Caterpillar Reports Record Sales and Revenues and Profit for 2012; Inventory Reduced $2 Billion in the Fourth Quarter
Caterpillar Reports Record Sales and Revenues and Profit for 2012; Inventory
Reduced $2 Billion in the Fourth Quarter
PR Newswire
PEORIA, Ill., Jan. 28, 2013
PEORIA, Ill., Jan. 28, 2013 /PRNewswire/ -- Despite economic and political
uncertainty in the United States, continued economic turmoil in much of Europe
and slower growth in China, Caterpillar Inc. (NYSE: CAT) today announced
record 2012 sales and revenues of $65.875 billion, an increase of 10 percent
from $60.138 billion in 2011. Profit per share of $8.48 was also an all-time
record, including the impact of the previously announced goodwill impairment
charge of $0.87 per share related to Siwei. The 2012 profit per share of $8.48
was up 15 percent from $7.40 in 2011. Profit was $5.681 billion, an increase
of 15 percent from $4.928 billion in 2011.
Fourth-quarter 2012 sales and revenues were $16.075 billion, down $1.168
billion from $17.243 billion in the fourth quarter of 2011. The impact of
changes in dealer new machine inventories lowered sales by about $1.4 billion
as dealers reduced inventories about $600 million in the fourth quarter of
2012, compared with an increase of about $800 million in the fourth quarter of
2011.
Fourth-quarter 2012 profit was $697 million compared with $1.547 billion in
the fourth quarter of 2011. Profit was $1.04 per share in the fourth quarter
of 2012 compared with profit per share of $2.32 in the fourth quarter of 2011.
Fourth-quarter 2012 profit was negatively impacted by the previously announced
goodwill impairment charge of $580 million, or $0.87 per share. Lower sales
and revenues and the cost impact from sharply lower production and the $2
billion decline in Caterpillar inventory also had a negative impact on
fourth-quarter profit. Those impacts were partially offset by a $300 million
positive impact related to the settlement of prior-year tax returns.
"From an operational standpoint, 2012 was a very successful year with record
sales and profit in a tough economic climate. Considering the weak economy in
the United States, along with much of Europe in recession and China slowing,
we had a solid year. Our incremental operating profit pull through was very
good, we made progress adjusting inventory levels, and our quality and safety
indicators continued to improve," said Caterpillar Chairman and Chief
Executive Officer Doug Oberhelman.
"I'm extremely pleased with our performance on reducing inventory $2 billion
in the fourth quarter. As the world economy began to soften at mid year, we
increased our focus on reducing inventory. Cat dealers also worked to lower
their inventories, and, as a result, reduced their order rates during the
second half of 2012. The result was a substantial reduction in our production
levels and inventory. The reductions had a significantly negative impact on
fourth-quarter sales and profit. The $2 billion inventory reduction in the
fourth quarter was a remarkable effort, but we're not done. Reduced production
levels are likely to continue at least through the first quarter of 2013 until
inventories and dealer order rates move back in line with end-user demand,"
Oberhelman added.
2013 Outlook
The outlook for 2013 is sales and revenues in a range of $60 to $68 billion
and profit per share of $7.00 to $9.00.
"The range of our 2013 outlook reflects the level of uncertainty we see in the
world today. We're encouraged by recent improvements in economic indicators,
but remain cautious. While we expect some improvement in the U.S. economy,
growth is expected to be relatively weak. We believe China's economy will
continue to improve, but not to the growth rates of 2010 and 2011. We also
remain concerned about Europe and expect economies in that region will
continue to struggle in 2013," said Oberhelman.
"If the recent improvement in economic indicators continues, 2013 could be
another record year for Caterpillar. We expect the first half of 2013 will be
weaker than the first half of 2012, with better growth in the second half.
However, if, like the last two years, growth and confidence decline in the
second half, 2013 could be a tough year. Either way, as we demonstrated with
inventory reductions in the fourth quarter, our team is prepared to execute
and deliver," Oberhelman added.
Notes:
o Glossary of terms is included on pages 18-19; first occurrence of terms
shown in bold italics.
o Information on non-GAAP financial measures is included on page 20.
For more than 85 years, Caterpillar Inc. has been making sustainable progress
possible and driving positive change on every continent. With 2012 sales and
revenues of $65.875 billion, Caterpillar is the world's leading manufacturer
of construction and mining equipment, diesel and natural gas engines,
industrial gas turbines and diesel-electric locomotives. The company also is a
leading services provider through Caterpillar Financial Services, Caterpillar
Remanufacturing Services and Progress Rail Services. More information is
available at: http://www.caterpillar.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this Press Release relate to future events and
expectations and are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "believe,"
"estimate," "will be," "will," "would," "expect," "anticipate," "plan,"
"project," "intend," "could," "should" or other similar words or expressions
often identify forward-looking statements. All statements other than
statements of historical fact are forward-looking statements, including,
without limitation, statements regarding our outlook, projections, forecasts
or trend descriptions. These statements do not guarantee future performance,
and we do not undertake to update our forward-looking statements.
Caterpillar's actual results may differ materially from those described or
implied in our forward-looking statements based on a number of factors,
including, but not limited to: (i) global economic conditions and economic
conditions in the industries and markets we serve; (ii) government monetary or
fiscal policies and infrastructure spending; (iii) commodity or component
price increases and/or limited availability of raw materials and component
products, including steel; (iv) our and our customers', dealers' and
suppliers' ability to access and manage liquidity; (v) political and economic
risks and instability, including national or international conflicts and civil
unrest; (vi) our and Cat Financial's ability to: maintain credit ratings,
avoid material increases in borrowing costs, and access capital markets; (vii)
the financial condition and credit worthiness of Cat Financial's customers;
(viii) inability to realize expected benefits from acquisitions and
divestitures, including the acquisition of Bucyrus International, Inc. and
Siwei; (ix) international trade and investment policies; (x) challenges
related to Tier 4 emissions compliance; (xi) market acceptance of our products
and services; (xii) changes in the competitive environment, including market
share, pricing and geographic and product mix of sales; (xiii) successful
implementation of capacity expansion projects, cost reduction initiatives and
efficiency or productivity initiatives, including the Caterpillar Production
System; (xiv) sourcing practices of our dealers or original equipment
manufacturers; (xv) compliance with environmental laws and regulations; (xvi)
alleged or actual violations of trade or anti-corruption laws and regulations;
(xvii) additional tax expense or exposure; (xviii) currency fluctuations;
(xix) our or Cat Financial's compliance with financial covenants; (xx)
increased pension plan funding obligations; (xxi) union disputes or other
employee relations issues; (xxii) significant legal proceedings, claims,
lawsuits or investigations; (xxiii) compliance requirements imposed if carbon
emissions legislation and/or regulations are adopted; (xxiv) changes in
accounting standards; (xxv) failure or breach of IT security; (xxvi) adverse
effects of natural disasters; and (xxvii) other factors described in more
detail under "Item 1A. Risk Factors" in our Form 10-K filed with the SEC on
February 21, 2012 for the year ended December 31, 2011. This filing is
available on our website at www.caterpillar.com/secfilings.
Key Points
Fourth Quarter 2012
(Dollars in millions except per share data)
Fourth Quarter Fourth Quarter $ Change % Change
2012 2011
Machinery and Power $ 15,357 $ 16,557 $ (1,200) (7)%
Systems Sales
Financial Products 718 686 32 5%
Revenues
Total Sales and Revenues $ 16,075 $ 17,243 $ (1,168) (7)%
Profit $ 697 $ 1,547 $ (850) (55)%
Profit per common share - $ 1.04 $ 2.32 $ (1.28) (55)%
diluted
Full Year 2012
(Dollars in millions except per share data)
Full Year Full Year $ Change % Change
2012 2011
Machinery and Power $ 63,068 $ 57,392 $ 5,676 10%
Systems Sales
Financial Products 2,807 2,746 61 2%
Revenues
Total Sales and Revenues $ 65,875 $ 60,138 $ 5,737 10%
Profit $ 5,681 $ 4,928 $ 753 15%
Profit per common share - $ 8.48 $ 7.40 $ 1.08 15%
diluted
2012 Highlights
o 2012 sales and revenues of $65.875 billion and profit per share of $8.48
were both all-time records.
o Inventory was significantly reduced during the fourth quarter of 2012,
down about $2 billion from the third quarter of 2012.
o Machinery and Power Systems (M&PS) operating cash flow was $4.198 billion
in 2012, compared with $7.972 billion in 2011.
o M&PS debt-to-capital ratio was 37.4 percent, down from 42.7 percent a year
earlier.
2013 Outlook
o The outlook for 2013 is sales and revenues in a range of $60 to $68
billion and profit per share of $7.00 to $9.00.
o We expect capital expenditures for 2013 to be slightly below 2012 capital
expenditures of $3.4 billion.
CONSOLIDATED RESULTS
Fourth Quarter 2012 vs. Fourth Quarter 2011
Consolidated Sales and Revenues Comparison
Fourth Quarter 2012 vs. Fourth Quarter 2011
To access this chart, go to http://caterpillar.com for the downloadable
version of Caterpillar 4Q2012 earnings.
