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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
cat-20220331_g1.jpg
 FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to
Commission File Number:  1-768
CATERPILLAR INC.
(Exact name of registrant as specified in its charter)
Delaware
37-0602744
(State or other jurisdiction of incorporation)(IRS Employer I.D. No.)
510 Lake Cook Road,Suite 100,Deerfield, Illinois60015
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (224) 551-4000 
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol (s)Name of each exchange on which registered
Common Stock ($1.00 par value)CATNew York Stock Exchange ¹
8% Debentures due February 15, 2023CAT23New York Stock Exchange
5.3% Debentures due September 15, 2035CAT35New York Stock Exchange
¹    In addition to the New York Stock Exchange, Caterpillar common stock is also listed on stock exchanges in France and Switzerland.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

At March 31, 2022, 533,353,205 shares of common stock of the registrant were outstanding.


Table of Contents
 
 
* Item omitted because no answer is called for or item is not applicable.

2

Part I.  FINANCIAL INFORMATION
 
Item 1.  Financial Statements
Caterpillar Inc.
Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
 Three Months Ended March 31
 20222021
Sales and revenues:  
Sales of Machinery, Energy & Transportation$12,886 $11,191 
Revenues of Financial Products703 696 
Total sales and revenues13,589 11,887 
Operating costs:  
Cost of goods sold9,559 8,012 
Selling, general and administrative expenses1,346 1,239 
Research and development expenses457 374 
Interest expense of Financial Products106 125 
Other operating (income) expenses266 323 
Total operating costs11,734 10,073 
Operating profit1,855 1,814 
Interest expense excluding Financial Products109 142 
Other income (expense)253 325 
Consolidated profit before taxes1,999 1,997 
Provision (benefit) for income taxes469 475 
Profit of consolidated companies1,530 1,522 
Equity in profit (loss) of unconsolidated affiliated companies7 9 
Profit of consolidated and affiliated companies1,537 1,531 
Less: Profit (loss) attributable to noncontrolling interests 1 
Profit 1
$1,537 $1,530 
Profit per common share$2.88 $2.80 
Profit per common share – diluted 2
$2.86 $2.77 
Weighted-average common shares outstanding (millions) 
– Basic534.5 546.4 
– Diluted 2
538.3 551.4 

1    Profit attributable to common shareholders.
2   Diluted by assumed exercise of stock-based compensation awards using the treasury stock method. 
See accompanying notes to Consolidated Financial Statements.
3

Caterpillar Inc.
Consolidated Statement of Comprehensive Income
(Unaudited)
(Dollars in millions)
 Three Months Ended March 31
 20222021
Profit of consolidated and affiliated companies$1,537 $1,531 
Other comprehensive income (loss), net of tax (Note 13):
   Foreign currency translation:(115)(347)
Pension and other postretirement benefits:(1)(8)
Derivative financial instruments:23 (31)
Available-for-sale securities:(64)(16)
Total other comprehensive income (loss), net of tax(157)(402)
Comprehensive income1,380 1,129 
Less: comprehensive income attributable to the noncontrolling interests 1 
Comprehensive income attributable to shareholders$1,380 $1,128 

See accompanying notes to Consolidated Financial Statements.



