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 September 30, 1995
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 September 30, 1995, 197,519,358 shares of common stock of the Registrant
were outstanding.
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 Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1995 1994 1995 1994
MACHINERY AND ENGINES:
Sales ................................ $3,568 $ 3,390 $11,400 $10,063
------ ------ ------ ------
Operating costs:
Cost of goods sold ................. 2,878 2,674 8,878 7,887
Selling, general and
administrative expenses .......... 352 332 1,091 974
Research and development expenses .. 89 69 273 229
------ ------ ------ ------
3,319 3,075 10,242 9,090
------ ------ ------ ------
Operating profit ..................... 249 315 1,158 973
Interest expense ..................... 48 49 144 150
------ ------ ------ ------
201 266 1,014 823
Other income ......................... 40 23 72 36
------ ------ ------ ------
Profit before taxes .................. 241 289 1,086 859
------ ------ ------ ------
FINANCIAL PRODUCTS:
Revenues ............................. 165 119 459 337
------ ------ ------ ------
Operating costs:
Selling, general and
administrative expenses .......... 57 46 170 136
Interest expense ................... 80 54 218 151
------ ------ ------ ------
137 100 388 287
------ ------ ------ ------
Operating profit ..................... 28 19 71 50
Other income (expense) ............... 11 4 30 (2)
------ ------ ------ ------
Profit before taxes .................. 39 23 101 48
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES ....... 280 312 1,187 907
Provision for income taxes ........... 69 75 368 254
------ ------ ------ ------
Profit of consolidated companies ..... 211 237 819 653
Equity in profit of
affiliated companies (Note 7) ...... 2 7 17 23
------ ------ ------ ------
PROFIT ................................. $ 213 $ 244 $ 836 $ 676
====== ====== ====== ======
PROFIT PER SHARE OF COMMON STOCK (NOTE 9):
Profit ............................... $ 1.07 $ 1.20 $ 4.19 $ 3.32
====== ====== ====== ======
Cash dividends paid per share of
common stock ......................... $ .35 $ .15 $ .85 $ .30
See accompanying notes to Consolidated Financial Statements.
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Sep. 30, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 897 $ 419
Receivables -- trade and other .................. 2,537 2,971
Receivables -- finance .......................... 1,771 1,319
Deferred income taxes and prepaid expenses ...... 911 865
Inventories (Note 8) ............................ 2,188 1,835
------- -------
Total current assets .............................. 8,304 7,409
Land, buildings, machinery, and equipment -- net .. 3,549 3,776
Long-term receivables -- trade and other .......... 114 125
Long-term receivables -- finance .................. 3,213 2,669
Investments in affiliated companies (Note 7) ...... 543 455
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 1,175 1,243
Intangible assets ................................. 240 237
Other assets ...................................... 348 336
------- -------
TOTAL ASSETS ........................................ $17,486 $16,250
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 1,222 $ 740
Accounts payable and accrued expenses ........... 2,695 2,624
Accrued wages, salaries, and employee benefits .. 827 1,047
Dividends payable ............................... - 50
Deferred and current income taxes payable ....... 179 144
Long-term debt due within one year .............. 951 893
------- -------
Total current liabilities ......................... 5,874 5,498
Long-term debt due after one year ................. 4,589 4,270
Liability for postemployment benefits ............. 3,502 3,548
Deferred income taxes ............................. 27 23
------- -------
TOTAL LIABILITIES ................................... 13,992 13,339
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued (Sep. 30, 1995 -- 203,723,656;
Dec. 31, 1994 -- 203,723,656) at paid in amount . 901 923
Profit employed in the business ................... 2,677 1,961
Foreign currency translation adjustment ........... 284 205
Less treasury stock (Sep. 30, 1995 -- 6,204,298
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... (368) (178)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 3,494 2,911
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $17,486 $16,250
======= =======
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1994 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)
Sep. 30, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 857 $ 395
Receivables -- trade and other .................. 2,422 2,919
Receivables -- finance .......................... - -
Deferred income taxes and prepaid expenses ...... 894 888
Inventories (Note 8)............................. 2,188 1,835
------- -------
Total current assets .............................. 6,361 6,037
Land, buildings, machinery, and equipment -- net .. 3,149 3,343
Long-term receivables -- trade and other .......... 114 125
Long-term receivables -- finance .................. - -
Investments in affiliated companies (Note 7) ...... 543 455
Investments in Financial Products subsidiaries .... 646 548
Deferred income taxes ............................. 1,195 1,254
Intangible assets ................................. 240 237
Other assets ...................................... 115 143
------- -------
TOTAL ASSETS ........................................ $12,363 $12,142
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 82 $ 17
Accounts payable and accrued expenses ........... 2,382 2,416
Accrued wages, salaries, and employee benefits .. 825 1,045
Dividends payable ............................... - 50
Deferred and current income taxes payable ....... 111 112
Long-term debt due within one year .............. 6 86
------- -------
Total current liabilities ......................... 3,406 3,726
Long-term debt due after one year ................. 1,934 1,934
Liability for postemployment benefits ............. 3,502 3,548
Deferred income taxes ............................. 27 23
------- -------
TOTAL LIABILITIES ................................... 8,869 9,231
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (Sep. 30, 1995 -- 203,723,656;
Dec. 31, 1994 -- 203,723,656) at paid in amount . 901 923
Profit employed in the business ................... 2,677 1,961
Foreign currency translation adjustment ........... 284 205
Less treasury stock (Sep. 30, 1995 -- 6,204,298
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... (368) (178)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 3,494 2,911
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $12,363 $12,142
======= =======
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, 1994 amounts.
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Sep. 30, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 40 $ 24
Receivables -- trade and other .................. 123 96
Receivables -- finance .......................... 1,771 1,319
Refundable income taxes ......................... - -
Deferred income taxes and prepaid expenses ...... 19 3
Inventories (Note 8) ............................ - -
------- -------
Total current assets .............................. 1,953 1,442
Land, buildings, machinery, and equipment -- net .. 400 433
Long-term receivables -- trade and other .......... - -
Long-term receivables -- finance .................. 3,213 2,669
Investments in affiliated companies (Note 7) ...... - -
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. - -
Intangible assets ................................. - -
Other assets ...................................... 233 193
------- -------
TOTAL ASSETS ........................................ $ 5,799 $ 4,737
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 1,140 $ 723
Accounts payable and accrued expenses ........... 322 278
Accrued wages, salaries, and employee benefits .. 2 2
Dividends payable ............................... - -
Deferred and current income taxes payable ....... 68 32
Long-term debt due within one year .............. 945 807
------- -------
Total current liabilities ......................... 2,477 1,842
Long-term debt due after one year ................. 2,655 2,336
Liability for postemployment benefits ............. - -
Deferred income taxes ............................. 21 11
------- -------
TOTAL LIABILITIES ................................... 5,153 4,189
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (Sep. 30, 1995 -- 203,723,656
Dec. 31, 1994 -- 203,723,656) at paid in amount . 333 303
Profit employed in the business ................... 306 245
Foreign currency translation adjustment ........... 7 -
Less treasury stock (Sep. 30, 1995 -- 6,204,298
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... - -
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 646 548
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 5,799 $ 4,737
======= =======
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, 1994 amounts.
