FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to
_______________
Commission File No. 1-768
CATERPILLAR INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
State or other jurisdiction of incorporation or organization)
37-0602744
(I.R.S. Employer Identification No.)
100 NE Adams Street, Peoria, Illinois
(Address of principal executive offices)
61629
(Zip Code)
(309) 675-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No _____.
At March 31, 1994, 101,829,268 shares of common stock of the Registrant
were outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CATERPILLAR INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
Statement of Consolidated Results of Operations
(Unaudited)
(Millions of dollars except per share data)
Three Months Ended
Mar. 31, Mar. 31,
1994 1993
MACHINERY AND ENGINES:
Sales ................................ $3,181 $ 2,608
------ ------
Operating costs:
Cost of goods sold ................. 2,483 2,172
Selling, general and
administrative expenses .......... 313 289
Research and development expenses .. 76 72
------ ------
2,872 2,533
------ ------
Operating profit ..................... 309 75
Interest expense ..................... 51 69
------ ------
258 6
Other income (expense)................ (8) 21
------ ------
Profit before taxes .................. 250 27
------ ------
FINANCIAL PRODUCTS:
Revenues ............................. 105 89
------ ------
Operating costs:
Selling, general and
administrative expenses .......... 43 35
Interest expense ................... 46 42
------ ------
89 77
------ ------
Operating profit ..................... 16 12
Other income (expense)................ (5) 5
------ ------
Profit before taxes .................. 11 17
<PAGE>
------ ------
CONSOLIDATED PROFIT BEFORE TAXES........ 261 44
Provision for income taxes ........... 79 10
------ ------
Profit of consolidated companies ..... 182 34
Equity in profit of affiliated
companies (Note 6) ................. 10 -
------ ------
PROFIT ................................. $ 192 $ 34
====== ======
PROFIT PER SHARE OF COMMON STOCK (NOTE 8):
Profit ............................... $ 1.89 $ 0.34
====== ======
Cash dividends paid per share of
common stock ......................... $ .15 $ .15
See accompanying notes to Consolidated Financial Statements.
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Mar. 31, Dec. 31,
1994 1993
ASSETS
Current assets:
Cash and short-term investments ............... $ 64 $ 83
Receivables -- trade and other ................ 3,020 2,637
Receivables -- finance ........................ 1,101 988
Refundable income taxes ....................... - -
Deferred income taxes and prepaid expenses .... 807 838
Inventories (Notes 5 and 7) ................... 1,678 1,525
------- -------
Total current assets ............................ 6,670 6,071
Land, buildings, machinery, and equipment -- net. 3,769 3,827
Long-term receivables -- trade and other ........ 137 132
Long-term receivables -- finance ................ 2,194 2,152
Investments in affiliated companies (Note 6) .... 381 395
Investments in Financial Products subsidiaries .. - -
Deferred income taxes ........................... 1,351 1,321
Intangible assets ............................... 352 353
Other assets .................................... 343 556
------- -------
TOTAL ASSETS ...................................... $15,197 $14,807
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ......................... $ 1,060 $ 822
Accounts payable and accrued expenses ......... 2,311 2,055
Accrued wages, salaries, and employee benefits. 961 957
Dividends payable ............................. - 15
Deferred and current income taxes payable ..... 157 111
Long-term debt due within one year ............ 598 711
------- -------
Total current liabilities ....................... 5,087 4,671
Long-term debt due after one year ............... 3,971 3,895
Liability for postemployment benefits ........... 3,762 4,018
Deferred income taxes ........................... 24 24
------- -------
TOTAL LIABILITIES ................................. 12,844 12,608
------- -------
<PAGE>
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 200,000,000
Outstanding shares (March 31, 1994 -- 101,829,268
[after deducting 32,560 treasury shares];
Dec. 31, 1993 -- 101,861,828) at paid in amount . 814 835
Profit employed in the business ................... 1,426 1,234
Minimum pension liability adjustment............... (40) (40)
Foreign currency translation adjustment ........... 153 170
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 2,353 2,199
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $15,197 $14,807
======= =======
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1993 amounts.
