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, 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 September 30, 1997, 372,285,791 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 third quarter, you
should read this entire document carefully.
SUMMARY OF RESULTS
- ------------------
On October 15, 1997, Caterpillar Inc. reported its best third quarter
ever for sales and revenues, profit, and profit per share. Profit
increased 24% to $385 million from $310 million a year ago and was the
third highest quarterly profit in company history. Profit per share grew
27%, as it continued to benefit from the ongoing share repurchase program.
Caterpillar has now posted record profit in 13 of the last 15 quarters.
Sales and revenues rose 14% to $4.60 billion, a third-quarter record
and the second highest quarterly sales and revenues in company history.
Commenting on the quarter, Caterpillar Chairman and CEO Donald V.
Fites said, "Once again, record results have been achieved by our
continuously improving organization. Our investment strategies continue
to enhance long-term growth as we evolve into an even stronger global
competitor. The superior performance and record results achieved over
the past four years are excellent testimony to the new Caterpillar we
have become."
HIGHLIGHTS - THIRD-QUARTER 1997 COMPARED WITH THIRD-QUARTER 1996
- ----------------------------------------------------------------
* Profit per share was up 27%, a third-quarter record at
$1.03 per share.
* Profit of $385 million, the highest third quarter ever,
was 24% or $75 million more than profit for third-quarter
1996.
* Sales and revenues of $4.60 billion, the highest third
quarter ever, rose 14% from third quarter a year ago.
* Margin (sales less cost of goods sold) as a percent of
sales increased to 25.2% from 24.5%.
* Operating profit for Machinery and Engines as a percent of
sales increased to 11.3% from 10.8%, despite the continued
strength of the dollar, and increased spending for major
growth initiatives and product line expansions that
include electric power generation, agricultural products,
mining systems, and compact machines.
* Physical sales volume was up 15%.
* Revenues from financial subsidiaries improved 17%.
* Sales both inside and outside the United States rose 14%.
* Fourth-quarter 1997 sales and profit are expected to be
moderately higher than fourth-quarter 1996, which would
result in record sales and profit for full-year 1997.
* The company's preliminary outlook for 1998 calls for
another record year of sales and revenues. (Complete
outlook begins on page 19.)
* The impact on consolidated results of recent sales
declines in Southeast Asia have been insignificant.
Anticipated sales declines in Southeast Asia for the
remainder of 1997 and 1998 are also expected to have an
insignificant impact on consolidated results.
* From inception in June 1995 to the end of the third
quarter, 31.6 million shares have been repurchased under
the company's share repurchase plan. The number of shares
outstanding at September 30, 1997, was 372.3 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 Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $4,385 $ 3,849 $13,133 $11,539
Revenues of Financial Products ....... 215 184 599 518
------ ------ ------ ------
Total sales and revenues ............. 4,600 4,033 13,732 12,057
OPERATING COSTS:
Cost of goods sold ................... 3,278 2,905 9,709 8,661
Selling, general, and
administrative expenses ............ 561 491 1,606 1,411
Research and development expenses .... 132 104 384 299
Interest expense of
Financial Products ................. 96 77 260 216
------ ------ ------ ------
Total operating costs ................ 4,067 3,577 11,959 10,587
------ ------ ------ ------
OPERATING PROFIT ....................... 533 456 1,773 1,470
Interest expense excluding
Financial Products ................. 53 48 163 146
Other income ......................... 62 32 147 97
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 542 440 1,757 1,421
Provision for income taxes ........... 166 138 579 462
------ ------ ------ ------
Profit of consolidated companies ..... 376 302 1,178 959
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... 9 8 36 21
Equity in profit of Financial
Products subsidiaries .............. - - - -
------ ------ ------ ------
PROFIT ................................. $ 385 $ 310 $1,214 $ 980
====== ====== ====== ======
PROFIT PER SHARE OF COMMON STOCK (NOTE 6):
Profit ............................... $ 1.03 $ 0.81 $ 3.22 $ 2.54
====== ====== ====== ======
Cash dividends paid per share of
common stock ........................ $ .25 $ .20 $ .65 $ .55
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 Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $4,385 $ 3,849 $13,133 $11,539
Revenues of Financial Products ....... - - - -
------ ------ ------ ------
Total sales and revenues ............. 4,385 3,849 13,133 11,539
OPERATING COSTS:
Cost of goods sold ................... 3,278 2,905 9,709 8,661
Selling, general, and
administrative expenses ............ 481 423 1,388 1,218
Research and development expenses .... 132 104 384 299
Interest expense of
Financial Products ................. - - - -
------ ------ ------ ------
Total operating costs ................ 3,891 3,432 11,481 10,178
------ ------ ------ ------
OPERATING PROFIT ....................... 494 417 1,652 1,361
Interest expense excluding
Financial Products ................. 53 48 163 146
Other income ......................... 51 32 121 90
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 492 401 1,610 1,305
Provision for income taxes ........... 147 124 524 418
------ ------ ------ ------
Profit of consolidated companies ..... 345 277 1,086 887
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... 9 8 36 21
Equity in profit of Financial
Products subsidiaries .............. 31 25 92 72
------ ------ ------ ------
PROFIT ................................. $ 385 $ 310 $1,214 $ 980
====== ====== ====== ======
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
<PAGE>
CATERPILLAR INC.