<PAGE>
CATERPILLAR INC.
Statement of Cash Flows for Nine Months Ended
(Unaudited)
(Millions of dollars)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Sep. 30, Sep. 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 836 $ 676
Adjustments for noncash items:
Depreciation and amortization ..................... 517 509
Profit of Financial Products ...................... - -
Other ............................................. 146 75
Changes in assets and liabilities:
Receivables -- trade and other .................. 468 (353)
Inventories ..................................... (344) (206)
Accounts payable and accrued expenses ........... 81 404
Other -- net .................................... (252) 66
------- -------
Net cash provided by operating activities ........... 1,452 1,171
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (256) (285)
Expenditures for equipment leased to others ....... (127) (128)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 66 76
Additions to finance receivables .................. (3,770) (2,048)
Collections of finance receivables ................ 1,887 1,254
Proceeds from sale of finance receivables.......... 935 241
Other -- net ...................................... (42) (49)
------- -------
Net cash used for investing activities .............. (1,307) (939)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (169) (61)
Common stock issued, including treasury
shares reissued ................................. - 12
Treasury shares purchased.......................... (226) (116)
Proceeds from long-term debt issued ............... 930 707
Payments on long-term debt ........................ (792) (601)
Short-term borrowings -- net ...................... 664 74
------- -------
Net cash provided by financing activities ........... 407 15
------- -------
Effect of exchange rate changes on cash ............. (74) 3
------- -------
Increase (decrease) in cash and
short-term investments ............................ 478 250
Cash and short-term investments at the
beginning of the period ........................... 419 83
------- -------
Cash and short-term investments at the
end of the period ................................. $ 897 $ 333
======= =======
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 Nine Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES
(Caterpillar Inc. with Financial
Products on the equity basis)
Sep. 30, Sep. 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 836 $ 676
Adjustments for noncash items:
Depreciation and amortization ................... 442 441
Profit of Financial Products .................... (61) (32)
Other ........................................... 82 58
Changes in assets and liabilities:
Receivables -- trade and other .................. 531 (311)
Inventories ..................................... (344) (206)
Accounts payable and accrued expenses ........... (1) 320
Other -- net .................................... (238) 81
------- -------
Net cash provided by operating activities ........... 1,247 1,027
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (254) (284)
Expenditures for equipment leased to others ....... (6) (4)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 13 12
Additions to finance receivables .................. - -
Collections of finance receivables ................ - -
Proceeds from sale of finance receivables.......... - -
Other -- net ...................................... (47) (46)
------- -------
Net cash used for investing activities .............. (294) (322)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (169) (61)
Common stock issued, including treasury
shares reissued ................................. - 12
Treasury shares purchased.......................... (226) (116)
Proceeds from long-term debt issued ............... - -
Payments on long-term debt ........................ (87) (215)
Short-term borrowings -- net ...................... 65 (84)
------- -------
Net cash used for financing activities .............. (417) (464)
------- -------
Effect of exchange rate changes on cash ............. (74) 2
------- -------
Increase (decrease) in cash and
short-term investments ............................ 462 243
Cash and short-term investments at the
beginning of the period ........................... 395 62
------- -------
Cash and short-term investments at the
end of the period ................................. $ 857 $ 305
======= =======
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 Nine Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Sep. 30, Sep. 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 61 $ 32
Adjustments for noncash items:
Depreciation and amortization ................... 75 68
Profit of Financial Products .................... - -
Other ........................................... 40 17
Changes in assets and liabilities:
Receivables -- trade and other .................. (27) (14)
Inventories ..................................... - -
Accounts payable and accrued expenses ........... 21 26
Other -- net .................................... 35 15
------- -------
Net cash provided by operating activities ........... 205 144
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (2) (1)
Expenditures for equipment leased to others ....... (121) (124)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 53 64
Additions to finance receivables .................. (3,770) (2,048)
Collections of finance receivables ................ 1,887 1,254
Proceeds from sale of finance receivables.......... 935 241
Other -- net ...................................... (25) (28)
------- -------
Net cash used for investing activities .............. (1,043) (642)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... - -
Common stock issued, including treasury
shares reissued ................................. 30 25
Treasury shares purchased.......................... - -
Proceeds from long-term debt issued ............... 930 707
Payments on long-term debt ........................ (705) (386)
Short-term borrowings -- net ...................... 599 158
------- -------
Net cash provided by financing activities ........... 854 504
------- -------
Effect of exchange rate changes on cash ............. - 1
------- -------
Increase (decrease) in cash and
short-term investments ............................ 16 7
Cash and short-term investments at the
beginning of the period ........................... 24 21
------- -------
Cash and short-term investments at the
end of the period ................................. $ 40 $ 28
======= =======
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- and nine-month periods
ended September 30, 1995 and 1994, (b) the consolidated financial
position at September 30, 1995 and December 31, 1994, and (c) the
consolidated statement of cash flows for the nine-month periods ended
September 30, 1995 and 1994 have been made.
2. The results for the three- and nine-month periods ended September 30,
1995 are not necessarily indicative of the results for the entire year
1995.
3. When inflationary effects are material, 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. This treatment was applied for the first half
of 1994. The 1995 inflationary effects through the third quarter were
immaterial.
4. The company buys and sells currencies in amounts large enough to cover
requirements for the business, and to protect its financial and
competitive positions in those currencies whose relative values may
change in foreign exchange markets. The company manages foreign
exchange exposures that arise from cash inflows or outflows denominated
in currencies other than the U.S. dollar with the objective to maximize
consolidated aftertax U.S. dollar cash flows. At Sept. 30, 1995, the
company had approximately $765 in contracts to buy or sell foreign
currency in the future. The carrying value of such contracts was an
asset of $2 and the fair market value was a liability of $28.
5. In its Form 10-K for 1993, the company reported settlement of a
consolidated class action lawsuit and institution of a declaratory
judgment action against its directors and officers liability insurer to
recover a portion of the settlement amount. On September 29, 1995,
the company reached an agreement with the insurer under which the insurer
agreed to reimburse the company in the amount of $10 million with respect
to the class action settlement. Pursuant to that agreement, the
declaratory judgment action against the insurer was dismissed. As noted
in the Management's Discussion and Analysis, the $10 million
reimbursement was recorded as "Other income/(expense)". The company has
reviewed the status of its other legal and environmental contingencies
and believes there are no material changes from that disclosed in Form
10-K for the year ended December 31, 1994.
