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 June 30, 1997
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 June 30, 1997, 376,424,424 shares of common stock of the Registrant
were outstanding.
<PAGE>
SUMMARY
- -------
This summary highlights selected information from this document and may
not contain all of the information that is important to you. For a detailed
analysis of the company's results for the first quarter, you should read this
entire document carefully.
SUMMARY OF RESULTS
- ------------------
Caterpillar reported its best quarter ever for sales and revenues,
profit and profit per share. Sales and revenues of $4.87 billion, profit
of $435 million and profit per share of $1.15 were the highest in the
company's history. Compared with second-quarter 1996, sales and revenues
increases 17% while profit rose 16%. Profit per share grew 19% as it also
benefited from the ongoing share repurchase program.
Caterpillar has now posted record profits in 12 of the last 14 quarters.
In June, the Board of Directors voted to increase the quarterly dividend
from 20 cents to 25 cents (post-split basis) per share of common stock - a 25%
increase, and to split the outstanding shares of common stock on a two-for-one
basis. All per share information has been restated to reflect the split.
Commenting on the quarter, Caterpillar Chairman and CEO Donald V. Fites
said, "Once again, we are pleased to report record results. We are continuing
with our investment strategies to enhance long-term growth and make us an even
stronger global competitor. The dividend increase and stock split demonstrate
our Board's confidence that the company can maintain superior performance in
the years ahead."
HIGHLIGHTS - SECOND-QUARTER 1997 COMPARED WITH SECOND-QUARTER 1996
- ------------------------------------------------------------------
* Profit per share was up 19% to a best ever $1.15 per share.
* Profit of $435 million, the highest quarter ever, was 16% or $61 million
more than profit for second-quarter 1996.
* Sales and revenues of $4.87 billion, the highest quarter ever, rose 17%
from the second quarter a year ago.
* Margin (sales less cost of goods sold) as a percent of sales increased to
26.2% from 25.7%.
* Operating profit for Machinery and Engines as a percent of sales remained
at 13%, despite increased spending for major growth initiatives and product
line expansion.
* Physical sales volume was up 17%.
* Revenues from financial subsidiaries increased 13%.
* Sales inside the United States rose 20%; sales outside the United States
rose 14%.
* Quarterly dividend increased from 20 cents to 25 cents (post-split
basis) -- a 25% increase.
* Two-for-one stock split announced in June.
* Company outlook has improved. (Complete outlook begins on page 20.)
* From inception in June 1995 to the end of the second quarter,
27.2 million (post-split basis) shares have been repurchased under the
company's share repurchase plan. The number of shares outstanding at
June 30, 1997, was 376.4 million. When the 10% share repurchase program
is complete, the company will have approximately 360 million shares
outstanding. The company anticipates this program will be completed
in 1998.
Page 1
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CATERPILLAR INC.
Statement of Results of Operations
(Unaudited)
(Millions of dollars except per share data)
CONSOLIDATED
(Caterpillar Inc. and subsidiaries)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $4,676 $ 4,008 $ 8,748 $ 7,690
Revenues of Financial Products ....... 194 172 384 334
------ ------ ------ ------
Total sales and revenues ............. 4,870 4,180 9,132 8,024
OPERATING COSTS:
Cost of goods sold ................... 3,450 2,976 6,431 5,756
Selling, general and
administrative expenses ............ 547 471 1,045 920
Research and development expenses .... 135 97 252 195
Interest expense of
Financial Products ................. 85 70 164 139
------ ------ ------ ------
Total operating costs ................ 4,217 3,614 7,892 7,010
------ ------ ------ ------
OPERATING PROFIT ....................... 653 566 1,240 1,014
Interest expense excluding
Financial Products ................. 58 49 110 98
Other income (expense) ............... 43 30 85 65
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 638 547 1,215 981
Provision for income taxes ........... 217 181 413 324
------ ------ ------ ------
Profit of consolidated companies ..... 421 366 802 657
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... 14 8 27 13
Equity in profit of Financial
Products subsidiaries .............. - - - -
------ ------ ------ ------
PROFIT ................................. $ 435 $ 374 $ 829 $ 670
====== ====== ====== ======
PROFIT PER SHARE OF COMMON STOCK (NOTE 6):
Profit ............................... $ 1.15 $ 0.97 $ 2.19 $ 1.73
====== ====== ====== ======
Cash dividends paid per share of
common stock ........................ $ .20 $ .175 $ .40 $ .35
See accompanying notes to Consolidated Financial Statements.
Page 2
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CATERPILLAR INC.
Statement of Results of Operations
(Unaudited)
(Millions of dollars except per share data)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES1
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $4,676 $ 4,008 $ 8,748 $ 7,690
Revenues of Financial Products ....... - - - -
------ ------ ------ ------
Total sales and revenues ............. 4,676 4,008 8,748 7,690
OPERATING COSTS:
Cost of goods sold ................... 3,450 2,976 6,431 5,756
Selling, general and
administrative expenses ............ 483 409 907 795
Research and development expenses .... 135 97 252 195
Interest expense of
Financial Products ................. - - - -
------ ------ ------ ------
Total operating costs ................ 4,068 3,482 7,590 6,746
------ ------ ------ ------
OPERATING PROFIT ....................... 608 526 1,158 944
Interest expense excluding
Financial Products ................. 58 49 110 98
Other income (expense) ............... 34 29 70 58
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 584 506 1,118 904
Provision for income taxes ........... 196 165 377 294
------ ------ ------ ------
Profit of consolidated companies ..... 388 341 741 610
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... 14 8 27 13
Equity in profit of Financial
Products subsidiaries .............. 33 25 61 47
------ ------ ------ ------
PROFIT ................................. $ 435 $ 374 $ 829 $ 670
====== ====== ====== ======
1 Represents Caterpillar Inc. and its subsidiaries except for Financial
Products, which is accounted for on the equity basis.
