Caterpillar Reports Best Third-Quarter Sales and Profit in History

PEORIA, Ill., Oct. 22, 2012 /PRNewswire/ -- Caterpillar Inc. (NYSE: CAT) today announced third-quarter 2012 sales and revenues of $16.445 billion, a 5-percent increase from third-quarter 2011 sales and revenues of $15.716 billion.  Profit per share for the third quarter of 2012 was $2.54, up 49 percent from $1.71 per share in the third quarter of 2011.  Third-quarter 2012 profit per share includes a pre-tax gain of $273 million from the sale of a majority interest in Caterpillar's third party logistics business, which had previously been announced.

"Last quarter and then again a month ago at MINExpo, we discussed economic and geopolitical headwinds facing the world, and we are certainly continuing to see the impact of those uncertainties in our business," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.  "Even so, we had a record third quarter, and our entire organization is focused on finishing 2012 as the best year for sales and profit in our history," Oberhelman added.  "Despite the turbulence in the global economy, we continue to track toward our goals on cost control, margin improvement, product quality, safety and better product availability for our customers."

2012 Outlook
We now expect 2012 sales and revenues to be about $66 billion and profit in a range of $9.00 to $9.25 per share.  The previous outlook for sales and revenues was a range of $68 to $70 billion with profit of about $9.60 per share at the middle of the sales and revenues outlook range.

The decline in the sales and revenues outlook reflects global economic conditions that are weaker than we had previously expected.  In addition, Cat dealers have lowered order rates well below end-user demand to reduce their inventories.  Production across much of the company has been lowered, resulting in temporary shutdowns and layoffs.  Lower production will continue until inventories and dealer order rates move back in line with dealer deliveries to end users.  The reduction in the profit outlook is in line with the lower sales and revenues outlook, partially offset by the gain on the sale of a majority interest in our third party logistics business.

"As we've moved through the year, we've seen continued economic weakening and uncertainty.  It's definitely impacting our business with dealers intending to lower inventories and mining customers delaying some projects and reducing orders," Oberhelman said.  "We're focused on being very nimble and taking actions to respond to the current environment while at the same time keeping our 2015 goals and expectations in mind.  It requires a pragmatic and steady approach as we balance our actions in the short term with what we need to do to be prepared for better growth when the world economy improves," Oberhelman added.

Preliminary 2013 Sales and Revenues Outlook
From an economic standpoint, we are expecting slightly better world growth in 2013 with modest improvement in the United States, China and most of the developing world, but continuing difficulty in Europe.  Based on our economic forecast, our preliminary outlook for 2013 is for sales and revenues to be about the same as 2012 in a range of up 5 percent to down 5 percent.

"We are taking a pragmatic view of 2013—we're not expecting rapid growth, and we're not predicting a global recession.  At this point, we expect 2013 sales will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half.  While machine deliveries to end users have continued to hold up, our sales will probably remain relatively weak early in 2013 as dealers are likely to continue reducing inventories.  When expected dealer inventory reductions level off, and easing actions by central banks and governments around the world begin to improve economic growth, we expect our business will begin to improve.  While there's reason for optimism, and we're not expecting a global recession in 2013, we are prepared and stand ready to take action no matter what happens to the global economy," Oberhelman added.

Notes:

  • Glossary of terms is included on pages 19-20; first occurrence of terms shown in bold italics.
  • Information on non-GAAP financial measures is included on page 21.

For more than 85 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. With 2011 sales and revenues of $60.138 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.; (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


Third Quarter 2012

(Dollars in millions except per share data)



Third Quarter
2012


Third Quarter
2011


$ Change


% Change

Machinery and Power Systems Sales

$

15,739


$

15,023


$

716


5%

Financial Products Revenues


706



693



13


2%

Total Sales and Revenues

$

16,445


$

15,716


$

729


5%

Profit

$

1,699


$

1,141


$

558


49%

Profit per common share – diluted

$

2.54


$

1.71


$

0.83


49%












  • Third-quarter sales and revenues of $16.445 billion, an all-time third-quarter record, were 5 percent higher than the third quarter of 2011. 
  • Profit per share was $2.54 in the third quarter of 2012, an all-time third-quarter record, and was an increase of $0.83 from the third quarter of 2011.
  • Third-quarter 2012 profit included a pre-tax gain of $273 million related to the sale of a majority interest in Caterpillar's third party logistics business. 
  • Machinery and Power Systems (M&PS) operating cash flow was $994 million in the third quarter of 2012, compared with $2.037 billion in the third quarter of 2011.  The decrease was primarily due to unfavorable changes in working capital.
  • M&PS debt-to-capital ratio was 38.0 percent at the end of the third quarter of 2012, down from 40.9 percent at the end of the second quarter of 2012. 
  • The liquidity position remained strong in the third quarter.  Total cash on a consolidated basis was $5.7 billion, up from $5.1 billion at the end of the second quarter of 2012.

