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 15, 1999
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
<PAGE>
Item 5. Other Events
October 15, 1999
CATERPILLAR REPORTS THIRD-QUARTER PROFIT PER SHARE OF 61 CENTS
- --------------------------------------------------------------
PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported
third-quarter sales and revenues of $4.72 billion, $458 million
lower than third-quarter 1998. The decrease was primarily due to
an 8 percent decline in physical sales volume, partially offset by
a 10 percent increase in Financial Products revenues.
Profit of $219 million or 61 cents per share, was $117 million
less than 1998's third quarter of $336 million. The decrease was
due primarily to lower sales volume, lower price realization and an
unfavorable change in product sales mix. Lower selling, general and
administrative (SG&A) and research and development (R&D) costs
partially offset these unfavorable items.
"Lower retail sales in several key geographic and industry
segments caused a decline in company sales this quarter," said
Caterpillar Chairman and CEO Glen Barton. "While sales of large
machines remained weak, truck engine sales continued at historic high
levels and demand for large reciprocating engines is picking up. The
diversity of our business continues to provide positive contributions
to results and the organization has demonstrated its ability to
effectively manage costs during a period of lower volume."
"We expect company sales and revenues to decline about 5 percent
in 1999 from the record level set in 1998. In 2000, better worldwide
growth, higher commodity prices and less dealer inventory reduction
should generate higher sales for both machines and engines."
- -1-
<PAGE>
HIGHLIGHTS
- ----------
THIRD-QUARTER 1999 COMPARED WITH THIRD-QUARTER 1998
- ---------------------------------------------------
* Sales and revenues of $4.72 billion were $458 million or 9 percent
lower than the third-quarter 1998.
* Revenues from Financial Products increased 10 percent.
* Sales inside the United States were 47 percent of worldwide sales
compared with 51 percent a year ago.
* Machinery and Engines SG&A and R&D expenses were reduced 8 percent
and 7 percent, respectively, from third-quarter 1998.
* Profit of $219 million and profit per share of 61 cents were down
35 percent and 34 percent, respectively, from third-quarter 1998.
Profit per share continues to benefit from the company's share
repurchase programs.
* 1.2 million shares were repurchased during the quarter under the
program announced in October 1998 to reduce the number of shares
outstanding to 320 million within the next three to five years.
On September 30, 1999 there were 354.6 million shares outstanding
(359.2 million assuming dilution).
OUTLOOK
- -------
We expect full-year 1999 sales and revenues to be lower than
previously anticipated, about 5 percent below 1998, and profit per
share to be about $3.00. Based on our preliminary outlook, increases
in both sales and profits are expected in 2000. (Complete outlook
begins on page 8.)
- -2-
<PAGE>
DETAILED ANALYSIS
- -----------------
THIRD-QUARTER 1999 COMPARED WITH THIRD-QUARTER 1998
- ---------------------------------------------------
Sales and revenues for third-quarter 1999 were $4.72 billion,
$458 million lower than third-quarter 1998. The decrease was
primarily due to an 8 percent decrease in physical sales volume,
partially offset by a 10 percent increase in Financial Products
revenues. Profit of $219 million was $117 million less than
third-quarter 1998. The decrease was due primarily to lower sales
volume, lower price realization (primarily geographic mix) and an
unfavorable change in product sales mix. Lower selling, general
and administrative (SG&A) and research and development (R&D) costs,
as well as higher other income (primarily foreign exchange) partially
offset these unfavorable items. Profit per share of 61 cents was down
31 cents from third-quarter 1998.
MACHINERY AND ENGINES
- ---------------------
Sales Table
-----------
(Millions of North Latin Asia/
dollars) Total America EAME* America Pacific
-------- -------- ------- -------- --------
Third-Quarter 1999
Machinery $2,661 $1,373 $737 $205 $346
Engines ** 1,761 925 493 173 170
-------- -------- ------- -------- --------
$4,422 $2,298 $1,230 $378 $516
======== ======== ======= ======== ========
Third-Quarter 1998
Machinery $3,229 $1,963 $733 $299 $234
Engines ** 1,677 795 589 150 143
-------- -------- ------- -------- --------
$4,906 $2,758 $1,322 $449 $377
======== ======== ======= ======== ========
* Europe, Africa & Middle East and Commonwealth of Independent States
** Does not include internal engine transfers of $281 million and
$319 million in 1999 and 1998, respectively. Internal engine
transfers are valued at prices comparable to those for unrelated
parties.