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.
Page 3
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CATERPILLAR INC.
Statement of Results of Operations
(Unaudited)
(Millions of dollars except per share data)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $ - $ - $ - $ -
Revenues of Financial Products ....... 200 178 396 346
------ ------ ------ ------
Total sales and revenues ............. 200 178 396 346
OPERATING COSTS:
Cost of goods sold ................... - - - -
Selling, general and
administrative expenses ............ 70 68 150 137
Research and development expenses .... - - - -
Interest expense of
Financial Products ................. 89 76 170 149
------ ------ ------ ------
Total operating costs ................ 159 144 320 286
------ ------ ------ ------
OPERATING PROFIT ....................... 41 34 76 60
Interest expense excluding
Financial Products ................. - - - -
Other income (expense) ............... 13 7 21 17
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 54 41 97 77
Provision for income taxes ........... 21 16 36 30
------ ------ ------ ------
Profit of consolidated companies ..... 33 25 61 47
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... - - - -
Equity in profit of Financial
Products subsidiaries .............. - - - -
------ ------ ------ ------
PROFIT ................................. $ 33 $ 25 $ 61 $ 47
====== ====== ====== ======
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.
Page 4
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
June 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 557 $ 487
Receivables -- trade and other .................. 3,195 2,956
Receivables -- finance .......................... 2,704 2,266
Deferred income taxes and prepaid expenses ...... 837 852
Inventories (Note 5) ............................ 2,526 2,222
------- -------
Total current assets .............................. 9,819 8,783
Land, buildings, machinery, and equipment -- net .. 3,786 3,767
Long-term receivables -- trade and other .......... 118 128
Long-term receivables -- finance .................. 3,601 3,380
Investments in unconsolidated
affiliated companies (Note 4) .................. 695 701
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 1,113 1,093
Intangible assets ................................. 223 233
Other assets ...................................... 842 643
------- -------
TOTAL ASSETS ........................................ $20,197 $18,728
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 944 $ 1,192
Accounts payable and accrued expenses ........... 3,098 2,858
Accrued wages, salaries, and employee benefits .. 988 1,010
Dividends payable ............................... 94 76
Deferred and current income taxes payable ....... 203 142
Long-term debt due within one year .............. 1,171 1,180
------- -------
Total current liabilities ......................... 6,498 6,458
Long-term debt due after one year ................. 6,267 5,087
Liability for postemployment benefits ............. 2,856 3,019
Deferred income taxes ............................. 60 48
------- -------
TOTAL LIABILITIES ................................... 15,681 14,612
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (June 30, 1997 -- 407,447,312;
Dec. 31, 1996 -- 407,447,312) at paid in amount . 1,074 881
Profit employed in the business ................... 4,375 3,904
Foreign currency translation adjustment ........... 104 162
Treasury stock (June 30, 1997 -- 31,022,888
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... (1,037) (831)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 4,516 4,116
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $20,197 $18,728
======= =======
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1996 amounts.
Page 5
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CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES1
June 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 466 $ 445
Receivables -- trade and other .................. 3,305 2,960
Receivables -- finance .......................... - -
Deferred income taxes and prepaid expenses ...... 843 876
Inventories (Note 5) ............................ 2,526 2,222
------- -------
Total current assets .............................. 7,140 6,503
Land, buildings, machinery, and equipment -- net .. 3,217 3,242
Long-term receivables -- trade and other .......... 118 128
Long-term receivables -- finance .................. - -
Investments in unconsolidated
affiliated companies (Note 4) .................. 695 701
Investments in Financial Products subsidiaries .... 803 759
Deferred income taxes ............................. 1,144 1,132
Intangible assets ................................. 223 233
Other assets ...................................... 506 368
------- -------
TOTAL ASSETS ........................................ $13,846 $13,066
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 40 $ 36
Accounts payable and accrued expenses ........... 2,718 2,556
Accrued wages, salaries, and employee benefits .. 982 1,005
Dividends payable ............................... 94 76
Deferred and current income taxes payable ....... 103 70
Long-term debt due within one year .............. 78 122
------- ------
Total current liabilities ......................... 4,015 3,865
Long-term debt due after one year ................. 2,399 2,018
Liability for postemployment benefits ............. 2,856 3,019
Deferred income taxes ............................. 60 48
------- -------
TOTAL LIABILITIES ................................... 9,330 8,950
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (June 30, 1997 -- 407,447,312;
Dec. 31, 1996 -- 407,447,312) at paid in amount . 1,074 881
Profit employed in the business ................... 4,375 3,904
Foreign currency translation adjustment ........... 104 162
Treasury stock (June 30, 1997 -- 31,022,888
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... (1,037) (831)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 4,516 4,116
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $13,846 $13,066
======= =======
1 Represents Caterpillar Inc. and its subsidiaries except for Financial
Products, which is accounted for on the equity basis.
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, 1996 amounts.
