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): July 20, 2000
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.
CATERPILLAR SALES, REVENUES AND PROFIT INCREASE IN
SECOND-QUARTER 2000; OUTLOOK REMAINS UNCHANGED
--------------------------------------------------
PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported
second-quarter sales and revenues of $5.36 billion, $262 million
or 5 percent higher than second-quarter 1999. The increase was
primarily due to higher physical volume. Financial Products
revenues increased $27 million or 10 percent from second-quarter
1999.
Profit of $315 million was $32 million or 11 percent higher
than second-quarter 1999. The increase was due primarily to
improved manufacturing efficiencies and the higher physical volume.
These favorable changes were partially offset by unfavorable other
income, mostly due to discounts on the securitization of receivables
and foreign exchange losses. Profit per share was 90 cents, up 15
percent.
"Through the first half of 2000, customer demand for Cat products
in total remained solid, though in the U.S., higher interest rates and
other factors have softened the market for construction equipment and
truck engines," said Chairman and CEO Glen Barton. "Our global
diversification, broad product line and the variety of businesses in
which we compete continue to create a broad base of opportunities.
Sales increased in all regions of the world. Strong demand for quality
power in telecommunications, process manufacturing and internet service
operations in North America and Europe is driving a dramatic increase
in Caterpillar's electric power business. Although there have been
changes in components of our outlook and we are concerned about the
interest rate environment for the rest of the year, the overall outlook
for 2000 remains unchanged - sales are expected to be up slightly and
profit to be up moderately."
-1-
<PAGE>
HIGHLIGHTS
----------
SECOND-QUARTER 2000 COMPARED WITH SECOND-QUARTER 1999
-----------------------------------------------------
* Sales and revenues of $5.36 billion were $262 million or 5 percent
higher. Revenues from Financial Products increased 10 percent.
* Sales inside the United States were 52 percent of worldwide sales
compared with 53 percent a year ago.
* Profit of $315 million was $32 million or 11 percent above second-
quarter 1999.
* Profit per share of 90 cents was up 15 percent.
* 3.06 million shares were repurchased during the quarter under the
program announced in October 1998 to reduce the number of shares
outstanding to 320 million over a three to five year period. On
June 30, 2000 there were 345.7 million shares outstanding.
* As previously announced, dividends were increased by 5 percent in
June, bringing the quarterly payout to 34 cents per share. This
is the seventh consecutive year dividends have been increased.
OUTLOOK
-------
We continue to expect full-year 2000 sales and revenues to be
slightly higher than 1999 and profit to increase moderately.
(Complete outlook begins on page 8.)
-2-
<PAGE>
DETAILED ANALYSIS
-----------------
SECOND-QUARTER 2000 COMPARED WITH SECOND-QUARTER 1999
-----------------------------------------------------
Sales and revenues for the second-quarter 2000 were $5.36 billion,
5 percent higher than second-quarter 1999. A 7 percent increase in
physical sales volume and a 10 percent increase in Financial Products
revenue were partially offset by the unfavorable impact of the stronger
U.S. dollar on sales denominated in currencies other than U.S. dollars
(primarily the euro). Profit of $315 million or 90 cents per share was
$32 million or 11 percent higher than second-quarter 1999. The
increase was due primarily to improved manufacturing efficiencies and
higher physical volume. These favorable changes were partially offset
by unfavorable other income, mostly due to discounts on the
securitization of receivables and foreign exchange losses. The
negative impact of the U.S. dollar on sales was mostly offset by the
U.S. dollar's positive impact on costs.
MACHINERY AND ENGINES
---------------------
Sales
-----
(Millions of North Latin Asia/
dollars) Total America EAME* America Pacific
-------- -------- ------- -------- --------
Second-Quarter 2000
-------------------
Machinery $ 3,320 $1,941 $ 833 $ 241 $ 305
Engines ** 1,736 1,003 441 103 189
-------- -------- ------- -------- --------
$ 5,056 $ 2,944 $1,274 $ 344 $ 494
======== ======== ======= ======== ========
Second-Quarter 1999
--------------- ---
Machinery $ 3,217 $1,953 $ 766 $ 203 $ 295
Engines ** 1,604 919 390 128 167
-------- -------- ------- -------- --------
$ 4,821 $ 2,872 $1,156 $ 331 $ 462
======== ======== ======= ======== ========
* Europe, Africa & Middle East and Commonwealth of Independent States
** Does not include internal engine transfers of $353 million
in second-quarter 2000 and $314 million in second-quarter 1999.