Statement of Results of Operations
(Unaudited)
(Millions of dollars except per share data)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Three Months Ended Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1997 1996 1997 1996
SALES AND REVENUES:
Sales of Machinery and Engines ....... $ - $ - $ - $ -
Revenues of Financial Products ....... 221 190 617 536
------ ------ ------ ------
Total sales and revenues ............. 221 190 617 536
OPERATING COSTS:
Cost of goods sold ................... - - - -
Selling, general, and
administrative expenses ............ 86 74 236 211
Research and development expenses .... - - - -
Interest expense of
Financial Products ................. 99 83 269 232
------ ------ ------ ------
Total operating costs ................ 185 157 505 443
------ ------ ------ ------
OPERATING PROFIT ....................... 36 33 112 93
Interest expense excluding
Financial Products ................. - - - -
Other income ......................... 14 6 35 23
------ ------ ------ ------
CONSOLIDATED PROFIT BEFORE TAXES 50 39 147 116
Provision for income taxes ........... 19 14 55 44
------ ------ ------ ------
Profit of consolidated companies ..... 31 25 92 72
Equity in profit of unconsolidated
affiliated companies (Note 4) ...... - - - -
Equity in profit of Financial
Products subsidiaries .............. - - - -
------ ------ ------ ------
PROFIT ................................. $ 31 $ 25 $ 92 $ 72
====== ====== ====== ======
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
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CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Sep. 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 787 $ 487
Receivables -- trade and other .................. 3,009 2,956
Receivables -- finance .......................... 2,914 2,266
Deferred income taxes and prepaid expenses ...... 865 852
Inventories (Note 5) ............................ 2,621 2,222
------- -------
Total current assets .............................. 10,196 8,783
Land, buildings, machinery, and equipment -- net .. 3,819 3,767
Long-term receivables -- trade and other .......... 109 128
Long-term receivables -- finance .................. 3,839 3,380
Investments in unconsolidated
affiliated companies (Note 4) .................. 715 701
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 1,016 1,093
Intangible assets ................................. 224 233
Other assets ...................................... 840 643
------- -------
TOTAL ASSETS ........................................ $20,758 $18,728
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 1,033 $ 1,192
Accounts payable and accrued expenses ........... 3,173 2,858
Accrued wages, salaries, and employee benefits .. 1,039 1,010
Dividends payable ............................... - 76
Deferred and current income taxes payable ....... 140 142
Long-term debt due within one year .............. 1,153 1,180
------- -------
Total current liabilities ......................... 6,538 6,458
Long-term debt due after one year ................. 6,645 5,087
Liability for postemployment benefits ............. 2,832 3,019
Deferred income taxes ............................. 57 48
------- -------
TOTAL LIABILITIES ................................... 16,072 14,612
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (Sep. 30, 1997 -- 407,447,312;
Dec. 31, 1996 -- 407,447,312) at paid in amount . 1,071 881
Profit employed in the business ................... 4,759 3,904
Foreign currency translation adjustment ........... 135 162
Treasury stock (Sep. 30, 1997 -- 35,161,521
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... (1,279) (831)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 4,686 4,116
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $20,758 $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
Sep. 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 739 $ 445
Receivables -- trade and other .................. 3,029 2,960
Receivables -- finance .......................... - -
Deferred income taxes and prepaid expenses ...... 880 876
Inventories (Note 5) ............................ 2,621 2,222
------- -------
Total current assets .............................. 7,269 6,503
Land, buildings, machinery, and equipment -- net .. 3,250 3,242
Long-term receivables -- trade and other .......... 109 128
Long-term receivables -- finance .................. - -
Investments in unconsolidated
affiliated companies (Note 4) .................. 715 701
Investments in Financial Products subsidiaries .... 861 759
Deferred income taxes ............................. 1,048 1,132
Intangible assets ................................. 224 233
Other assets ...................................... 505 368
------- -------
TOTAL ASSETS ........................................ $13,981 $13,066
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 73 $ 36
Accounts payable and accrued expenses ........... 2,796 2,556
Accrued wages, salaries, and employee benefits .. 1,033 1,005
Dividends payable ............................... - 76
Deferred and current income taxes payable ....... 40 70
Long-term debt due within one year .............. 75 122
------- -------
Total current liabilities ......................... 4,017 3,865
Long-term debt due after one year ................. 2,389 2,018
Liability for postemployment benefits ............. 2,832 3,019
Deferred income taxes ............................. 57 48
------- -------
TOTAL LIABILITIES ................................... 9,295 8,950
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (Sep. 30, 1997 -- 407,447,312;
Dec. 31, 1996 -- 407,447,312) at paid in amount . 1,071 881
Profit employed in the business ................... 4,759 3,904
Foreign currency translation adjustment ........... 135 162
Treasury stock (Sep. 30, 1997 -- 35,161,521
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... (1,279) (831)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 4,686 4,116
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $13,981 $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
Sep. 30, Dec. 31,
1997 1996
ASSETS
Current assets:
Cash and short-term investments ................. $ 48 $ 42
Receivables -- trade and other .................. 189 175
Receivables -- finance .......................... 2,914 2,266