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES
(Caterpillar Inc. with Financial
Products on the equity basis)
Mar. 31, Dec. 31,
1994 1993
ASSETS
Current assets:
Cash and short-term investments ................. $ 46 $ 62
Receivables -- trade and other .................. 2,984 2,612
Receivables -- finance .......................... - -
Refundable income taxes ......................... - -
Deferred income taxes and prepaid expenses ...... 827 869
Inventories (Notes 5 and 7)...................... 1,678 1,525
------- -------
Total current assets .............................. 5,535 5,068
Land, buildings, machinery, and equipment -- net .. 3,390 3,456
Long-term receivables -- trade and other .......... 137 132
Long-term receivables -- finance .................. - -
Investments in affiliated companies (Note 6) ...... 381 395
Investments in Financial Products subsidiaries .... 467 457
Deferred income taxes ............................. 1,362 1,334
Intangible assets ................................. 352 353
Other assets ...................................... 150 398
------- -------
TOTAL ASSETS ........................................ $11,774 $11,593
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 339 $ 139
Accounts payable and accrued expenses ........... 2,112 1,925
Accrued wages, salaries, and employee benefits .. 959 955
Dividends payable ............................... - 15
Deferred and current income taxes payable ....... 114 71
Long-term debt due within one year .............. 85 218
------- -------
Total current liabilities ......................... 3,609 3,323
Long-term debt due after one year ................. 2,027 2,030
Liability for postemployment benefits ............. 3,762 4,018
Deferred income taxes ............................. 23 23
------- -------
TOTAL LIABILITIES ................................... 9,421 9,394
------- -------
<PAGE>
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 200,000,000
Outstanding shares (March 31, 1994 -- 101,829,268
[after deducting 32,560 treasury shares];
Dec. 31, 1993 -- 101,861,828) at paid in amount . 814 835
Profit employed in the business ................... 1,426 1,234
Minimum pension liability adjustment (40) (40)
Foreign currency translation adjustment ........... 153 170
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 2,353 2,199
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $11,774 $11,593
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide required supplemental disclosure
of information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1993 amounts.
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Mar. 31, Dec. 31,
1994 1993
ASSETS
Current assets:
Cash and short-term investments ................. $ 18 $ 21
Receivables -- trade and other .................. 43 63
Receivables -- finance .......................... 1,101 988
Refundable income taxes ......................... - -
Deferred income taxes and prepaid expenses ...... 3 2
Inventories (Notes 5 and 7) ..................... - -
------- -------
Total current assets .............................. 1,165 1,074
Land, buildings, machinery, and equipment -- net .. 379 371
Long-term receivables -- trade and other .......... - -
Long-term receivables -- finance .................. 2,194 2,152
Investments in affiliated companies (Note 6) ...... - -
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. - -
Intangible assets ................................. - -
Other assets ...................................... 193 158
------- -------
TOTAL ASSETS ........................................ $ 3,931 $ 3,755
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 721 $ 683
Accounts payable and accrued expenses ........... 229 201
Accrued wages, salaries, and employee benefits .. 2 2
Dividends payable ............................... - -
Deferred and current income taxes payable ....... 43 40
Long-term debt due within one year .............. 513 493
------- -------
Total current liabilities ......................... 1,508 1,419
Long-term debt due after one year ................. 1,944 1,865
Liability for postemployment benefits ............. - -
Deferred income taxes ............................. 12 14
------- -------
TOTAL LIABILITIES ................................... 3,464 3,298
------- -------
<PAGE>
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 200,000,000
Outstanding shares (March 31, 1994 -- 101,829,268
[after deducting 32,560 treasury shares];
Dec. 31, 1993 -- 101,861,828) at paid in amount . 258 258
Profit employed in the business ................... 214 206
Minimum pension liability adjustment - -
Foreign currency translation adjustment ........... (5) (7)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 467 457
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 3,931 $ 3,755
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide required supplemental disclosure
of information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1993 amounts.
<PAGE>
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Mar. 31, Mar. 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ......................................... $ 192 $ 34
Adjustments for noncash items:
Depreciation and amortization .................. 169 166
Profit of Financial Products ................... - -
Other -- net ................................... 70 (6)
Changes in assets and liabilities:
Receivables -- trade and other ............... (382) (297)
Inventories .................................. (153) 25
Accounts payable and accrued expenses ........ 242 132
Other -- net ................................. 14 54
------ -------
Net cash provided by operating activities ........ 152 108
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ............................. (82) (69)
Expenditures for equipment leased to others .... (39) (20)
Proceeds from disposals of land, buildings,
machinery, and equipment ..................... 13 9
Additions to finance receivables ............... (589) (352)
Collections of finance receivables ............. 445 297
Other -- net ................................... (49) (48)
------- -------
Net cash used for investing activities ........... (301) (183)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ................................. (15) (15)
Common stock issued, including treasury
shares reissued .............................. 10 1
Treasury shares purchased ...................... (47) -
Proceeds from long-term debt issued ............ 250 290
Payments on long-term debt ..................... (293) (114)
Short-term borrowings -- net ................... 229 (121)
------- -------
Net cash provided by financing activities ........ 134 41
------- -------
Effect of exchange rate changes on cash .......... (4) 1
------- -------
<PAGE>
Decrease in cash and
short-term investments ......................... (19) (33)
Cash and short-term investments at the
beginning of the period ........................ 83 119
------- -------
Cash and short-term investments at the
end of the period .............................. $ 64 $ 86
======= =======
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.