Machinery sales were $2.66 billion, a decrease of $568 million
or 18 percent from third-quarter 1998. The lower sales resulted
primarily from a 14 percent decrease in physical sales volume due
to lower sales to end users and a larger reduction in dealer new
machine inventory than occurred in the third quarter last year.
Price realization also declined primarily due to unfavorable
geographic mix.
- -3-
<PAGE>
Sales rose in the Asia/Pacific region, remained near year-earlier
levels in EAME and declined elsewhere. In North America, sales fell
due to lower retail industry demand and the reduction of dealer new
machine inventories. In EAME, higher retail demand led to higher s
ales in Europe while the opposite occurred in Africa & Middle East
and Commonwealth of Independent States (CIS). In the Asia/Pacific
region, sales were higher due to a reversal of last year's reduction
in dealer new machine inventories and improved retail demand. In
Latin America, sales were lower due to the decline in retail industry
demand.
Engine sales were $1.76 billion, an increase of $84 million
from third-quarter 1998, reflecting a 4 percent increase in physical
sales volume and slightly better price realization (primarily
geographic mix).
Sales were up in North America, Asia/Pacific and Latin America
reflecting higher sales in on-highway truck and power generation
applications. Sales of large engines into the petroleum sector
were lower due to the impact of last year's drop in oil prices.
In North America, sales were up in both the United States and Canada
due to the very strong on-highway truck market and an increased share
of industry sales, as well as higher demand for power generation
applications. Sales were lower in EAME reflecting the impact of
weak growth in Africa & Middle East, low oil prices, and continued
weakness in the agricultural equipment sector. Sales were up in
Asia/Pacific as higher sales of reciprocating engines more than
offset a decline in turbine engines. In Latin America, sales began
to improve from last year's levels as economic growth picked up.
Operating Profit Table
----------------------
(Millions of dollars) Third-Quarter 1999 Third-Quarter 1998
------------------ ------------------
Machinery $160 $344
Engines 141 106
---- ----
$301 $450
---- ----
Caterpillar operations are highly integrated; therefore, the company
uses a number of allocations to determine lines of business operating
profit.
Machinery operating profit decreased $184 million, or 53 percent
from third-quarter 1998. Margin (sales less cost of goods sold)
declined primarily due to the lower sales volume and price realization,
as well as the impact of lower production volumes on manufacturing
efficiencies. SG&A and R&D expenses were lower reflecting the impact
of ongoing cost reduction actions.
- -4-
<PAGE>
Engine operating profit increased $35 million, or 33 percent
from third-quarter 1998 due to the higher sales volume and slightly
better price realization. SG&A and R&D expenses were about the same.
Interest expense was $3 million higher than a year ago.
Other income/expense reflects a net increase in income of
$23 million due mostly to a favorable change in foreign exchange
gains and losses.
FINANCIAL PRODUCTS
- ------------------
Revenues for the third quarter were $326 million, up $30 million
or 10 percent compared with third-quarter 1998. The increase resulted
primarily from continued growth in Cat Financial's portfolio.
Before tax profit decreased $15 million or 19 percent from
third-quarter 1998. Less favorable reserve adjustments at Caterpillar
Insurance Co. Ltd. (Cat Insurance) were the principal cause of the
lower profit.
INCOME TAXES
- ------------
Third-quarter 1999 tax expense reflects an effective annual
tax rate of 32 percent. Third-quarter 1998 tax expense reflected a
32 percent rate and a favorable adjustment of $13 million to recognize
the impact of a tax rate change from 33 percent to 32 percent for the
first six months of 1998.
