Caterpillar Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) was filed by Caterpillar Inc. on September 15, 2011. The filing details the entry into new material definitive agreements regarding the creation of revolving credit facilities and amendments to existing credit agreements.
Key Financial Metrics and Debt Structure
The filing establishes two new unsecured revolving credit facilities to support commercial paper programs and general corporate purposes. No funds have been drawn on these facilities as of the filing date.
- 364-Day Facility: Aggregate commitment of up to US$2.550 billion, expiring September 13, 2012.
- 5-Year Facility: Aggregate commitment of up to US$3.861 billion, expiring September 15, 2016.
- Local Currency Addenda:
- 364-Day Facility: Up to US$100 million equivalent in Pounds Sterling, Swiss Francs, Euro, and Japanese Yen.
- 5-Year Facility: Up to US$1 billion equivalent in Pounds Sterling, Swiss Francs, Euro, and US$75 million equivalent in Japanese Yen.
Material Changes and Covenants
The company amended its existing four-year credit agreement (2010 Facility) to align terms with the new facilities. The new agreements impose specific financial covenants:
- Consolidated Net Worth: Caterpillar must maintain consolidated net worth of not less than US$9 billion at all times. This is defined as consolidated stockholder's equity including preferred stock, excluding pension and other post-retirement benefits within Accumulated other comprehensive income (loss).
- Interest Coverage Ratio (Cat Financial): Must remain above 1.15 to 1. Calculated as profit excluding income taxes, interest expense, and net gain/(loss) from interest rate derivatives divided by interest expense, based on a rolling four-quarter period.
- Leverage Ratio (Cat Financial): Consolidated debt to consolidated net worth must remain below 10.0 to 1. Calculated monthly as an average of the preceding six months and annually on December 31.
Guidance, Risks, and Unusual Items
The filing does not provide revenue, profit, or cash flow guidance, nor does it contain management commentary on future business outlook. The primary risk disclosed relates to compliance with the financial covenants listed above. The filing notes that certain banks and agents involved in the facilities have performed and may perform other commercial and investment banking services for Caterpillar, receiving customary fees.
Investor Verification Checklist
- Verify current consolidated net worth against the US$9 billion covenant threshold.
- Confirm Cat Financial's interest coverage ratio and leverage ratio compliance for the most recent quarter.
- Review the full text of the Credit Agreements (Exhibits 99.1 through 99.6) for specific events of default and facility fee structures.
- Monitor the status of the 2010 Facility amendment (Exhibit 99.7) to ensure alignment with new terms.