See accompanying notes to Consolidated Financial Statements.
<PAGE>
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES
(Caterpillar Inc. with Financial
Products on the equity basis)
Mar. 31, Mar. 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 192 $ 34
Adjustments for noncash items:
Depreciation and amortization ................... 147 150
Profit of Financial Products .................... (8) (10)
Other -- net .................................... 62 (13)
Changes in assets and liabilities:
Receivables -- trade and other .................. (374) (282)
Inventories ..................................... (153) 25
Accounts payable and accrued expenses ........... 179 96
Other -- net .................................... 22 48
------- -------
Net cash provided by operating activities ........... 67 48
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (82) (68)
Expenditures for equipment leased to others ....... (2) (1)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 3 5
Additions to finance receivables .................. - -
Collections of finance receivables ................ - -
Other -- net ...................................... (9) (27)
------- -------
Net cash used for investing activities .............. (90) (91)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid .................................... (15) (15)
Common stock issued, including treasury
shares reissued ................................. 10 1
Treasury shares purchased ......................... (47) -
Proceeds from long-term debt issued ............... (2) 200
Payments on long-term debt ........................ (139) (3)
Short-term borrowings -- net ...................... 205 (174)
------- -------
Net cash provided by financing activities ........... 12 9
------- -------
Effect of exchange rate changes on cash ............. (5) 0
------- -------
<PAGE>
Decrease in cash and
short-term investments ............................ (16) (34)
Cash and short-term investments at the
beginning of the period ........................... 62 104
------- -------
Cash and short-term investments at the
end of the period ................................. $ 46 $ 70
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide supplemental disclosure of information
about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
<PAGE>
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Mar. 31, Mar. 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 8 $ 10
Adjustments for noncash items:
Depreciation and amortization ................... 22 16
Profit of Financial Products .................... - -
Other -- net .................................... 8 7
Changes in assets and liabilities:
Receivables -- trade and other .................. 23 20
Inventories ..................................... - -
Accounts payable and accrued expenses ........... 22 (2)
Other -- net .................................... 2 9
------- -------
Net cash provided by operating activities ........... 85 60
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ 0 (1)
Expenditures for equipment leased to others ....... (37) (19)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 10 4
Additions to finance receivables .................. (589) (352)
Collections of finance receivables ................ 445 297
Other -- net ...................................... (40) (21)
------- -------
Net cash used for investing activities .............. (211) (92)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid .................................... - -
Common stock issued, including treasury
shares reissued ................................. - -
Treasury shares purchased ......................... - -
Proceeds from long-term debt issued ............... 252 90
Payments on long-term debt ........................ (154) (111)
Short-term borrowings -- net ...................... 24 53
------- -------
Net cash provided by financing activities ........... 122 32
------- -------
Effect of exchange rate changes on cash ............. 1 1
------- -------
Increase (decrease) in cash and
short-term investments ............................ (3) 1
<PAGE>
Cash and short-term investments at the
beginning of the period ........................... 21 15
------- -------
Cash and short-term investments at the
end of the period ................................. $ 18 $ 16
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide supplemental disclosure of information
about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share data)
1. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of (a) the
consolidated results of operations for the three-month periods
ended March 31, 1994 and 1993, (b) the consolidated financial
position at March 31, 1994 and December 31, 1993, and (c) the
consolidated statement of cash flows for the three-month periods ended
March 31, 1994 and 1993 have been made.
2. The results for the three-month period ended March 31, 1994 are not
necessarily indicative of the results for the entire year 1994.
3. The company removes certain components of foreign currency exchange
gains and losses arising from operations in Brazil's highly inflationary
economy from "Other income" on the Statement of Consolidated Results of
Operations and includes these amounts on the operating statement lines
where the related inflationary effects are reported. Consequently,
exchange gains and losses on local currency denominated debt and cash
deposits, where the interest rates reflect the rate of inflation, are
offset against interest expense or interest income, respectively.