2012 Outlook

  • The 2012 outlook reflects sales and revenues of about $66 billion and profit in a range of $9.00 to $9.25 per share.  The previous outlook was a sales and revenues range of $68 to $70 billion and profit per share of about $9.60 at the middle of the sales and revenues range.
  • Capital expenditures for 2012 are expected to be less than $4 billion—with about half invested in the United States.
  • The outlook for 2012 represents the highest sales and revenues and profit in Caterpillar history, exceeding last year's record results.

Preliminary 2013 Sales and Revenues Outlook

  • We expect sales and revenues to be about the same as 2012 in a range of up 5 percent to down 5 percent.

CONSOLIDATED RESULTS

Consolidated Sales and Revenues

Consolidated Sales and Revenues Comparison
Third Quarter 2012 vs. Third Quarter 2011

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 3Q2012 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the third quarter of 2011 (at left) and the third 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
Sales and revenues were $16.445 billion in the third quarter of 2012, an increase of $729 million, or 5 percent, from the third quarter of 2011.  When reviewing the change in sales and revenues, we focus on the following views:

  • Reason for the change:  Sales volume improved $622 million, price realization was favorable $305 million, the net impact of acquisitions and divestitures added $36 million, and Financial Products revenues were up $13 millionCurrency partially offset these increases by $247 million.  Sales of new equipment increased, and sales of aftermarket parts were about flat.
  • Geographic region:  Sales in North America were up 9 percent, sales in Asia/Pacific increased 8 percent and sales in EAME and Latin America were about flat.  The increase in North America was primarily driven by improvements in the United States.  Within Asia/Pacific, declines in China were more than offset by increases in Australia and other parts of Asia/Pacific.  While sales in Europe were down, sales in Africa, the Middle East and CIS increased. 
  • Segment:  Most of the sales and revenues increase was in Resource Industries, with sales up 13 percent from the third quarter of 2011.  Power Systems' sales were up 5 percent, Construction Industries' sales were about flat, and Financial Products' revenues were up 3 percent.  All Other segment sales were down 31 percent, primarily a result of the sale of a majority interest in our third party logistics business.

Consolidated Operating Profit

Consolidated Operating Profit Comparison
Third Quarter 2012 vs. Third Quarter 2011

To access this chart, go to http://caterpillar.com for the downloadable version of Caterpillar 3Q2012 earnings.

The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the third quarter of 2011 (at left) and the third 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 third quarter of 2012 was $2.596 billion compared with $1.759 billion for the third quarter of 2011.  The increase was primarily the result of the impact of acquisitions and divestitures, higher sales volume and improved price realization.  See further discussion on the gain on the sale of a majority interest in Caterpillar's third party logistics business on page 16 and the impact of the acquisition of Bucyrus International, Inc. (Bucyrus) on page 17.

The improvements were partially offset by higher manufacturing costs and increased SG&A and R&D expenses.  Manufacturing costs were up $259 million primarily due to higher period manufacturing costs.  Period manufacturing costs include wages and benefits, depreciation and other period costs that support production.  SG&A and R&D expenses increased $109 million primarily due to growth-related initiatives, increased costs to support product programs and unfavorable changes in mark-to-market deferred compensation expense. 

These cost increases were partially offset by lower incentive compensation expense.

The impact of currency was favorable to profit by $81 million, as the benefit to costs of $328 million more than offset the negative impact to sales of $247 million.

Other Profit/Loss Items

  • Interest expense excluding Financial Products increased $17 million from the third quarter of 2011 primarily due to underwriting expense related to our debt exchange in the third quarter of 2012 and higher average borrowings.
  • Other income/expense was expense of $17 million compared with expense of $13 million in the third quarter of 2011. 
  • The provision for income taxes in the third quarter of 2012 reflects an estimated annual effective tax rate of 30.5 percent compared with 29 percent for the third quarter of 2011 and 26.5 percent for the full-year 2011.  The increase from 26.5 percent to 30.5 percent is primarily due to expected changes in our geographic mix of profits from a tax perspective and the expiration of the U.S. research and development tax credit.    

Global Workforce
Caterpillar worldwide full-time employment was 129,113 at the end of the third quarter of 2012 compared with 121,513 at the end of the third quarter of 2011, an increase of 7,600 full-time employees.  The flexible workforce decreased by 2,954 for a net increase in the global workforce of 4,646.

