SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 16, 1998
CATERPILLAR INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-768
(Commission File Number)
37-0602744
(IRS Employer I.D. No.)
100 NE Adams Street, Peoria, Illinois
(Address of principal executive offices)
61629
(Zip Code)
Registrant's telephone number, including area code: (309) 675-1000
Item 5. Other Events
SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995
The information included in the "Economic and Industry Outlook" and
"Company Outlook" sections of the Company's Third Quarter Financial
Release dated October 16, 1998 is forward looking and involves
uncertainties that could significantly impact expected results. These
uncertainties include factors that affect all international businesses,
as well as matters specific to the Company and the markets it serves.
Turmoil in World Financial Markets
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Turmoil in world financial markets over the past month has made
forecasting particularly difficult. Business confidence plays an
important role in the purchase decision and recent events in
financial markets, including difficulties experienced by hedge funds,
have increased uncertainty and reduced confidence. The chairman
of the Federal Reserve, Alan Greenspan, also recently noted the
worldwide flight to liquidity and increased aversion to risk which,
in the first instance have significantly reduced the flow of
credit to emerging markets, and in the second instance have contributed
to signs of an emerging credit crunch in certain segments of the U.S.
credit markets. If a credit crunch were to develop, funding for
projects would be more difficult to obtain and could negatively
impact projects worldwide and the U.S. non-residential construction
market in particular. The current outlook assumes that financial
turmoil subsides over the next few months but that business
confidence will be impacted to some degree and that non-residential
construction in particular will be negatively impacted.
Events in Asia, Latin America and Russia
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Unforeseen events in Asia or Latin America could impact sales. Our
current assessment calls for continued deep recession in Japan,
Korea, Thailand, Indonesia, Malaysia, and Hong Kong and recession or
weak growth in many other Southeast Asian developing countries.
In Latin America, economies have slowed noticeably due to high interest
rates but the region as a whole is expected to avoid recession.
This assessment presumes the two regions' currencies and stock markets
stabilize over the next several months and that the impact of these
events is limited outside the two regions to slower economic growth
in the U.S. and Canada and to lower world commodity prices.
If the region's currencies and/or stock markets fail to stabilize,
if China, Hong Kong, or Brazil were to devalue, or if Japan were
to experience a financial collapse, then the impact on world
growth and industry demand would be more severe which could result
in lower company sales. Company sales also could be negatively
impacted by a greater than anticipated flow of new and used equipment
from weak Asian markets to the rest of the world which could exert
pressure on both price realization and share of industry sales.
Recent events also highlight the risks in Russia which has slipped back
into severe recession. Political and economic instability is very high
and a further deterioration could impact worldwide stock or currency
markets, which in turn could weaken Company sales.
Monetary and Fiscal Policies
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For most companies operating in a global economy, monetary and fiscal
policies implemented in the U.S. and abroad could have a significant
impact on economic growth, and, accordingly, demand for a product. For
example, if the Federal Reserve fails to cut interest rates quickly
enough in response to a significant decline in world stock markets,
the U.S. economy could slow and negatively impact demand for the
Company's products. In general, high interest rates, reductions
in government spending, higher taxes, significant currency devaluations,
and uncertainty over key policies are some factors likely to lead to
slower economic growth and lower industry demand. The current outlook
is for slower U.S. growth in 1999 and not recession. If, for whatever
reason, the U.S. were to enter a recession then demand for Company
products would fall in the U.S. and Canada and would also be lower
throughout the rest of the world.
Political Factors
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Political factors in the U.S. and abroad also have a major impact on global
companies. The Company is one of the largest U.S. exporters as a percentage
of sales. International trade and fiscal policies implemented in the U.S.
this year could impact the Company's ability to expand its business abroad.
U.S. foreign relations with certain countries and any related restrictions
imposed could also have a significant impact on foreign sales. In addition,
political instability in regions such as the CIS make potential economic
growth difficult to predict for those countries.
Currency Fluctuations
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Currency fluctuations are also a significant unknown for global companies.
If the U.S. dollar strengthens against foreign currencies, the Company's
ability to realize price increases on sales could be negatively impacted. Most
of the Company's key competitors have their principal manufacturing operations
based in Japan or European countries. The majority of our manufacturing assets
are in the United States. Consequently, should an overvalued dollar persist,
our costs compared with these competitors would be relatively higher. As a
major net exporter from the United States, the persistence of an overvalued
dollar, over time, could have an unfavorable impact on our global
competitive position.
Dealer Practices
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In addition to these factors, there are uncertainties related to the
Company's industry and specific operations. A major factor contributing
to the Company's success is its dealer distribution network. Dealer practices,
such as changes in inventory levels for both new and rental equipment, are not
within the Company's control (primarily because these practices depend upon
the dealer's assessment of anticipated sales) and may have a significant
positive or negative impact on our results.
Other Factors
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The rate of infrastructure spending, housing starts, commercial construction
and mining also play a significant role in the Company's results. Our products
are an integral component of these activities and as these activities increase
or decrease in the U.S. or abroad, demand for our products may be
significantly impacted.
The Company operates in a highly competitive environment and our outlook
depends on a forecast of the Company's percentage of industry sales. A
reduction in that percentage could result from pricing or product strategies
pursued by competitors, unanticipated product or manufacturing difficulties,
a failure to price the product competitively, or an unexpected buildup in
competitors' new machine or dealer owned rental fleets.
This discussion of uncertainties is by no means exhaustive but is designed
to highlight important factors that may impact our outlook. Obvious
factors such as general economic conditions throughout the world do not
warrant further discussion but are noted to further emphasize the myriad
of contingencies that may cause the Company's actual results to differ
from those currently anticipated.
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.
By: /s/ R. Rennie Atterbury III
R. Rennie Atterbury III
Vice President
Date: October 16, 1998