Similarly, exchange gains on local currency liabilities subject to
monetary correction are offset against the related expense.
4. The company enters into contracts to buy and sell foreign currencies in
the future only to protect the U.S. dollar value of certain currency
positions and future foreign currency transactions. The company does
not engage in speculation. At March 31, 1994, the company had
approximately $1,095 in contracts to buy or sell foreign currency in the
future.
5. In the first quarter of 1994, the company changed its method of computing
LIFO ("last-in, first-out") inventories from a single pool approach to a
multiple pool approach for substantially all of its inventories. The
company believes that the multiple pool method results in a better
matching of revenues and expenses. The cumulative effect of the change
on prior years was not determinable. This change is not expected to have
a material effect on 1994 or subsequent years' results of operations or
financial position.
<PAGE>
6. Affiliated Companies
The company's investments in affiliated companies consist principally of
a 50% interest in Shin Caterpillar Mitsubishi Ltd., Japan $(355). The
other 50% owner of this company is Mitsubishi Heavy Industries, Ltd.,
Japan.
Combined financial information of the affiliated companies, as
translated to U.S. dollars, was as follows:
Three Months Ended
Dec. 31, Dec. 31,
1994 1993
RESULTS OF OPERATIONS
(Unaudited)
Sales ..................... $ 784 $ 818
====== ======
Profit (loss) ............. $ 16 $ (3)
====== ======
Dec.31, Sept. 30,
1994 1993
FINANCIAL POSITION
(Unaudited)
Assets:
Current assets ................................. $1,708 $1,691
Land, buildings, machinery and equipment - net.. 713 750
Other assets ................................... 276 310
------ ------
2,697 2,751
------ ------
Liabilities:
Current liabilities ............................ 1,523 1,441
Long-term debt due after one year .............. 338 449
Other liabilities .............................. 98 90
------ ------
1,959 1,980
------ ------
Ownership ........................................ $ 738 $ 771
====== ======
7. Inventories (principally LIFO method) comprised the following
Mar. 31, Dec. 31,
1994 1993
(unaudited)
Raw materials and work-in-process ................ $ 580 $ 545
Finished goods ................................... 915 812
Supplies ......................................... 182 168
------ ------
$1,677 $1,525
====== ======
<PAGE>
8. Following is a computation of profit per share:
Three Months Ended
Mar. 31, Mar. 31,
1994 1993
(Unaudited)
I. Net profit for period:
Profit-consolidated (A) ......... $ 192 $ 34
====== ======
II. Determination of shares (millions):
Weighted average number of
common shares outstanding (B) .. 101.9 101.0
Shares issuable on exercise of
stock options, net of shares
assumed to be purchased out
of proceeds at market price .... 1.3 0.2
------ ------
Average common shares
outstanding for fully diluted
computation (C) ................ 103.2 101.2
====== ======
III. Profit per share of common
stock:
Assuming no dilution (A/B) ...... $1.89 $0.34
Assuming full dilution (A/C) .... $1.86 $0.34
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND LIQUIDITY AND CAPITAL RESOURCES
A. Consolidated Results of Operations
THREE MONTHS ENDED MARCH 31, 1994 VS. THREE MONTHS ENDED MARCH 31, 1993
The company reported record quarterly sales and revenues and
significantly improved profit. First-quarter profit was a record (excluding
nonrecurring items) of $192 million -- the sixth consecutive quarter of
improved profit. Profit per share of common stock was $1.89, $1.55 higher
than the 34 cents per share first-quarter profit last year.
Sales and revenues of $3.29 billion were also a new high for any quarter
and were 22% greater than the first quarter of 1993. The most significant
factors affecting 1994 first-quarter results were an 18% increase in physical
sales volume and a 4% improvement in price realization.
Financial Products results reflected in this Form 10-Q differ from
amounts previously announced because earnings of Caterpillar Financial
Services Corporation (Cat Financial) were revised to reflect application of
mark to market accounting for interest rate caps and swaptions sold by Cat
Financial in conjunction with its overall funding strategy. Consolidated
earnings were not revised from amounts presented in an April 20, 1994
release because the effect of the revision was not material (2.7%) with
respect to consolidated first quarter earnings.
Machinery and Engines
Sales of $3.18 billion were a record and were up $573 million from the
first quarter 1993. Profit before tax was $241 million, compared with profit
of $27 million for the same quarter a year ago. The primary reason for the
improvement was higher sales -- an 18% increase in physical sales volume and
a 4% improvement in price realization.