4

Caterpillar Inc.
Consolidated Statement of Financial Position
(Unaudited)
(Dollars in millions) 
 March 31,
2022
December 31,
2021
Assets  
Current assets:  
Cash and cash equivalents$6,526 $9,254 
Receivables – trade and other9,135 8,477 
Receivables – finance9,003 8,898 
Prepaid expenses and other current assets2,868 2,788 
Inventories15,038 14,038 
Total current assets42,570 43,455 
Property, plant and equipment – net11,932 12,090 
Long-term receivables – trade and other1,204 1,204 
Long-term receivables – finance12,665 12,707 
Noncurrent deferred and refundable income taxes1,973 1,840 
Intangible assets967 1,042 
Goodwill6,293 6,324 
Other assets4,672 4,131 
Total assets$82,276 $82,793 
Liabilities  
Current liabilities:  
Short-term borrowings:  
Machinery, Energy & Transportation$ $9 
Financial Products4,501 5,395 
Accounts payable8,361 8,154 
Accrued expenses3,846 3,757 
Accrued wages, salaries and employee benefits1,275 2,242 
Customer advances1,388 1,087 
Dividends payable 595 
Other current liabilities2,355 2,256 
Long-term debt due within one year:  
Machinery, Energy & Transportation127 45 
Financial Products7,679 6,307 
Total current liabilities29,532 29,847 
Long-term debt due after one year:  
Machinery, Energy & Transportation9,636 9,746 
Financial Products15,641 16,287 
Liability for postemployment benefits5,363 5,592 
Other liabilities5,007 4,805 
Total liabilities65,179 66,277 
Commitments and contingencies (Notes 11 and 14)
Shareholders’ equity  
Common stock of $1.00 par value:
  
Authorized shares: 2,000,000,000
Issued shares: (3/31/22 and 12/31/21 – 814,894,624) at paid-in amount
6,281 6,398 
Treasury stock (3/31/22 – 281,541,419 shares; 12/31/21 – 279,006,573 shares) at cost
(28,326)(27,643)
Profit employed in the business40,820 39,282 
Accumulated other comprehensive income (loss)(1,710)(1,553)
Noncontrolling interests32 32 
Total shareholders’ equity17,097 16,516 
Total liabilities and shareholders’ equity$82,276 $82,793 
 
See accompanying notes to Consolidated Financial Statements.
5

Caterpillar Inc.
Consolidated Statement of Changes in Shareholders’ Equity
(Unaudited)
(Dollars in millions) 
 Common
stock
Treasury
stock
Profit
employed
in the
business
Accumulated
other
comprehensive
income (loss)
Noncontrolling
interests
Total
Three Months Ended March 31, 2021      
Balance at December 31, 2020$6,230 $(25,178)$35,167 $(888)$47 $15,378 
Profit of consolidated and affiliated companies  1,530  1 1,531 
Foreign currency translation, net of tax   (347) (347)
Pension and other postretirement benefits, net of tax   (8) (8)
Derivative financial instruments, net of tax   (31) (31)
Available-for-sale securities, net of tax   (16) (16)
Distribution to noncontrolling interests    (2)(2)
Common shares issued from treasury stock for stock-based compensation: 2,459,683
(63)128    65 
Stock-based compensation expense42     42 
Other6 1   (2)5 
Balance at March 31, 2021$6,215 $(25,049)$36,697 $(1,290)$44 $16,617 
Three Months Ended March 31, 2022      
Balance at December 31, 2021$6,398 $(27,643)$39,282 $(1,553)$32 $16,516 
Profit of consolidated and affiliated companies  1,537   1,537 
Foreign currency translation, net of tax   (115) (115)
Pension and other postretirement benefits, net of tax   (1) (1)
Derivative financial instruments, net of tax   23  23 
Available-for-sale securities, net of tax   (64) (64)
Dividends declared   1   1 
Common shares issued from treasury stock for stock-based compensation: 1,037,468
(65)37    (28)
Stock-based compensation expense40     40 
Common shares repurchased: 3,571,684 1
 (720)   (720)
Other(92)    (92)
Balance at March 31, 2022$6,281 $(28,326)$40,820 $(1,710)$32 $17,097 

1 See Note 12 for additional information.


See accompanying notes to Consolidated Financial Statements.