Deferred income taxes and prepaid expenses ...... 16 15
Inventories (Note 5) ............................ - -
------- -------
Total current assets .............................. 3,167 2,498
Land, buildings, machinery, and equipment -- net .. 569 525
Long-term receivables -- trade and other .......... - -
Long-term receivables -- finance .................. 3,839 3,380
Investments in unconsolidated
affiliated companies (Note 4) .................. - -
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 4 3
Intangible assets ................................. - -
Other assets ...................................... 335 275
------- -------
TOTAL ASSETS ........................................ $ 7,914 $ 6,681
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 960 $ 1,156
Accounts payable and accrued expenses ........... 600 520
Accrued wages, salaries, and employee benefits .. 6 5
Dividends payable ............................... - -
Deferred and current income taxes payable ....... 116 72
Long-term debt due within one year .............. 1,078 1,058
------- -------
Total current liabilities ......................... 2,760 2,811
Long-term debt due after one year ................. 4,256 3,069
Liability for postemployment benefits ............. - -
Deferred income taxes ............................. 37 42
------- -------
TOTAL LIABILITIES ................................... 7,053 5,922
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (Sep. 30, 1997 -- 407,447,312
Dec. 31, 1996 -- 407,447,312) at paid in amount . 383 353
Profit employed in the business ................... 495 404
Foreign currency translation adjustment ........... (17) 2
Treasury stock (Sep. 30, 1997 -- 35,161,521
shares; Dec. 31, 1996 -- 26,745,092 shares)
at cost.......................................... - -
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 861 759
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 7,914 $ 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 Nine Months Ended
(Unaudited)
(Millions of dollars)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Sep. 30, Sep. 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 1,214 $ 980
Adjustments for noncash items:
Depreciation and amortization ................... 565 523
Profit of Financial Products .................... - -
Other ........................................... 22 81
Changes in assets and liabilities:
Receivables -- trade and other .................. (43) (174)
Inventories ..................................... (393) (223)
Accounts payable and accrued expenses ........... 396 199
Other -- net .................................... (99) (100)
------- -------
Net cash provided by operating activities ........... 1,662 1,286
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (419) (269)
Expenditures for equipment leased to others ....... (216) (171)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 100 89
Additions to finance receivables .................. (4,900) (4,158)
Collections of finance receivables ................ 2,454 2,170
Proceeds from sale of finance receivables.......... 1,119 964
Net short-term loans to Financial Products......... - -
Investments and acquisitions ...................... (25) (325)
Other -- net ...................................... (280) (98)
------- -------
Net cash used for investing activities .............. (2,167) (1,798)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (245) (213)
Common stock issued, including treasury
shares reissued ................................. 10 8
Treasury shares purchased.......................... (470) (214)
Net short-term loans from Machinery and Engines.... - -
Proceeds from long-term debt issued ............... 2,280 805
Payments on long-term debt ........................ (887) (761)
Short-term borrowings -- net ...................... 133 1,020
------- -------
Net cash provided by financing activities ........... 821 645
------- -------
Effect of exchange rate changes on cash ............. (16) (12)
------- -------
Increase in cash and short-term investments ......... 300 121
Cash and short-term investments at the
beginning of the period ........................... 487 638
------- -------
Cash and short-term investments at the
end of the period ................................. $ 787 $ 759
======= =======
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 Nine Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES1
Sep. 30, Sep. 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 1,214 $ 980
Adjustments for noncash items:
Depreciation and amortization ................... 462 434
Profit of Financial Products .................... (92) (72)
Other ........................................... 27 64
Changes in assets and liabilities:
Receivables -- trade and other .................. (36) (159)
Inventories ..................................... (393) (223)
Accounts payable and accrued expenses ........... 305 95
Other -- net .................................... (118) (80)
------- -------
Net cash provided by operating activities ........... 1,369 1,039
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (416) (264)
Expenditures for equipment leased to others ....... (4) (4)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 10 18
Additions to finance receivables .................. - -
Collections of finance receivables ................ - -
Proceeds from sale of finance receivables.......... - -
Net short-term loans to Financial Products......... (50) 142
Investments and acquisitions ...................... (25) (325)
Other -- net ...................................... (248) (73)
------- -------
Net cash used for investing activities .............. (733) (506)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (245) (213)
Common stock issued, including treasury
shares reissued ................................. 10 8
Treasury shares purchased.......................... (470) (214)
Net short-term loans from Machinery and Engines.... - -
Proceeds from long-term debt issued ............... 461 31
Payments on long-term debt ........................ (116) (16)
Short-term borrowings -- net ...................... 37 5
------- -------
Net cash used for financing activities .............. (323) (399)
------- -------
Effect of exchange rate changes on cash ............. (19) (1)
------- -------