Sales inside the United States were $1.65 billion, up 21% compared with
the first quarter 1993, while sales outside the United States were $1.53
billion, up 23%. Inside the United States, the increase was due primarily to
improved industry demand. Outside the United States, the increase was
primarily a result of an increase in dealer machine inventory during the
first quarter 1994 compared with dealer inventory reductions during the first
quarter a year ago and increased demand for engines. The improvement in
price realization was the result of price increases taken since the first
quarter 1993.
Margin (sales less cost of goods sold) increased $262 million, a result
of higher sales. As a percent of sales, the margin rate improved from 16.7%
in the first quarter 1993 to 21.9% in the current quarter. The improvement
was a result of improved price realization, higher sales volume, and strong
cost control, partially offset by an unfavorable change in sales mix.
Overall, costs adjusted for volume were about the same as the first quarter
1993 as the effect of inflation was about offset by improved efficiencies.
Hourly employment was up about 5%, while sales volume increased 18%.
<PAGE>
Selling, general and administrative (SG&A) expenses of $313 million
increased $24 million over the same quarter a year ago. The increase was
primarily because of incentive pay expense related to higher profit, and
parts distribution costs resulting from higher volume. All other costs were
about the same despite inflation.
Research and development expenses were up $4 million from the first
quarter 1993 as a result of new product introduction programs.
Interest expense decreased $18 million, to $51 million for the quarter
because of a reduction in debt of $822 million compared with March 31, 1993.
Other income/expense was an expense of $8 million, compared with income
of $21 million a year ago. The $29 million change was due primarily to a
charge of $17 million related to the probable settlement of two related class
action complaints filed against the company and certain of its officers and
directors in 1990. The complaints were consolidated in 1991 and alleged,
among other things, violations of certain provisions of the federal
securities laws. The decision to settle in no way acknowledges any
wrongdoing on the part of the company, its officers or directors, but was
deemed to be the most cost-effective resolution. The company believes a
substantial portion of the cost of the settlement will ultimately be
reimbursed under the company's insurance coverage, although no recovery has
been recorded.
Other income/expense was also unfavorably affected by a reclassification
of investment income. The company modified its Voluntary Employees'
Beneficiary Association (VEBA) trusts to qualify as plan assets in accounting
for employee postretirement benefits other than pensions. Income from the
trusts has now become a component of employee benefit expense and reduces
operating costs, primarily cost of goods sold. VEBA income included in
operating profit was $6 million in the first quarter 1994. VEBA income
included in other income/expense in the first quarter 1993 was $6 million.
Results of Brazilian operations were significantly better than a year ago
and had no material effect on first-quarter 1994 consolidated results.
Financial Products
The before-tax profit for Financial Products was $11 million, compared
with profit of $17 million in the first quarter 1993. The decrease in profit
was due to a $9 million charge resulting from the application of
mark to market accounting treatment for interest rate caps and swaptions
sold by Cat Financial, partially offset by Cat Financial's larger portfolio
of earning assets.
Revenues were $105 million, up $16 million from the first quarter last
year. The increase in revenues resulted from Cat Financial's larger
portfolio. Cat Financial financed new retail business of $441 million, a
$124 million or 39% increase, compared with the first quarter 1993.
Selling, general and administrative expenses increased $8 million from a
year ago. The increase was primarily due to depreciation of equipment on
operating leases, provision for credit losses, and other volume-related
expenses at Cat Financial. The increase in interest expense of $4 million
was due to increased borrowings to support the larger portfolio, mostly
offset by lower borrowing rates.
Other income/expense was an expense of $5 million, compared with income
of $5 million a year ago. The $10 million change was primarily the result of
the mark to market adjustment discussed above.
Income Taxes
Tax expense of $79 million was $69 million higher than a year ago. The
increase was due to higher before-tax profit and a change in the estimated
annual tax rate to 30%, compared with 24% for the first quarter 1993.
<PAGE>
Affiliated Companies
The company's share of affiliated companies' results improved $10 million
from the same quarter last year. The improvement was primarily the result of
a gain from the sale of surplus land at the company's 50%-owned affiliate,
Shin Caterpillar Mitsubishi Ltd. in Japan.
FIRST QUARTER 1994 COMPARED WITH FOURTH QUARTER 1993
First-quarter profit of $192 million or $1.89 per share of common stock
was an improvement of $44 million over the $148 million or $1.46 per share
profit before extraordinary loss for the fourth quarter 1993. An
extraordinary loss of $29 million was recorded in the fourth quarter for the
early retirement of debt.