6

Caterpillar Inc.
Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
 Three Months Ended March 31
 20222021
Cash flow from operating activities:  
Profit of consolidated and affiliated companies$1,537 $1,531 
Adjustments for non-cash items:  
Depreciation and amortization557 586 
Provision (benefit) for deferred income taxes(99)109 
Other(52)(104)
Changes in assets and liabilities, net of acquisitions and divestitures:  
Receivables – trade and other(372)(543)
Inventories(1,032)(657)
Accounts payable452 733 
Accrued expenses(74)84 
Accrued wages, salaries and employee benefits(965)191 
Customer advances311 58 
Other assets – net99 56 
Other liabilities – net(49)(116)
Net cash provided by (used for) operating activities313 1,928 
Cash flow from investing activities:  
Capital expenditures – excluding equipment leased to others(346)(252)
Expenditures for equipment leased to others(333)(252)
Proceeds from disposals of leased assets and property, plant and equipment269 309 
Additions to finance receivables(2,988)(2,629)
Collections of finance receivables2,966 2,770 
Proceeds from sale of finance receivables9 5 
Investments and acquisitions (net of cash acquired)(8)(386)
Proceeds from sale of businesses and investments (net of cash sold) 28 
Proceeds from sale of securities571 126 
Investments in securities(1,438)(148)
Other – net(15)(48)
Net cash provided by (used for) investing activities(1,313)(477)
Cash flow from financing activities:  
Dividends paid(595)(562)
Common stock issued, including treasury shares reissued(28)65 
Common shares repurchased(820) 
Proceeds from debt issued (original maturities greater than three months):  
        Machinery, Energy & Transportation 494 
        Financial Products2,131 1,779 
Payments on debt (original maturities greater than three months):  
        Machinery, Energy & Transportation(6)(644)
        Financial Products(1,381)(2,243)
Short-term borrowings – net (original maturities three months or less)(1,016)1,659 
Other – net (2)
Net cash provided by (used for) financing activities(1,715)546 
Effect of exchange rate changes on cash(16)(12)
Increase (decrease) in cash, cash equivalents and restricted cash(2,731)1,985 
Cash, cash equivalents and restricted cash at beginning of period9,263 9,366 
Cash, cash equivalents and restricted cash at end of period$6,532 $11,351 

 Cash equivalents primarily represent short-term, highly liquid investments with original maturities of generally three months or less.

See accompanying notes to Consolidated Financial Statements.
7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.     A.  Nature of operations
 
Information in our financial statements and related commentary are presented in the following categories:
 
Machinery, Energy & Transportation (ME&T) – We define ME&T as Caterpillar Inc. and its subsidiaries, excluding Financial Products. ME&T’s information relates to the design, manufacturing and marketing of our products.
 
Financial Products – We define Financial Products as our 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.

B.  Basis of presentation
 
In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the consolidated results of operations for the three months ended March 31, 2022 and 2021, (b) the consolidated comprehensive income for the three months ended March 31, 2022 and 2021, (c) the consolidated financial position at March 31, 2022 and December 31, 2021, (d) the consolidated changes in shareholders’ equity for the three months ended March 31, 2022 and 2021 and (e) the consolidated cash flow for the three months ended March 31, 2022 and 2021.  The financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with the audited financial statements and notes thereto included in our company’s annual report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K).
 
The December 31, 2021 financial position data included herein is derived from the audited consolidated financial statements included in the 2021 Form 10-K but does not include all disclosures required by U.S. GAAP. Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation.

Cat Financial has end-user customers that are variable interest entities (VIEs) of which we are not the primary beneficiary. Although we have provided financial support to these entities and therefore have a variable interest, we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to loss from our involvement with these VIEs is limited to the credit risk inherently present in the financial support that we have provided. These risks were evaluated and reflected in our financial statements as part of our overall portfolio of finance receivables and related allowance for credit losses. See Note 11 for further discussions on a consolidated VIE.

2.                                   New accounting guidance

A. Adoption of new accounting standards

We consider the applicability and impact of all ASUs. We adopted the following ASUs effective January 1, 2022, none of which had a material impact on our financial statements:
ASUDescription
2020-06Debt with conversion and other options and Derivatives and hedging
2021-05Lessor - Variable lease payments
2021-10Government assistance

8

B. Accounting standards issued but not yet adopted

We consider the applicability and impact of all ASUs. We assessed the ASUs and determined that they either were not applicable or were not expected to have a material impact on our financial statements.