Page 6
<PAGE>
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
June 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 91 $ 42
Receivables -- trade and other .................. 230 175
Receivables -- finance .......................... 2,704 2,266
Deferred income taxes and prepaid expenses ...... 16 15
Inventories (Note 5) ............................ - -
------- -------
Total current assets .............................. 3,041 2,498
Land, buildings, machinery, and equipment -- net .. 569 525
Long-term receivables -- trade and other .......... - -
Long-term receivables -- finance .................. 3,601 3,380
Investments in unconsolidated
affiliated companies (Note 4) .................. - -
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 4 3
Intangible assets ................................. - -
Other assets ...................................... 336 275
------- -------
TOTAL ASSETS ........................................ $ 7,551 $ 6,681
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 904 $ 1,156
Accounts payable and accrued expenses ........... 742 520
Accrued wages, salaries, and employee benefits .. 6 5
Dividends payable ............................... - -
Deferred and current income taxes payable ....... 100 72
Long-term debt due within one year .............. 1,093 1,058
------- -------
Total current liabilities ......................... 2,845 2,811
Long-term debt due after one year ................. 3,868 3,069
Liability for postemployment benefits ............. - -
Deferred income taxes ............................. 35 42
------- -------
TOTAL LIABILITIES ................................... 6,748 5,922
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (June 30, 1997 -- 407,447,312
Dec. 31, 1996 -- 407,447,312) at paid in amount . 353 353
Profit employed in the business ................... 464 404
Foreign currency translation adjustment ........... (14) 2
Treasury stock (June 30, 1997 -- 31,022,888
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... - -
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 803 759
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 7,551 $ 6,681
======= =======
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, 1996 amounts.
Page 7
<PAGE>
CATERPILLAR INC.
Statement of Cash Flow for Six Months Ended
(Unaudited)
(Millions of dollars)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
June 30, June 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 829 $ 670
Adjustments for noncash items:
Depreciation and amortization ..................... 376 348
Profit of Financial Products ...................... - -
Other ............................................. (65) 20
Changes in assets and liabilities:
Receivables -- trade and other .................. (238) (275)
Inventories ..................................... (298) (239)
Accounts payable and accrued expenses ........... 306 210
Other -- net .................................... (67) 94
------- -------
Net cash provided by operating activities ........... 843 828
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (223) (136)
Expenditures for equipment leased to others ....... (152) (107)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 66 52
Additions to finance receivables .................. (3,236) (2,739)
Collections of finance receivables ................ 1,547 1,302
Proceeds from sale of finance receivables.......... 848 772
Net short-term loans to Financial Products......... - -
Investments and acquisitions ...................... (22) (188)
Other -- net ...................................... (269) (92)
------- -------
Net cash used for investing activities .............. (1,441) (1,136)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (151) (136)
Common stock issued, including treasury
shares reissued ................................. 7 5
Treasury shares purchased.......................... (218) (103)
Net short-term loans from Machinery and Engines.... - -
Proceeds from long-term debt issued ............... 1,735 298
Payments on long-term debt ........................ (673) (451)
Short-term borrowings -- net ...................... (20) 699
------- -------
Net cash provided by financing activities ........... 680 312
------- -------
Effect of exchange rate changes on cash ............. (12) (9)
------- -------
Increase (decrease) in cash and
short-term investments ............................ 70 (5)
Cash and short-term investments at the
beginning of the period ........................... 487 638
------- -------
Cash and short-term investments at the
end of the period ................................. $ 557 $ 633
======= =======
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 8
<PAGE>
CATERPILLAR INC.
Statement of Cash Flow for Six Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES1
June 30, June 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 829 $ 670
Adjustments for noncash items:
Depreciation and amortization ................... 310 290
Profit of Financial Products .................... (61) (47)
Other ........................................... (56) 9
Changes in assets and liabilities:
Receivables -- trade and other .................. (160) (262)
Inventories ..................................... (298) (239)
Accounts payable and accrued expenses ........... 217 94
Other -- net .................................... (77) 115
------- -------
Net cash provided by operating activities ........... 704 630
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (222) (133)
Expenditures for equipment leased to others ....... - (2)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 1 7
Additions to finance receivables .................. - -
Collections of finance receivables ................ - -
Proceeds from sale of finance receivables.......... - -
Net short-term loans to Financial Products......... (206) (27)
Investments and acquisitions ...................... (22) (188)
Other -- net ...................................... (207) (47)
------- -------
Net cash used for investing activities .............. (656) (390)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (151) (136)
Common stock issued, including treasury
shares reissued ................................. 7 5
Treasury shares purchased.......................... (218) (103)
Net short-term loans from Machinery and Engines.... - -
Proceeds from long-term debt issued ............... 459 27
Payments on long-term debt ........................ (116) (9)
Short-term borrowings -- net ...................... 4 (6)
------- -------
Net cash used for financing activities .............. (15) (222)
------- -------
Effect of exchange rate changes on cash ............. (12) (13)
------- -------
Increase in cash and short-term investments ......... 21 5
Cash and short-term investments at the
beginning of the period ........................... 445 580
------- -------
Cash and short-term investments at the
end of the period ................................. $ 466 $ 585
======= =======
1 Represents Caterpillar Inc. and its subsidiaries except for Financial
Products, which is accounted for on the equity basis.
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 9
<PAGE>
CATERPILLAR INC.