The increase was a result of growth and acquisitions, partially offset by divestitures.  Acquisitions, primarily ERA Mining Machinery Limited (Siwei) and Motoren-Werke Mannheim Holding GmbH (MWM), added 5,977 people to the global workforce.  Divestitures related to the sale of Caterpillar's third party logistics business and a portion of the Bucyrus distribution business decreased the global workforce by 7,353.



September 30,



2012


2011


Change








Full-time employment


129,113


121,513


7,600

Flexible workforce


21,652


24,606


(2,954)

Total


150,765


146,119


4,646








Summary of change







U.S. workforce additions






3,350

Non-U.S. workforce additions






2,672







6,022








Acquisitions / Divestitures (net)






(1,376)

Total






4,646

 

 

SEGMENT RESULTS






Sales and Revenues by Geographic Region



(Millions of dollars)

Total


%

Change


North

America


%

Change


Latin

America


%

Change


EAME


%

Change


Asia/

Pacific


%

Change

Third Quarter 2012

























Construction Industries1

$

4,904


0%


$

1,910


23%


$

629


(23)%


$

1,186


7%


$

1,179


(18)%

Resource Industries2 


5,214


13%



1,421


8%



1,001


18%



936


(4)%



1,856


27%

Power Systems3


5,317


5%



2,175


0%



543


2%



1,564


2%



1,035


24%

All Other Segment4


318


(31)%



182


(3)%



11


(45)%



68


(55)%



57


(45)%

Corporate Items and Eliminations


(14)





(14)





-





-





-



Machinery & Power Systems Sales

$

15,739


5%


$

5,674


9%


$

2,184


(1)%


$

3,754


0%


$

4,127


8%


























Financial Products Segment


776


3%



420


2%



100


2%



99


(10)%



157


15%

Corporate Items and Eliminations


(70)





(46)





(7)





(6)





(11)



Financial Products Revenues

$

706


2%


$

374


(1)%


$

93


8%


$

93


(10)%


$

146


14%


























Consolidated Sales and Revenues

$

16,445


5%


$

6,048


8%


$

2,277


(1)%


$

3,847


(1)%


$

4,273


8%


























Third Quarter 2011

























Construction Industries 1

$

4,900




$

1,549




$

812




$

1,104




$

1,435



Resource Industries2 


4,599





1,318





845





980





1,456



Power Systems3


5,075





2,173





534





1,536





832



All Other Segment4


461





188





20





150





103



Corporate Items and Eliminations


(12)





(12)





-





-





-



Machinery & Power Systems Sales

$

15,023




$

5,216




$

2,211




$

3,770




$

3,826




























Financial Products Segment


757





413





98





110





136



Corporate Items and Eliminations


(64)





(37)





(12)





(7)





(8)



Financial Products Revenues

$

693




$

376




$

86




$

103




$

128




























Consolidated Sales and Revenues

$

15,716




$

5,592




$

2,297




$

3,873




$

3,954




1

Does not include inter-segment sales of $102 million and $162 million in third-quarter 2012 and 2011, respectively.

2

Does not include inter-segment sales of $253 million and $290 million in third-quarter 2012 and 2011, respectively.

3

Does not include inter-segment sales of $597 million and $600 million in third-quarter 2012 and 2011, respectively.

4

Does not include inter-segment sales of $885 million and $913 million in third-quarter 2012 and 2011, respectively.



Sales and Revenues by Segment

(Millions of dollars)

Third Quarter 2011


Sales

Volume


Price Realization


Currency


Acquisitions/ Divestitures


Other


Third Quarter 2012


$ Change


%

Change

Construction Industries

$

4,900


$

99


$

32


$

(127)


$

-


$

-


$

4,904


$

4



0%

Resource Industries


4,599



471



169



(33)



8



-



5,214



615



13%

Power Systems


5,075



101



79



(81)



143



-



5,317



242



5%

All Other Segment


461



(22)



-



(6)



(115)



-



318



(143)



(31)%

Corporate Items and Eliminations


(12)



(27)



25



-



-



-



(14)



(2)




Machinery & Power Systems Sales

$

15,023


$

622


$

305


$

(247)


$

36


$

-


$

15,739


$

716



5%




























Financial Products Segment


757



-



-



-



-



19



776



19



3%

Corporate Items and Eliminations


(64)



-



-



-



-



(6)



(70)



(6)




Financial Products Revenues

$

693


$

-


$

-


$

-


$

-


$

13


$

706


$

13



2%




























Consolidated Sales and Revenues

$

15,716


$

622


$

305


$

(247)


$

36


$

13


$

16,445


$

729



5%




























 

Operating Profit by Segment

(Millions of dollars)

Third Quarter

2012


Third Quarter

2011


$

Change


%

Change

Construction Industries 

$

459


$

496


$

(37)


(7)%

Resource Industries  


1,113



745