Internal engine transfers are valued at prices comparable to
those for unrelated parties.
Machinery sales were $3.32 billion, an increase of $103 million
or 3 percent from second-quarter 1999. The higher sales resulted from
a 7 percent increase in physical sales volume. Price realization was
lower, primarily due to the unfavorable impact of the stronger U.S.
dollar on sales denominated in currencies other than U.S. dollars
(primarily the euro).
-3-
<PAGE>
Sales in North America remained near year-earlier levels as
lower dealer sales to end users were offset by a slower pace of dealer
inventory reduction. The lower dealer sales to end users reflected
both a drop in industry demand and a lower share of industry sales.
Sales in EAME were higher due to improved dealer sales to end users
and an increase in dealer inventories. Sales in Latin America
increased as dealer sales to end users stabilized and dealers held
inventories steady through the quarter compared to reducing them a
year ago. Sales in the Asia/Pacific region were up slightly from
second-quarter 1999 as higher dealer sales to end users more than
offset dealer inventory reduction.
Engine sales were $1.74 billion, an increase of $132 million or
8 percent from second-quarter 1999. The higher sales resulted from a
6 percent increase in physical sales volume. Price realization was
also higher.
The majority of the quarterly sales gain came from stronger sales
into power generation as demand for electric power products increased
in most areas of the world. It has been particularly strong in North
America and Europe where Caterpillar's power solutions help meet peak
power needs and provide premium quality power for telecommunications,
process manufacturing and internet service operations. Sales of
electric power products also benefited from the addition of revenues
from F.G. Wilson, converted from an affiliated company to a
consolidated subsidiary in July 1999.
Operating Profit
----------------
(Millions of dollars) Second-Quarter Second-Quarter
2000 1999
------------- -------------
Machinery $ 374 $ 293
Engines 171 117
------ ------
$ 545 $ 410
====== ======
Caterpillar operations are highly integrated; therefore,
the company uses a number of allocations to determine lines
of business operating profit.
Machinery operating profit increased $81 million, or 28 percent
from second-quarter 1999. Margin (sales less cost of goods sold)
improved primarily due to the higher sales volume and improved
manufacturing efficiencies, partially offset by the slightly negative
impact of currency. Selling, general & administrative (SG&A) expenses
were lower.
-4-
<PAGE>
Engine operating profit increased $54 million, or 46 percent,
from second-quarter 1999 due to better price realization (primarily
geographic mix), improved manufacturing efficiencies and higher sales
volume. These were partially offset by higher SG&A.
Interest expense was $9 million higher than a year ago.
Other income/expense was expense of $50 million compared with
income of $15 million last year. The adverse change was mostly due
to discounts taken on the sale of trade receivables and unfavorable
foreign exchange gains and losses.
FINANCIAL PRODUCTS
------------------
Revenues for the second quarter were $359 million, up $44 million
or 14 percent compared with second-quarter 1999 (excluding revenue
transactions with Machinery and Engines, revenues increased $27 million
or 10 percent). The increase resulted primarily from continued growth
in Cat Financial's portfolio.
Before tax profit decreased $9 million or 15 percent from second-
quarter 1999. The decrease resulted primarily from a reduction in
favorable reserve adjustments at Caterpillar Insurance Company Ltd.
INCOME TAXES
------------
Second-quarter tax expense reflects an estimated annual tax rate
of 32 percent for both 2000 and 1999.
UNCONSOLIDATED AFFILIATED COMPANIES
-----------------------------------
The company's share of unconsolidated affiliated companies'
results declined $5 million from second quarter 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 in July 1999.
SUPPLEMENTAL INFORMATION
------------------------
Dealer Machine Sales to End Users
---------------------------------
Sales (including both sales to end users and deliveries to dealer
rental operations) in North America were lower compared to second-
quarter 1999. This was due to weaker sales in the United States
resulting from a decline in industry demand and lower share of industry
sales. Sales in Canada were higher. For the region, sales into
general construction, industrial, quarry & aggregates, waste and
agriculture were lower. Sales rose in mining and forestry. Sales in
heavy construction were down slightly compared to second-quarter 1999
as sales to pipeline construction declined, while highway construction
remained near year-earlier levels.