6. The company and Caterpillar Financial Services Corporation (Cat
Financial) have an agreement whereby the company agrees to ensure that
Cat Financial maintains a tangible net worth of at least $20 at all times
("Support Agreement"). The Support Agreement also requires Cat Financial
to maintain for the fiscal year a minimum ratio of earnings before tax
plus interest expense to interest expense of 1.15 to 1. If it appeared
Cat Financial could not achieve that ratio for a particular year, the
company would make a payment to Cat Financial or forgive a payment due
from Cat Financial to ensure achievement of that ratio. The obligations
of the company under the Support Agreement are to Cat Financial only and
are not directly enforceable by any creditor of Cat Financial.
7. Affiliated Companies
The company's investments in affiliated companies consist principally of
a 50% interest in Shin Caterpillar Mitsubishi Ltd., Japan $(503). 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 Nine Months Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
RESULTS OF OPERATIONS
(Unaudited)
Sales ..................... $ 957 $ 832 $2,823 $2,430
====== ====== ====== ======
Profit (loss) ............. $ 2 $ 12 $ 34 $ 37
====== ====== ====== ======
June 30, Sep. 30,
1995 1994
FINANCIAL POSITION
(Unaudited)
Assets:
Current assets ................................. $2,158 $1,853
Land, buildings, machinery and equipment - net.. 879 781
Other assets ................................... 346 298
------ ------
3,383 2,932
------ ------
Liabilities:
Current liabilities ............................ 1,880 1,575
Long-term debt due after one year .............. 289 332
Other liabilities .............................. 154 150
------ ------
2,323 2,057
------ ------
Ownership ........................................ $1,060 $ 875
====== ======
8. Inventories (principally "last-in, first-out" method) comprised the
following:
Sep. 30, Dec. 31,
1995 1994
(unaudited)
Raw materials and work-in-process ................ $ 846 $ 697
Finished goods ................................... 1,130 942
Supplies ......................................... 212 196
------ ------
$2,188 $1,835
====== ======
9. Following is a computation of profit (loss) per share:
Three Months Ended Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1995 1994 1995 1994
(Unaudited)
I. Net profit for period:
Profit - consolidated (A) ....... $ 213 $ 244 $ 836 $ 676
====== ====== ====== =======
II. Determination of shares (millions):
Weighted average number of
common shares outstanding (B) .. 198.3 203.0 199.4 203.5
Shares issuable on exercise of
stock options, net of shares
assumed to be purchased out
of proceeds at market price .... 2.3 2.2 1.8 2.1
------ ------ ------ -------
Average common shares
outstanding for fully diluted
computation (C) ................ 200.6 205.2 201.2 205.6
====== ====== ====== =======
III. Profit per share of common
stock:
Assuming no dilution (A/B) ...... $1.07 $1.20 $4.19 $3.32
Assuming full dilution (A/C) .... $1.06 $1.19 $4.15 $3.29
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND LIQUIDITY AND CAPITAL RESOURCES
A. Consolidated Results of Operations
THREE MONTHS ENDED SEPTEMBER 30, 1995 VS. THREE MONTHS ENDED SEPTEMBER 30,
1994
The company reported third-quarter profit of $213 million or $1.07 per
share of common stock. This compares with profit of $244 million or $1.20
per share for the third quarter of 1994. Sales and revenues were $3.73
billion, an increase of $224 million from the same quarter a year ago. The
decrease in profit was primarily a result of the unfavorable impact of the
weaker dollar on costs, higher sales discounts and an unfavorable change in
geographic sales mix. These factors more than offset the benefit from higher
sales.
Worldwide, company sales expectations for 1995 remain unchanged. Sales
and profit for the fourth quarter are expected to be above third-quarter
levels. Sales and profit are expected to reach record levels for the third
consecutive year.
On June 7, 1995, the company announced a plan to repurchase up to 10% of
its outstanding common stock over the next three to five years. As of the end
of the third quarter, 3 million shares (1.5%) had been repurchased under the
plan.
Machinery and Engines
Sales of Machinery and Engines were $3.57 billion, $178 million higher
than the same quarter last year. The increase reflects a 4% improvement in
sales volume and 1% better price realization. Profit before tax was $241
million, a decrease of $48 million from profit of $289 million a year ago.
The increase in physical sales volume reflects an increase in machine and
engine sales outside the United States, partially offset by a decrease in
machine sales inside the United States. Price realization improved because of
price increases taken over the past year and the effect of the weaker dollar
as sales in European currencies translated into more U.S. dollars. These
factors were partially offset by higher sales discounts and an unfavorable
change in geographic sales mix. The benefit to sales (and margin) of the
weaker dollar was limited by currency hedges (forward contracts) covering most
U.S. manufactured product sold in Europe. The hedges were put in place in
1991 to protect margins against potential strengthening of the U.S. dollar.
Without these currency hedges, sales and margin during the third quarter
would have been about $35 million higher. All remaining forward contracts
mature in 1995.
Margin (sales less cost of goods sold) declined $26 million. The decline
reflects the effect of the weaker dollar as costs incurred in European
currencies and the Japanese yen translated into more U.S. dollars, higher
costs due to inflation and inefficiencies resulting from lower production
volumes to maintain dealer and company inventories in line with dealer selling
rates. Inefficiencies result when production is reduced and fixed costs
continue, negatively affecting margin.
Compared with the third quarter of last year, the U.S. dollar weakened
approximately 10% relative to the Belgian franc, the German mark and the
Japanese yen. These unfavorable items more than offset the benefits of
improved sales volume and price realization. Margin as a percent of sales was
19.3%, a 1.8 percentage point decrease from the third quarter a year ago.
Selling, general and administrative expenses were $352 million compared
with $332 million the same quarter last year. During the third quarter of
1994, a significant number of SG&A employees were working in manufacturing
areas as a result of the United Auto Workers (UAW) union strike. Consequently,
the labor costs associated with those employees were assigned to cost of goods
sold. SG&A expenses increased in 1995 as those employees have returned to
their regular jobs. The increase also reflects activity to support higher
sales volume and expanded operations around the world, higher costs due to
inflation and the effect of the weaker dollar as costs in European currencies
translated into more U.S. dollars. Partially offsetting the increase was a
favorable adjustment to insurance reserves based on an annual actuarial
valuation and a decrease in incentive pay expense.
Research and development (R&D) expenses of $89 million were $20 million
higher primarily because R&D employees who worked in manufacturing functions
during the third quarter of 1994 were back in their regular jobs in 1995.