UNCONSOLIDATED AFFILIATED COMPANIES
- -----------------------------------
The company's share of unconsolidated affiliated companies'
results declined $7 million from a year ago, primarily due to weaker
results at Shin Caterpillar Mitsubishi Ltd. and the conversion of
F.G. Wilson from an affiliated company to a consolidated subsidiary.
SUPPLEMENTAL INFORMATION
- ------------------------
Dealer Machine Sales to End Users and Deliveries to Dealer Rental
Operations
Sales and deliveries in North America were below third-quarter
1998 levels. Sales were lower in both the United States and Canada
reflecting lower industry demand. Sales were lower in all sectors
except metals mining. Slower growth in dealer rental operations
also contributed to lower deliveries.
Sales and deliveries in the EAME region declined slightly as
lower sales in Africa & Middle East and CIS more than offset higher
sales in Europe. Germany, France, Italy, Spain and the United
Kingdom all posted higher sales while South Africa, Turkey and
- -5-
<PAGE>
Russia posted lower sales. For EAME as a whole, sales were lower
in most applications, with the exception of highway construction
and forestry where sales were higher. The decrease in sales was
partially offset by higher deliveries to dealer rental operations.
Sales and deliveries in Latin America fell due to recession
and weak growth throughout much of the region over the past year.
Sales in the third quarter were lower in all key countries, except
Peru, where sales improved. Sales were lower in most major
applications.
Sales and deliveries in Asia/Pacific exceeded year-earlier
levels as higher sales in developing countries and Japan more than
offset lower sales in Australia. Sales were higher in India,
Indonesia, China, Korea, Malaysia and Thailand. For the region
as a whole, sales were higher in key applications except metals
mining, industrial and petroleum.
Dealer Inventories of New Machines
Worldwide dealer new machine inventories at the end of the third
quarter were lower than a year ago and about normal relative to
current selling rates. Inventories were lower in Latin America, EAME
and Asia/Pacific, and virtually unchanged in North America. At
quarter's end, inventories compared with current selling rates were
slightly below normal in Asia/Pacific, moderately below normal in
EAME, and moderately above normal in Latin America. Inventories in
North America, although still declining, were slightly above normal
compared with current selling rates.
Engine Sales to End Users and OEMs
Sales in North America were up as higher demand for on-highway
truck engine and power generation applications more than offset lower
demand in the petroleum and marine sectors. Sales of on-highway
truck engines continued to be very strong due to record industry
demand and our increased share of industry sales. Consequently,
reciprocating engine sales were up in both the United States and
Canada. Turbine engine demand, however, was lower due principally
to the impact of low oil prices late last year and early this year
on sales into the petroleum sector.
Sales in EAME were down due to lower sales in both Europe and
Africa & Middle East. Weak growth in Africa & Middle East and last
year's low oil prices contributed to a decline in turbine engine
sales to the petroleum sector.
Sales in Latin America were lower due to a decline in turbine
engine demand reflecting the impact of low oil prices. Sales of
reciprocating engines remained near last year's level. Higher
sales into the on-highway truck engine sector were more than offset
by lower sales into the petroleum and power generation sectors.
Sales in Asia/Pacific also declined due to the impact of low
oil prices as a decrease in petroleum sector sales more than offset
an increase in sales to the power generation and marine markets.
- -6-
<PAGE>
CONDENSED CASH FLOW
- -------------------
Net free cash flow (profit after tax adjusted for depreciation,
changes in working capital, capital expenditures, and dividends) for
Machinery and Engines was $569 million for 1999, a decrease of
$888 million from 1998. This decrease was primarily due to lower
profit after tax and an unfavorable change in working capital.
The unfavorable change in working capital reflects lower benefits
from the revolving sale of receivables to Cat Financial, partially
offset by the positive impact of a reduction in inventory.