Increase in cash and short-term investments ......... 294 133
Cash and short-term investments at the
beginning of the period ........................... 445 580
------- -------
Cash and short-term investments at the
end of the period ................................. $ 739 $ 713
======= =======
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 Nine Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Sep. 30, Sep. 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Profit ............................................ $ 92 $ 72
Adjustments for noncash items:
Depreciation and amortization ................... 103 89
Profit of Financial Products .................... - -
Other ........................................... (3) 20
Changes in assets and liabilities:
Receivables -- trade and other .................. 13 3
Inventories ..................................... - -
Accounts payable and accrued expenses ........... 46 47
Other -- net .................................... 42 16
------- -------
Net cash provided by operating activities ........... 293 247
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (3) (5)
Expenditures for equipment leased to others ....... (212) (167)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 90 71
Additions to finance receivables .................. (4,900) (4,158)
Collections of finance receivables ................ 2,454 2,170
Proceeds from sale of finance receivables.......... 1,119 964
Net short-term loans to Financial Products......... - -
Investments and acquisitions ...................... - -
Other -- net ...................................... (62) (45)
------- -------
Net cash used for investing activities .............. (1,514) (1,170)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... - -
Common stock issued, including treasury
shares reissued ................................. 30 20
Treasury shares purchased.......................... - -
Net short-term loans from Machinery and Engines.... 50 (142)
Proceeds from long-term debt issued ............... 1,819 774
Payments on long-term debt ........................ (771) (745)
Short-term borrowings -- net ...................... 96 1,015
------- -------
Net cash provided by financing activities ........... 1,224 922
------- -------
Effect of exchange rate changes on cash ............. 3 (11)
------- -------
Increase (decrease) in cash and
short-term investments ............................ 6 (12)
Cash and short-term investments at the
beginning of the period ........................... 42 58
------- -------
Cash and short-term investments at the
end of the period ................................. $ 48 $ 46
======= =======
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 nine-month periods
ended September 30, 1997 and 1996, (b) the consolidated financial
position at September 30, 1997 and December 31, 1996, and (c) the
consolidated statement of cash flow for the nine-month periods ended
September 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 nine-month periods ended September 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 $400. 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 Nine Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
RESULTS OF OPERATIONS
(Unaudited)
Sales ..................... $ 835 $ 903 $3,587 $2,723
====== ====== ====== ======
Profit .................... $ 21 $ 20 $ 80 $ 47
====== ====== ====== ======
June 30, Sep. 30,
1997 1996
FINANCIAL POSITION
(Unaudited)
Assets:
Current assets ................................. $2,067 $1,995
Land, buildings, machinery and equipment - net.. 796 733
Other assets ................................... 348 395
------ ------
3,211 3,123
------ ------
Liabilities:
Current liabilities ............................ 1,652 1,683
Long-term debt due after one year .............. 220 133
Other liabilities .............................. 152 145
------ ------
2,024 1,961
------ ------
Ownership ........................................ $1,187 $1,162
====== ======
Page 11
<PAGE>
5. Inventories (principally "last-in, first-out" method) comprised the
following:
Sep. 30, Dec. 31,
1997 1996
(unaudited)
Raw materials and work-in-process ................ $1,032 $ 909
Finished goods ................................... 1,390 1,103
Supplies ......................................... 199 210
------ ------
$2,621 $2,222
====== ======
6. Following is a computation of profit per share:
Three Months Ended Nine Months Ended
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
1997 1996 1997 1996
(Unaudited)
I. Net profit for period:
Profit - consolidated (A) ....... $ 385 $ 310 $1,214 $ 980
====== ====== ====== =======
II. Determination of shares (millions):
Weighted average number of
common shares outstanding (B) .. 374.7 384.1 377.0 386.1
Shares issuable on exercise of
stock options, net of shares
assumed to be purchased out
of proceeds at market price .... 6.7 4.8 6.3 4.8
------ ------ ------ -------
Average common shares
outstanding for fully diluted
computation (C) ................ 381.4 388.9 383.3 390.9
====== ====== ====== =======
III. Profit per share of common
stock:
Assuming no dilution (A/B) ...... $1.03 $0.81 $3.22 $2.54
Assuming full dilution (A/C) .... $1.01 $0.80 $3.17 $2.51
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 SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED SEPTEMBER 30,
1996
Third-quarter sales and revenues increased 14% while profit rose 24%.
Profit per share was up 27%, reflecting the impact of the higher profit and
the ongoing share repurchase program. Profit of $385 million or $1.03 per
share was $75 million or 22 cents per share higher than third-quarter 1996
profit of $310 million or 81 cents per share. Physical sales volume increased
15% and was the most significant factor contributing to the increased profit.
Machinery and Engines
Profit before tax of $492 million increased 23% or $91 million from last
year's third quarter. Sales of Machinery and Engines of $4.39 billion rose
14%. The higher sales resulted from a 15% increase in physical sales volume.
The increase in physical sales volume resulted from higher machine and
engine sales inside and outside the United States. Price realization was
about 1% lower, as price increases taken over the past year were more than
offset by the effect of the stronger dollar on sales denominated in currencies
other than the U.S.
