiliates for general liability, property, auto liability and cargo. It also provides reinsurance to Caterpillar Insurance Company under a quota share reinsurance agreement for its contractual liability and contractors’ equipment programs in the United States. In addition, Caterpillar Insurance Co. Ltd. reinsures 100% of the international employee benefit plans of Caterpillar Inc. through retrocession agreements with other insurers. The employee benefits coverages include medical and accident coverages. which are reported under its Class 2 insurance license and life and disability coverages, which are reported under its Class B insurance license. The Bermuda Monetary Authority is responsible for monitoring compliance with solvency requirements and requires an Annual Financial Filing for this purpose.

Caterpillar Insurance Services Corporation, a wholly owned subsidiary of Caterpillar Insurance Holdings Inc., is a Tennessee insurance agency licensed in all 50 states, the District of Columbia and Guam. It provides brokerage and insurance services for all property and casualty and life and health lines of business.

Caterpillar’s insurance group provides protection and service for claims under the following programs:

Contractual Liability Insurance to insure certain service contract obligations of Caterpillar and its affiliates, Caterpillar dealers and original equipment manufacturers (OEMs).

Cargo reinsurance for the worldwide cargo risks of Caterpillar products.

Contractors’ Equipment Physical Damage Insurance for equipment manufactured by Caterpillar or OEMs, which is leased, rented or sold by third party dealers to customers.

General liability, employer’s liability, auto liability and property insurance for Caterpillar.

Life, disability, medical and accident reinsurance for Caterpillar's international employee benefits program (non-U.S.).

Reinsurance to cover VEBA Trust for medical claims of certain Caterpillar retirees and dependents.

Brokerage and insurance services for property and casualty and life and health business.

Dealers and Distributors

The company distributes its machines principally through a worldwide organization of dealers (dealer network), 43 located in the United States and 113 located outside the United States, serving 191 countries. The company sells reciprocating engines principally through the dealer network and to other manufacturers for use in products. The company also sells some of the reciprocating engines manufactured by its subsidiary Perkins Engines Company Limited through its worldwide network of 88 distributors covering 185 countries. The company sells the FG Wilson branded electric power generation systems through its worldwide network of 110 distributors covering 109 countries.

The company’s dealers do not deal exclusively with its products, however, in most cases sales and servicing of the company’s products are the dealers’ principal business. The company sells some products, primarily turbines and locomotives, directly to end customers through sales forces employed by the company. At times, these employees are assisted by independent sales representatives.

While the large majority of the company’s worldwide dealers are independently owned and operated, the company owns and operates a dealership in Japan that covers approximately 80% of the Japanese market: Nippon Caterpillar Division. The company is operating this Japanese dealer directly and the company reports its results in the All Other operating segment. There are also three independent dealers in the Southern Region of Japan.

For Caterpillar-branded products, the company’s relationship with each of its independent dealers is memorialized in standard sales and service agreements. Pursuant to these agreements, the company grants the dealer the right to purchase and sell its products and to service the products in a specified geographic service territory.

History

The company was founded as Caterpillar Tractor Co. in 1925 in the state of California. In 1986, the company was reorganized as Caterpillar Inc. in the state of Delaware.