The chart above graphically illustrates reasons for the change in Consolidated
Sales and Revenues between the fourth quarter of 2011 (at left) and the fourth
quarter of 2012 (at right). Items favorably impacting sales and revenues
appear as upward stair steps with the corresponding dollar amounts above each
bar, while items negatively impacting sales and revenues appear as downward
stair steps with dollar amounts reflected in parentheses above each bar.
Caterpillar management utilizes these charts internally to visually
communicate with the company's Board of Directors and employees.
Sales and Revenues
Total sales and revenues were $16.075 billion in the fourth quarter of 2012, a
decrease of $1.168 billion, or 7 percent, from the fourth quarter of 2011.
When reviewing the change in sales and revenues, we focus on the following
perspectives:
o Reason for the change: Sales volume decreased $1.655 billion, and the
impact of currency was unfavorable $82 million. The majority of the sales
volume decrease was related to changes in dealer new machine inventories.
These decreases were partially offset by increased price realization of
$421 million and the favorable net impact of acquisitions and divestitures
of $116 million. Financial Products revenues were $32 million higher.
o Sales by geographic region: Excluding acquisitions and divestitures, sales
decreased in all geographic regions except Latin America, with the most
significant decrease in North America. Within Asia/Pacific, decreases in
China and other parts of Asia/Pacific more than offset sales increases in
Australia and Japan. Within EAME, lower sales in Europe and CIS were
partially offset by increased sales in the Middle East and Africa.
o Segment: The decrease in sales was primarily due to Construction
Industries, with sales down 25 percent. Excluding acquisitions and
divestitures, Resource Industries' sales improved 16 percent, and Power
Systems' sales decreased 9 percent. Financial Products' revenues were up 5
percent.
Consolidated Operating Profit
Consolidated Operating Profit Comparison
Fourth Quarter 2012 vs. Fourth Quarter 2011
To access this chart, go to http://caterpillar.com for the downloadable
version of Caterpillar 4Q2012 earnings.
The chart above graphically illustrates reasons for the change in Consolidated
Operating Profit between the fourth quarter of 2011 (at left) and the fourth
quarter of 2012 (at right). Items favorably impacting operating profit appear
as upward stair steps with the corresponding dollar amounts above each bar,
while items negatively impacting operating profit appear as downward stair
steps with dollar amounts reflected in parentheses above each bar. Caterpillar
management utilizes these charts internally to visually communicate with the
company's Board of Directors and employees. The bar entitled Other includes
consolidating adjustments and Machinery and Power Systems other operating
(income) expenses.
Operating profit for the fourth quarter of 2012 was $1.038 billion, a decline
of $922 million from the fourth quarter of 2011. The most significant item was
the goodwill impairment charge related to Siwei of $580 million. The remaining
$342 million decline was primarily the result of higher manufacturing costs
and lower sales volume (which includes the impact of a favorable mix of
products), partially offset by favorable price realization. Manufacturing
costs were unfavorable primarily due to inefficiencies driven by lower
production and declining inventory in the fourth quarter of 2012.
Other Profit/Loss Items
o Interest expense excluding Financial Products increased $8 million from
the fourth quarter of 2011.
o Other income/expense was expense of $11 million compared with income of
$125 million in the fourth quarter of 2011. The decrease was due to the
unfavorable impact of currency gains and losses.
o The provision for income taxes in the fourth quarter of 2012 reflects an
effective tax rate of 30.5 percent compared with 26.5 percent for the
fourth quarter of 2011, excluding the items discussed in the next
paragraph. The increase from 26.5 percent to 30.5 percent is primarily due
to changes in our geographic mix of profits from a tax perspective and the
expiration of the U.S. research and development tax credit. While the
American Taxpayer Relief Act of 2012 extended the credit, the related
benefit will be reported in 2013 results due to the law's enactment in
January 2013.
The 2012 fourth-quarter tax provision includes a benefit of $300 million
from a decrease in tax and interest reserves due to a settlement reached
with the Internal Revenue Service related to 2000 through 2006 U.S. tax
returns. Approximately $200 million of this benefit is related to tax, and
$100 million is related to interest. This was offset by a negative impact
of $237 million from goodwill not deductible for tax purposes related to
the Siwei goodwill impairment and the divestiture of portions of the
Bucyrus distribution business. This compares to a $108 million net benefit
in the fourth quarter of 2011.
o Profit/loss attributable to noncontrolling interests favorably impacted
profit by $12 million compared with the fourth quarter of 2011.
Global Workforce
Caterpillar worldwide full-time employment was 125,341 at the end of 2012
compared with 125,099 at the end of 2011, an increase of 242 full-time
employees. The flexible workforce decreased 6,989 for a net decrease in the
global workforce of 6,747.
The decrease was the result of divestitures and lower production in the fourth
quarter of 2012, partially offset by acquisitions. Divestitures, primarily the
sale of a majority interest in our third party logistics business and portions
of the Bucyrus distribution business, decreased the global workforce by 7,723.
Acquisitions, primarily Siwei, added 4,643 to the global workforce.
December 31,
2012 2011 Change
Full-time employment 125,341 125,099 242
Flexible workforce 17,716 24,705 (6,989)
Total 143,057 149,804 (6,747)
Summary of change
U.S. workforce 33
Non-U.S. workforce (3,700)
(3,667)
Acquisitions/divestitures net (3,080)
Total (6,747)
SEGMENT RESULTS
Sales and Revenues by Geographic Region
(Millions of Total % North % Latin % EAME % Asia/ %
dollars) Change America Change America Change Change Pacific Change
Fourth
Quarter 2012
Construction $ 4,028 (25)% $ 1,445 (17)% $ 600 (23)% $ 882 (28)% $ 1,101 (32)%
Industries^1
Resource
Industries^2 5,776 14% 1,467 (13)% 1,095 42% 1,266 32% 1,948 20%
^
Power 5,307 (6)% 1,994 (9)% 539 (25)% 1,628 (4)% 1,146 9%
Systems^3
All Other 255 (49)% 153 (35)% 16 (38)% 48 (67)% 38 (58)%
Segment^4
Corporate
Items and (9) (12) 1 1 1
Eliminations
Machinery &
Power $ 15,357 (7)% $ 5,047 (14)% $ 2,251 (2)% $ 3,825 (5)% $ 4,234 (3)%
Systems
Sales
Financial
Products 789 5% 422 2% 103 10% 104 (5)% 160 19%
Segment
Corporate
Items and (71) (41) (8) (6) (16)
Eliminations
Financial
Products $ 718 5% $ 381 2% $ 95 9% $ 98 1% $ 144 13%
Revenues
Consolidated
Sales and $ 16,075 (7)% $ 5,428 (13)% $ 2,346 (2)% $ 3,923 (5)% $ 4,378 (3)%
Revenues
Fourth
Quarter 2011
Construction
Industries ^ $ 5,355 $ 1,743 $ 777 $ 1,222 $ 1,613
1
Resource
Industries^2 5,056 1,694 771 962 1,629
^
Power 5,672 2,203 722 1,693 1,054
Systems^3
All Other 496 235 26 145 90
Segment^4
Corporate
Items and (22) (15) (1) (4) (2)
Eliminations
Machinery &
Power $ 16,557 $ 5,860 $ 2,295 $ 4,018 $ 4,384
Systems
Sales
Financial
Products 752 413 94 110 135
Segment
Corporate
Items and (66) (38) (7) (13) (8)
Eliminations
Financial
Products $ 686 $ 375 $ 87 $ 97 $ 127
Revenues
Consolidated
Sales and $ 17,243 $ 6,235 $ 2,382 $ 4,115 $ 4,511
Revenues
^1 Does not include inter-segment sales of $115 million and $142 million in
fourth quarter 2012 and 2011, respectively.
^2 Does not include inter-segment sales of $208 million and $314 million in
fourth quarter 2012 and 2011, respectively.
^3 Does not include inter-segment sales of $455 million and $644 million in
fourth quarter 2012 and 2011, respectively.
^4 Does not include inter-segment sales of $773 million and $865 million in
fourth quarter 2012 and 2011, respectively.