Margin (sales less cost of goods sold) of $1.11 billion increased $163
million from the third quarter a year ago. Margin as a percent of sales was
25.2%, up from 24.5%, 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 increased fixed manufacturing costs.
The increased manufacturing costs were primarily in support of major growth
initiatives and product line expansions that include electric power
generation, agricultural products, mining systems, and compact machines. The
net effect of the stronger dollar on the margin rate was minimal.
Selling, general, and administrative expenses were $481 million, compared
with $423 million during the third-quarter 1996. The $58 million increase
primarily reflects increased spending levels in support of major growth
initiatives and product line expansions. The effect of inflation on costs
also contributed to the increase.
Research and development expenses of $132 million increased $28 million
from third-quarter 1996. The increase reflects expected higher spending in
support of new and improved products.
Operating profit was $494 million, up $77 million from the third quarter
a year ago. Operating profit, as a percent of sales, was 11.3% compared with
10.8% a year ago.
Interest expense was $5 million higher than third quarter a year ago due
to higher average debt levels.
Other income/expense was income of $51 million compared with income of
$32 million last year.
Financial Products
Financial Products' third-quarter revenues were a record $221 million, up
$31 million compared with third-quarter 1996, primarily the result of
Caterpillar Financial Services Corporation's (Cat Financial) larger portfolio.
Before-tax profit was $50 million, an improvement of $11 million from
last year's third quarter. The increase resulted primarily from a favorable
reserve adjustment and higher investment income from Caterpillar Insurance Co.
Ltd. (Cat Insurance).
Page 13
<PAGE>
Income Taxes
The provision for income taxes was $166 million, compared with $138
million for the third quarter last year. The increase was primarily due to
the higher before-tax profit. Third-quarter 1996 tax expense reflected an
effective annual tax rate of 32 1/2% and a favorable adjustment of $5 million
to recognize the impact of a tax rate change from 33% used for the first six
months of the year. Third-quarter 1997 tax expense reflects an effective
annual tax rate of 33% and a favorable adjustment of $12 million to recognize
the impact of a change from 34% used for the first six months of the year.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results was
$9 million, up $1 million from a year ago.
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1997
Third-quarter profit of $385 million or $1.03 per share was $50 million
below second-quarter profit of $435 million or $1.15 per share. Second-quarter
profit was the highest quarterly profit in company history. A 5% decrease in
physical sales volume was the most significant factor contributing to the
lower profit.
Machinery and Engines
Profit before tax for Machinery and Engines was $492 million, a $92
million decrease from the previous quarter. Sales of $4.39 billion decreased
$291 million primarily because of the 5% lower physical sales volume. Price
realization was about 1% lower.
The decrease in physical sales volume was primarily the result of lower
machine sales inside the United States. Also contributing to the lower
physical sales volumes were fewer machine sales outside the United States and
fewer engine sales inside the United States. Partially offsetting these lower
sales were higher engine sales outside the United States. Price realization
was about 1% lower due to the effect of the stronger dollar on sales
denominated in currencies other than the U.S. and slightly higher sales
discounts.
Margin was $119 million lower than the second quarter, primarily the
result of lower physical sales volume. As a percent of sales, the margin rate
was 25.2%, compared with 26.2% last quarter. The lower margin rate was
primarily the result of the unfavorable impact of lower physical sales volume.
The net effect of the stronger dollar on the margin rate was minimal.
Selling, general, and administrative expenses were $481 million, down
$2 million from the second quarter.
Research and development expenses of $132 million were down $3 million
from the second quarter.
Operating profit of $494 million decreased $114 million. As a percent of
sales, operating profit was 11.3%, compared with 13.0% in the second quarter.
Interest expense of $53 million was $5 million lower than second quarter
due to lower average debt levels.
Other income/expense was income of $51 million, $17 million higher than
second quarter.
Financial Products
Financial Products' revenues increased $21 million, primarily the result
of Cat Financial's portfolio growth. Before-tax profit was $50 million, a
decrease of $4 million from second quarter. The decrease in profit before tax
was due to a more favorable second-quarter reserve adjustment at Cat
Insurance.
Page 14
<PAGE>
Income Taxes
Income tax expense of $166 million decreased $51 million from the
previous quarter. The decrease reflects the lower profit before tax, a change
in the effective annual tax rate from 34% to 33%, and a favorable adjustment
of $12 million to recognize the impact of the tax rate change for the first
six months.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results was
$9 million, a decrease of $5 million from the previous quarter.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS ENDED SEPTEMBER 30, 1996
Profit for the nine months ended September 30, 1997 was $1.21 billion or
$3.22 per share of common stock, an improvement of $234 million over profit of
$980 million or $2.54 per share for the first nine months of 1996. Sales and
revenues of $13.73 billion were $1.68 billion higher than last year.
Machinery and Engines
Sales were $13.13 billion, an increase of $1.59 billion from the same
period last year. Profit before tax was $1.61 billion, an improvement of
$305 million. The primary reason for the increase in profit was 14% 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 was about the same as price increases taken over the
past year and a favorable change in geographic sales mix were about offset by
the effect of the stronger dollar on sales denominated in currencies other
than the U.S.