For the Nine Months Ended CONSOLIDATED
(Millions of dollars) Sept 30, Sept 30,
1999 1998
-------- -------
Profit after tax $707 $1,212
Depreciation and amortization 702 652
Change in working capital -
excluding cash, debt and
dividends payable (565) (1,854)
Capital expenditures excluding
equipment leased to others (438) (520)
Expenditures for equipment
leased to others, net of disposals (150) (150)
Dividends paid (330) (293)
------ ------
Net Free Cash Flow (74) (953)
------ ------
Other significant cash flow items:
Treasury shares purchased (218) (491)
Net (increase) decrease in
long-term finance receivables (388) (874)
Net increase (decrease) in debt 1,143 3,663
Investments and acquisitions -
(net of cash acquired) (282) (1,326)
Prefunding of employee benefit
plans - -
Other (258) (76)
------ ------
Change in cash and short-term
Investments $(77) $(57)
====== ======
------------------------------------------------
For the Nine Months Ended MACHINERY & ENGINES*
(Millions of dollars) Sept 30, Sept 30,
1999 1998
-------- -------
Profit after tax $707 $1,212
Depreciation and amortization 559 532
Change in working capital -
excluding cash, debt and
dividends payable 56 516
Capital expenditures excluding
equipment leased to others (435) (516)
Expenditures for equipment
leased to others, net of disposals 12 6
Dividends paid (330) (293)
------ ------
Net Free Cash Flow 569 1,457
------ ------
Other significant cash flow items:
Treasury shares purchased (218) (491)
Net (increase) decrease in
long-term finance receivables - -
Net increase (decrease) in debt 235 609
Investments and acquisitions -
(net of cash acquired) (258) (1,326)
Prefunding of employee benefit
plans - -
Other (410) (328)
------ ------
Change in cash and short-term
Investments $(82) $(79)
====== ======
* Represents Caterpillar Inc. and its subsidiaries, except for
Financial Products which is accounted for on the equity basis.
Note: Lines titled "Change in working capital - excluding cash,
debt and dividends payable" and "Capital Expenditures excluding
equipment leased to others" exclude $88 million and $91 million,
respectively, included in the "Investments and acquisitions -
(net of cash acquired)" and "Other" lines for the nine months ended
September 30, 1999; Lines titled "Change in working capital -
excluding cash, debt and dividends payable" and "Capital expenditures
excluding equipment leased to others" exclude $10 million and
$368 million, respectively, included in the "Investments and
acquisitions - (net of cash acquired)" line for the nine months
ended September 30, 1998.
------------------------------------------------
For the Nine Months Ended FINANCIAL PRODUCTS
(Millions of dollars) Sept 30, Sept 30,
1999 1998
-------- -------
Profit after tax $125 $141
Depreciation and amortization 143 120
Change in working capital -
excluding cash, debt and
dividends payable (620) (2,370)
Capital expenditures excluding
equipment leased to others (3) (4)
Expenditures for equipment
leased to others, net of disposals (162) (156)
Dividends paid (36) (49)
------ ------
Net Free Cash Flow (553) (2,318)
------ ------
Other significant cash flow items:
Treasury shares purchased - -
Net (increase) decrease in
long-term finance receivables (388) (874)
Net increase (decrease) in debt 908 3,054
Investments and acquisitions -
(net of cash acquired) (24) -
Prefunding of employee benefit
plans - -
Other 62 160
------ ------
Change in cash and short-term
Investments $ 5 $ 22
====== ======
- -7-
<PAGE>
EMPLOYMENT
- ----------
At the end of the third quarter, Caterpillar's worldwide
employment was 67,302 compared with 66,223 one year ago. Acquisitions
added 2,517 during this period.
OUTLOOK
- -------
Summary
Company sales and revenues for 1999 are forecast to be lower
than previously anticipated, about 5 percent below 1998 levels as
lower machine sales will more than offset higher engine sales. The
decline in machine sales reflects significant dealer inventory
reduction and weaker retail demand in North America, recession in
Latin America, pronounced weakness in Africa & Middle East and the
impact of low commodity prices on worldwide sales into the mining,
oil, agricultural and forestry sectors. Engine sales are up in North
America (particularly for on-highway trucks) and in Asia/Pacific,
but the increase will not be sufficient to offset the decline in
worldwide machine sales. In total, company sales are expected to
exceed last year's level in Asia/Pacific, decline slightly in North
America and EAME, and decline significantly in Latin America. Given
this sales forecast, profit per share is expected to be about $3.00.