Sales and Revenues by Segment
(Millions of Fourth Sales Price Acquisitions/ Fourth %
dollars) Quarter Volume Realization Currency Divestitures Other Quarter $ Change Change
2011 2012
Construction $ 5,355 $ (1,306) $ 32 $ (53) $ - $ - $ 4,028 $ (1,327) (25)%
Industries
Resource 5,056 301 267 1 151 - 5,776 720 14%
Industries
Power 5,672 (559) 94 (27) 127 - 5,307 (365) (6)%
Systems
All Other 496 (78) 1 (2) (162) - 255 (241) (49)%
Segment
Corporate
Items and (22) (13) 27 (1) - - (9) 13
Eliminations
Machinery &
Power $ 16,557 $ (1,655) $ 421 $ (82) $ 116 $ - $ 15,357 $ (1,200) (7)%
Systems
Sales
Financial
Products 752 - - - - 37 789 37 5%
Segment
Corporate
Items and (66) - - - - (5) (71) (5)
Eliminations
Financial
Products $ 686 $ - $ - $ - $ - $ 32 $ 718 $ 32 5%
Revenues
Consolidated
Sales and $ 17,243 $ (1,655) $ 421 $ (82) $ 116 $ 32 $ 16,075 $ (1,168) (7)%
Revenues
Operating Profit by Segment
Fourth Quarter Fourth Quarter $ %
(Millions of dollars)
2012 2011 Change Change
Construction Industries $ 26 $ 534 $ (508) (95)%
Resource Industries ^ 611 997 (386) (39)%
Power Systems ^ 697 823 (126) (15)%
All Other Segment ^ 126 236 (110) (47)%
Corporate Items and (534) (721) 187
Eliminations
Machinery & Power Systems $ 926 $ 1,869 $ (943) (50)%
Financial Products Segment 180 134 46 34%
Corporate Items and 2 22 (20)
Eliminations
Financial Products $ 182 $ 156 $ 26 17%
Consolidating Adjustments (70) (65) (5)
Consolidated Operating Profit $ 1,038 $ 1,960 $ (922) (47)%
Construction Industries
Construction Industries' sales were $4.028 billion in the fourth quarter of
2012, a decrease of $1.327 billion, or 25 percent, from the fourth quarter of
2011. Sales decreased in all geographic regions of the world, driven by
dealers reducing new machine inventory levels in the fourth quarter of 2012
compared with dealers increasing inventory levels in the fourth quarter of
2011. Dealer-reported new machine inventory decreased about $950 million
during the fourth quarter of 2012 compared with an increase of about $525
million during the fourth quarter of 2011. Dealer deliveries to end users were
about the same as the fourth quarter of 2011.
Construction Industries' profit was $26 million in the fourth quarter of 2012
compared with $534 million in the fourth quarter of 2011. The decrease in
profit was primarily due to lower sales volume and increased manufacturing
costs from inefficiencies driven by lower production and declining inventory
in the fourth quarter of 2012.
Resource Industries
Resource Industries' sales were $5.776 billion in the fourth quarter of 2012,
an increase of $720 million, or 14 percent, from the fourth quarter of 2011.
The sales increase was due to higher volume, improved price realization and an
increase in Bucyrus sales of $102 million. New equipment sales increased,
while sales for aftermarket parts declined. Sales increased in every region of
the world except North America, where declining coal production contributed to
lower sales.
As a result of increased production capability, coupled with our existing
mining order backlog, sales were higher than the fourth quarter of 2011.
However, new orders were well below the fourth quarter of 2011.
Resource Industries' profit was $611 million in the fourth quarter of 2012
compared with $997 million in the fourth quarter of 2011. The decrease was a
result of the goodwill impairment charge related to Siwei of $580 million.
Excluding the impairment charge, segment profit improved as a result of
favorable price realization and higher sales volume, which included a
favorable mix of products. This was partially offset by higher manufacturing
costs primarily due to inefficiencies driven by lower production and declining
inventory in the fourth quarter of 2012.
See discussion on the impact of Bucyrus on page 16.
Power Systems
Power Systems' sales were $5.307 billion in the fourth quarter of 2012, a
decrease of $365 million, or 6 percent, from the fourth quarter of 2011. The
decrease was the result of lower sales volume, partially offset by the
acquisition of MWM Holding GmbH (MWM) and improved price realization.
Sales decreased in all regions except Asia/Pacific. Excluding acquisitions,
sales for petroleum, industrial and electric power applications were lower.
Most of the decline was a result of dealers reducing their inventory levels in
2012 compared with dealers increasing inventory levels in 2011. Rail-related
sales also declined.
Power Systems' profit was $697 million in the fourth quarter of 2012 compared
with $823 million in the fourth quarter of 2011. The decrease was primarily
due to lower sales volume (which includes the impact of a favorable mix of
products), partially offset by favorable price realization.
MWM, acquired during the fourth quarter of 2011, added sales of $127 million,
primarily in EAME, and increased segment profit by $26 million.
Financial Products Segment
Financial Products' revenues were $789 million, an increase of $37 million, or
5 percent, from the fourth quarter of 2011. The increase was primarily due to
the favorable impact from higher average earning assets, partially offset by
the unfavorable impact from lower average financing rates on new and existing
finance receivables and operating leases.
Financial Products' profit was $180 million in the fourth quarter of 2012,
compared with $134 million in the fourth quarter of 2011. The increase was
primarily due to a $34 million favorable impact from lower claims experience
at Cat Insurance and a $32 million favorable impact from higher average
earning assets. These increases were partially offset by a $17 million
increase in the provision for credit losses at Cat Financial.
During 2012, Cat Financial's overall portfolio quality reflected continued
improvement. At the end of 2012, past dues at Cat Financial were 2.26 percent
compared with 2.80 percent at the end of the third quarter of 2012 and 2.89
percent at the end of 2011. Write-offs, net of recoveries, were $46 million
for the fourth quarter of 2012, up from $38 million for the fourth quarter of
2011. Write-offs, net of recoveries, were $102 million for 2012, down from
$158 million for 2011.
As of December 31, 2012, Cat Financial's allowance for credit losses totaled
$426 million or 1.49 percent of net finance receivables, compared with $369
million or 1.47 percent of net finance receivables at year-end 2011.
All Other Segment
All Other Segment includes groups that provide services such as component
manufacturing, remanufacturing and logistics.
The decrease in sales was primarily due to the absence of our third party
logistics business, which was sold in the third quarter of 2012.
The decrease in profit was primarily driven by lower production volume and the
absence of our third party logistics business.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $532 million in the fourth
quarter of 2012, a decrease of $167 million from the fourth quarter of 2011.
Corporate items and eliminations include: corporate-level expenses; timing
differences, as some expenses are reported in segment profit on a cash basis;
retirement benefit costs other than service cost; currency differences, as
segment profit is reported using annual fixed exchange rates; and
inter-segment eliminations.
The decrease in expense from the fourth quarter of 2011 was primarily due to
the favorable impact of currency and timing differences, partially offset by
increased corporate costs. Segment profit for 2012 is based on fixed exchange
rates set at the beginning of 2012, while segment profit for 2011 is based on
fixed exchange rates set at the beginning of 2011. The difference in actual
exchange rates compared with fixed exchange rates is included in corporate
items and eliminations and is not reflected in segment profit.
2013 Outlook
2013 Economic Outlook
World economic conditions, while improving, are still relatively weak.
Indicators improved in many countries in late 2012, suggesting better
prospects for economic growth in 2013. In the large economies, we expect some
improvement in the United States and China, and a continuation of economic
uncertainty in Europe.
Overall, we expect the world economy will begin the year with weak growth and
improve as 2013 unfolds. We anticipate overall world economic growth of at
least 2.5 percent—a small improvement from our estimate of 2.3 percent for
2012.
Key points related to this outlook include:
o Central banks reduced interest rates over the past 15 months and some
further cuts are possible. With inflation low, we expect there will be
little pressure to tighten policies in 2013. With the exception of Europe,
monetary easing will likely offset much of the impacts of tighter fiscal
budgets. Overall, we expect economic policies will be the most favorable
for growth since 2010.
o One sign lower interest rates are working is that both manufacturing and
service purchasing manager indices improved over the past few months. Both
ended 2012 at values that signal growth.
o Another positive sign is that metals prices have improved from their
mid-August 2012 lows, and fourth-quarter data for China indicates
increased imports of coal, iron ore and copper.
o We expect economic growth will improve demand for most metals in 2013, and
average metal prices in 2013 will be higher than 2012. We expect copper
will average $3.75 per pound in 2013 and China port iron ore $135 per ton.
Those prices will likely be attractive for production and investment.
o Coal prices also improved in late 2012, but are currently 5 to 20 percent
below a year ago. We expect that continued relatively low prices for U.S.
natural gas will keep pressure on coal prices in 2013. We are expecting
Central Appalachian coal will average about $65 per ton, slightly higher
than $63 per ton in 2012.
o Average interest rates in developed economies are already below lows
reached during the financial crisis, so prospects for lower rates are
limited. However, some central banks are adding liquidity in their
financial systems as a way to increase economic growth.
o Growth in the developed economies will likely be slow in early 2013 and
improve throughout the year. We expect economic growth will average about
1.5 percent this year, slightly above 2012.
o Financial conditions have improved in the United States in response to
past U.S. Federal Reserve easing. Credit spreads are down, bank capital
ratios are near record highs and banks are easing lending standards. The
Fed's plan to increase monthly bond purchases to $85 billion will likely
help ease financial conditions and increase lending. We expect the U.S.
economy to grow at least 2.5 percent in 2013.
o The underlying fundamentals that support U.S. housing construction
continue to improve. Housing affordability is better, the inventory of
unsold homes has come down significantly over the past few years and home
prices have begun to recover. As a result, we expect housing starts to
exceed 1 million units in 2013, which would be the highest year since
2007.
o Nonresidential building construction in the United States improved in
2012, and we expect further growth in 2013. Vacancy rates are down, and
property prices are up, both trends that we expect to continue.