-5-
<PAGE>
Sales increased in EAME as a result of growing demand throughout
the region. In Europe, economic growth supported higher sales in
France and Spain. Reconstruction efforts boosted sales in Central
Europe. Sales in the United Kingdom and Italy remained near year-
earlier levels while sales in Germany declined. In Africa & Middle
East, sales were higher in Turkey and Saudi Arabia, which more than
offset declines in United Arab Emirates, Egypt and South Africa. Sales
in the Commonwealth of Independent States (CIS) increased. For the
EAME region, sales were higher to heavy construction, mining,
industrial, quarry & aggregates and forestry. Sales into general
construction, agriculture and waste were lower.
In Latin America, sales declined from year-earlier levels. Sales
were lower in Colombia, Mexico and Argentina, more than offsetting
gains in Brazil and Peru. For the region, sales were lower in
industrial, general construction and mining sectors. Sales increased
into heavy construction and forestry.
In Asia/Pacific, sales increased due to growth in China,
Australia, Korea, Malaysia and Indonesia. Sales in India and the
Philippines were lower. For the region, sales increased into heavy
construction, mining, general construction and forestry. Sales into
the quarry & aggregates sector were lower.
Dealer Inventories of New Machines
----------------------------------
Worldwide dealer new machine inventories at the end of the second
quarter were lower than a year ago. Declines in North America and
Asia/Pacific more than offset increases in EAME and Latin America.
Inventories compared to current selling rates were lower than a
year earlier in all regions.
Engine Sales to End Users and OEMs
----------------------------------
Higher sales in North America resulted from surging demand for
electric power products to help meet electric utilities' peak power
requirements and increased customer needs for high quality power.
Demand for larger engine product to support network operation centers
(sometimes referred to as internet service providers) was particularly
robust. Sales were also higher in the petroleum sector due to the
impact of higher crude oil and natural gas prices. Sales of on-highway
truck engines declined as expected due to weakening industry demand,
however Caterpillar's market leadership position in this industry
continued to grow. Sales into marine and industrial were also lower.
Sales in the rest of the world were lower as sales declined in all
sectors except power generation which benefited from the acquisition of
F.G. Wilson.
-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 $436 million for 2000, an increase of
$160 million from 1999. This increase was primarily due to higher profit
after tax and a favorable change due to a smaller increase in working capital.
For the Six Months Ended CONSOLIDATED
(Millions of dollars) June 30, June 30,
2000 1999
-------- -------
Profit after tax $573 $488
Depreciation and amortization 514 467
Change in working capital -
excluding cash, debt and
dividends payable (398) (955)
Capital expenditures excluding
equipment leased to others (252) (263)
Expenditures for equipment
leased to others, net of disposals (204) (97)
Dividends paid (228) (214)
------ ------
Net Free Cash Flow 5 (574)
------ ------
Other significant cash flow items:
Treasury shares purchased (326) (149)
Net (increase) decrease in
long-term finance receivables (504) (544)
Net increase (decrease) in debt 934 1,550
Investments and acquisitions -
(net of cash acquired) (78) (251)
Other (110) (67)
------ ------
Change in cash and short-term
Investments $ (79) $ (35)
====== ======
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" and "Other" lines for
the six months ended June 30, 1999.
************************************************
For the Six Months Ended MACHINERY & ENGINES*
(Millions of dollars) June 30, June 30,
2000 1999
-------- -------
Profit after tax $573 $488
Depreciation and amortization 399 374
Change in working capital -
excluding cash, debt and
dividends payable (69) (113)
Capital expenditures excluding
equipment leased to others (246) (262)
Expenditures for equipment
leased to others, net of disposals 7 3
Dividends paid (228) (214)
------ ------
Net Free Cash Flow 436 276
------ ------
Other significant cash flow items:
Treasury shares purchased (326) (149)
Net (increase) decrease in
long-term finance receivables - -
Net increase (decrease) in debt (40) 188
Investments and acquisitions -
(net of cash acquired) (70) (228)
Other (66) (148)
------ ------
Change in cash and short-term
Investments $(66) $ (61)
====== ======
* 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" and "Other" lines for
the six months ended June 30, 1999.