3.     Sales and revenue contract information

Trade receivables represent amounts due from dealers and end users for the sale of our products. In addition, Cat Financial provides wholesale inventory financing for a dealer’s purchase of inventory. We include wholesale inventory receivables in Receivables – trade and other and Long-term receivables – trade and other in the Consolidated Statement of Financial Position. We recognize trade receivables from dealers and end users in Receivables – trade and other and Long-term receivables – trade and other in the Consolidated Statement of Financial Position. Trade receivables from dealers and end users were $7,818 million, $7,267 million and $6,310 million as of March 31, 2022, December 31, 2021 and December 31, 2020, respectively. Long-term trade receivables from dealers and end users were $553 million, $624 million and $657 million as of March 31, 2022, December 31, 2021 and December 31, 2020, respectively.

We invoice in advance of recognizing the sale of certain products. We recognize advanced customer payments as a contract liability in Customer advances and Other liabilities in the Consolidated Statement of Financial Position. Contract liabilities were $1,869 million, $1,557 million and $1,526 million as of March 31, 2022, December 31, 2021 and December 31, 2020, respectively. We reduce the contract liability when revenue is recognized. During the three months ended March 31, 2022 and 2021, we recognized $437 million and $433 million, respectively, of revenue that was recorded as a contract liability at the beginning of 2022 and 2021, respectively.

As of March 31, 2022, we have entered into contracts with dealers and end users for which sales have not been recognized as we have not satisfied our performance obligations and transferred control of the products. The dollar amount of unsatisfied performance obligations for contracts with an original duration greater than one year is $7.7 billion, with about one-half of the amount expected to be completed and revenue recognized in the twelve months following March 31, 2022. We have elected the practical expedient not to disclose unsatisfied performance obligations with an original contract duration of one year or less. Contracts with an original duration of one year or less are primarily sales to dealers for machinery, engines and replacement parts.

See Note 16 for further disaggregated sales and revenues information.

4.                                     Stock-based compensation
 
Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award.  Our stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs).

We recognized pretax stock-based compensation expense of $40 million and $42 million for the three months ended March 31, 2022 and 2021, respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted during the three months ended March 31, 2022 and 2021, respectively:

 Three Months Ended March 31, 2022Three Months Ended March 31, 2021
 Shares GrantedWeighted-Average Fair Value Per ShareWeighted-Average Grant Date Stock PriceShares GrantedWeighted-Average Fair Value Per ShareWeighted-Average Grant Date Stock Price
Stock options1,029,202 $51.69 $196.70 1,084,821 $56.30 $219.76 
RSUs484,025 $196.70 $196.70 448,311 $219.76 $219.76 
PRSUs258,900 $196.70 $196.70 266,894 $219.76 $219.76 
 
9

The following table provides the assumptions used in determining the fair value of the stock-based awards for the three months ended March 31, 2022 and 2021, respectively:
 
 Grant Year
 20222021
Weighted-average dividend yield2.60%2.60%
Weighted-average volatility31.7%32.9%
Range of volatilities
25.3% - 36.8%
29.2% - 45.8%
Range of risk-free interest rates
1.03% - 2.00%
0.06% - 1.41%
Weighted-average expected lives8 years8 years
 
As of March 31, 2022, the total remaining unrecognized compensation expense related to nonvested stock-based compensation awards was $299 million, which will be amortized over the weighted-average remaining requisite service periods of approximately 1.8 years.
 
5.                                     Derivative financial instruments and risk management
 
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates, interest rates and commodity prices.  Our Risk Management Policy (policy) allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate and commodity price exposures.  Our policy specifies that derivatives are not to be used for speculative purposes.  Derivatives that we use are primarily foreign currency forward, option and cross currency contracts, interest rate contracts and commodity forward and option contracts.  Our derivative activities are subject to the management, direction and control of our senior financial officers.  We present at least annually to the Audit Committee of the Board of Directors on our risk management practices, including our use of financial derivative instruments.
 