Infrastructure construction is likely to be higher as we expect state and
local government spending to increase in 2013.
o Interest rates in the Eurozone are at record lows, and credit spreads are
improving. However, economic policies are less aggressive than in Japan
and the United States. As a result, we expect growth in the Eurozone will
struggle to match 2012, and we expect that construction activity will
decline for the sixth consecutive year, reaching the lowest level since at
least 1990.
o We expect the new Japanese government to ease monetary policy and increase
infrastructure spending. We expect Japanese economic growth near 1 percent
in 2013.
o Developing economies have been lowering interest rates for more than a
year, and average rates are close to levels reached during the financial
crisis. Low interest rates will likely contribute to better growth. We
expect that, in the aggregate, developing economies will grow at more than
5 percent in 2013.
o China's economic slowdown in 2012 unfavorably impacted construction in
China and world prices for metals, coal and oil. In the second half of
2012, the Chinese government accelerated credit growth and infrastructure
spending, and, as a result, economic data in the fourth quarter improved.
Our outlook assumes the Chinese government will maintain pro-growth
policies throughout 2013. We expect economic growth near 8.5 percent and a
more favorable environment for construction and commodity demand.
o Most other Asian countries also lowered interest rates in 2012, and we
expect faster economic growth in 2013 than 2012. Better economic growth is
expected to be positive for construction.
o Interest rates in Latin America have also been declining and are at record
lows in Brazil. We expect lower interest rates, higher commodity prices
and better world economic growth will improve economic growth in the
region to about 4 percent in 2013. We also expect construction activity to
improve as a result of better economic growth and large infrastructure
programs.
o Most countries in Africa/Middle East and CIS have maintained economic
policies close to those adopted in the financial crisis, and, as a result,
growth has generally been sustained. We expect pro-growth policies will
continue throughout 2013, allowing about 4-percent economic growth in
Africa/Middle East and in the CIS.
Economic Risks
o Economic policies became more pro-growth in 2012, and, as a result, recent
economic data has been more favorable. Overall, we expect policies to
become even more stimulative, so upside to our outlook is possible. As in
the past, we are concerned that central banks will reverse policies too
early once better economic growth becomes apparent.
o A downside risk is Eurozone growth lagging behind the rest of the world.
As the disparity becomes more evident, concern about the Eurozone economy
and its currency could return.
Sales and Revenues Outlook
We expect 2013 sales and revenues to be in a range of $60 to $68 billion
reflecting both upside and downside potential from $65.9 billion of sales and
revenues in 2012.
We are optimistic that recent positive economic indicators suggest economic
growth in 2013, but we remain cautious about how quickly economic improvement
will translate into higher sales and revenues.
Following are key points related to the 2013 sales and revenues outlook:
o At the middle of our outlook range, sales and revenues are expected to be
about $2 billion lower than in 2012.
o More than all of the decline in sales and revenues is expected to be in
our Resource Industries segment. Mining customers have announced lower
capital expenditures in 2013, and mining equipment in dealer inventories
is expected to decline in 2013.
o Sales and revenues will be negatively impacted about $200 million per
quarter in our All Other segment during the first half of 2013 as a result
of the absence of sales from our third party logistics business, which was
sold in July of 2012.
o We expect that Construction Industries' sales will be flat to up slightly
in 2013 with improving end-user demand largely offset by the impact of
dealers lowering inventories in 2013.
o We expect Power Systems' sales to be relatively flat in 2013 compared with
2012.
o We are expecting price realization to improve about 1 percent in 2013.
2013 Profit Outlook
The outlook for 2013 profit is a range of $7.00 to $9.00 per share. Profit in
2012 was $8.48 per share. Absence of the $580 million ($0.87 per share)
goodwill impairment related to Siwei is the most significant favorable factor
when comparing the 2013 outlook to 2012 results.
Other key points related to our profit outlook for 2013:
o Price realization is expected to be positive to profit in 2013, but the
impact is expected to be about offset by higher depreciation and an
unfavorable sales mix.
o Negative items include lower sales volume and the absence of the $273
million pre-tax gain on the sale of a majority interest of our third party
logistics business in the third quarter of 2012.
o Absence of the $300 million favorable tax benefit from the settlement of
prior-year returns in the fourth quarter of 2012 will be negative, but
will be partially offset by the expectation of a favorable discrete tax
benefit of about $85 million in 2013 related to U.S. tax law changes that
were enacted in 2013, but were retroactive to 2012.
o Excluding discrete items, we expect the effective tax rate for 2013 to be
near the 30.5 percent rate in 2012.
o Capital expenditures in 2013 are expected to be slightly below the $3.4
billion in 2012.
First Quarter of 2013
While we are not providing a specific sales and revenues and profit outlook
for the first quarter of 2013, we are expecting that sales and revenues in the
first quarter are likely to be significantly lower than the first quarter of
2012. The middle of our full-year outlook for sales and revenues is about $2
billion below 2012 sales and revenues. We expect that sales and revenues will
decline more than $2 billion in the first quarter of 2013 compared with the
first quarter of 2012.
Much of the expected decline in first-quarter sales is a result of the
continuation of reduced production as dealers are expected to continue to
lower their new machine inventories. We expect that dealer inventory
reductions will be negative to sales in the first quarter of 2013, while in
the first quarter of 2012 dealers increased inventory which benefitted
Caterpillar sales.
Profit is also expected to be significantly lower in the first quarter of 2013
than in the first quarter of 2012—a result of lower expected sales and the
negative cost impact of continuing low production levels and declining
inventory.
QUESTIONS AND ANSWERS
Your inventory, which had been a concern, declined substantially in the
Q1: fourth quarter. Can you describe what you did during the quarter to lower
inventory and how it impacted your fourth-quarter results?
We are pleased with the work that was done throughout the company to
achieve significant and orderly inventory reduction in the fourth
quarter. The groundwork began around mid-year as economic indicators
began to soften. Based on softening economic conditions and the amount of
inventory we had available in our Product Distribution Centers (PDCs),
A: dealers also took action to lower their inventories. As a result, new
orders from dealers declined sharply in the third quarter, and we began
lowering production schedules and incoming material from suppliers around
the world. While production schedules began to decline in the third
quarter, the most significant impacts on production and the flow of
incoming material were in the fourth quarter.
Our actions, coupled with dealer inventory reductions, had a significant
negative impact on fourth-quarter sales and profit. For sales, the
negative impact of dealer inventory changes was about the same as the
total company decline in sales and revenues from the fourth quarter of
2011 to the fourth quarter of 2012. The sales decline, along with the
negative cost impact from lower production and declining inventory, were
significantly unfavorable to profit.
Q2: Is inventory at about the right level, or do you expect further
reductions?
Yes, we expect further inventory reductions as production levels will
continue to decline at least through the first quarter of 2013. However,
A: we expect sales will be lower in the first quarter of 2013 so the decline
in inventory will not likely be as significant as in the fourth quarter
of 2012.
While you did not provide specific sales and profit guidance for the
Q3: first quarter of 2013, your outlook reflects caution regarding the first
quarter. Why?
The first quarter is typically a seasonally weaker quarter for dealer
sales. The impact of the seasonal weakness is usually partially offset in
Caterpillar sales as dealers add to inventories ahead of seasonally
A: stronger second-quarter demand. We do not expect dealers will add
inventory in the first quarter as they usually do, rather, we expect
dealers will continue to reduce their inventories until they are right
sized with demand. We expect this will lead to a weak quarter for
Caterpillar sales well below the first quarter of 2012.
Q4: Dealer inventory declined in the fourth quarter of 2012. What are your
expectations for 2013?
Although dealer new machine inventory declined in the fourth quarter, it
increased more than $1 billion during full-year 2012. Over the course of
2012, we continued to ramp up inventory in our PDCs to better serve
A: dealers and customers. As a result, we expect that dealers will be able
to reduce their inventories further in 2013. We expect that dealers will
reduce inventories by more than they increased in 2012 and will likely
end 2013 with inventory below year-end 2011 levels.
Q5: Can you comment on your order backlog at the end of the fourth quarter?
At the end of the fourth quarter, the backlog was $19.6 billion. This
represents a $3.5 billion reduction from the end of the third quarter of
2012 and a $10.2 billion reduction from year-end 2011. The most
A: significant decrease in the fourth quarter of 2012 was in Resource
Industries. Although dealer deliveries to end users in the fourth quarter
of 2012 remained about flat compared with the third quarter of 2012,
orders received from Cat dealers have continued to be well below end-user
demand.
We can calculate incremental operating profit pull through, but the
Q6: impact of your acquisitions and divestitures makes the calculation
difficult. Can you adjust 2012 for acquisitions, divestitures and
currency impacts?
The following table shows the change in sales and revenues and operating
A: profit. It excludes the impact of acquisitions and divestitures that
occurred during 2011 or 2012, and it adjusts sales and operating profit
changes for the impact of currency changes.