North America
In North America, engine sales are forecast to register another
year of outstanding growth, primarily due to continued very strong
demand for on-highway truck engines. Engine sales are also forecast
to be higher for power generation applications. Machine sales,
however, will be lower due to a significant reduction in dealer new
machine inventory and to a decline in retail industry demand. For
construction and mining equipment, industry sales are expected to be
down about 10 percent reflecting the impact of low worldwide commodity
prices as well as lower demand in most construction sectors. Sales
into the agricultural sector will be down more sharply due to continued
depressed commodity prices. In addition, the six-year Federal highway
bill has not boosted United States sales this year as much as
anticipated due to delays in getting major capital projects underway,
although the benefit is still expected in 2000 and 2001. Machine
sales in Canada this year will also be down, reflecting the impact of
high interest rates late last year and lower commodity prices. In
total, company sales for North America will be down this year, as
lower machine sales will more than offset higher engine sales.
EAME
In Western Europe, economic growth has picked up in the second
half, particularly in the United Kingdom and Germany. For the year
as a whole, machine sales are forecast to be higher due primarily to
an increased share of industry sales although unit industry demand
will also be up. Engine sales, however, are still expected to be
down reflecting weakness in OEM markets, especially for agricultural
equipment. In Africa & Middle East, weak growth and low commodity
prices will result in lower sales for both machines and engines.
Current oil prices should boost sales next year. Sales also will
be lower in Russia. For the region as a whole, company sales are
forecast to be down primarily due to weakness in Africa & Middle East.
- -8-
<PAGE>
Latin America
The region is slowly recovering from recessions experienced by
many countries over the last fifteen months. Higher oil prices will
help a number of countries and interest rates have come down
substantially. Mexico is registering solid growth and the Brazilian
economy is recovering faster than expected. Venezuela, Chile and Peru
are emerging from recession and Argentina has stopped contracting.
Colombia and Ecuador have not improved. Demand has recently begun
to pick up for the region as a whole, but company sales will still be
considerably lower for the year due to the significant decline year-
to-date for both machines and engines.
Asia/Pacific
Recovery has been stronger than expected for both developing Asia
and Japan this year. Gross Domestic Product (GDP) for developing Asia
is now forecast to grow 5 percent this year and even Japan is now
expected to register some growth. In developing Asia, this strong
growth combined with infrastructure spending in China should lead to
higher sales of both machines and reciprocating engines. Turbine
demand, however, is significantly lower due to project delays. In
Japan, business conditions are expected to remain relatively weak
despite some growth in the economy, keeping industry demand for
machines near 1998 levels. In Australia, continued good economic
growth should keep sales near last year's level. For the region as
a whole, company sales are forecast to be up due to higher industry
demand and the expectation that dealers will end the year with more
inventory than a year ago.
Preliminary 2000 Outlook
In North America, United States GDP growth of 3 percent should
lead to another year of very strong engine sales, particularly for
on-highway trucks. Industry demand for machines is expected to
increase moderately in Canada and decline slightly in the United
States, but company machine sales are forecast to increase as
shipments come back into line with retail demand.
In EAME, sales should increase as the Africa & Middle East
region begins to recover and as demand continues to grow in Europe
where GDP growth is forecast to approach 3 percent.
In Latin America, economic recovery should boost GDP growth to
3 to 4 percent, leading to higher sales throughout most of the region.
In Asia/Pacific, higher sales are forecast for developing Asia
as recovery continues and GDP growth remains near 5 percent. Sales
in Australia are projected to decline slightly from 1999 levels as
economic growth moderates, while demand in Japan should improve from
very depressed levels.
In summary, company sales are forecast to improve in 2000 due
to better worldwide growth, higher commodity prices and less dealer
inventory reduction. Higher sales are expected in all regions for
both machines and engines. Considering this sales forecast, profit
is expected to improve from 1999 levels.