Statement of Cash Flow for Six Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
June 30, June 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 61 $ 47
Adjustments for noncash items:
Depreciation and amortization ................... 66 58
Profit of Financial Products .................... - -
Other ........................................... (8) 14
Changes in assets and liabilities:
Receivables -- trade and other .................. (33) (3)
Inventories ..................................... - -
Accounts payable and accrued expenses ........... 27 80
Other -- net .................................... 26 2
------- -------
Net cash provided by operating activities ........... 139 198
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (1) (3)
Expenditures for equipment leased to others ....... (152) (105)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 65 45
Additions to finance receivables .................. (3,236) (2,739)
Collections of finance receivables ................ 1,547 1,302
Proceeds from sale of finance receivables.......... 848 772
Net short-term loans to Financial Products......... - -
Investments and acquisitions ...................... - -
Other -- net ...................................... (62) (45)
------- -------
Net cash used for investing activities .............. (991) (773)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... - -
Common stock issued, including treasury
shares reissued ................................. - -
Treasury shares purchased.......................... - -
Net short-term loans from Machinery and Engines.... 206 27
Proceeds from long-term debt issued ............... 1,276 271
Payments on long-term debt ........................ (557) (442)
Short-term borrowings -- net ...................... (24) 705
------- -------
Net cash provided by financing activities ........... 901 561
------- -------
Effect of exchange rate changes on cash ............. - 4
------- -------
Increase (decrease) in cash and
short-term investments ............................ 49 (10)
Cash and short-term investments at the
beginning of the period ........................... 42 58
------- -------
Cash and short-term investments at the
end of the period ................................. $ 91 $ 48
======= =======
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 10
<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 six-month periods
ended June 30, 1997 and 1996, (b) the consolidated financial position at
June 30, 1997 and December 31, 1996, and (c) the consolidated statement
of cash flow for the six-month periods ended June 30, 1997 and 1996
have been made. Certain amounts for prior periods have been
reclassified to conform with the current period financial statement
presentation.
2. The results for the three- and six-month periods ended June 30, 1997 are
not necessarily indicative of the results for the entire year 1997.
3. The company has reviewed the status of its environmental and legal
contingencies and believes there are no material changes from that
disclosed in Form 10-K for the year ended December 31, 1996.
4. Unconsolidated Affiliated Companies
The company's investments in unconsolidated affiliated companies consist
principally of a 50% interest in Shin Caterpillar Mitsubishi Ltd., Japan
of $377. The other 50% owner of this company is Mitsubishi Heavy
Industries, Ltd., Japan.
Combined financial information of the unconsolidated affiliated
companies, as translated to U.S. dollars, was as follows:
Three Months Ended Six Months Ended
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1997 1996 1997 1996
RESULTS OF OPERATIONS
(Unaudited)
Sales ..................... $1,756 $ 913 $2,752 $1,820
====== ====== ====== ======
Profit .................... $ 31 $ 16 $ 58 $ 27
====== ====== ====== ======
Mar. 31, Sep. 30,
1997 1996
FINANCIAL POSITION
(Unaudited)
Assets:
Current assets ................................. $1,973 $1,995
Land, buildings, machinery and equipment - net.. 735 733
Other assets ................................... 351 395
------ ------
3,059 3,123
------ ------
Liabilities:
Current liabilities ............................ 1,610 1,683
Long-term debt due after one year .............. 186 133
Other liabilities .............................. 143 145
------ ------
1,939 1,961
------ ------
Ownership ........................................ $1,120 $1,162
====== ======
Page 11
<PAGE>
5. Inventories (principally "last-in, first-out" method) comprised the
following:
Jun. 30, Dec. 31,
1997 1996
(unaudited)
Raw materials and work-in-process ................ $1,071 $ 909
Finished goods ................................... 1,249 1,103
Supplies ......................................... 206 210
------ ------
$2,526 $2,222
====== ======
6. Following is a computation of profit per share:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
(Unaudited)
I. Net profit for period:
Profit - consolidated (A) ....... $ 435 $ 374 $ 829 $ 670
====== ====== ====== =======
II. Determination of shares (millions):
Weighted average number of
common shares outstanding (B) .. 377.1 386.8 378.2 387.2
Shares issuable on exercise of
stock options, net of shares
assumed to be purchased out
of proceeds at market price .... 6.5 4.1 6.5 4.1
------ ------ ------ -------
Average common shares
outstanding for fully diluted
computation (C) ................ 383.6 390.9 384.7 391.3
====== ====== ====== =======
III. Profit per share of common
stock:
Assuming no dilution (A/B) ...... $1.15 $0.97 $2.19 $1.73
Assuming full dilution (A/C) .... $1.13 $0.96 $2.16 $1.71
Page 12
<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 JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996
Second-quarter sales and revenues increased 17% while profit rose 16%.
Profit per share was up 19% reflecting the impact of the higher profit and
the ongoing share repurchase program. Profit of $435 million or $1.15 per
share was $61 million or 18 cents per share higher than second-quarter 1996
profit of $374 million or 97 cents per share. A 17% increase in physical
sales volume was the most significant factor contributing to the increased
profit.
Machinery and Engines
Profit before tax of $584 million increased 15% or $78 million from last
year's second quarter. Sales of Machinery and Engines of $4.68 billion were
up 17%. The higher sales resulted from a 17% increase in physical sales
volume. Price realization was about the same.
The increase in physical sales volume resulted from higher machine and
engine sales both inside and outside the United States. Price realization
was about the same, as price increases taken over the past year were offset
by the negative effect of the stronger dollar on sales denominated in
currencies other than the U.S.
Margin (sales less cost of goods sold) of $1.23 billion increased $194
million from the second quarter a year ago. Margin as a percent of sales was
26.2%, up from 25.7%, primarily because of the favorable impact of higher
physical sales volume and price increases taken over the past year.
Partially offsetting these favorable items were an unfavorable change in
product sales mix and increased fixed manufacturing costs. These increased
manufacturing costs were primarily in support of major growth initiatives and
product line expansion that include electric power generation, agricultural
products, mining systems, and compact machines. The net effect of the dollar
on the margin rate was nominal, as the favorable effect of the stronger
dollar on costs incurred in Japanese yen and European currencies was offset
by the negative impact on price realization.
Selling, general and administrative expenses were $483 million, compared
with $409 million during the second-quarter 1996. The $74 million increase
primarily reflects increased spending levels in support of major growth
initiatives and product line expansion. The effect of inflation on costs
also contributed to the increase.