Sales and revenues of $3.29 billion were $118 million higher than the
fourth quarter 1993 and were the primary reason for the increase in profit.
Machinery and Engines
The before-tax profit related to Machinery and Engines of $241 million
was $46 million higher than the fourth quarter of 1993. Sales of $3.18
billion were $114 million higher. Sales volume was up 2% and price
realization was up 1%.
Margin of $698 million was about the same as the previous quarter.
Margin as a percent of sales declined from 22.4% in the fourth quarter 1993
to 21.9% in the first quarter. The decline was due to the absence of
inventory-related items that favorably affected cost of goods sold in the
fourth quarter. These items included LIFO (last-in, first-out) inventory
decrement benefits of $23 million, and favorable adjustments resulting from
periodic reconciliation of inventory stock records to the accounting records.
Overall, all other costs were about the same.
Selling, general and administrative expenses of $313 million were $46
million less than the fourth quarter 1993. The decrease was the result of
timing of expenses, as the fourth quarter is generally a higher cost quarter
for these types of expenses.
Research and development expenses were down $14 million compared with the
previous quarter. This was also a result of timing.
Interest expense for the first quarter of $51 million was $10 million
lower than the fourth quarter 1993. The decline was the result of lower
long-term debt.
Other income/expense was an expense of $8 million, compared with income
of $19 million in the fourth quarter. The change resulted from the charge
for probable settlement of two class action complaints and the change in the
VEBA trusts. (See Other Income/Expense comments in First Quarter 1994
Compared With First Quarter 1993 section.)
Financial Products
Before-tax profit for Financial Products of $11 million compared with $17
million in the fourth quarter 1993. The decrease in profit was due to a $9
million charge resulting from the application of mark to market accounting
treatment for interest rate caps and swaptions sold by Cat Financial,
partially offset by Cat Financial's larger portfolio of earning assets.
Income Taxes
Tax expense for the quarter was $79 million, up $15 million from the
fourth quarter. The increase was due to use of the 30% estimated annual tax
rate for the first quarter and the increase in before-tax profit.
Fourth-quarter 1993 taxes were recorded at the actual 1993 rate of 27%.
Affiliated Companies
The company's share of affiliated companies' results increased $10
million from the fourth quarter 1993. The improvement was primarily a
result of a gain recognized from the sale of surplus land at the company's
50%-owned affiliate, Shin Caterpillar Mitsubishi Ltd. in Japan.
<PAGE>
Sales
Following are summaries of first-quarter company and dealer sales
compared with the same quarter in 1993.
Company Sales Inside the United States
Caterpillar sales inside the United States were $1.65 billion, a $285
million or 21% increase from the same quarter a year ago. The improvement
was due primarily to significantly higher dealer sales, the result of much
stronger industry demand for both machines and engines, and higher price
realization.
Sales inside the United States were 52% of total sales in both quarters.
U.S. Dealer Machine Sales to End-Users
Sales were up considerably from a year ago, with increases in most market
applications. Sales in construction sectors increased significantly:
- Commercial, industrial and government building sector sales were
higher due to improved building construction levels.
- Sales to highway contractors continued to rise in response to much
higher levels of highway construction and repair.
- Housing-related sales registered another sizable increase as a
result of strong housing starts in the second half of 1993.
While commodity sectors increased modestly overall, results were mixed by
segment:
- Sales for coal mining applications declined moderately in line
with lower mine production in late 1993.
- Sand and quarry mining sector sales were considerably higher,
reflecting greater levels of non-residential construction.
- Sales to metal mining declined slightly despite higher mine
production.
- Agriculture-related sales climbed substantially as a result of the
generally improving farm economy.
- Sales to the forestry sector were up moderately. Forestry
production was up only slightly despite the higher level of
housing starts, as lumber prices remained high due to
environmental restrictions on supply.
- Petroleum sector sales were unchanged. Pipeline construction
continued to trend down. Oil prices are 25% below year-ago levels,
and drilling activity remains relatively low.
Dealer machine sales increased significantly to industrial applications
(primarily the manufacture and sale of building materials) reflecting the
ongoing improvement in the construction industry. Sales were essentially
flat into solid waste applications.
U.S. Dealer New Machine Inventories
U.S. dealer new machine inventories were up significantly from the end of
the fourth quarter, and were about normal relative to current selling rates.