************************************************
For the Six Months Ended FINANCIAL PRODUCTS
(Millions of dollars) June 30, June 30,
2000 1999
-------- -------
Profit after tax $ 75 $ 84
Depreciation and amortization 115 93
Change in working capital -
excluding cash, debt and
dividends payable (484) (798)
Capital expenditures excluding
equipment leased to others (6) (1)
Expenditures for equipment
leased to others, net of disposals (211) (100)
Dividends paid (29) (36)
------ ------
Net Free Cash Flow (540) (758)
------ ------
Other significant cash flow items:
Treasury shares purchased - -
Net (increase) decrease in
long-term finance receivables (504) (544)
Net increase (decrease) in debt 1,165 1,357
Investments and acquisitions -
(net of cash acquired) (8) (23)
Other (126) (6)
------ ------
Change in cash and short-term
Investments $ (13) $ 26
====== ======
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" and "Other" lines for
the six months ended June 30, 1999.
-7-
<PAGE>
EMPLOYMENT
----------
At the end of second-quarter 2000, Caterpillar's worldwide
employment was 66,836 compared with 66,545 one year ago. Employment
outside the United States grew by approximately 1,300 as we expanded
operations to meet increased demand.
OUTLOOK
-------
Summary
-------
Company sales and revenues are forecast to increase slightly in
2000 as higher sales in EAME and Asia/Pacific more than offset lower
sales in North America. Company sales will benefit from better
worldwide economic growth and higher prices for most commodities. Oil
prices in particular are forecast to remain high, averaging $25 - $30
per barrel for the year, while agricultural prices are expected to
remain under pressure due to crop surpluses in the United States.
Company sales also will benefit from less dealer inventory reduction.
The competitive environment, however, remains particularly challenging
with pressure on both share of industry sales and price realization.
Further, we continue to be concerned about the interest rate
environment for the rest of the year.
In North America, machine sales are expected to decline due to a
drop in industry demand and a slightly lower share of industry sales.
Engine sales are expected to exceed 1999 levels as robust power
generation sales and higher petroleum sales more than offset lower
industry demand for on-highway truck engines. In EAME and
Asia/Pacific, good economic growth and higher commodity prices should
lead to higher retail demand and higher company sales for machines and
engines. In Latin America, company sales are forecast to be flat as
higher machine sales are offset by lower engine sales.
In summary, company sales and revenues are forecast to increase
slightly in 2000 due to higher engine sales and increased financial
revenues. Machinery sales are forecast to remain near 1999 levels as
lower sales in the United States are offset by higher sales elsewhere.
Profit is forecast to increase moderately.
North America
-------------
In the United States, retail industry demand for construction
equipment is forecast to decline 10 percent to 15 percent despite Gross
Domestic Product (GDP) growth of about 4.5 percent. While such strong
economic growth would usually lead to increased demand, higher interest
rates, lower housing starts and a drop in replacement buying are
causing industry demand to continue to fall from the 1998 peak. Heavy
construction could provide a partial offset to the drop in general
construction, but recent highway spending increases have continued to
favor bridge repair and resurfacing which are not as heavy equipment
intensive. Sales into most other sectors are likely to be down for the
year including mining, quarry & aggregates, industrial, forestry and
waste. Sales of agricultural equipment also are unlikely to exceed
1999 levels due to a drop in industry demand. Company machine sales are
still forecast to benefit from higher sales of compact equipment and
less dealer inventory reduction, but this will not be enough to offset
lower industry demand and a slightly lower share of industry sales.
-8-
<PAGE>
Company engine sales in the United States are forecast to exceed
1999 levels as strong demand for power generation, higher sales into
petroleum and higher share of industry sales for heavy and medium-duty
truck engines should more than offset lower industry demand for on-
highway truck engines.
In Canada, good economic growth should lead to higher sales for
both machines and engines.
For the North American region as a whole, company sales are
forecast to be slightly below last year's level as lower machine sales
more than offset higher engine sales.
EAME
----
In Western Europe, GDP growth is expected to accelerate from
2.3 percent in 1999 to 3.3 percent in 2000 leading to a 5 percent to
10 percent increase in machine industry demand as well as stronger
engine sales. Growth is also expected to improve in Africa & Middle
East with double-digit gains in machine industry demand. Higher
commodity prices, particularly oil and natural gas, are driving
increased demand for both machines and engines. Sales in Russia and
elsewhere in the CIS, however, are likely to remain depressed. For
the EAME region as a whole, better growth and improved business
confidence should lead to higher company sales, despite the weak
euro's unfavorable impact on the translation of European sales from
euros to dollars.