(Millions of dollars)
2012 2011 Change
Sales and Revenues $ 65,875 $ 60,138 $ 5,737
Acquisitions and Divestitures (5,521) (2,853) (2,668)
Sales and Revenues excluding Acquisitions 60,354 57,285 3,069
and Divestitures
Sales Currency Impact 582 — 582
Sales and Revenues excluding Acquisitions, $ 60,936 $ 57,285 $ 3,651
Divestitures and Currency Impacts
Operating Profit $ 8,573 $ 7,153 $ 1,420
Acquisitions and Divestitures Operating (103) (9) (94)
(Profit) / Loss
Operating Profit excluding Acquisitions and 8,470 7,144 1,326
Divestitures
Operating Profit Currency Impact (110) — (110)
Operating Profit excluding Acquisitions, $ 8,360 $ 7,144 $ 1,216
Divestitures and Currency Impacts
Incremental Margin Rate excluding Acquisitions and Divestitures 43%
Impacts
Incremental Margin Rate excluding Acquisitions, Divestitures and 33%
Currency Impacts
Q7: Can you comment on expense related to your short-term incentive
compensation plans in 2012?
A: Short-term incentive compensation expense is directly related to financial
and operational performance.
For 2012, the expense was about $825 million—$230 million in the first
quarter, $265 million in the second quarter, $130 million in the third
quarter and $200 million in the fourth quarter. In 2011, the total expense
was about $1.2 billion.
Q8: Can you summarize the impact of Bucyrus operations on 2012 operating
profit?
A: Following is a table that summarizes the impact of Bucyrus on
fourth-quarter and full-year 2011 and 2012 results.
Impact of Bucyrus on Profit
Millions of dollars
Impact Excluding Divestitures Fourth Fourth Full Year Full Year
Gain/(Loss) Quarter Quarter
2012 2011 2012 2011
Sales $ 1,491 $ 1,389 $ 4,758 $ 2,524
Cost of goods sold (1,269) (1,140) (3,716) (2,159)
SG&A (161) (161) (635) (351)
R&D (40) (14) (153) (26)
Other operating income (costs) 5 (7) 3 (84)
Operating profit (loss) 26 67 257 (96)
Interest expense (28) (35) (130) (79)
Other income (expense) (9) (1) (12) (228)
Profit (loss) before tax (11) 31 115 (403)
Income tax (provision)/benefit 5 (3) (40) 133
Profit (loss) after tax of cons. (6) 28 75 (270)
companies
Profit (loss) attributable to — (1) (1) (1)
non-controlling interest
Profit/(loss) $ (6) $ 27 $ 74 $ (271)
Distribution Business Divestitures
Gain/(Loss)
SG&A $ (44) $ (17) $ (177) $ (32)
Other operating income (costs) 124 96 310 96
Impact on operating profit 80 79 133 64
Income tax (provision)/benefit (62) (61) (161) (55)
Profit/(loss) $ 18 $ 18 $ (28) $ 9
Fourth-quarter 2012 operating profit was unfavorably impacted by $58 million
to correct for an overstatement of inventory resulting from previously
recorded profit on inter-company sales. This error favorably impacted 2011
operating profit by $24 million and first-quarter 2012 operating profit by $34
million.
Q9: Can you comment on M&PS operating cash flow for 2012?
Machinery and Power Systems (M&PS) operating cash flow was $4.198 billion
in 2012, compared with $7.972 billion in 2011. The decrease was due to
unfavorable changes in working capital, most significantly accounts
A: payable. The reduction in payables reflects a decline in material
purchases to support inventory reductions achieved in the fourth quarter
of 2012. In addition, tax payments, pension contributions and short-term
incentive compensation payments were higher in 2012.
The following questions and answers relate to the accounting misconduct at
Siwei that was announced on January 18, 2013:
Q10: Does the discovery of misconduct at Siwei change Caterpillar's strategy
for China or its view of the mining industry?
No. Caterpillar has 23 existing manufacturing facilities in China, four
new facilities under construction, four Research & Development (R&D)
centers and three logistics and parts centers, employing more than 15,000
people across the country. In addition, China produces and consumes more
coal than any other country in the world. Our strategy to expand our coal
mining business in China is unchanged, and we are optimistic about the
underground coal mining equipment opportunities.
The accounting
misconduct that occurred at Siwei does not reflect the way Caterpillar
A: does business and is not in keeping with our Worldwide Code of Conduct.
The actions of the individuals involved were clearly wrong and purposely
designed to overstate the profitability of the company prior to our
acquisition. This does not change our plans to develop, grow and improve
the business.
The acquisition is aligned with Caterpillar's strategy to
expand in the rapidly growing Chinese coal mining equipment industry
utilizing the Siwei roof support products and manufacturing capabilities,
combined with Caterpillar's strong commitment to product innovation and
safety, to help our mining customers in China become more efficient and
safer within their mines.
Q11: What is Caterpillar's due diligence process for mergers and acquisitions?
We believe our process is rigorous and robust and includes Caterpillar
personnel and outside accounting, legal and financial advisors. It is
A: important to understand that Siwei was a publicly traded company with
audited financial statements. What we discovered at Siwei following the
acquisition was deliberate, multi-year, coordinated accounting misconduct
that was concealed by the persons responsible.
Q12: Can you provide more details about the nature of the accounting
misconduct?
Caterpillar first became concerned about an issue when discrepancies were
identified in November 2012, between the inventory recorded in Siwei's
accounting records and the company's actual physical inventory. This was
determined by a physical inventory count conducted at Siwei as part of
Caterpillar's integration process. Caterpillar promptly launched a
A: comprehensive review and investigation into the nature and source of this
discrepancy. This extensive review has identified inappropriate
accounting practices involving improper cost allocation that resulted in
overstated profit. The review further identified improper revenue
recognition practices involving early and, at times unsupported, revenue
recognition. This review is ongoing.
Q13: Have the issues at Siwei had an impact on your 2013 outlook?
A: We do not expect the matters related to Siwei to have a significant
impact on Caterpillar's 2013 sales and revenues or profit.
Q14: Will there be litigation as a result of the Siwei investigation?
Caterpillar was misled by the accounting misconduct at Siwei. There has
been a tremendous amount of time, energy and resources dedicated to this
investigation to date. But, we are not done. We are putting in more
A: effort to finish our investigation as we consider all our options to
recover our losses and hold those responsible accountable for their
wrongdoing. Caterpillar has a long-standing policy not to comment on
pending or contemplated litigation, and further comment is not
appropriate at this time.
GLOSSARY OF TERMS
All Other Segment – Primarily includes activities such as: the
remanufacturing of Cat engines and components and remanufacturing services
for other companies as well as the product management, development,
manufacturing, marketing and product support of undercarriage, specialty
products, hardened bar stock components and ground engaging tools
primarily for Caterpillar products; logistics services; the product
1. management, development, marketing, sales and product support of
on-highway vocational trucks for North America (U.S. & Canada only);
distribution services responsible for dealer development and
administration, dealer portfolio management and ensuring the most
efficient and effective distribution of machines, engines and parts; and
the 50/50 joint venture with Navistar (NC2) until it became a wholly owned
subsidiary of Navistar effective September 29, 2011. On July 31, 2012, we
sold a majority interest in Caterpillar's third party logistics business.
2. Consolidating Adjustments – Eliminations of transactions between Machinery
and Power Systems and Financial Products.
Construction Industries – A segment responsible for small and core
construction machines. Responsibility includes business strategy, product
design, product management and development, manufacturing, marketing, and
sales and product support. The product portfolio includes backhoe loaders,
small wheel loaders, small track-type tractors, skid steer loaders,
3. multi-terrain loaders, mini excavators, compact wheel loaders, select work
tools, small, medium and large track excavators, wheel excavators, medium
wheel loaders, medium track-type tractors, track-type loaders, motor
graders and pipe layers. In addition, Construction Industries has
responsibility for Power Systems and components in Japan and an integrated
manufacturing cost center that supports Machinery and Power Systems
businesses.
Currency – With respect to sales and revenues, currency represents the
translation impact on sales resulting from changes in foreign currency
exchange rates versus the U.S. dollar. With respect to operating profit,
currency represents the net translation impact on sales and operating
costs resulting from changes in foreign currency exchange rates versus the
U.S. dollar. Currency includes the impact on sales and operating profit
4. for the Machinery and Power Systems lines of business only; currency
impacts on Financial Products revenues and operating profit are included
in the Financial Products portions of the respective analyses. With
respect to other income/expense, currency represents the effects of
forward and option contracts entered into by the company to reduce the
risk of fluctuations in exchange rates and the net effect of changes in
foreign currency exchange rates on our foreign currency assets and
liabilities for consolidated results.
Debt-to-Capital Ratio – A key measure of financial strength used by both
management and our credit rating agencies. The metric is a ratio of
5. Machinery and Power Systems debt (short-term borrowings plus long-term
debt) and redeemable noncontrolling interest to the sum of Machinery and
Power Systems debt, redeemable noncontrolling interest and stockholders'
equity.
6. EAME – A geographic region including Europe, Africa, the Middle East and
the Commonwealth of Independent States (CIS).
Earning Assets – Assets consisting primarily of total finance receivables
7. net of unearned income, plus equipment on operating leases, less
accumulated depreciation at Cat Financial.
Financial Products Segment – Provides financing to customers and dealers
for the purchase and lease of Caterpillar and other equipment, as well as
some financing for Caterpillar sales to dealers. Financing plans include
8. operating and finance leases, installment sale contracts, working capital
loans and wholesale financing plans. The segment also provides various
forms of insurance to customers and dealers to help support the purchase
and lease of our equipment.