Company Engine Sales Inside the United States
Sales of diesel engines were significantly higher than the same quarter
last year primarily due to higher demand for on-highway truck engines from
Original Equipment Manufacturers (OEMs). Truck sales by OEMs continue to
register strong gains due to low interest rates and higher levels of economic
activity. Sales of turbine engines were down moderately.
Company Sales Outside the United States
Caterpillar sales outside the United States were $1.53 billion, a $288
million or 23% increase from first quarter 1993. The improvement was due to
an increase in dealer machine inventory during the quarter compared with
dealer inventory reductions a year ago. Higher end-user demand for engines
and improved price realization also contributed to higher company sales.
<PAGE>
Sales outside the United States represented 48% of worldwide sales, the
same as first quarter last year.
Dealer Machine Sales to End Users Outside the United States
Dealer sales outside the United States were about the same as the first
quarter of 1993. Sales improved in most industrialized countries and in
several of the developing regions, but were offset by much lower sales in the
Middle East.
Sales in the industrialized regions were considerably above year-earlier
levels except in Japan:
- Europe: Sales were moderately higher, reflecting the economic
recoveries now under way in most countries. Sales are rising rapidly
in the United Kingdom where recovery has been under way the longest.
Sales also are making strong gains in France, but continue to trend
down in Germany.
- Australia: End-user demand was up sharply, particularly in metal
mining, as economic recovery continues to grow.
- Canada: Sales were moderately higher as economic recovery continues.
Strong gains were registered in coal mining, sand and quarry mining,
and in industrial applications.
- Japan's sales of imported product were flat as recessionary conditions
persist.
End-user demand in the developing regions fell moderately overall --
increases in some regions were more than offset by declines elsewhere:
- Asia: Sales were unchanged despite excellent economic growth as a
decline in China offset gains elsewhere.
- Latin America (excluding Brazil): End-user demand rose moderately for
the region as a whole and for Mexico in particular.
- Africa and the Middle East: Sales declined sharply as end-user demand
fell in most countries and ceased altogether in Iran.
- Brazil: Sales fell moderately, reflecting less activity in mining
sectors.
- Commonwealth of Independent States (CIS): Pipeline and mine-related
sales posted a significant gain.
Dealer New Machine Inventories Outside the United States
Dealer new machine inventories outside the United States were up
moderately from the fourth quarter, but are still slightly below normal
relative to current selling rates.
Company Engine Sales Outside the United States
Sales of diesel engines rose considerably primarily due to much higher
demand for power generation equipment. Sales of turbine engines were up
substantially from a year ago.
ACCOUNTING CHANGES
In the first quarter of 1994, the company changed its method of computing
LIFO ("last-in, first-out") inventories from a single pool approach to a
multiple pool approach for substantially all of its inventories. The company
believes that the multiple pool method results in a better matching of
revenues and expenses. The cumulative effect of the change on prior years was
not determinable. This change is not expected to have a material effect on
1994 or subsequent years' results of operations or financial position.
EMPLOYMENT
At the end of the first quarter, Caterpillar's worldwide employment was
51,671, compared with 50,271 one year ago. Hourly employment increased 1,335
to 29,800, while salaried and management employment increased 65 to 21,871.
<PAGE>
OUTLOOK
The economic outlook for 1994 is unchanged from what was reported on
March 17, 1994. The economies of the United States and Europe appear
stronger than the company expected at the time the 1994 outlook statement was
issued in January. Consequently, industry demand will likely be stronger than
anticipated in both regions and may even post a slight gain in Europe.
Better economic and industry growth also is forecast for Australia.
The economic and industry outlook for the rest of the world remains
essentially unchanged. Little industry growth is expected in Japan, and
moderately higher industry demand in Canada, Asia, and Latin America will more
than offset a decline in the Africa/Middle East area.
The outlook for company sales of machines and engines is also unchanged
from that reported on March 17, 1994. Worldwide sales for the year are
forecast to be stronger than expected in January 1994. Profit for the year
should also be higher than expected in January as a result of the higher
sales.
Labor conditions remain an uncertainty. Negotiations with the United
Auto Workers (UAW) union have not resumed. While the UAW strike ended in
April 1992, a new contract has not been signed. Production and shipment
volumes from UAW-represented facilities, however, continue to meet or exceed
plans. Quality levels continue to exceed pre-strike levels.
B. Liquidity & Capital Resources
Consolidated operating cash flows totaled $152 million in the first
quarter of 1994, compared with $108 million in the first quarter of 1993.