Research and development expenses of $135 million increased $38 million
from the second quarter a year ago. The increase reflects expected higher
spending in support of new and improved products.
Operating profit was $608 million, up $82 million from the second
quarter a year ago. Operating profit, as a percent of sales, was 13%, about
the same as a year ago.
Interest expense was $9 million higher than the second quarter a year
ago due to higher debt levels.
Other income/expense was income of $34 million compared with income of
$29 million last year.
Financial Products
Financial Products second-quarter revenues were a record $200 million,
up $22 million compared with second-quarter 1996, primarily the result of
Caterpillar Financial Services Corporation's (Cat Financial) larger
portfolio.
Page 13
<PAGE>
Before-tax profit was $54 million, an improvement of $13 million from
last year's second quarter. The increase resulted primarily from favorable
insurance reserve adjustments and higher investment income at Caterpillar
Insurance Company Ltd. (Cat Insurance), and continued growth in the portfolio
of earning assets at Cat Financial.
Income Taxes
The provision for income taxes was $217 million compared with $181
million for the second quarter last year. The increase was because of the
higher before-tax profit and an effective tax rate of 34% compared with 33%
for the second quarter of 1996.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results was
$14 million, up $6 million from a year ago. Increased profit from Shin
Caterpillar Mitsubishi Ltd., along with profits from recent investments in
other unconsolidated affiliates, largely F.G. Wilson, L.L.C., were the
reasons for the increase.
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED MARCH 31, 1997
Second-quarter profit and profit per share were up 10% and 11%
respectively, while sales and revenues increased 14%. Profit of $435 million
or $1.15 per share was $41 million higher than first-quarter profit of $394
million or $1.04 per share.
Machinery and Engines
Profit before tax for Machinery and Engines was $584 million, a $50
million increase from the previous quarter. Sales of $4.68 billion increased
$604 million because of 16% higher physical sales volume, partially offset by
1% lower price realization. The increase in physical sales volume was the
result of higher machine and engine sales both inside and outside the United
States. Price realization was lower primarily because of higher sales
discounts and the negative effect of the stronger dollar on sales denominated
in currencies other than the U.S.
Margin was $135 million higher than the first quarter, primarily the
result of the higher physical sales volume. As a percent of sales, the
margin rate was 26.2% compared with 26.8% last quarter. The lower margin
rate is primarily the result of the absence of the favorable impact of a
buildup of inventory during the first quarter. (When inventory increases,
certain fixed costs incurred in the current period are inventoried. These
inventoried fixed costs are then charged to cost of goods sold in later
periods when inventory decreases.) Also contributing to the lower margin
rate were higher sales discounts, an unfavorable change in product sales mix,
and an increase in fixed manufacturing costs in support of growth initiatives
and product line expansion.
Partially offsetting these unfavorable items was the favorable impact of
higher physical sales volume. The net effect of the dollar on the margin
rate was nominal, as the favorable effect of the stronger dollar on costs
incurred in Japanese yen and European currencies was about offset by the
negative impact on price realization.
Selling, general and administrative expenses were $483 million, up $59
million from the first quarter. This was in line with expected increased
spending levels in support of major growth initiatives and product line
expansion.
Research and development expenses of $135 million were up $18 million
from the first quarter. The increase reflects higher spending in support of
new and improved products.
Page 14
<PAGE>
Operating profit of $608 million increased $58 million. As a percent of
sales, operating profit was 13.0%, compared with 13.5% in the first quarter.
Interest expense of $58 million was $6 million higher than the first
quarter due to higher debt levels.
Other income/expense was income of $34 million, $2 million lower than
the first quarter.
Financial Products
Financial Products' revenues increased $4 million, primarily the result
of Cat Financial's portfolio growth. Before-tax profit was $54 million, an
increase of $11 million from the first quarter.
Income Taxes
Income tax expense of $217 million increased $21 million from the
previous quarter. The increase reflects the higher profit before tax. The
effective tax rate was 34% for both quarters.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results was
$14 million, an increase of $1 million from the previous quarter.
SIX MONTHS ENDED JUNE 30, 1997 VS. SIX MONTHS ENDED JUNE 30, 1996
Profit for the six months ended June 30, 1997 was $829 million or $2.19
per share of common stock, an improvement of $159 million over profit of
$670 million or $1.73 per share for the first six months of 1996. Sales and
revenues of $9.13 billion were $1.11 billion higher than last year.
Machinery and Engines
Sales were $8.75 billion, an increase of $1.06 billion from the same
period last year. Profit before tax was $1.12 billion, an improvement of
$214 million. The primary reason for the increase in profit was higher
physical sales volume.
The increase in physical sales volume resulted from higher machine and
engine sales both inside and outside the United States.
Price realization improved due to price increases taken over the past
year, a favorable change in geographic sales mix, and lower sales discounts.
These favorable items were partially offset by the negative effect of the
stronger dollar on sales denominated in currencies other than the U.S.
Margin increased $383 million primarily because of the higher physical
sales volume. Margin as a percent of sales was 26.5%, up from 25.1%,
primarily because of the higher physical sales volume and price increases
taken over the past year. Partially offsetting these favorable items were
increased fixed manufacturing costs and an unfavorable change in product
sales mix. These increased manufacturing costs were primarily in support
of major growth initiatives and product line expansion that include
electric power generation, agricultural products, mining systems, and
compact machines. The net effect of the dollar on the margin rate was
nominal, as the favorable effect of the stronger dollar on costs incurred
in Japanese yen and European currencies was offset by the negative impact
on price realization.