9. Latin America – Geographic region including Central and South American
countries and Mexico.
Machinery and Power Systems (M&PS) – Represents the aggregate total of
10. Construction Industries, Resource Industries, Power Systems, and All Other
Segment and related corporate items and eliminations.
Machinery and Power Systems Other Operating (Income) Expenses – Comprised
11. primarily of gains/losses on disposal of long-lived assets, long-lived
asset impairment charges, pension curtailment charges and employee
redundancy costs.
Manufacturing Costs – Manufacturing costs exclude the impacts of currency
and represent the volume-adjusted change for variable costs and the
absolute dollar change for period manufacturing costs. Variable
manufacturing costs are defined as having a direct relationship with the
volume of production. This includes material costs, direct labor and other
12. costs that vary directly with production volume such as freight, power to
operate machines and supplies that are consumed in the manufacturing
process. Period manufacturing costs support production but are defined as
generally not having a direct relationship to short-term changes in
volume. Examples include machinery and equipment repair, depreciation on
manufacturing assets, facility support, procurement, factory scheduling,
manufacturing planning and operations management.
Power Systems – A segment responsible for the product management,
development, manufacturing, marketing, sales and product support of
reciprocating engine powered generator sets, integrated systems used in
the electric power generation industry, reciprocating engines and
integrated systems and solutions for the marine and petroleum industries;
13. reciprocating engines supplied to the industrial industry as well as
Caterpillar machinery; the product management, development, manufacturing,
marketing, sales and product support of turbines and turbine-related
services; the development, manufacturing, remanufacturing, maintenance,
leasing and service of diesel-electric locomotives and components and
other rail-related products and services.
Price Realization – The impact of net price changes excluding currency and
14. new product introductions. Consolidated price realization includes the
impact of changes in the relative weighting of sales between geographic
regions.
Resource Industries – A segment responsible for business strategy, product
design, product management and development, manufacturing, marketing and
sales and product support for large track-type tractors, large mining
trucks, underground mining equipment, tunnel boring equipment, large wheel
loaders, off-highway trucks, articulated trucks, wheel tractor scrapers,
wheel dozers, compactors, select work tools, forestry products, paving
products, machinery components and electronics and control systems. In
addition, Resource Industries manages areas that provide services to other
15. parts of the company, including integrated manufacturing, research and
development and coordination of the Caterpillar Production System. On July
8, 2011, the acquisition of Bucyrus International, Inc. was completed.
This added the responsibility for business strategy, product design,
product management and development, manufacturing, marketing and sales and
product support for electric rope shovels, draglines, hydraulic shovels,
drills, highwall miners and electric drive off-highway trucks to Resource
Industries. In addition, Resource Industries segment profit includes
Bucyrus acquisition-related costs and the impact from divestiture of
portions of the Bucyrus distribution business.
Sales Volume – With respect to sales and revenues, sales volume represents
the impact of changes in the quantities sold for Machinery and Power
Systems as well as the incremental revenue impact of new product
introductions, including emissions-related product updates. With respect
16. to operating profit, sales volume represents the impact of changes in the
quantities sold for Machinery and Power Systems combined with product mix
as well as the net operating profit impact of new product introductions,
including emissions-related product updates. Product mix represents the
net operating profit impact of changes in the relative weighting of
Machinery and Power Systems sales with respect to total sales.
Siwei – ERA Mining Machinery Limited (ERA), including its wholly-owned
subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co.,
17. Ltd., commonly known as Siwei, which was acquired during the second
quarter of 2012. Siwei primarily designs, manufactures, sells and supports
underground coal mining equipment in China and is included in our Resource
Industries segment.
NON-GAAP FINANCIAL MEASURES
The following definition is provided for "non-GAAP financial measures" in
connection with Regulation G issued by the Securities and Exchange Commission.
This non-GAAP financial measure has no standardized meaning prescribed by U.S.
GAAP and therefore is unlikely to be comparable to the calculation of similar
measures for other companies. Management does not intend this item to be
considered in isolation or substituted for the related GAAP measure.
Machinery and Power Systems
Caterpillar defines Machinery and Power Systems as it is presented in the
supplemental data as Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis. Machinery and Power Systems
information relates to the design, manufacture and marketing of our products.
Financial Products information relates to the financing to customers and
dealers for the purchase and lease of Caterpillar and other equipment. The
nature of these businesses is different, especially with regard to the
financial position and cash flow items. Caterpillar management utilizes this
presentation internally to highlight these differences. We also believe this
presentation will assist readers in understanding our business. Pages 24-29
reconcile Machinery and Power Systems with Financial Products on the equity
basis to Caterpillar Inc. consolidated financial information.
Caterpillar's latest financial results and outlook are also available via:
Telephone:
(800) 228-7717 (Inside the United States and Canada)
(858) 764-9492 (Outside the United States and Canada)
Internet:
http://www.caterpillar.com/investor
http://www.caterpillar.com/irwebcast (live broadcast/replays of
quarterly conference call)
Caterpillar Inc.
Condensed Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Sales and revenues:
Sales of Machinery and Power Systems $ 15,357 $ 16,557 $ 63,068 $ 57,392
Revenues of Financial Products 718 686 2,807 2,746
Total sales and revenues 16,075 17,243 65,875 60,138
Operating costs:
Cost of goods sold 11,899 12,763 47,055 43,578
Selling, general and administrative 1,591 1,487 5,919 5,203
expenses
Research and development expenses 613 604 2,466 2,297
Interest expense of Financial 198 203 797 826
Products
Goodwill impairment charge 580 — 580 —
Other operating (income) expenses 156 226 485 1,081
Total operating costs 15,037 15,283 57,302 52,985
Operating profit 1,038 1,960 8,573 7,153
Interest expense excluding Financial 115 107 467 396
Products
Other income (expense) (11) 125 130 (32)
Consolidated profit before taxes 912 1,978 8,236 6,725
Provision (benefit) for income taxes 214 416 2,528 1,720
Profit of consolidated companies 698 1,562 5,708 5,005
Equity in profit (loss) of 2 — 14 (24)
unconsolidated affiliated companies
Profit of consolidated and affiliated 700 1,562 5,722 4,981
companies
Less: Profit (loss) attributable to 3 15 41 53
noncontrolling interests
Profit ^1 $ 697 $ 1,547 $ 5,681 $ 4,928
Profit per common share $ 1.07 $ 2.39 $ 8.71 $ 7.64
Profit per common share – diluted^2 $ 1.04 $ 2.32 $ 8.48 $ 7.40
Weighted average common shares
outstanding (millions)
- Basic 654.4 647.1 652.6 645.0
- Diluted^2 669.3 665.9 669.6 666.1
Cash dividends declared per common $ 1.04 $ 0.92 $ 2.02 $ 1.82
share
^1 Profit attributable to common stockholders.
^2 Diluted by assumed exercise of stock-based compensation awards using the
treasury stock method.