- -9-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
CONSOLIDATED
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $4,422 $4,906
Revenues of Financial Products 293 267
-------- -------
Total sales and revenues 4,715 5,173
-------- -------
Operating costs:
Cost of goods sold 3,470 3,748
Selling, general, and
administrative expenses 616 631
Research and development expenses 151 163
Interest expense of Financial Products 142 135
-------- -------
Total operating costs 4,379 4,677
-------- -------
Operating Profit 336 496
Interest expense excluding
Financial Products 71 68
Other income (expense) 62 43
-------- -------
Consolidated profit before taxes 327 471
Provision for income taxes 104 138
-------- -------
Profit of consolidated companies 223 333
Equity in profit of
unconsolidated affiliates (4) 3
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $219 $336
======== =======
EPS of common stock $0.62 $0.93
======== =======
EPS of common stock - assuming dilution $0.61 $0.92
======== =======
Weighted average shares
outstanding (thousands)
Basic 355,042 361,909
Assuming dilution 359,876 366,765
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $4,422 $4,906
Revenues of Financial Products - -
-------- -------
Total sales and revenues 4,422 4,906
-------- -------
Operating costs:
Cost of goods sold 3,470 3,748
Selling, general, and
administrative expenses 500 545
Research and development expenses 151 163
Interest expense of Financial Products - -
-------- -------
Total operating costs 4,121 4,456
-------- -------
Operating Profit 301 450
Interest expense excluding
Financial Products 71 68
Other income (expense) 33 10
-------- -------
Consolidated profit before taxes 263 392
Provision for income taxes 81 108
-------- -------
Profit of consolidated companies 182 284
Equity in profit of
unconsolidated affiliates (4) 3
Equity in profit of Financial
Products subsidiaries 41 49
-------- -------
Profit $219 $336
======== =======
* Represents Caterpillar Inc. and its subsidiaries, except for
Financial Products which is accounted for on the equity basis.
Transactions between Machinery and Engines and Financial Products
have been eliminated to arrive at the Consolidated data.
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
FINANCIAL PRODUCTS
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 326 296
-------- -------
Total sales and revenues 326 296
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 124 94
Research and development expenses - -
Interest expense of Financial Products 149 136
-------- -------
Total operating costs 273 230
-------- -------
Operating Profit 53 66
Interest expense excluding
Financial Products - -
Other income (expense) 11 13
-------- -------
Consolidated profit before taxes 64 79
Provision for income taxes 23 30
-------- -------
Profit of consolidated companies 41 49
Equity in profit of
unconsolidated affiliates - -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $ 41 $ 49
======== =======
- -10-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
(Millions of dollars except per share data)
CONSOLIDATED
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $13,841 $14,836
Revenues of Financial Products 842 735
-------- -------
Total sales and revenues 14,683 15,571
-------- -------
Operating costs:
Cost of goods sold 10,791 10,060
Selling, general, and
administrative expenses 1,901 1,852
Research and development expenses 458 483
Interest expense of Financial Products 407 357
-------- -------
Total operating costs 13,557 13,752
-------- -------
Operating Profit 1,126 1,819
Interest expense excluding
Financial Products 203 198
Other income (expense) 127 145
-------- -------
Consolidated profit before taxes 1,050 1,766
Provision for income taxes 336 565
-------- -------
Profit of consolidated companies 714 1,201
Equity in profit of
unconsolidated affiliates (7) 11
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $707 $1,212
======== =======
EPS of common stock $1.99 $3.32
======== =======
EPS of common stock - assuming dilution $1.97 $3.28
======== =======
Weighted average shares
outstanding (thousands)
Basic 355,772 364,785
Assuming dilution 359,897 370,022
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES*
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $13,841 $14,836
Revenues of Financial Products - -
-------- -------
Total sales and revenues 13,841 14,836
-------- -------
Operating costs:
Cost of goods sold 10,791 11,060
Selling, general, and
administrative expenses 1,567 1,605
Research and development expenses 458 483
Interest expense of Financial Products - -
-------- -------
Total operating costs 12,816 13,148
-------- -------
Operating Profit 1,025 1,688
Interest expense excluding
Financial Products 203 198
Other income (expense) 31 52
-------- -------
Consolidated profit before taxes 853 1,542
Provision for income taxes 264 482
-------- -------
Profit of consolidated companies 589 1,060
Equity in profit of
unconsolidated affiliates (7) 11
Equity in profit of Financial
Products subsidiaries 125 141
-------- -------
Profit $707 $1,212
======== =======
* Represents Caterpillar Inc. and its subsidiaries, except for
Financial Products which is accounted for on the equity basis.