Selling, general and administrative expenses were $907 million, compared
with $795 million during the first six months of 1996. The $112 million
increase primarily reflects increased spending levels in support of major
growth initiatives and product line expansion. The effects of inflation on
costs, higher incentive pay expense, and volume-related parts distribution
expenses also contributed to the increase.
Page 15
<PAGE>
Research and development (R&D) expenses were $252 million, compared with
$195 million during the first six months of 1996. The $57 million increase
primarily reflects expected higher spending in support of new and improved
products.
Operating profit of $1.16 billion was $214 million higher than the first
six months of 1996. Operating profit as a percent of sales was 13.2%
compared with 12.3% a year ago.
Interest expense of $110 million was $12 million higher than a year ago
due to higher debt levels.
Other income/expense was income of $70 million compared with income of
$58 million last year. The increase of $12 million reflects several
favorable items in 1997.
Financial Products
Financial Products revenues for the six months ended June 30, 1997, were
$396 million, up $50 million from the same period a year ago. The increase
was primarily the result of Cat Financial's larger portfolio.
Before-tax profit for Financial Products was $97 million, an increase of
$20 million from the first six months of 1996. The increase resulted
primarily from higher earnings from a larger portfolio of earning assets at
Cat Financial.
Selling, general and administrative expenses were up $13 million,
primarily due to an increase in depreciation on leased equipment and other
increases due to portfolio growth, partially offset by a favorable Cat
Insurance's reserve adjustment. Interest expense was $21 million higher
due to increased borrowings to support the larger portfolio, partially
offset by lower borrowing rates.
Income Taxes
Tax expense was $413 million, $89 million higher than a year ago. The
increase reflects higher before-tax profit and an effective tax rate of 34%
compared with 33% a year ago.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results
was $27 million, up $14 million from a year ago. Increased profit from
Shin Caterpillar Mitsubishi Ltd., along with profits from recent
investments in other unconsolidated affiliates, largely F.G. Wilson,
L.L.C., were the reasons for the increase.
SALES
Following are summaries of second-quarter company sales and dealer
deliveries compared with the same quarter in 1996.
Caterpillar Sales Inside the United States
Caterpillar sales inside the United States were $2.42 billion, a
$396 million or 20% increase from the same quarter a year ago. The increase
was primarily due to higher industry demand for both machines and engines.
Price realization improved slightly.
Sales inside the United States during the second quarter were 52% of
total sales, an increase from 50% a year ago.
U.S. Dealer Machine Sales to End-Users
U.S. dealer machine sales to end-users increased primarily as a result
of higher industry demand for construction, mining and agricultural
equipment.
Page 16
<PAGE>
Sales to end-users (including rental purchase options) were higher in
most construction sectors.
- Sales into the highway sector were up reflecting higher levels of
highway-related construction spending.
- Housing-related sales exceeded year-earlier levels reflecting
continued strength in residential housing.
- Commercial, industrial and government building-related sales were
higher in response to increased construction spending in these areas.
- Sales of equipment for the construction of dams, ports and harbors
were lower.
Sales into commodity applications also increased with gains registered
in all sectors except metal mining.
- Coal-mining-related sales were up reflecting both higher mine
production and higher coal prices.
- Sales into the sand and quarry sector increased due to considerably
higher aggregate production.
- Agricultural-related sales rose reflecting a healthy farm economy and
growing industry demand.
- Sales to the metal mining sector were lower. Production was up, but
metals prices remained below year-earlier levels.
- Forestry sector sales were above year-earlier levels reflecting both
higher forestry production and prices.
In other applications, sales to industrial users and landfills declined.
Deliveries to U.S. Dealer Rental Fleets
Deliveries to U.S. dealer rental fleets were up from second-quarter
1996. At the end of the second quarter, U.S. dealer dedicated rental units
were above first-quarter levels and above year-earlier levels.
U.S. Dealer New Machine Inventories
U.S. dealer new machine inventories declined from the end of the first
quarter but were above year-ago levels. At the end of the second quarter,
dealer inventories were about normal relative to the current high selling
rates.
Company Engine Sales Inside the United States
Company engine sales inside the United States were above year-earlier
levels with higher sales in all applications, including industrial, truck,
electric power generation, and marine.
Sales of turbine engines also were higher with increases in oil and gas
applications, as well as electric power generation. Sales into oil and gas
applications were particularly strong due to increased turbine demand from
offshore production activity and natural gas transmission.
Caterpillar Sales Outside the United States
Caterpillar sales outside the United States were $2.26 billion, a $272
million or 14% increase over second-quarter 1996. Company sales of both
machines and engines were higher with the improvement coming from an increase
in physical sales volume. Price realization was slightly lower.
Sales outside the United States represented 48% of worldwide sales
compared with 50% for the second quarter of last year.
Page 17
<PAGE>
Dealer Machine Sales to End-Users Outside the United States
Dealer machine sales to end-users outside the United States were higher
than year earlier with gains in Latin America, Canada, Europe, Japan and
Africa/Middle East more than offsetting declines elsewhere.
- Europe: Sales for the region were higher primarily due to increased
demand in Spain. Sales were up in Germany, but lower in the United
Kingdom, France and Italy. Sales were higher in Central Europe.
- Asia (excluding Japan): Sales were below year-earlier levels
reflecting financial difficulties in Thailand and the imposition of
custom duties in Malaysia. Sales also declined in China. Sales did
increase, however, in Indonesia and India.
- Canada: Good economic growth and low interest rates resulted in
strong industry demand. Sales were higher in all applications except
metal mining and nonresidential construction.
- Africa/Middle East: Sales were up just slightly from 1996 levels
reflecting slower economic growth and last year's decline in
commodity prices. Sales were higher in Turkey, but lower in South
Africa.