Margin increased $546 million primarily because of the higher physical
sales volume. Margin as a percent of sales was 26.1%, up from 24.9%,
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. The increased manufacturing costs were primarily in support of
major growth initiatives and product line expansions that include electric
power generation, agricultural products, mining systems, and compact
machines. The net effect of the dollar on the margin rate was minimal.
Selling, general, and administrative expenses were $1.39 billion,
compared with $1.22 billion during the first nine months of 1996. The
$170 million increase primarily reflects increased spending levels in
support of major growth initiatives and product line expansions. The
effects of inflation on costs and volume-related parts distribution
expenses also contributed to the increase. Partially offsetting these
unfavorable items was the effect of the stronger dollar on costs incurred
in European currencies.
Research and development expenses were $384 million, compared with
$299 million during the first nine months of 1996. The $85 million increase
primarily reflects expected higher spending in support of new and improved
products.
Operating profit of $1.65 billion was $291 million higher than the first
nine months of 1996. Operating profit as a percent of sales was 12.6%
compared with 11.8% a year ago.
Interest expense of $163 million was $17 million higher than a year ago
primarily due to higher average debt levels.
Other income/expense was income of $121 million compared with income of
$90 million last year. The increase of $31 million reflects several favorable
items in 1997.
Page 15
<PAGE>
Financial Products
Financial Products revenues for the nine months ended September 30, 1997,
were $617 million, up $81 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 $147 million, an increase of
$31 million from the first nine months of 1996. The increase resulted
primarily from higher earnings from a larger portfolio of earning assets at
Cat Financial and a more favorable Cat Insurance reserve adjustment.
Selling, general, and administrative expenses were up $25 million,
primarily due to an increase in depreciation on leased equipment and other
increases due to portfolio growth, partially offset by the more favorable Cat
Insurance reserve adjustment. Interest expense was $37 million higher due to
increased borrowings to support the larger portfolio, partially offset by
lower borrowing rates.
Income Taxes
Tax expense was $579 million, $117 million higher than a year ago. The
increase reflects higher before-tax profit and an effective tax rate of 33%
compared with 32 1/2% a year ago.
Unconsolidated Affiliated Companies
The company's share of unconsolidated affiliated companies' results was
$36 million, up $15 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 third-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 $2.08 billion, a
$253 million or 14% increase over third quarter last year. The increase was
primarily due to higher industry demand for machines and engines which more
than offset the impact of dealer new machine inventory reductions. Price
realization improved slightly.
Sales inside the United States during the third quarter were 47% of
sales, the same as 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.
Good economic growth, low inflation, stable interest rates, and a positive
outlook all contributed to higher industry demand.
Sales to end-users (including rental purchase options) remained strong
in all key construction sectors.
- Sales into the highway sector rose as a result of much higher levels
of highway-related construction spending.
- Housing-related sales exceeded year-earlier levels reflecting
continued strength in residential housing.
- Sales for commercial, industrial and government building-related
construction were unchanged from a year ago despite increased
construction spending in these areas.
Page 16
<PAGE>
Sales into commodity applications also increased with gains registered
in most sectors.
- Sand and quarry mining-related sales increased due to considerably
higher aggregate production.
- Sales to the coal mining sector were lower, despite higher mine
production and higher coal prices.
- Forestry sector sales were above year-earlier levels, reflecting both
higher forestry production and prices.
- Sales into the agricultural sector rose because of a healthy farm
economy and higher industry demand.
- Metal mining-related sales declined. Production rose, but metals
prices remained below year-earlier levels.
In other applications, sales to industrial users and landfills declined.
Deliveries to U.S. Dealer Rental Fleets
Deliveries to U.S. dealer rental fleets increased from third-quarter
1996. At the end of the third quarter, U.S. dealer dedicated rental units
were above second-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 second
quarter, but were above year-ago levels. At the end of the third 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, also reflecting strong, underlying economic fundamentals. Sales of
reciprocating engines were up with higher sales in all key applications,
including on-highway trucks, marine, electric power generation, and
industrial. Sales of turbine engines also were higher with an increase in oil
and gas applications due to higher demand from offshore production activity
and natural gas transmission.
Caterpillar Sales Outside the United States
- -------------------------------------------
Caterpillar sales outside the United States were $2.31 billion, a
$283 million or 14% increase over third-quarter 1996. Company sales of both
machines and engines increased as improvement in physical sales volume more
than offset a decline in price realization. Most of the improvement in
physical sales volume was due to an increase in dealer machine inventories
versus a decline in the third quarter a year ago. At the end of the third
quarter 1997, dealer inventory levels were about normal.
Sales outside the United States represented 53% of worldwide sales, the
same as third quarter of last year.
Dealer Machine Sales to End-Users Outside the United States
Dealer machine sales to end-users outside the United States were about
the same as year-earlier levels with gains in Latin America, Canada,
Europe, and Commonwealth of Independent States (CIS) offset by declines
elsewhere.
