Business Combinations

3 Months Ended

Mar. 31, 2012

Business Combinations

Business Combinations

18.Business Combinations

Caterpillar Tohoku Ltd

In March 2012, we acquired 100 percent of the stock of Caterpillar Tohoku Ltd (Cat Tohoku). Cat Tohoku was an independently owned and operated dealership providing sales, rental, service and after market support for Caterpillar machines and engines in the northeastern part of Japan. The purchase price, net of $18 million of acquired cash, was approximately $202 million. The purchase price included the assumption of $77 million in third party debt as well as $64 million net trade payables due to Caterpillar. We paid approximately $59 million at closing and recognized a payable of $21 million for estimated consideration due in March 2013. The acquisition of Cat Tohoku supports Caterpillar’s efforts to restructure its distribution network in Japan.

The transaction was financed with available cash. Tangible assets acquired of $251 million primarily include cash of $18 million, receivables of $33 million, inventory of $26 million, and property, plant and equipment of $157 million. Finite-lived intangible assets acquired were $8 million. Liabilities assumed of $132 million, recorded at their fair values, primarily included debt of $77 million and accounts payable of $39 million. Goodwill of $16 million, which is deductible for income tax purposes, represents the excess of cost over the fair value of net tangible assets acquired. These values represent a preliminary allocation of the purchase price subject to finalization of post-closing procedures. The results of the acquired business for the period from the acquisition date are included in the accompanying consolidated financial statements and are reported in the Construction Industries segment in Note 14. 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.