- Latin America: Sales increased in response to much stronger economic
activity, particularly in the construction sector. Higher sales were
reported in most countries, including Brazil, Chile, Venezuela, Peru
and Mexico.
- Australia: Sales were lower primarily due to a decrease in
mining-related demand.
- Japan: Sales of imported product were up reflecting some improvement
in investor confidence.
- Commonwealth of Independent States (CIS): Sales remained weak as the
larger countries continued to struggle economically.
Dealer New Machine Inventories Outside the United States
Dealer new machine inventories outside the United States were up from
the end of the first quarter, but down from year-earlier levels. At the end
of the second quarter, dealer inventories were slightly below normal relative
to current selling rates.
Company Engine Sales Outside the United States
Company engine sales outside the United States were above year-earlier
levels due to the addition of large engine products produced by MaK Motoren
GmbH for sale into the marine and electric power generation sectors. In the
absence of these large engine products, company sales would have been below
year-earlier levels with declines in electric power generation and industrial
applications.
Sales of turbine engines were higher with gains in oil and gas
applications as well as electric power generation.
PLANT CLOSING AND CONSOLIDATION COSTS
At June 30, 1997 the reserve for plant closing and consolidation costs
was $254 million. Of this balance, $160 million related to costs associated
with the closure of the Component Products Division's Precision Barstock
Products (PBP) operation located in York, Pennsylvania.
The probable closing of the York PBP manufacturing operation was
announced in December 1991. In March 1996, it was announced that the
facility would be closed. The company is currently in the process of
closing the unit.
Also in the reserve for plant closing and consolidation costs at
June 30, 1997, was $69 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 reduced as the benefits
are provided. Currently, benefits are expected to be provided through 2003.
Page 18
<PAGE>
EMPLOYMENT
At the end of the second quarter, Caterpillar's worldwide employment was
58,336, compared with 55,002 one year ago. Hourly employment increased 1,517
to 33,557; salaried and management employment increased 1,817 to 24,779. The
increased employment is the result of acquisitions, expanded operations, and
major growth initiatives.
ECONOMIC AND INDUSTRY OUTLOOK
The world economic outlook continues to improve, primarily due to the
surprising strength and solid underlying fundamentals of the U.S. economy.
World economic growth in 1997 is now forecast to be noticeably stronger than
last year which should lead to higher industry demand for machines, engines
and turbines. Looking ahead to 1998, good economic growth is forecast to
continue which should provide another year of excellent industry opportunity.
The U.S. economy slowed in the second quarter after a much stronger than
expected performance in the first quarter. Better growth is expected to
resume in the third quarter and Gross Domestic Product (GDP) is now forecast
to advance 3.5% to 4.0% for 1997. Inflation is expected to remain under
control. In this very favorable environment, industry demand for both
machines and engines should surpass last year's levels. The economy's growth
rate should slow in 1998, but remain strong enough to keep industry demand
near 1997 levels.
The European economy has picked up and now shows definite signs of
improvement despite differences over movement toward a single currency and
other policy priorities. Tight fiscal policies, however, are expected to
cause a slight decline in the construction equipment industry demand this
year. In Japan, an April 1 consumption tax increase and a reduction in
public works spending will likely lead to lower industry demand for the
remainder of the year. In 1998, both Europe and Japan should register better
economic growth led by further improvement in the private sector. Industry
demand also should improve although uncertainties over public spending and
other aspects of government policy remain for both regions.
Elsewhere, faster growth in Canada and Latin America should lead to
higher industry demand in these two regions for 1997. Growth has slowed in
Asia and especially in Thailand, but the industry is still expected to equal
or surpass last year's level. Slower economic growth in both Australia and
Africa/Middle East will likely hold demand just below 1996 levels. Lack of
economic recovery in Russia continues to limit demand in the CIS. For 1998,
better economic growth and higher industry demand are forecast for Latin
America, Africa/Middle East and the CIS. Higher industry demand also is
forecast for Asia where good economic growth should continue, especially in
China.
Global currency markets have moved significantly this year. The U.S.
dollar continues to strengthen against most European currencies while
weakening somewhat against the Japanese yen. Although the Japanese yen
strengthened in recent months, it remains weaker than a year ago. A strong
dollar over the long term has an unfavorable impact on Caterpillar and other
U.S. exporters. An overvalued dollar undermines the competitive position of
companies that have developed a strong manufacturing base to serve global
markets from the United States. As a major net exporter from the United
States, an overvalued dollar would, over time, have an unfavorable impact on
Caterpillar's global competitive position. However, Caterpillar's ability to
weather a period of dollar overvaluation has improved in recent years. We
now have cost competitive manufacturing operations for models produced and
sold in both Europe and Japan. Further, key foreign-headquartered
competitors in our industry have geographically diversified their
manufacturing operations.
Page 19
<PAGE>
COMPANY OUTLOOK
The company outlook for the second half of 1997 consolidated sales and
revenues calls for sales to be moderately higher than the second half of
1996.
It is anticipated that profit for the second half will also be
moderately higher than the second half of 1996, consistent with the higher
sales. The previously announced higher levels of investment (both capital
and expense) to enhance the long-term growth of the company will continue to
take place as planned in 1997. Profit per share for the second half of 1997
will also benefit from the share repurchase program.
The information included in the Outlook section is forward looking and
involves risks and uncertainties that could significantly impact expected
results. A discussion of these risks and uncertainties is contained in
Form 8-K filed with the Securities & Exchange Commission on July 22, 1997.
B. Liquidity & Capital Resources
Consolidated operating cash flows totaled $843 million through the second
quarter of 1997, compared with $828 million for the first six months of 1996.