Caterpillar Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
(Millions of dollars)
December 31, December 31,
2012 2011
Assets
Current assets:
Cash and short-term investments $ 5,490 $ 3,057
Receivables - trade and other 10,092 10,285
Receivables – finance 8,860 7,668
Deferred and refundable income 1,547 1,580
taxes
Prepaid expenses and other current 988 994
assets
Inventories 15,547 14,544
Total current assets 42,524 38,128
Property, plant and equipment – net 16,461 14,395
Long-term receivables - trade and other 1,316 1,130
Long-term receivables – finance 14,029 11,948
Investments in unconsolidated 272 133
affiliated companies
Noncurrent deferred and refundable 2,011 2,157
income taxes
Intangible assets 4,016 4,368
Goodwill 6,942 7,080
Other assets 1,785 2,107
Total assets $ 89,356 $ 81,446
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery and Power $ 636 $ 93
Systems
-- Financial Products 4,651 3,895
Accounts payable 6,753 8,161
Accrued expenses 3,667 3,386
Accrued wages, salaries and 1,911 2,410
employee benefits
Customer advances 2,978 2,691
Dividends payable — 298
Other current liabilities 2,055 1,967
Long-term debt due within one year:
-- Machinery and Power 1,113 558
Systems
-- Financial Products 5,991 5,102
Total current liabilities 29,755 28,561
Long-term debt due after one year:
-- Machinery and Power 8,666 8,415
Systems
-- Financial Products 19,086 16,529
Liability for postemployment benefits 11,085 10,956
Other liabilities 3,182 3,583
Total liabilities 71,774 68,044
Redeemable noncontrolling interest — 473
Stockholders' equity
Common stock 4,481 4,273
Treasury stock (10,074) (10,281)
Profit employed in the business 29,558 25,219
Accumulated other comprehensive income (6,433) (6,328)
(loss)
Noncontrolling interests 50 46
Total stockholders' equity 17,582 12,929
Total liabilities, redeemable noncontrolling $ 89,356 $ 81,446
interest and stockholders' equity
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Twelve Months Ended
December 31,
2012 2011
Cash flow from operating activities:
Profit of consolidated and affiliated companies $ 5,722 $ 4,981
Adjustments for non-cash items:
Depreciation and amortization 2,813 2,527
Goodwill impairment charge 580 —
Other (191) 457
Changes in assets and liabilities, net of acquisitions
and divestitures:
Receivables – trade and other (173) (1,345)
Inventories (1,149) (2,927)
Accounts payable (1,868) 1,555
Accrued expenses 183 308
Accrued wages, salaries and employee (490) 619
benefits
Customer advances 241 173
Other assets – net 252 (91)
Other liabilities – net (679) 753
Net cash provided by (used for) operating activities 5,241 7,010
Cash flow from investing activities:
Capital expenditures – excluding equipment leased to (3,350) (2,515)
others
Expenditures for equipment leased to others (1,726) (1,409)
Proceeds from disposals of leased assets and property, 1,117 1,354
plant and equipment
Additions to finance receivables (12,010) (10,001)
Collections of finance receivables 8,995 8,874
Proceeds from sale of finance receivables 132 207
Investments and acquisitions (net of cash acquired) (618) (8,184)
Proceeds from sale of businesses and investments (net 1,199 376
of cash sold)
Proceeds from sale of available-for-sale securities 306 247
Investments in available-for-sale securities (402) (336)
Other – net 167 (40)
Net cash provided by (used for) investing activities (6,190) (11,427)
Cash flow from financing activities:
Dividends paid (1,617) (1,159)
Distribution to noncontrolling interests (6) (3)
Common stock issued, including treasury shares 52 123
reissued
Excess tax benefit from stock-based compensation 192 189
Acquisitions of noncontrolling interests (449) (8)
Proceeds from debt issued (original maturities greater 16,015 15,460
than three months)
Payments on debt (original maturities greater than (11,099) (10,593)
three months)
Short-term borrowings – net (original maturities three 461 (43)
months or less)
Net cash provided by (used for) financing activities 3,549 3,966
Effect of exchange rate changes on cash (167) (84)
Increase (decrease) in cash and short-term investments 2,433 (535)
Cash and short-term investments at beginning of period 3,057 3,592
Cash and short-term investments at end of period $ 5,490 $ 3,057
All short-term investments, which consist primarily of highly liquid
investments with original maturities of three months or less, are considered
to be cash equivalents.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Three Months Ended December 31, 2012
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Sales and revenues:
Sales of Machinery and $ 15,357 $ 15,357 $ — $ —
Power Systems
Revenues of Financial 718 — 807 (89) ^2
Products
Total sales and revenues 16,075 15,357 807 (89)
Operating costs:
Cost of goods sold 11,899 11,899 — —
Selling, general and 1,591 1,426 188 (23) ^3
administrative expenses
Research and development 613 613 — —
expenses
Interest expense of 198 — 199 (1) ^4
Financial Products
Goodwill impairment charge 580 580 — —
Other operating (income) 156 (87) 238 5 ^3
expenses
Total operating costs 15,037 14,431 625 (19)
Operating profit 1,038 926 182 (70)
Interest expense excluding 115 126 — (11) ^4
Financial Products
Other income (expense) (11) (84) 14 59 ^5
Consolidated profit before 912 716 196 —
taxes
Provision for income taxes 214 168 46 —
Profit of consolidated 698 548 150 —
companies
Equity in profit (loss) of
unconsolidated affiliated 2 2 — —
companies
Equity in profit of
Financial Products' — 147 — (147) ^6
subsidiaries
Profit of consolidated and 700 697 150 (147)
affiliated companies
Less: Profit (loss)
attributable to 3 — 3 —
noncontrolling interests
Profit ^7 $ 697 $ 697 $ 147 $ (147)
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' revenues earned from Machinery and Power
Systems.
^3 Elimination of net expenses recorded by Machinery and Power Systems paid to
Financial Products.
^4 Elimination of interest expense recorded between Financial Products and
Machinery and Power Systems.
Elimination of discount recorded by Machinery and Power Systems on
^5 receivables sold to Financial Products and of interest earned between
Machinery and Power Systems and Financial Products.
^6 Elimination of Financial Products' profit due to equity method of
accounting.
^7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Three Months Ended December 31, 2011
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Sales and revenues:
Sales of Machinery and $ 16,557 $ 16,557 $ — $ —
Power Systems
Revenues of Financial 686 — 766 (80) ^2
Products
Total sales and revenues 17,243 16,557 766 (80)
Operating costs:
Cost of goods sold 12,763 12,763 — —
Selling, general and 1,487 1,344 177 (34) ^3
administrative expenses
Research and development 604 604 — —
expenses
Interest expense of 203 — 203 — ^4
Financial Products
Other operating (income) 226 (23) 230 19 ^3
expenses
Total operating costs 15,283 14,688 610 (15)
Operating profit 1,960 1,869 156 (65)
Interest expense excluding 107 118 — (11) ^4
Financial Products
Other income (expense) 125 63 8 54 ^5
Consolidated profit before 1,978 1,814 164 —
taxes
Provision for income taxes 416 384 32 —
Profit of consolidated 1,562 1,430 132 —
companies
Equity in profit (loss) of
unconsolidated affiliated — — — —
companies
Equity in profit of
Financial Products' — 129 — (129) ^6
subsidiaries
Profit of consolidated and 1,562 1,559 132 (129
affiliated companies
Less: Profit (loss)
attributable to 15 12 3 —
noncontrolling interests
Profit ^7 $ 1,547 $ 1,547 $ 129 $ (129)
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' revenues earned from Machinery and Power
Systems.
^3 Elimination of net expenses recorded by Machinery and Power Systems paid to
Financial Products.
^4 Elimination of interest expense recorded between Financial Products and
Machinery and Power Systems.
Elimination of discount recorded by Machinery and Power Systems on
^5 receivables sold to Financial Products and of interest earned between
Machinery and Power Systems and Financial Products.
^6 Elimination of Financial Products' profit due to equity method of
accounting.
^7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Twelve Months Ended December 31, 2012
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Sales and revenues:
Sales of Machinery and $ 63,068 $ 63,068 $ — $ —
Power Systems
Revenues of Financial 2,807 — 3,160 (353) ^2
Products
Total sales and revenues 65,875 63,068 3,160 (353)
Operating costs:
Cost of goods sold 47,055 47,055 — —
Selling, general and 5,919 5,348 618 (47) ^3
administrative expenses
Research and development 2,466 2,466 — —
expenses
Interest expense of 797 — 801 (4) ^4
Financial Products
Goodwill impairment charge 580 580 — —
Other operating (income) 485 (495) 1,000 (20) ^3
expenses
Total operating costs 57,302 54,954 2,419 (71)
Operating profit 8,573 8,114 741 (282)
Interest expense excluding 467 512 — (45) ^4
Financial Products
Other income (expense) 130 (146) 39 237 ^5
Consolidated profit before 8,236 7,456 780 —
taxes
Provision for income taxes 2,528 2,314 214 —
Profit of consolidated 5,708 5,142 566 —
companies
Equity in profit (loss) of
unconsolidated affiliated 14 14 — —
companies
Equity in profit of
Financial Products' — 555 — (555) ^6
subsidiaries
Profit of consolidated and 5,722 5,711 566 (555)
affiliated companies
Less: Profit (loss)
attributable to 41 30 11 —
noncontrolling interests
Profit ^7 $ 5,681 $ 5,681 $ 555 $ (555)
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' revenues earned from Machinery and Power
Systems.
^3 Elimination of net expenses recorded by Machinery and Power Systems paid to
Financial Products.
^4 Elimination of interest expense recorded between Financial Products and
Machinery and Power Systems.
Elimination of discount recorded by Machinery and Power Systems on
^5 receivables sold to Financial Products and of interest earned between
Machinery and Power Systems and Financial Products.
^6 Elimination of Financial Products' profit due to equity method of
accounting.
^7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Twelve Months Ended December 31, 2011
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Sales and revenues:
Sales of Machinery and $ 57,392 $ 57,392 $ — $ —
Power Systems
Revenues of Financial 2,746 — 3,057 (311) ^2
Products
Total sales and revenues 60,138 57,392 3,057 (311)
Operating costs:
Cost of goods sold 43,578 43,578 — —
Selling, general and 5,203 4,631 621 (49) ^3
administrative expenses
Research and development 2,297 2,297 — —
expenses
Interest expense of 826 — 827 (1) ^4
Financial Products
Other operating (income) 1,081 63 1,026 (8) ^3
expenses
Total operating costs 52,985 50,569 2,474 (58)
Operating profit 7,153 6,823 583 (253)
Interest expense excluding 396 439 — (43) ^4
Financial Products
Other income (expense) (32) (279) 37 210 ^5
Consolidated profit before 6,725 6,105 620 —
taxes
Provision (benefit) for 1,720 1,568 152 —
income taxes
Profit of consolidated 5,005 4,537 468 —
companies
Equity in profit (loss) of
unconsolidated affiliated (24) (24) — —
companies
Equity in profit of
Financial Products' — 453 — (453) ^6
subsidiaries
Profit of consolidated and 4,981 4,966 468 (453)
affiliated companies
Less: Profit (loss)
attributable to 53 38 15 —
noncontrolling interests
Profit ^7 $ 4,928 $ 4,928 $ 453 $ (453)
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' revenues earned from Machinery and Power
Systems.