Transactions between Machinery and Engines and Financial Products
have been eliminated to arrive at the Consolidated data.
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
(Millions of dollars except per share data)
FINANCIAL PRODUCTS
Sept 30, Sept 30,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 944 812
-------- -------
Total sales and revenues 944 812
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 356 267
Research and development expenses - -
Interest expense of Financial Products 425 365
-------- -------
Total operating costs 781 632
-------- -------
Operating Profit 163 180
Interest expense excluding
Financial Products - -
Other income (expense) 34 44
-------- -------
Consolidated profit before taxes 197 224
Provision for income taxes 72 83
-------- -------
Profit of consolidated companies 125 141
Equity in profit of
unconsolidated affiliates - -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $125 $141
======== =======
- -11-
<PAGE>
CATERPILLAR INC.
CONDENSED FINANCIAL POSITION
(Millions of dollars)
Consolidated
(Caterpillar Inc. and Subsidiaries)
Sept 30, Dec. 31, Sept 30,
1999 1998 1998
-------- -------- --------
Assets
Current assets:
Cash and short-term investments $283 $360 $235
Receivables - trade and other 3,399 3,660 3,605
Receivables - finance 4,289 3,516 3,862
Deferred income taxes 563 474 432
Prepaid expenses 724 607 536
Inventories 2,719 2,842 3,116
-------- -------- --------
Total current assets 11,977 11,459 11,786
Property, plant, and
equipment - net 4,936 4,866 4,517
Long-term receivables
- trade and other 97 85 124
Long-term receivables
- finance 5,446 5,058 4,755
Investments in unconsolidated
affiliated companies 518 773 769
Deferred income taxes 925 955 1,002
Intangible assets 1,563 1,241 1,236
Other assets 997 691 945
-------- -------- --------
Total Assets $26,459 $25,128 $25,134
======== ======== ========
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery & Engines $ 60 $49 $ 47
-- Financial Products 151 760 536
Accounts payable 2,102 2,250 2,366
Accrued expenses 1,094 928 946
Accrued wages, salaries, and
employee benefits 1,089 1,217 1,125
Dividends payable - 107 -
Deferred and current
income taxes payable 67 15 97
Long-term debt due within one year:
-- Machinery & Engines 152 60 69
-- Financial Products 2,885 2,179 1,853
-------- -------- --------
Total current liabilities 7,600 7,565 7,039
Long-term debt due after one year:
-- Machinery & Engines 3,125 2,993 2,967
-- Financial Products 7,222 6,411 6,759
Liability for post-employment
benefits 2,620 2,590 2,714
Deferred income taxes
and other liabilities 494 438 485
-------- -------- --------
Total Liabilities 21,061 19,997 19,964
-------- -------- --------
Stockholders' Equity
Common stock 1,044 1,063 1,066
Profit employed in the business 6,608 6,123 6,037
Accumulated other comprehensive
income (19) 1 52
Treasury stock (2,235) (2,056) (1,985)
-------- -------- --------
Total Stockholders' Equity 5,398 5,131 5,170
-------- -------- --------
Total Liabilities and
Stockholders' Equity $26,459 $25,128 $25,134
======== ======== ========
Certain amounts for 1998 have been reclassified to conform with the
1999 financial statement presentation.