Operating profit of $249 million was $66 million lower than the same
period last year. As a percent of sales, operating profit of 7.0% was down
2.3 percentage points.
Interest expense was about the same as the third quarter a year ago.
Other income/expense was income of $40 million compared with income of
23 million during the third quarter of 1994. The current quarter benefited
from a $10 million reimbursement under the company's insurance coverage for
the settlement of two class action complaints.
Financial Products
Financial Products' before tax profit was $39 million, up $16 million
from the same quarter a year ago primarily because of a larger portfolio of
earning assets at Caterpillar Financial Services Corporation.
Revenues of $165 million increased $46 million, a result of a larger
portfolio. Cat Financial financed new retail business of $779 million, a $282
million or 57% increase compared with the third quarter of 1994.
Selling, general and administrative expenses increased $11 million,
reflecting a higher provision for credit losses and other volume-related
expenses at Cat Financial. Interest expense was $26 million higher because of
an increase in average borrowings to support the larger portfolio.
Other income/expense was income of $11 million compared with income of $4
million during the year-earlier quarter. The improvement reflects a $4
million gain on sale of receivables at Cat Financial and increased investment
income at Cat Insurance.
Income Taxes
The provision for income taxes was $69 million, compared with $75 million
last year. Third-quarter 1994 tax expense reflected an estimated effective
annual tax rate of 28% and a favorable adjustment of $12 million to recognize
the impact of a tax rate change from 30%, which had been used for the first
six months of 1994. Third-quarter 1995 tax expense reflects an estimated
effective annual tax rate of 31% and a favorable adjustment of $18 million to
recognize the impact of a change from 33%, which was used for the first six
months of the year.
Affiliated Companies
The company's share of affiliated companies' results declined $5 million
from the same quarter last year, primarily a result of lower sales at the
company's 50%-owned affiliate, Shin Caterpillar Mitsubishi Ltd. (SCM) in
Japan.
THREE MONTHS ENDED SEPTEMBER 30, 1995 VS THREE MONTHS ENDED JUNE 30, 1995
Third quarter profit of $213 million or $1.07 per share declined $110 million
or 55 cents per share from the second quarter of this year. The most
significant factor contributing to the change was a $480 million decrease in
sales and revenues.
Machinery and Engines
Profit before tax for Machinery and Engines was $241 million, $204
million lower than last quarter primarily because of a $491 million decline in
sales. The sales decrease reflects an 11% decline in physical sales volume
and 1% lower price realization. The decrease in physical sales volume
resulted from lower machine sales volume principally in the United States as
dealers took steps to maintain inventories in line with selling rates. The
decline in price realization was due to higher sales discounts.
Margin of $690 million was down $259 million primarily because of lower
sales. Margin as a percent of sales was 19.3% compared with 23.4% last
quarter. The decrease reflects lower sales and inefficiencies resulting from
lower production volumes. The lower volumes were due to planned cuts in
scheduled production including employee vacation periods during the quarter.
Selling, general and administrative expenses declined $26 million from
last quarter primarily because of a favorable adjustment to insurance reserves
based on an annual actuarial valuation.
Research and development expenses and interest expense were both about
the same as the second quarter.
Operating profit of $249 million decreased $224 million from the second
quarter. Operating profit as a percent of sales was 7.0%, down from 11.7%
last quarter.
Other income/expense was income of $40 million compared with income of
$20 million last quarter. The improvement reflects a reimbursement under the
company's insurance coverage for the settlement of two class action complaints
and several smaller, nonrecurring items.
Financial Products
Before-tax profit for Financial Products of $39 million was up $9 million
from the second quarter, a result of a larger portfolio of earning assets, a
gain on sale of receivables at Cat Financial and higher investment income at
Cat Insurance. The second quarter benefited from a $5 million mark-to-market
gain on Cat Financial's written interest rate caps that were terminated in the
second quarter.
Income Taxes
Tax expense of $69 million was $87 million lower than the prior quarter.
The decline reflects lower profit before tax and a change in the estimated
effective annual tax rate from 33% to 31%, as well as a favorable adjustment
of $18 million to recognize the impact of the tax rate change for the first
six months.
Affiliated Companies
The company's share of affiliated companies' results was $2 million, down
$2 million from the second quarter primarily because of lower sales and the
absence of land sale gains at SCM.
NINE MONTHS ENDED SEPTEMBER 30, 1995 VS. NINE MONTHS ENDED SEPTEMBER 30, 1994
Profit for the nine months ended September 30, 1995 was $836 million or
$4.19 per share of common stock, an improvement of $160 million over profit of
$676 million or $3.32 per share for the first nine months of 1994. Sales and
revenues of $11.86 billion were $1.46 billion higher than last year and were
the primary reason for the improvement in profit.
Machinery and Engines
Sales were $11.40 billion, an increase of $1.34 billion from the same
period last year. Before-tax profit was $1.09 billion, an improvement of $227
million. The primary reason for the increase in profit was higher sales -- a
10% increase in physical sales volume and a 3% improvement in price
realization.
The increase in physical sales volume resulted primarily from higher
machine sales both inside and outside the United States as customer demand
improved over the past year. Price realization improved primarily because of
price increases taken over the past year and the effect of the weaker dollar
as sales in European currencies translated into more U.S. dollars. These
factors were partially offset by higher sales discounts and an unfavorable
change in geographic sales mix. The benefit to sales (and margin) of the
weaker dollar was limited by currency hedges (forward contracts) covering most
U.S. manufactured products sold in Europe. The hedges were put in place in
1991 to protect margins against potential strengthening of the U.S. dollar.
Without these currency hedges, sales and margin during the period would have
been about $100 million higher. All remaining forward contracts mature during
1995.
Margin increased $346 million primarily because of higher sales volume
and better price realization. These favorable items were partially offset by
the effect of the weaker dollar on costs, proportionately higher sales of
lower margin products and inflation on material costs. Sales of lower margin
products continue to increase and contribute to the company's overall margin,
but at a rate that is slightly less than the average margin on other products.
Total margin as a percent of sales was 22.1%, a .5 percentage point increase
from a year ago.
Selling, general and administrative expenses were $117 million higher
than the same period last year because of higher spending levels to support
increased sales volume and expanded operations around the world, higher costs
due to inflation and the effect of the weaker dollar as costs in European
currencies translated into more U.S. dollars. In addition, the absence of the
assignment of labor costs from SG&A to cost of goods sold for employees
working in manufacturing functions during 1994 contributed to the increase.
Partially offsetting these factors was a favorable adjustment to insurance
reserves based on an annual actuarial valuation and a decrease in incentive
pay expense.
