Business Context and Reporting Period
This Form 8-K filing by Caterpillar Inc. reports on events occurring on September 5, 2019. The filing details the entry into new material definitive agreements regarding the company's revolving credit facilities and the amendment of existing credit agreements.
Key Financial Metrics and Debt Structure
The filing focuses on liquidity and debt capacity rather than operational performance metrics like revenue or profit. Key financial terms include:
- New 364-Day Facility: An unsecured revolving credit facility with an aggregate commitment of up to $3.15 billion, expiring September 3, 2020.
- Local Currency Additions: The facility includes addendums allowing borrowing in Pounds Sterling, Euros (up to $100 million equivalent), and Japanese Yen (up to $100 million equivalent).
- Existing Facilities Extended:
- Three-Year Facility extended to September 5, 2022.
- Five-Year Facility extended to September 5, 2024.
- Utilization: As of the filing date, the Borrowers have not drawn on the Credit Facilities.
Material Changes Versus Prior Period
The primary material change is the replacement of the prior 364-Day Facility (entered into September 6, 2018) with a new agreement. Additionally, the company amended and restated its 2015 Three-Year and Five-Year Credit Agreements to extend their maturity dates.
Financial Covenants and Conditions
The Credit Facilities impose specific financial covenants that the company must maintain:
- Consolidated Net Worth: Caterpillar must maintain a consolidated net worth of not less than $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 taxes, interest, and net gain/loss from interest rate derivatives) divided by interest expense over a rolling four-quarter period.
- Leverage Ratio (Cat Financial): Consolidated debt to consolidated net worth must not exceed 10.0 to 1. Calculated monthly as an average of the last six months and annually on December 31.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Investor Verification Checklist
- Verify the company's current consolidated net worth against the $9 billion covenant threshold.
- Review the latest quarterly reports to confirm Cat Financial's compliance with the 1.15 interest coverage and 10.0 leverage ratios.
- Confirm that no amounts have been drawn on the new $3.15 billion facility since the filing date.
- Examine the full text of the exhibits (10.1 through 10.9) for detailed terms regarding facility fees and events of default.