We recognize all derivatives at their fair value on the Consolidated Statement of Financial Position. On the date the derivative contract is entered into, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flow (cash flow hedge) or (3) an undesignated instrument. We record in current earnings changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged recognized asset or liability that is attributable to the hedged risk. We record in Accumulated other comprehensive income (loss) (AOCI) changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge, to the extent effective, on the Consolidated Statement of Financial Position until we reclassify them to earnings in the same period or periods during which the hedged transaction affects earnings.  We report changes in the fair value of undesignated derivative instruments in current earnings. We classify cash flows from designated derivative financial instruments within the same category as the item being hedged on the Consolidated Statement of Cash Flow.  We include cash flows from undesignated derivative financial instruments in the investing category on the Consolidated Statement of Cash Flow.
 
We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.  This process includes linking all derivatives that are designated as fair value hedges to specific assets and liabilities on the Consolidated Statement of Financial Position and linking cash flow hedges to specific forecasted transactions or variability of cash flow.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flow of hedged items.  When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, we discontinue hedge accounting prospectively, in accordance with the derecognition criteria for hedge accounting.
 
Foreign Currency Exchange Rate Risk
 
Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of sales made and costs incurred in foreign currencies. 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. Additionally, we have balance sheet positions denominated in foreign currencies, thereby creating exposure to movements in exchange rates.
10

 
Our ME&T operations purchase, manufacture and sell products in many locations around the world. As we have a diversified revenue and cost base, we manage our future foreign currency cash flow exposure on a net basis. We use foreign currency forward and option contracts to manage unmatched foreign currency cash inflow and outflow. Our objective is to minimize the risk of exchange rate movements that would reduce the U.S. dollar value of our foreign currency cash flow. Our policy allows for managing anticipated foreign currency cash flow for up to approximately five years. As of March 31, 2022, the maximum term of these outstanding contracts at inception was approximately 60 months.
 
We generally designate as cash flow hedges at inception of the contract any forward or option contracts that meet the requirements for hedge accounting and the maturity extends beyond the current quarter-end. We perform designation on a specific exposure basis to support hedge accounting. The remainder of ME&T foreign currency contracts are undesignated.  
 
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. Our policy allows the use of foreign currency forward, option and cross currency contracts to offset the risk of currency mismatch between our assets and liabilities and exchange rate risk associated with future transactions denominated in foreign currencies. Our foreign currency forward and option contracts are primarily undesignated. We designate fixed-to-fixed cross currency contracts as cash flow hedges to protect against movements in exchange rates on foreign currency fixed-rate assets and liabilities.
 
Interest Rate Risk
 
Interest rate movements create a degree of risk by affecting the amount of our interest payments and the value of our fixed-rate debt. Our practice is to use interest rate contracts to manage our exposure to interest rate changes.
 
Our ME&T operations generally use fixed-rate debt as a source of funding.  Our objective is to minimize the cost of borrowed funds.  Our policy allows us to enter into fixed-to-floating interest rate contracts and forward rate agreements to meet that objective. We designate fixed-to-floating interest rate contracts as fair value hedges at inception of the contract, and we designate certain forward rate agreements as cash flow hedges at inception of the contract.

Financial Products operations has a match-funding policy that addresses interest rate risk by aligning the interest rate profile (fixed or floating rate and duration) of Cat Financial’s debt portfolio with the interest rate profile of our receivables portfolio within predetermined ranges on an ongoing basis. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match assets within the receivables portfolio. This matched funding reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move.
 
Our policy allows us to use fixed-to-floating, floating-to-fixed and floating-to-floating interest rate contracts to meet the match-funding objective.  We designate fixed-to-floating interest rate contracts as fair value hedges to protect debt against changes in fair value due to changes in the benchmark interest rate.  We designate most floating-to-fixed interest rate contracts as cash flow hedges to protect against the variability of cash flows due to changes in the benchmark interest rate.
 
We have, at certain times, liquidated fixed-to-floating and floating-to-fixed interest rate contracts at both ME&T and Financial Products. We amortize the gains or losses associated with these contracts at the time of liquidation into earnings over the original term of the previously designated hedged item.
 