Research and development expenses were up $44 million from the first nine
months of 1994, a result of expanded activity for new product introductions
and a decrease in assignment of labor costs from R&D to cost of goods sold as
fewer employees were working in manufacturing areas in 1995 compared with
1994.
Interest expense of $144 million was $6 million lower than a year ago as
the benefit of lower average debt of approximately $250 million was partially
offset by higher interest rates.
Other income/expense was income of $72 million compared with income of
$36 million last year. The improvement reflects the absence of a $17 million
expense in 1994 for the settlement of two class action complaints and a $10
million recovery in 1995 from the company's insurance company related to this
settlement.
Financial Products
Before-tax profit for Financial Products was $101 million, up $53 million
from the first nine months of 1994. The increase was a result of Cat
Financial's larger portfolio of earning assets and a $25 million favorable
change in the unrealized mark-to-market adjustment for Cat Financial's written
interest rate caps. These written caps were terminated during the second
quarter of 1995.
Revenues of $459 million increased $122 million from a year ago, the
result of Cat Financial's larger portfolio.
Selling, general and administrative expenses were $170 million, compared
with $136 million in the first nine months of 1994. The increase reflects a
higher provision for credit losses and other volume-related expenses at Cat
Financial. Interest expense was $218 million for the first nine months, up
$67 million because of higher average borrowings to support the larger
portfolio.
Other income/expense was income of $30 million compared with expense of
$2 million a year ago. The favorable change resulted from a $11 million
mark-to-market gain for interest rate caps in the current period, compared
with a $14 million unrealized mark-to-market loss during the same period last
year.
Income Taxes
Tax expense was $368 million, $114 million higher than a year ago. The
increase reflects higher before-tax profit and a 31% estimated annual tax rate
compared with 28% for the first nine months of 1994.
Affiliated Companies
The company's share of affiliated companies' results was $17 million,
down $6 million from a year ago primarily because of lower land sale gains at
SCM.
SALES
Following are summaries of third-quarter company sales and dealer
deliveries compared with the same quarter in 1994.
Company Sales Inside the United States
Caterpillar sales inside the United States were $1.63 billion, a $105
million or 6% decrease from the same quarter a year ago. The decline was due
primarily to a steeper reduction in dealers' new machine inventories than
occurred during the third quarter last year, a reaction to slower economic
growth and improved factory machine availability. This reduction in dealer
inventories more than offset stronger industry demand and higher price
realization.
Sales inside the United States were 46% of total sales, down from 51%
during the third quarter last year.
U.S. Dealer Machine Sales to End-Users
Sales were up from a year ago. Industry demand, although softening, was
still stronger than a year earlier. Sales to end-users (including rental
purchase options) were mixed with gains in the commodity sector offsetting
declines in construction, industrial and solid waste applications.
Sales to the construction sector declined despite higher highway sales:
- Highway sales were above year-earlier levels reflecting higher spending
on highway construction and repair.
- Sales related to housing were up even though housing starts were
lower than a year ago.
- Commercial, industrial and government building sales were lower despite
higher levels of construction spending in these areas.
Sales to the commodity sector varied by work application but on balance
were above year- earlier levels:
- Coal mining-related sales were higher reflecting higher mine
production.
- Sales to the sand and quarry mining sector were lower although sector
production was up.
- Forestry-related sales were higher even though lumber production was
down. Pulp production, however, was higher and so were both lumber and
pulp prices.
- Sales to the agricultural sector were above last year's level
reflecting the introduction of new models.
- Metal mining-related sales were lower despite higher mine production
and better metals prices.
- Sales to the petroleum sector were higher. Oil prices were lower on
average for the quarter than a year earlier and pipeline construction
continued to trend down.
Deliveries to U.S. Dealer Rental Fleets
Deliveries to U.S. dealers for their dedicated rental fleets increased
over third quarter 1994 levels. U.S. dealer rental inventories increased from
second quarter levels and were above year ago levels.
U.S. Dealer New Machine Inventories
U.S. dealer new machine inventories were down from the end of the second
quarter. Compared to third quarter 1994, inventories are up but remain only
slightly above normal relative to current selling rates.
Company Engine Sales Inside the United States
Sales of diesel engines were below year-earlier levels. Lower dealer
demand for engines in power generation and industrial applications more than
offset higher sales to truck Original Equipment Manufacturers (OEMs).
Industry demand for trucks, although softening, was still stronger than a
year earlier. Sales of turbine engines declined.
Company Sales Outside the United States
Caterpillar sales outside the United States were $1.94 billion, a $283
million or 17% increase from third quarter 1994. The improvement was due
primarily to higher demand from end-users. Company sales also benefited from
an increase in dealers' new machine inventories and improved price
realization.
Sales outside the United States represented 54% of worldwide sales.
Dealer Machine Sales to End-Users Outside the United States
Dealer sales outside the United States were up from third quarter 1994
levels due primarily to higher demand in Africa, Middle East, Europe and Asia.
- Europe: Sales rose in most countries reflecting continued economic
recovery and a rebound in investment activity. Particularly good gains
were realized in the United Kingdom, France and Italy while sales
declined in Germany. Higher sales were reported in all Central
European countries.
- Asia (excluding China and Japan): Sales increased as excellent
economic growth continues. Indonesia, Malaysia and India experienced
the largest gains.
- Latin America: Sales declined due primarily to downturns in Mexico and
Argentina. All other large economies except Brazil posted sales gains.
- Africa and the Middle East: Demand was up reflecting improved
commodity prices, exports and economic growth. South Africa and Turkey
registered the largest gains.
- Canada: Sales fell due to weaker industry demand reflecting a sluggish
economy and political uncertainties. Declines were recorded in all
work applications except petroleum, agriculture and solid waste.
- Australia: Sales were higher than the same quarter a year ago with
gains in metal and coal mining as well as all construction sectors.
Despite these improvements, however, the industry is softening in
reaction to slower economic growth.
- Japan: Sales of imported product were up although the economy and
industry remain weak.
- Commonwealth of Independent States (CIS): Sales were unchanged from a
year earlier.
- China: Sales also were unchanged. Excellent economic growth continues
and year-to-date sales remain ahead of last year.
Dealer New Machine Inventories Outside the United States
Dealer new machine inventories outside the United States were up from the
end of the second quarter and from the end of third quarter 1994. However,
because demand has also improved, dealer inventories are about normal relative
to current selling rates.
Company Engine Sales Outside the United States
Sales of diesel engines were higher than a year ago. Increased demand
for engines to provide power generation combined with higher deliveries for
marine applications more than offset lower sales to truck OEMs. Sales of
turbine engines also increased.