- Europe: Sales for the region were higher, primarily due to increased
demand in Germany. Sales also were higher in France, but were lower
in the United Kingdom, Italy, and Spain.
- Latin America: Sales rose in response to much stronger economic
activity, especially in the construction sector. Higher sales were
reported in most countries, including Brazil, Argentina, Chile, and
Peru.
Page 17
<PAGE>
- Asia (excluding Japan): Sales declined, reflecting tighter monetary
and fiscal policies following currency devaluations in Thailand,
Indonesia, Malaysia, and the Philippines. Sales also declined in
China despite continued excellent economic growth.
- Africa/Middle East: Slower economic growth combined with last year's
decline in commodity prices resulted in lower sales for the region.
Sales were near last year's levels in Turkey, but lower in South
Africa.
- Canada: Good economic growth, low interest rates, and higher housing
starts have produced strong industry demand. Sales were higher in all
construction sectors as well as petroleum, coal mining, and
agricultural sectors.
- Australia: Sales were lower primarily due to a decrease in
mining-related demand.
- Japan: Sales of imported product were down due to a very weak economy
and a reduction in public works spending.
- 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 second quarter and up from year-earlier levels. At the end of
the third quarter, dealer inventories were about 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 primarily due to the addition of large engine products sold into the
marine and power generation sectors. In the absence of these large engine
products, sales of reciprocating engines would have been slightly below
year-earlier levels. Sales of turbine engines however, were above
year-earlier levels, reflecting greater demand for electric power generation.
PLANT CLOSING AND CONSOLIDATION COSTS
At September 30, 1997, the reserve for plant closing and consolidation
costs was $250 million. Of this balance, $157 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
September 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.
EMPLOYMENT
At the end of the third quarter, Caterpillar's worldwide employment was
59,246, compared with 55,205 one year ago. Hourly employment increased 1,863
to 33,998; salaried and management employment increased 2,178 to 25,248. The
increased employment is the result of acquisitions, expanded operations, and
major growth initiatives.
Page 18
<PAGE>
ECONOMIC AND INDUSTRY OUTLOOK
The world economy remains on track to register solid growth in 1997,
primarily due to the surprising strength and solid underlying fundamentals of
the U.S. economy. Canadian and Latin American economies also are performing
very well, providing strong demand for product throughout the Western
Hemisphere. As a result, worldwide industry demand for machines and engines
will be higher than last year, despite lower demand in Asia, Europe,
Australia, and Japan. Looking ahead to 1998, solid economic growth is forecast
to continue and should provide higher worldwide industry demand.
In the U.S., good economic growth is forecast to continue for the
remainder of the year with Gross Domestic Product (GDP) advancing 3.5% to 4.0%
for 1997 - the best since 1989. Inflation is expected to remain subdued and
interest rates are forecast to move only slightly higher, if at all. In this
favorable environment, industry demand for machines and engines should surpass
last year's levels. The economy's growth rate should slow some in 1998, but
remain strong enough to keep industry demand for machines near 1997 levels.
Industry demand for engines is expected to be stronger in 1998.
The European economy continues to register noticeable improvement with
GDP forecast to grow 2.5% this year versus 1.6% last year. Tight fiscal
policies, however, are still expected to cause a slight decline in
construction equipment industry demand this year. In Japan, tight fiscal
policies caused the economy to contract in the second quarter and may have
lead to another decline in the third quarter. As a result of this economic
weakness and a reduction in public works spending, industry demand will
decline for the year. In 1998, Europe is forecast to register better economic
growth led by exports and business investment. The resulting growth in Europe
should be good enough to produce higher industry demand. In contrast, the
Japanese economy is forecast to remain very weak, with industry demand
continuing at recessionary levels.
Elsewhere, faster growth in Canada and Latin America has led to higher
industry demand for these two regions in 1997. Good economic growth should
continue in 1998, leading to even higher industry demand. In contrast, slower
economic growth this year in Australia and Africa/Middle East is expected to
hold industry demand near last year's levels. For 1998, demand is expected to
improve in Africa/Middle East but remain about flat in Australia. Demand also
is forecast to remain flat in Russia, both this year and next.
In developing Asia, four countries (Thailand, Indonesia, Malaysia, and
the Philippines) have recently experienced economic difficulties. These four
countries currently comprise less than 5% of total company sales and revenues.
In response to the devaluations which have occurred since July 2, all but
Malaysia have raised interest rates and all have announced reductions in
government spending, especially for public works projects. Thailand has also
increased taxes. As a result, economic growth has slowed noticeably in the
second half, and Thailand will likely enter a recession. Industry demand has
declined significantly in the second half of 1997, especially in Thailand.
Excluding China, which has not been affected, developing Asia's GDP growth
will likely be about 5.5% for the year compared with 7% last year, and
industry demand is now forecast to decline for the year as a whole. In 1998,
the economies of these four countries are anticipated to remain relatively
weak due to high interest rates and reduced government spending. As a result,
developing Asia's (excluding China) GDP growth is forecast to be about 5% and
the industry is expected to decline for a second year. China, in contrast, is
forecast to maintain excellent economic and industry growth.