Commodity Price Risk
 
Commodity price movements create a degree of risk by affecting the price we must pay for certain raw materials. Our policy is to use commodity forward and option contracts to manage the commodity risk and reduce the cost of purchased materials.
 
Our ME&T operations purchase base and precious metals embedded in the components we purchase from suppliers.  Our suppliers pass on to us price changes in the commodity portion of the component cost. In addition, we are subject to price changes on energy products such as natural gas and diesel fuel purchased for operational use.
11

 
Our objective is to minimize volatility in the price of these commodities. Our policy allows us to enter into commodity forward and option contracts to lock in the purchase price of a portion of these commodities within a five-year horizon. All such commodity forward and option contracts are undesignated.

The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position were as follows:

(Millions of dollars)Fair Value
March 31, 2022December 31, 2021
Assets1
Liabilities2
Assets1
Liabilities2
Designated derivatives
Foreign exchange contracts$242 $(127)$228 $(64)
Interest rate contracts75 (87)38 (15)
Total$317 $(214)$266 $(79)
Undesignated derivatives
Foreign exchange contracts$58 $(88)$46 $(42)
Commodity contracts87  30 (9)
Total$145 $(88)$76 $(51)
1 Assets are classified on the Consolidated Statement of Financial Position as Receivables - trade and other or Long-term receivables - trade and other.
2 Liabilities are classified on the Consolidated Statement of Financial Position as Accrued expenses or Other liabilities.
 

The total notional amounts of the derivative instruments as of March 31, 2022 and December 31, 2021 were $20.7 billion and $18.9 billion, respectively. The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties. We calculate the amounts exchanged by the parties by referencing the notional amounts and by other terms of the derivatives, such as foreign currency exchange rates, interest rates or commodity prices.

Gains (Losses) on derivative instruments are categorized as follows:

(Millions of dollars)Three Months Ended March 31
Fair Value / Undesignated HedgesCash Flow Hedges
Gains (Losses) Recognized on the Consolidated Statement of Results of Operations1
Gains (Losses) Recognized in AOCI
Gains (Losses) Reclassified from AOCI2
202220212022202120222021
Foreign exchange contracts$(63)$78 $(9)$72 $26 $129 
Interest rate contracts7 7 56 7 (7)(11)
Commodity contracts93 20     
Total$37 $105 $47 $79 $19 $118 
1 Foreign exchange contract and Commodity contract gains (losses) are included in Other income (expense). Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products.
2 Foreign exchange contract gains (losses) are primarily included in Sales of Machinery, Energy & Transportation and Other income (expense) in the Consolidated Statement of Results of Operations. Interest rate contract gains (losses) are primarily included in Interest expense of Financial Products in the Consolidated Statement of Results of Operations.

12

The following amounts were recorded on the Consolidated Statement of Financial Position related to cumulative basis adjustments for fair value hedges:

(Millions of dollars)Carrying Value of the Hedged LiabilitiesCumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
March 31, 2022December 31, 2021March 31, 2022December 31, 2021
Long-term debt due within one year$750 $755 $ $5 
Long-term debt due after one year2,419 1,304 (87)(2)
Total$3,169 $2,059 $(87)$3 

We enter into International Swaps and Derivatives Association (ISDA) master netting agreements within ME&T and Financial Products that permit the net settlement of amounts owed under their respective derivative contracts. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable for contracts due on the same date and in the same currency for similar types of derivative transactions. The master netting agreements generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event.

Collateral is generally not required of the counterparties or of our company under the master netting agreements. As of March 31, 2022 and December 31, 2021, no cash collateral was received or pledged under the master netting agreements.

The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event was as follows:

(Millions of dollars)March 31, 2022December 31, 2021
AssetsLiabilitiesAssetsLiabilities
Gross Amounts Recognized$462 $(302)$342 $(130)
Financial Instruments Not Offset(152)152 (114)114 
Cash Collateral Received    
Net Amount$310 $(150)$