PLANT CLOSING AND CONSOLIDATION COSTS
At Sept. 30, 1995 the reserve for plant closing and consolidation costs
was $322 million. Of this balance, $174 million related to costs associated
with the probable closure of the Component Products Division's York,
Pennsylvania, facility. The probable closing of the York facility was
announced in December 1991. The company determined that unless significant
cost reductions were made, the unit would be closed -- probably in the 1996
time frame.
Also in the reserve for plant closing and consolidation costs at
September 30, 1995, was $119 million for write-downs of buildings, machinery
and equipment at previously closed facilities. The remainder of the reserve
related to severance benefits provided to former employees at previously
closed facilities. The reserve for such benefits is amortized as the benefits
are provided. Currently amortization periods are through 2003.
LABOR UPDATE
The strike by the United Auto Workers union that began on June 21, 1994,
at eight of the company's U.S. facilities continued. Representatives from
Caterpillar and the UAW held several bargaining meetings during the third
quarter and have agreed that additional meetings will be scheduled in the near
future. Significant issues remain to be resolved before a contract settlement
can be reached.
The 8,700 striking employees represent about 16% of Caterpillar's total
work force. The ongoing strike had no impact on the company's ability to meet
the needs of its customers.
EMPLOYMENT
At the end of the third quarter, Caterpillar's worldwide employment,
including UAW members on strike, was 54,267, compared with 53,894 one year
ago. Hourly employment increased 76 to 32,059, while salaried and management
employment increased 297 to 22,208.
OUTLOOK
Worldwide, company sales expectations for 1995 remain unchanged. Sales
and profit for the fourth quarter are expected to be above third-quarter
levels. Sales and profit are expected to reach record levels for the third
consecutive year.
The 1995 economic and industry outlook for the United States remains
unchanged from that issued at the beginning of the year. Moderate economic
growth is still expected, but continuing tight monetary policy has led to
weaker industry demand in the second half. For the year as a whole, industry
demand for machines should be near 1994 levels while demand for engines will
exceed last year's level. In Canada, industry demand will be weaker than
originally expected due to high interest rates and political uncertainty.
Industry demand is still expected to register good growth in Europe, Africa
and Asia. Higher demand in these three areas will more than offset declines
in Latin America and Japan, where economic growth has been weaker than
expected.
In 1996, world economic growth should be similar to that experienced in
1995. Industry demand for machines is forecast to remain at 1995 levels while
demand for engines will likely decline. Slower economic growth is forecast
for the United States, Canada and Australia resulting in a declining industry
in those countries. In contrast, moderate economic growth and relatively low
interest rates are forecast to continue in Europe which should lead to higher
industry demand. Economic activity should remain strong in Asia, and better
growth is likely in Africa/Middle East, Latin America and Japan.
Consequently, industry demand for machines is forecast to increase enough
outside North America and Australia to maintain worldwide demand at about this
year's level. Our current expectations are that 1996 company sales will be
similar to 1995's record sales.
B. Liquidity and Capital Resources
Consolidated operating cash flows totaled $564 million in the third
quarter of 1995, compared with $478 million in the third quarter of 1994.
Total debt at the end of the quarter was $6.76 billion, an increase of
$859 million from year-end 1994. Over this period, debt related to Machinery
and Engines decreased $15 million, to $2.02 billion, while debt related to
Financial Products increased $874 million to $4.74 billion.
Machinery and Engines
Operating cash flows totaled $496 million in the third quarter of 1995,
compared with $422 million in the third quarter of 1994. The cash flow
increase is primarily the result of decrease in receivables.
Capital expenditures, excluding equipment leased to others, totaled $100
million in the third quarter compared with $114 million a year ago. The
percent of debt to debt plus stockholders equity improved to 37% at September
30, 1995, from 41% at December 31, 1994.
Financial Products
Operating cash flows totaled $68 million in the third quarter of 1995,
compared with $56 million in the third quarter of 1994. Cash used to purchase
equipment leased to others totaled $44 million in the third quarter of 1995.
In addition, third-quarter 1995 net cash received for finance receivables was
$81 million, compared with cash used of $225 million during the third quarter
of 1994.
Financial Products' debt was $4.74 billion at September 30, 1995, an
increase of $874 million from December 31, 1994. At the end of the third
quarter, finance receivables past due over 30 days were 2.2%, compared with
2.4% at the end of the same period one year ago. The ratio of debt to equity
of Cat Financial was 8.0:1 at September 30, 1995, compared with 7.5:1 at
September 30, 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In its Form 10-K for 1993, the Company reported settlement of a
consolidated class action lawsuit and institution of a declaratory judgment
action against its directors and officers liability insurer ("Insurer") to
recover a portion of the settlement amount. On September 29, 1995, the
Company reached an agreement with the Insurer under which the Insurer agreed
to reimburse the Company in the amount of $10 million with respect to the
class action settlement. Pursuant to that agreement, the declaratory judgment
action against the Insurer was dismissed.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3(ii) ByLaws
27 Financial Data Schedule
(b) One report, dated September 18, 1995, on Form 8-K was filed
during the quarter ending September 30, 1995, pursuant to Item 5 of that
form. No financial statements were filed as part of that report.
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: October 25, 1995 By: /s/ D. R. Oberhelman
D. R. Oberhelman, Vice President
and Chief Financial Officer
Date: October 26, 1995 By: /s/ R. R. Atterbury III
R. R. Atterbury III, Secretary
EXHIBIT INDEX
Exhibit
Number Description
3(ii) ByLaws
27 Financial Data Schedule
EXHIBIT NUMBER 3(ii)
CATERPILLAR INC.
BYLAWS
Article I
Offices
Section 1. Registered Office.
The registered office of the corporation in the State of Delaware shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices.
The corporation may also have offices at such other places both within and
without the State of Delaware as the board of directors may from time to time
determine or the business of the corporation may require.
Article II
Stockholders
Section 1. Stockholder Meetings.
(a) Place of Meetings. Meetings of stockholders shall be held at such
places, within or without the State of Delaware, as may from time to time be
designated by the board of directors.
(b) Annual Meeting.
(i) The annual meeting of stockholders shall be held on the second
Wednesday in April in each year at a time designated by the board of
directors, or at such a time and date as may be designated by the board.
(ii) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the board of directors, (b) otherwise properly brought before the meeting
by or at the direction of the board of directors, or (c) otherwise properly
brought before the meeting by a stockholder. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the corporation, not less than
45 days nor more than 90 days prior to the meeting; provided, however, that in
the event that less than 60 days' notice of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth (15th) day
following the date on which such notice of the date of the annual meeting was
mailed. A stockholder's notice to the secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting,
(b) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
corporation which are beneficially owned by the stockholder and (d) any
material interest of the stockholder in such business. Notwithstanding
anything in the bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 1(b)(ii). The presiding officer of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 1, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted.