^3 Elimination of net expenses recorded by Machinery and Power Systems paid to
Financial Products.
^4 Elimination of interest expense recorded between Financial Products and
Machinery and Power Systems.
Elimination of discount recorded by Machinery and Power Systems on
^5 receivables sold to Financial Products and of interest earned between
Machinery and Power Systems and Financial Products.
^6 Elimination of Financial Products' profit due to equity method of
accounting.
^7 Profit attributable to common stockholders.
Caterpillar Inc.
Supplemental Data for Cash Flow
For The Twelve Months Ended December 31, 2012
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Cash flow from
operating activities:
Profit of consolidated
and affiliated $ 5,722 $ 5,711 $ 566 $ (555) ^2
companies
Adjustments for
non-cash items:
Depreciation and 2,813 2,082 731 —
amortization
Undistributed
profit of Financial — (305) — 305 ^3
Products
Goodwill impairment 580 580 — —
charge
Other (191) (298) (88) 195 ^4
Changes in assets and
liabilities, net of
acquisitions and
divestitures:
Receivables - trade (173) — (37) (136) ^4,5
and other
Inventories (1,149) (1,094) — (55) ^4
Accounts payable (1,868) (1,821) (15) (32) ^4
Accrued expenses 183 134 48 1 ^4
Accrued wages,
salaries and (490) (488) (2) —
employee benefits
Customer advances 241 241 — —
Other assets - net 252 275 (7) (16) ^4
Other liabilities - (679) (819) 124 16 ^4
net
Net cash provided by
(used for) operating 5,241 4,198 1,320 (277)
activities
Cash flow from
investing activities:
Capital expenditures -
excluding equipment (3,350) (3,335) (15) —
leased to others
Expenditures for
equipment leased to (1,726) (100) (1,781) 155 ^4,9
others
Proceeds from
disposals of leased 1,117 244 891 (18) ^4
assets and property,
plant and equipment
Additions to finance (12,010) — (18,754) 6,744 ^5,8,9
receivables
Collections of finance 8,995 — 14,787 (5,792) ^5,9
receivables
Net intercompany — — 250 (250) ^5
purchased receivables
Proceeds from sale of 132 — 144 (12) ^5
finance receivables
Net intercompany — (203) 33 170 ^6
borrowings
Investments and
acquisitions (net of (618) (562) — (56) ^9
cash acquired)
Proceeds from sale of
businesses and 1,199 1,943 — (744) ^8
investments (net of
cash sold)
Proceeds from sale of
available-for-sale 306 27 279 —
securities
Investments in
available-for-sale (402) (8) (394) —
securities
Other - net 167 126 41 —
Net cash provided by
(used for) investing (6,190) (1,868) (4,519) 197
activities
Cash flow from
financing activities:
Dividends paid (1,617) (1,617) (250) 250 ^7
Distribution to
noncontrolling (6) (6) — —
interests
Common stock issued,
including treasury 52 52 — —
shares reissued
Excess tax benefit
from stock-based 192 192 — —
compensation
Acquisitions of
noncontrolling (449) (449) — —
interests
Net intercompany — (33) 203 (170) ^6
borrowings
Proceeds from debt
issued (original 16,015 2,209 13,806 —
maturities greater
than three months)
Payments on debt
(original maturities (11,099) (1,107) (9,992) —
greater than three
months)
Short-term borrowings
- net (original 461 (14) 475 —
maturities three
months or less)
Net cash provided by
(used for) financing 3,549 (773) 4,242 80
activities
Effect of exchange rate (167) (80) (87) —
changes on cash
Increase (decrease) in
cash and short-term 2,433 1,477 956 —
investments
Cash and short-term
investments at 3,057 1,829 1,228 —
beginning of period
Cash and short-term
investments at end of $ 5,490 $ 3,306 $ 2,184 $ —
period
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' profit after tax due to equity method of
accounting.
^3 Non-cash adjustment for the undistributed earnings from Financial Products.
^4 Elimination of non-cash adjustments and changes in assets and liabilities
related to consolidated reporting.
^5 Reclassification of Financial Products' cash flow activity from investing
to operating for receivables that arose from the sale of inventory.
^6 Elimination of net proceeds and payments to/from Machinery and Power
Systems and Financial Products.
^7 Elimination of dividend from Financial Products to Machinery and Power
Systems.
Elimination of proceeds received from Financial Products related to
^8 Machinery and Power Systems' sale of portions of the Bucyrus distribution
businesses to Cat dealers.
^9 Reclassification of Financial Products' payments related to Machinery and
Power Systems' acquisition of Caterpillar Tohoku Limited.
Caterpillar Inc.
Supplemental Data for Cash Flow
For The Twelve Months Ended December 31, 2011
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
Consolidated and Power Financial Consolidating
Systems ^1 Products Adjustments
Cash flow from operating
activities:
Profit of consolidated $ 4,981 $ 4,966 $ 468 $ (453) ^2
and affiliated companies
Adjustments for non-cash
items:
Depreciation and 2,527 1,802 725 —
amortization
Other 457 342 (112) 227 ^4
Financial Products'
dividend in excess of — 147 — (147) ^3
profit
Changes in assets and
liabilities, net of
acquisitions and
divestitures:
Receivables - trade (1,345) 286 5 (1,636) ^4,5
and other
Inventories (2,927) (2,924) — (3) ^4
Accounts payable 1,555 1,635 (8) (72) ^4
Accrued expenses 308 282 28 (2) ^4
Accrued wages,
salaries and employee 619 610 9 —
benefits
Customer advances 173 173 — —
Other assets - net (91) (139) 35 13 ^4
Other liabilities - 753 792 (26) (13) ^4
net
Net cash provided by
(used for) operating 7,010 7,972 1,124 (2,086)
activities
Cash flow from investing
activities:
Capital expenditures -
excluding equipment (2,515) (2,503) (12) —
leased to others
Expenditures for
equipment leased to (1,409) (143) (1,342) 76 ^4
others
Proceeds from disposals
of leased assets and 1,354 259 1,173 (78) ^4
property, plant and
equipment
Additions to finance (10,001) — (17,058) 7,057 ^5,8
receivables
Collections of finance 8,874 — 15,260 (6,386) ^5
receivables
Net intercompany — — (1,164) 1,164 ^5
purchased receivables
Proceeds from sale of 207 — 207 —
finance receivables
Net intercompany — 600 41 (641) ^6
borrowings
Investments and
acquisitions (net of (8,184) (8,184) — —
cash acquired)
Proceeds from sale of
businesses and 376 712 11 (347) ^8
investments (net of cash
sold)
Proceeds from sale of
available-for-sale 247 13 234 —
securities
Investments in
available-for-sale (336) (15) (321) —
securities
Other - net (40) (70) 26 4 ^9
Net cash provided by
(used for) investing (11,427) (9,331) (2,945) 849
activities
Cash flow from financing
activities:
Dividends paid (1,159) (1,159) (600) 600 ^7
Distribution to (3) (3) — —
noncontrolling interests
Common stock issued,
including treasury 123 123 4 (4) ^9
shares reissued
Excess tax benefit from 189 189 — —
stock-based compensation
Acquisitions of (8) (1) (7) —
noncontrolling interests
Net intercompany — (41) (600) 641 ^6
borrowings
Proceeds from debt
issued (original 15,460 4,587 10,873 —
maturities greater than
three months)
Payments on debt
(original maturities (10,593) (2,269) (8,324) —
greater than three
months)
Short-term borrowings -
net (original maturities (43) 60 (103) —
three months or less)
Net cash provided by
(used for) financing 3,966 1,486 1,243 1,237
activities
Effect of exchange rate (84) (123) 39 —
changes on cash
Increase (decrease) in
cash and short-term (535) 4 (539) —
investments
Cash and short-term
investments at beginning 3,592 1,825 1,767 —
of period
Cash and short-term
investments at end of $ 3,057 $ 1,829 $ 1,228 $ —
period
^1 Represents Caterpillar Inc. and its subsidiaries with Financial Products
accounted for on the equity basis.
^2 Elimination of Financial Products' profit after tax due to equity method of
accounting.
^3 Elimination of Financial Products' dividend to Machinery and Power Systems
in excess of Financial Products' profit.
^4 Elimination of non-cash adjustments and changes in assets and liabilities
related to consolidated reporting.
^5 Reclassification of Financial Products' cash flow activity from investing
to operating for receivables that arose from the sale of inventory.
^6 Elimination of net proceeds and payments to/from Machinery and Power
Systems and Financial Products.
^7 Elimination of dividend from Financial Products to Machinery and Power
Systems.
^8 Elimination of proceeds received from Financial Products related to
Machinery and Power Systems' sale of Carter Machinery.
^9 Elimination of change in investment and common stock related to Financial
Products.
SOURCE Caterpillar Inc.
Website: http://www.caterpillar.com
Contact: Jim Dugan, Corporate Public Affairs, Caterpillar, +1-309-494-4100
(Office) or +1-309-360-7311 (Mobile), Dugan_Jim@cat.com
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