- -12-
<PAGE>
SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995
- ------------------------------------------------------
Certain statements contained in our Third Quarter 1999 Financial
Release are forward looking and involve uncertainties that could
significantly impact expected results. The words "believes,"
"expects," "estimates," "anticipates," "will be" and similar words
or expressions identify forward-looking statements made on behalf
of Caterpillar. Uncertainties include factors that affect all
international businesses, as well as matters specific to the
Company and the markets it serves.
Current Outlook
- ---------------
Our current outlook calls for recovery to continue throughout Asia
and Brazil. Venezuela, Chile and Peru are emerging from recession
and Argentina should be stabilizing. If, for any reason, these
recoveries falter, sales would likely be lower than anticipated in
the affected region. Renewed currency speculation, a significant
decline in the stock market (in the region or in the U.S.), or much
higher interest rates (in the region or in the U.S.) could result
in weaker than anticipated economic growth and sales. Economic
recovery could also be delayed or weakened by growing budget or
current account deficits or inappropriate government policies.
In particular, our outlook assumes that the Japanese government
remains committed to stimulating the economy and that the Brazilian
government follows through with promised reforms. A reversal by
either government could result in renewed recession. Our outlook
also assumes that currency and stock markets remain relatively stable.
If currency or stock markets were to decline significantly, uncertainty
would increase and interest rates could move higher, both of which
would probably result in slower economic growth and lower sales.
The outlook for our sales also depends on commodity prices which
are expected to remain near current levels, or trend slightly higher,
for the remainder of the year. Oil prices have moved up considerably
since the start of the year and are expected to remain high for the
winter. Gold prices have recently moved higher on announcements of
government plans to refrain from selling gold, and we assume gold
prices remain near current levels. Agricultural prices are likely
to remain weak while most metals prices should be up slightly.
Based on this forecast, equipment sales into sectors that are
sensitive to commodity prices are likely to remain relatively weak
for the second half.
Stronger than anticipated world growth, particularly in Europe,
could lead to a noticeable recovery in commodity prices before year
end which could result in greater than expected sales next year.
Conversely, weaker than anticipated world economic growth could lead
to a drop in commodity prices and lower than expected sales, especially
next year. Europe plays a key role in this forecast and our current
outlook is for improvement leading to annual average GDP growth of
2.2% or better. If Europe falters, then commodity prices could be
weaker.
Russia remains very weak. Political and economic instability are
very high and a further deterioration could impact worldwide stock
or currency markets, which in turn could weaken Company sales.
- -13-
<PAGE>
Monetary and Fiscal Policies
- ----------------------------
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 raises rates significantly, the
U.S. economy could slow abruptly leading to an unanticipated decline
in sales. The current outlook is for a further 25 basis point
increase over the next three months, which combined with recent
increases, should begin to slow GDP growth. Or, the Federal Reserve
could fail to cut interest rates quickly enough in response to a
significant decline in world stock markets, which also would slow
the U.S. economy 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 slightly slower
U.S. growth in 2000 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
- -----------------
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.
Currency Fluctuations
- ---------------------
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, an overvalued dollar makes our costs relatively
higher compared with these competitors. As a major net exporter from
the United States, an overvalued dollar, over time, could have an
unfavorable impact on our global competitive position.
Dealer Practices
- ----------------
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 the appropriate level of inventory) and may
have a significant positive or negative impact on our results.
- -14-
<PAGE>
Other Factors
- -------------
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. In 1999, the
six-year Federal highway bill has not boosted U.S. sales as much as
anticipated due to delays in getting major capital projects underway.
If, unexpectedly, these delays continued in the Year 2000, sales could
be negatively impacted.
Another factor which can impact company sales and profit is mix. Our
outlook assumes a certain geographic mix of sales (higher priced areas
vs. lower priced areas) as well as a product mix of sales (machines vs.
engines, small vs. large, high margin vs. low margin). Results may be
impacted positively or negatively by changes in the mix.
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.
The outlook also depends on our ability to realize price increases.
The environment remains very competitive and a repeat of the price
discounting that occurred in 1998 would result in lower than
anticipated price realization.
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 15, 1999
- -15-
<PAGE>