(c) Special Meetings. Special meetings of the stockholders of this
corporation for any purpose or purposes may be called at any time by the
chairman of the board or the vice chairman, or by the board of directors
pursuant to a resolution approved by a majority of the entire board of
directors, but such special meetings may not be called by any other person or
persons.
(d) Notice of Meetings. Notice of every meeting of the stockholders shall be
given in the manner prescribed by law.
(e) Quorum. Except as otherwise required by law, the certificate of
incorporation and these bylaws, the holders of not less than one-third of the
shares entitled to vote at any meeting of the stockholders, present in person
or by proxy, shall constitute a quorum and the act of the majority of such
quorum shall be deemed the act of the stockholders. If a quorum shall fail to
attend any meeting, the chairman of the meeting may adjourn the meeting to
another place, date or time. If a notice of any adjourned special meeting of
stockholders is sent to all stockholders entitled to vote thereat, stating
that it will be held with those present constituting a quorum, then, except as
otherwise required by law, those present at such adjourned meeting shall
constitute a quorum and all matters shall be determined by a majority of votes
cast at such meeting.
Section 2. Determination of Stockholders Entitled to Vote.
To determine the stockholders entitled to notice of any meeting or to vote,
the board of directors may fix in advance a record date as provided in Article
VI, Section 1 hereof, or if no record date is fixed by the board a record date
shall be determined as provided by law.
Section 3. Voting.
(a) Subject to the provisions of applicable law, and except as otherwise
provided in the certificate of incorporation, each stockholder present in
person or by proxy shall be entitled to one vote for each full share of stock
registered in the name of such stockholder at the time fixed by the board of
directors or by law as the record date of the determination of stockholders
entitled to vote at a meeting.
(b) Every stockholder entitled to vote may do so either in person or by one
or more agents authorized by a written proxy executed by the person or his
duly authorized agent whether by manual signature, typewriting, telegraphic
transmission or otherwise.
(c) Voting may be by voice or by ballot as the chairman of the meeting shall
determine.
(d) In advance of any meeting of stockholders the board of directors may
appoint one or more persons (who shall not be candidates for office) as
inspectors of election to act at the meeting. If inspectors are not so
appointed, or if an appointed inspector fails to appear or fails or refuses to
act at a meeting, the chairman of any meeting of stockholders may, and on the
request of any stockholder or his proxy shall, appoint inspectors of election
at the meeting.
(e) Any action required or permitted to be taken by the stockholders of the
corporation must be effected at a duly called annual or special meeting of
such holders and may not be effected by any consent in writing by such
holders.
Article III
Board of Directors
Section 1. Election of Directors.
(a) Number. The authorized number of directors of the corporation shall be
fixed from time to time by the board of directors but shall not be less than
three (3). The exact number of directors shall be determined from time to
time either by a resolution or bylaw duly adopted by the board of directors.
(b) Classes of Directors. The board of directors shall be and is divided
into three classes: Class I, Class II and Class III, which shall be as nearly
equal in number as possible. Each director shall serve for a term ending on
the date of the third annual meeting of stockholders following the annual
meeting at which the director was elected; provided, however, that each
initial director in Class I shall hold office until the annual meeting of
stockholders in 1987; each initial director in Class II shall hold office
until the annual meeting of stockholders in 1988; and each initial director in
Class III shall hold office until the annual meeting of stockholders in 1989.
Notwithstanding the foregoing provisions of this subsection (b), each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal.
(c) Newly Created Directorships and Vacancies. In the event of any increase
or decrease in the authorized number of directors, the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the board of directors among the three classes of directors so
as to maintain such classes as nearly equal in number as possible. No
decrease in the number of directors constituting the board of directors shall
shorten the term of any incumbent director. Newly created directorships
resulting from any increase in the number of directors and any vacancies on
the board of directors resulting from death, resignation, disqualification,
removal or other cause shall be filled by the affirmative vote of a majority
of the remaining directors then in office (and not by stockholders), even
though less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
(d) Nomination of Directors. Candidates for director shall be nominated
either
(i) by the board of directors or a committee appointed by the board of
directors or
(ii) by nomination at any such stockholders' meeting by or on behalf of any
stockholder entitled to vote at such meeting provided that written notice of
such stockholder's intent to make such nomination or nominations has been
given, either by personal delivery or by United States mail, postage prepaid,
to the secretary of the corporation not later than (1) with respect to an
election to be held at an annual meeting of stockholders, ninety (90) days in
advance of such meeting, and (2) with respect to an election to be held at a
special meeting of stockholders for the election of directors, the close of
business on the tenth (10th) day following the date on which notice of such
meeting is first given to stockholders. Each such notice shall set forth: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder; (d)
such other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the board of directors; and (e) the
consent of each nominee to serve as a director of the corporation if so
elected. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
(e) Removal. Any director may be removed from office without cause but only
by the affirmative vote of the holders of not less than seventy-five percent
(75%) of the outstanding stock of the corporation entitled to vote generally
in the election of directors, voting together as a single class.
(f) Preferred Stock Provisions. Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of stock issued by this
corporation having a preference over the common stock as to dividends or upon
liquidation, shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies, nominations, terms of removal and other
features of such directorships shall be governed by the terms of Article
FOURTH of the certificate of incorporation and the resolution or resolutions
establishing such class or series adopted pursuant thereto and such directors
so elected shall not be divided into classes pursuant to Article SIXTH of the
certificate of incorporation unless expressly provided by such terms.
Section 2. Meetings of the Board of Directors.
(a) Regular Meetings. Regular meetings of the board of directors shall be
held without call at the following times:
(i) 8:30 a.m. on the second Wednesday in February, April, June, August,
October and December;
(ii) one-half hour prior to any special meeting of the stockholders, and
immediately following the adjournment of any annual or special meeting of the
stockholders.
Notice of all such regular meetings is hereby dispensed with.
(b) Special Meetings. Special meetings of the board of directors may be
called by the chairman of the board, any two (2) directors or by any officer
authorized by the board. Notice of the time and place of special meetings
shall be given by the secretary or an assistant secretary, or by any other
officer authorized by the board. Such notice shall be given to each director
personally or by mail, messenger, telephone or telegraph at his business or
residence address. Notice by mail shall be deposited in the United States
mail, postage prepaid, not later than the third (3rd) day prior to the date
fixed for the meeting. Notice by telephone or telegraph shall be sent, and
notice given personally or by messenger shall be delivered, at least
twenty-four (24) hours prior to the time set for the meeting. Notice of a
special meeting need not contain a statement of the purpose of the meeting.
(c) Adjourned Meetings. A majority of directors present at any regular or
special meeting of the board of directors, whether or not constituting a
quorum, may adjourn from time to time until the time fixed for the next
regular meeting. Notice of the time and place of holding an adjourned meeting
shall not be required if the time and place are fixed at the meeting
adjourned.
