Caterpillar Reports Record Sales and Revenues and Profit for 2012; Inventory Reduced $2 Billion in the Fourth Quarter

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:

  • Glossary of terms is included on pages 18-19; first occurrence of terms shown in bold italics.
  • 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
2012


Fourth Quarter
2011


$ Change


% Change

Machinery and Power Systems Sales

$

15,357


$

16,557


$

(1,200)


(7)%

Financial Products Revenues


718



686



32


5%

Total Sales and Revenues

$

16,075


$

17,243


$

(1,168)


(7)%

Profit

$

697


$

1,547


$

(850)


(55)%

Profit per common share - diluted

$

1.04


$

2.32


$

(1.28)


(55)%












Full Year 2012

(Dollars in millions except per share data)



Full Year
2012


Full Year
2011


$ Change


% Change

Machinery and Power Systems Sales

$

63,068


$

57,392


$

5,676


10%

Financial Products Revenues


2,807



2,746



61


2%

Total Sales and Revenues

$

65,875


$

60,138


$

5,737


10%

Profit

$

5,681


$

4,928


$

753


15%

Profit per common share - diluted

$

8.48


$

7.40


$

1.08


15%












2012 Highlights

  • 2012 sales and revenues of $65.875 billion and profit per share of $8.48 were both all-time records.
  • Inventory was significantly reduced during the fourth quarter of 2012, down about $2 billion from the third quarter of 2012.
  • Machinery and Power Systems (M&PS) operating cash flow was $4.198 billion in 2012, compared with $7.972 billion in 2011.
  • M&PS debt-to-capital ratio was 37.4 percent, down from 42.7 percent a year earlier.

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.
  • 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:

  • 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.
  • 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.
  • 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

  • Interest expense excluding Financial Products increased $8 million from the fourth quarter of 2011.
  • 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.
  • 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.
  • 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 dollars)

Total


%
Change


North
America


%
Change


Latin
America


%
Change


EAME


%
Change


Asia/
Pacific


%
Change

Fourth Quarter 2012

























Construction Industries1

$

4,028


(25)%


$

1,445


(17)%


$

600


(23)%


$

882


(28)%


$

1,101


(32)%

Resource Industries2


5,776


14%



1,467


(13)%



1,095


42%



1,266


32%



1,948


20%

Power Systems3


5,307


(6)%



1,994


(9)%



539


(25)%



1,628


(4)%



1,146


9%

All Other Segment4


255


(49)%



153


(35)%



16


(38)%



48


(67)%



38


(58)%

Corporate Items and Eliminations


(9)





(12)





1





1





1



Machinery & Power Systems Sales

$

15,357


(7)%


$

5,047


(14)%


$

2,251


(2)%


$

3,825


(5)%


$

4,234


(3)%


























Financial Products Segment


789


5%



422


2%



103


10%



104


(5)%



160


19%

Corporate Items and Eliminations


(71)





(41)





(8)





(6)





(16)



Financial Products Revenues

$

718


5%


$

381


2%


$

95


9%


$

98


1%


$

144


13%


























Consolidated Sales and Revenues

$

16,075


(7)%


$

5,428


(13)%


$

2,346


(2)%


$

3,923


(5)%


$

4,378


(3)%


























Fourth Quarter 2011

























Construction Industries 1

$

5,355




$

1,743




$

777




$

1,222




$

1,613



Resource Industries2


5,056





1,694





771





962





1,629



Power Systems3


5,672





2,203





722





1,693





1,054



All Other Segment4


496





235





26





145





90



Corporate Items and Eliminations


(22)





(15)





(1)





(4)





(2)



Machinery & Power Systems Sales

$

16,557




$

5,860




$

2,295




$

4,018




$

4,384




























Financial Products Segment


752





413





94





110





135



Corporate Items and Eliminations


(66)





(38)





(7)





(13)





(8)



Financial Products Revenues

$

686




$

375




$

87




$

97




$

127




























Consolidated Sales and Revenues

$

17,243




$

6,235




$

2,382




$

4,115




$

4,511



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 dollars)

Fourth
Quarter 2011


Sales
Volume


Price
Realization


Currency


Acquisitions/
Divestitures


Other


Fourth
Quarter
2012


$ Change


%
Change

Construction Industries

$

5,355


$

(1,306)


$