Total debt at the end of the first six months was $8.38 billion, an
increase of $923 million from year-end 1996. Over this period, debt related
to Machinery and Engines increased $341 million, to $2.52 billion, while debt
related to Financial Products increased $582 million to $5.86 billion.
During 1995, the company announced a plan to repurchase up to 10%
of its outstanding common stock over the next three to five years.
From inception in June 1995 to the end of the second-quarter 1997,
27.2 million (post-split basis) shares have been repurchased under the
plan. The number of shares outstanding at June 30, 1997, was
376.4 million. When the 10% share repurchase program is complete, the
company will have approximately 360 million shares outstanding. The
company anticipates this program will be completed in 1998.
Machinery and Engines
Operating cash flow totaled $704 million through the second quarter of
1997, compared with $630 million with the second quarter of 1996. The
increase in operating cash flow primarily results from the increase in
profits over the same period a year ago, partially offset by a $100 million
pre-funding of employee benefit plans.
Capital expenditures, excluding equipment leased to others, totaled $222
million for the first six months of 1997, compared with $133 million a year
ago. During the first six months of 1997, debt related to Machinery and
Engines increased from the issuance of $300 million of 100 year debentures
and a new $162 million capital lease obligation, collateralized by leased
manufacturing equipment and a security deposit. The company also retired
$105 million of medium term notes during the first six months of 1997. The
overall increase in debt for the first six months of 1997 increased the
percent of debt to debt plus stockholders equity from 35% at December 31,
1996, to 36% at June 30, 1997.
Financial Products
Operating cash flow totaled $139 million through the second quarter of
1997, compared with $198 million through the second quarter of 1996. Cash
used to purchase equipment leased to others totaled $152 million through the
second quarter of 1997. In addition, year-to-date 1997 net cash used for
finance receivables was $841 million, compared with $665 through the second
quarter of 1996.
Financial Products' debt was $5.86 billion at June 30, 1997, an
increase of $582 million from December 31, 1996 and was primarily comprised of
$3.3 billion of medium term notes, $164 million of notes payable to banks and
$2.3 billion of commercial paper. At the end of the first quarter, finance
receivables past due over 30 days were 1.9%, compared with 2.5% at the end of
the same period one year ago. The ratio of debt to equity of Cat Financial
was 8.5:1 at June 30, 1997, compared with 7.8:1 at December 31, 1996.
Page 20
<PAGE>
Financial Products had outstanding credit lines totaling $3.66 billion
at June 30, 1997, which included $1.84 billion of the company's revolving
credit agreement. These credit lines are with a number of banks and are
considered support for the company's outstanding commercial paper, commercial
paper guarantees, the discounting of bank and trade bills, and bank
borrowings.
Reclassification
During the first six months of 1997, management reclassified
$674 million of short-term borrowings to long-term debt due after one year.
This reclassification reflects a change in management's intent to finance for
periods greater than a year certain portions of debt under revolving credit
agreements. For purposes of improving comparability, $555 million and
$515 million were reclassified at December 31, 1996 and June 30, 1996,
respectively, from short-term borrowings to long-term debt due after one
year. This change impacted the Consolidated and Financial Products' portion
of the Financial Position, but had no impact on the Machinery and Engines'
portion. Furthermore, this change had no impact on the Results of
Operations. All comparisons to second quarter 1996 and fourth quarter 1996
are with the reclassified amounts.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
The Company has nine employee stock purchase plans administered
outside the United States for our foreign employees. Those plans have
approximately 1,735 participants in the aggregate. During the Second
Quarter of 1997, a total of 14,560 shares of Caterpillar common stock
or foreign denominated equivalents were distributed under the plans.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) Three reports on Form 8-K, April 15, June 2, and June 11, 1997,
were filed during the quarter ending June 30, 1997, both pursuant
to Item 5 of that form. Additional reports on Form 8-K were
filed on July 2, July 17, and July 22, 1997 pursuant to Item 5.
No financial statements were filed as part of those reports.
Page 21
<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: August 6, 1997 By: /s/ D. R. Oberhelman
D. R. Oberhelman, Vice President
and Chief Financial Officer
Date: August 6, 1997 By: /s/ R. R. Atterbury III
R. R. Atterbury III, Secretary
Page 22
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FINANCIAL STATEMENTS FOR SIX-MONTHS
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 171
<SECURITIES> 386
<RECEIVABLES> 3,195<F1>
<ALLOWANCES> 0<F1><F2>
<INVENTORY> 2,526
<CURRENT-ASSETS> 9,819
<PP&E> 9,110
<DEPRECIATION> 5,324
<TOTAL-ASSETS> 20,197
<CURRENT-LIABILITIES> 6,498
<BONDS> 6,267
0<F2>
0<F2>
<COMMON> 407
<OTHER-SE> 4,109
<TOTAL-LIABILITY-AND-EQUITY> 20,197
<SALES> 8,748
<TOTAL-REVENUES> 9,132
<CGS> 6,431
<TOTAL-COSTS> 7,892
<OTHER-EXPENSES> (85)
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 1,215
<INCOME-TAX> 413
<INCOME-CONTINUING> 829
<DISCONTINUED> 0<F2>
<EXTRAORDINARY> 0<F2>
<CHANGES> 0<F2>
<NET-INCOME> 829
<EPS-PRIMARY> $2.19<F3>
<EPS-DILUTED> $2.16<F3>
<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.
<F3> On June 11, 1997 the company announced a two-for-one stock split in the
form of a 100 percent stock dividend. The stock dividend was paid on July 11,
1997 to shareholders of record on June 23, 1997. All per share information
shown herein reflects the split. Prior Financial Data Schedules have not been
restated to reflect the split.
</FN>
</TABLE>