(d) Place of Meetings. Unless a resolution of the board of directors, or the
written consent of all directors given either before or after the meeting and
filed with the secretary, designates a different place within or without the
State of Delaware, meetings of the board of directors, both regular and
special, shall be held at the corporation's offices at 100 N.E. Adams Street,
Peoria, Illinois.
(e) Participation by Telephone. Members of the board may participate in a
meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another, and such participation shall constitute presence in person at such
meeting.
(f) Quorum. At all meetings of the board one-third of the total number of
directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. A
meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action is
approved by at least a majority of the required quorum for such meeting. Less
than a quorum may adjourn any meeting of the board from time to time without
notice.
Section 3. Action Without Meeting.
Any action required or permitted to be taken by the board of directors may be
taken without a meeting if all members of the board consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the board.
Section 4. Compensation of Directors.
The directors may be paid such compensation for their services as the board
shall from time to time determine. Directors who receive salaries as officers
or employees of the corporation shall not receive additional compensation for
their services as directors.
Section 5. Committees of the Board.
There shall be such committees of the board of directors each consisting of
two or more directors with such authority, subject to applicable law, as a
majority of the board shall by resolution determine. Committees of the board
shall meet subject to the call of the chairman of each committee and shall
prepare and file with the secretary minutes of their meetings. Unless a
committee shall by resolution establish a different procedure, notice of the
time and place of committee meetings shall be given by the chairman of the
committee, or at his request by the chairman of the board or by the secretary
or an assistant secretary. Such notice shall be given to each committee
member personally or by mail, messenger, telephone or telegraph at his
business or residence address at the times provided in subsection (b) of
Section 2 of this Article for notice of special meetings of the board of
directors. One-third of a committee but not less than two members shall
constitute a quorum for the transaction of business. Except as a committee by
resolution may determine otherwise, the provisions of Section 3 and of
subsections (c), (d) and (e) of Section 2 of this Article shall apply, mutatis
mutandis, to meetings of board committees.
Article IV
Officers
Section 1. Officers.
The officers of the corporation shall be a chairman of the board, who shall be
the chief executive officer, one or more group presidents, one or more vice
presidents (one of whom shall be designated the chief financial officer), a
secretary and a treasurer, together with such other officers as the board of
directors shall determine. Any two or more offices may be held by the same
person.
Section 2. Election and Tenure of Officers.
Officers shall be elected by the board of directors, shall hold office at the
pleasure of the board, and shall be subject to removal at any time by the
board. Vacancies in office may be filled by the board.
Section 3. Powers and Duties of Officers.
Each officer shall have such powers and duties as may be prescribed by the
board of directors or by an officer authorized so to do by the board.
Section 4. Compensation of Officers.
The compensation of officers shall be determined by the board of directors;
provided that the board may delegate authority to determine the compensation
of any assistant secretary or assistant treasurer, with power to redelegate.
Article V
Indemnification
The corporation shall indemnify to the full extent permitted by, and in the
manner permissible under, the laws of the State of Delaware any person made,
or threatened to be made, a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that
he, his testator or intestate is or was a director or officer of the
corporation or any predecessor of the corporation, or served any other
enterprise as a director or officer at the request of the corporation or any
predecessor of the corporation.
The foregoing provisions of this Article V shall be deemed to be a contract
between the corporation and each director and officer who serves in such
capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
The foregoing rights of indemnification shall not be deemed exclusive of any
other rights to which any director or officer may be entitled apart from the
provisions of this Article.
The board of directors in its discretion shall have power on behalf of the
corporation to indemnify any person, other than a director or officer, made a
party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an employee of the corporation.
Article VI
Miscellaneous
Section 1. Record Date.
(a) In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the board may fix, in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days prior to the date of such
meeting nor more than sixty (60) days prior to any other action. If not fixed
by the board, the record date shall be determined as provided by law.
(b) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting unless the board fixes a new record date for the adjourned meeting.
(c) Stockholders on the record date are entitled to notice and to vote or to
receive the dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided
by agreement or by applicable law.
Section 2. Stock Certificates.
(a) Every holder of shares in the corporation shall be entitled to have a
certificate signed in the name of the corporation by the chairman of the board
or the vice chairman or a vice president and by the treasurer or an assistant
treasurer, or the secretary or an assistant secretary, certifying the number
of shares and the class or series of shares owned by the stockholder. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
(b) The corporation may issue a new share certificate or a new certificate
for any other security in the place of any certificate theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate or the owner's
legal representative to give the corporation a bond (or other adequate
security) sufficient to indemnify it against any claim that may be made
against it (including any expense or liability) on account of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate.
Section 3. Corporate Seal.
The corporation shall have a corporate seal in such form as shall be
prescribed and adopted by the board of directors.
Section 4. Construction and Definitions.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws.
Section 5. Amendments.
Subject to the provisions of the certificate of incorporation, these bylaws
may be altered, amended or repealed at any regular meeting of the stockholders
(or at any special meeting thereof duly called for that purpose) by a majority
vote of the shares represented and entitled to vote at the meeting; provided
that in the notice of such special meeting notice of such purpose shall be
given. Subject to the laws of the State of Delaware, the certificate of
incorporation and these bylaws, the board of directors may by majority vote of
those present at any meeting at which a quorum is present amend these bylaws,
or enact such other bylaws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD
ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 103
<SECURITIES> 794
<RECEIVABLES> 2,537 <F1>
<ALLOWANCES> 0 <F1><F2>
<INVENTORY> 2,188
<CURRENT-ASSETS> 8,304
<PP&E> 8,373
<DEPRECIATION> 4,824
<TOTAL-ASSETS> 17,486
<CURRENT-LIABILITIES> 5,874
<BONDS> 4,589
0<F2>
0<F2>
<COMMON> 204
<OTHER-SE> 3,290
<TOTAL-LIABILITY-AND-EQUITY> 17,486
<SALES> 11,400
<TOTAL-REVENUES> 11,859
<CGS> 8,878
<TOTAL-COSTS> 10,630
<OTHER-EXPENSES> (102)
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 144
<INCOME-PRETAX> 1,187
<INCOME-TAX> 368
<INCOME-CONTINUING> 836
<DISCONTINUED> 0<F2>
<EXTRAORDINARY> 0<F2>
<CHANGES> 0<F2>
<NET-INCOME> 836
<EPS-PRIMARY> 4.19
<EPS-DILUTED> 4.15
<FN>
<F1> Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Statement of Financial Position.
<F2> Amounts inapplicable or not disclosed as a separate line on the
Statement of Financial Position or Results of Operations are reported
as 0 herein.
</FN>
</TABLE>