Total debt at the end of the quarter was $5.63 billion, an increase
of $201 million from year-end 1993. Of the increase, $64 million related to
Machinery & Engines and $137 million related to Financial Products.
Machinery and Engines
Operating cash flows totaled $67 million in the first quarter of 1994,
compared with $48 million in the first quarter of 1993. The cash flow
increase is primarily the result of increased profitability, partially offset
by an increase in receivables because of higher sales.
Capital expenditures, excluding equipment leased to others, increased
$14 million compared with the first quarter of 1993.
The percent of debt to debt plus stockholders equity was 51% at March 31,
1994 compared with 52% at December 31, 1993. During the first quarter of
1994, $136 million of Zero Coupon Notes were retired.
Financial Products
Operating cash flows totaled $85 million in the first quarter of 1994,
compared with $60 million in the first quarter of 1993. Cash used to purchase
equipment leased to others totaled $37 million in the first quarter of 1994.
In addition, first-quarter 1994 net finance receivables increased $144 million
from year-end 1993 levels.
Financial Products' debt was $3.18 billion at March 31, 1994, an increase
of $137 million from December 31, 1993.
At the end of the first quarter, finance receivables past due over 30
days were 2.1%, compared with 2.7% at the end of the first quarter of 1993.
<PAGE>
The ratio of debt to equity of Cat Financial was 7.4:1 at March 31, 1994,
compared with 7.3:1 at December 31, 1993.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Caterpillar Inc. was held on April
13, 1994, for the purpose of electing a board of directors, approving the
appointment of auditors, and voting on the proposals described below. Proxies
for the meeting were solicited pursuant to Section 14(a) of the Securities
Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
Shares Shares
Voted Shares Not
"For" "Withheld "Voted"
L. H. Affinito 85,201,320 319,629 0
D. V. Fites 85,191,969 328,980 0
J. W. Fondahl 85,206,869 314,080 0
D. R. Goode 85,206,149 314,800 0
J. I. Smith 85,178,423 342,526 0
The appointment of Price Waterhouse as independent auditor was approved
by the following vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
84,961,640 367,085 192,224 0
The stockholder proposal requiring the company to include shareholder
director nominees in the company's proxy materials was defeated with the
following vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
13,739,863 64,124,186 1,213,332 6,443,568
The stockholder proposal to declassify the Board of Directors for the
purpose of director elections was defeated with the following vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
33,221,109 45,176,715 679,557 6,443,568
The stockholder proposal requesting the board take steps to provide for
cumulative voting in the election of directors was defeated with the following
vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
24,631,044 53,681,891 764,446 6,443,568
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
12 Statement Setting Forth Computations
of Ratio of Profit to Fixed Charges.
(The ratios of profit to fixed charges
for the three-month periods ended March
31, 1994 and 1993 were 3.5 and 1.3,
respectively.)
(b) There have been no reports on Form 8-K filed during the quarter for
which this report on Form 10-Q is being filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CATERPILLAR INC.
Date: May ___, 1994 By: /s/ J. W. Owens
J. W. Owens, Vice President
and Principal Financial Officer
Date: May ___, 1994 By: /s/ R. R. Atterbury III
R. R. Atterbury III, Secretary
<PAGE>
EXHIBIT INDEX
Number Description
12 Statement Setting Forth Computations
of Ratios of Profit to Fixed Charges
<PAGE>
EXHIBIT NUMBER 12
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS
OF PROFIT TO FIXED CHARGES
Caterpillar Inc., Consolidated Subsidiary Companies,
and 50%-owned Affiliated Companies
(Unaudited)
(Dollars in millions)
Three Months Ended
Mar. 31, Mar. 31,
1994 1993
Profit for period .............. $ 192 $ 34
Add:
Provision for income taxes .. 91 11
------ ------
Profit before taxes ............ $ 283 $ 45
------ ------
Fixed charges:
Interest and other costs
related to borrowed
funds(1) .................. $ 102 $ 117
Rentals at computed
interest factors(2) ....... 13 13
------ ------
Total fixed charges ............ $ 115 $ 130
------ ------
Profit before provision
for income taxes and
fixed charges ............... $ 398 $ 175
====== ======
Ratio of profit to
fixed charges ............... 3.5 1.3
====== ======
(1)Interest expense as reported in the Consolidated Results of Operations
plus the Company's proportionate share of 50%-owned affiliated companies'
interest expense.
(2)Amounts represent those portions of rent expense that are reasonable
approximations of interest costs.
<PAGE>