In summary, strong industry demand in the Western Hemisphere will more
than offset weakness elsewhere to produce higher worldwide demand in 1997.
For 1998, the preliminary outlook is for slightly higher industry demand as
projected increases in the Western Hemisphere, Europe, and Africa/Middle East
should be more than sufficient to offset the anticipated decline in Asia.
Page 19
<PAGE>
SOUTHEAST ASIA
As indicated above, our current forecast of industry demand in developing
Asia (excluding China) is lower than previously expected. However, we
continue to believe this region has strong long-term growth potential for
Caterpillar products. The impact on consolidated results of recent sales
declines in this region have been insignificant. Anticipated sales declines
in this region for the remainder of 1997 and 1998 are expected to have an
insignificant impact on consolidated results as well.
COMPANY OUTLOOK
The company outlook for fourth-quarter 1997 consolidated sales and
revenues calls for sales to be moderately higher than fourth-quarter 1996.
It is anticipated that profit for the fourth quarter will also be
moderately higher than the fourth quarter a year ago, 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. Profit per share for the fourth quarter of
1997 will continue to benefit from the share repurchase program.
Our preliminary expectations are that 1998 company sales will slightly
surpass 1997 record levels.
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 October 15, 1997.
B. Liquidity & Capital Resources
Consolidated operating cash flow totaled $1.66 billion through the third
quarter of 1997, compared with $1.29 billion for the first nine months of
1996.
Total debt at the end of the first nine months was $8.83 billion, an
increase of $1.37 billion from Year End 1996. Over this period, debt related
to Machinery and Engines increased $361 million, to $2.54 billion, while
debt related to Financial Products increased $1.01 billion to $6.29 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 third-quarter 1997, 31.6 million shares have
been repurchased under the plan. The number of shares outstanding at
September 30, 1997, was 372.3 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 $1.37 billion through the third quarter of
1997, compared with $1.04 billion through the third quarter of 1996. The
increase in operating cash flow primarily results from the increase in
profits over the same period a year ago.
Capital expenditures, excluding equipment leased to others, totaled $416
million for the first nine months of 1997, compared with $264 million a year
ago.
During the first nine 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 nine months of 1997. The
percent of debt to debt plus stockholders equity was 35% at both September 30,
1997, and December 31, 1996.
Page 20
<PAGE>
Financial Products
Operating cash flow totaled $293 million through the third quarter of
1997, compared with $247 million through the third quarter of 1996. The
increase in operating cash flow primarily results from the increase in
profits and higher depreciation and amortization over the same period a
year ago.
Expenditures for equipment leased to others totaled $212 million through
the third quarter of 1997. In addition, year-to-date 1997 net cash used for
finance receivables was $1.33 billion, compared with $1.02 billion through the
third quarter of 1996.
Financial Products' debt was $6.29 billion at September 30, 1997, an
increase of $1.01 billion from December 31, 1996 and was primarily comprised
of $3.6 billion of medium term notes, $147 million of notes payable to banks
and $2.4 billion of commercial paper. At the end of the third quarter,
finance receivables past due over 30 days were 1.6%, compared with 1.8% at the
end of the same period one year ago. The ratio of debt to equity of Cat
Financial was 8.3:1 at September 30, 1997, compared with 7.8:1 at December 31,
1996.
Financial Products had outstanding credit lines totaling $3.7 billion
at September 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 nine months of 1997, management reclassified
$718 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
$289 million were reclassified at December 31, 1996 and September 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 third 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 third
quarter of 1997, a total of 38,492 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) One report on Form 8-K dated August 19, 1997, was filed during
the quarter ending September 30, 1997, pursuant to Item 5 of
that form. One additional report on Form 8-K was filed on
October 15, 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: October 31, 1997 By: /s/ D. R. Oberhelman
----------------------
D. R. Oberhelman, Vice President
and Chief Financial Officer
Date: October 31, 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 NINE-MONTHS
ENDED SEPTEMBER 30, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 129
<SECURITIES> 658
<RECEIVABLES> 3,009<F1>
<ALLOWANCES> 0<F1><F2>
<INVENTORY> 2,621
<CURRENT-ASSETS> 10,196
<PP&E> 11,577
<DEPRECIATION> 7,758
<TOTAL-ASSETS> 20,758
<CURRENT-LIABILITIES> 6,538
<BONDS> 6,645
0<F2>
0<F2>
<COMMON> 407
<OTHER-SE> 4,279
<TOTAL-LIABILITY-AND-EQUITY> 20,758
<SALES> 13,133
<TOTAL-REVENUES> 13,732
<CGS> 9,709
<TOTAL-COSTS> 11,959
<OTHER-EXPENSES> (147)
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 163
<INCOME-PRETAX> 1,757
<INCOME-TAX> 579
<INCOME-CONTINUING> 1,214
<DISCONTINUED> 0<F2>
<EXTRAORDINARY> 0<F2>
<CHANGES> 0<F2>
<NET-INCOME> 1,214
<EPS-PRIMARY> $3.22
<EPS-DILUTED> $3.17
<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>