Asia/Pacific
------------
In developing Asia, economic recovery is forecast to continue
with GDP growth of about 6 percent. This growth should result in
considerably higher engine sales than last year, particularly for
power generation. Even though the construction sector remains very
weak, machine sales are forecast to increase somewhat from last year's
depressed level as higher dealer sales to end users, especially in
China, more than offset a reduction in dealer inventories. In
Australia, good economic growth should continue although there is also
some uncertainty about the impact on the economy of the implementation
of the new goods and services tax on July 1. Machine sales volume is
forecast to be higher for the year, but lower engine sales and a weak
Australian dollar are likely to result in lower overall US dollar sales
for Australia. For the Asia/Pacific region in total, company sales of
both engines and machines should exceed 1999 levels.
Latin America
-------------
GDP growth is forecast to improve from 0.4 percent in 1999 to
4 percent in 2000 as most of the region recovers from last year's
recession. Combined with higher commodity prices, this improved growth
should result in higher machine and reciprocating engine sales. Sales
of turbine engines, however, are likely to be lower, resulting in
company sales remaining near 1999 levels.
-9-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
CONSOLIDATED
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $5,056 $4,821
Revenues of Financial Products 307 280
-------- -------
Total sales and revenues 5,363 5,101
-------- -------
Operating costs:
Cost of goods sold 3,840 3,743
Selling, general, and
administrative expenses 647 632
Research and development expenses 157 152
Interest expense of Financial Products 170 136
-------- -------
Total operating costs 4,814 4,663
-------- -------
Operating Profit 549 438
Interest expense excluding
Financial Products 74 65
Other income (expense) (1) 49
-------- -------
Consolidated profit before taxes 474 422
Provision for income taxes 151 136
-------- -------
Profit of consolidated companies 323 286
Equity in profit of
unconsolidated affiliates (8) (3)
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $315 $283
======== =======
EPS of common stock $0.91 $0.80
======== =======
EPS of common stock - assuming dilution $0.90 $0.78
======== =======
Weighted average shares
outstanding (thousands)
Basic 347,066 355,943
Assuming dilution 349,378 361,065
************************************************
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES*
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $5,056 $4,821
Revenues of Financial Products - -
-------- -------
Total sales and revenues 5,056 4,821
-------- -------
Operating costs:
Cost of goods sold 3,840 3,743
Selling, general, and
administrative expenses 514 516
Research and development expenses 157 152
Interest expense of Financial Products - -
-------- -------
Total operating costs 4,511 4,411
-------- -------
Operating Profit 545 410
Interest expense excluding
Financial Products 74 65
Other income (expense) (50) 15
-------- -------
Consolidated profit before taxes 421 360
Provision for income taxes 134 113
-------- -------
Profit of consolidated companies 287 247
Equity in profit of
unconsolidated affiliates (8) (3)
Equity in profit of Financial
Products subsidiaries 36 39
-------- -------
Profit $315 $283
======== =======
* 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
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 359 315
-------- -------
Total sales and revenues 359 315
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 143 123
Research and development expenses - -
Interest expense of Financial Products 181 142
-------- -------
Total operating costs 324 265
-------- -------
Operating Profit 35 50
Interest expense excluding
Financial Products - -
Other income (expense) 18 12
-------- -------
Consolidated profit before taxes 53 62
Provision for income taxes 17 23
-------- -------
Profit of consolidated companies 36 39
Equity in profit of
unconsolidated affiliates - -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $ 36 $ 39
======== =======
-10-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
(Millions of dollars except per share data)
CONSOLIDATED
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ 9,681 $ 9,419
Revenues of Financial Products 601 549
-------- -------
Total sales and revenues 10,282 9,968
-------- -------
Operating costs:
Cost of goods sold 7,398 7,321
Selling, general, and
administrative expenses 1,284 1,285
Research and development expenses 312 307
Interest expense of Financial Products 323 265
-------- -------
Total operating costs 9,317 9,178
-------- -------
Operating Profit 965 790
Interest expense excluding
Financial Products 145 132
Other income (expense) 40 65
-------- -------
Consolidated profit before taxes 860 723
Provision for income taxes 274 232
-------- -------
Profit of consolidated companies 586 491
Equity in profit of
unconsolidated affiliates (13) (3)
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $573 $488
======== =======
EPS of common stock $1.64 $1.37
======== =======
EPS of common stock - assuming dilution $1.63 $1.35
======== =======
Weighted average shares
outstanding (thousands)
Basic 349,425 356,159
Assuming dilution 352,126 360,180
************************************************
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES*
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $9,681 $9,419
Revenues of Financial Products - -
-------- -------
Total sales and revenues 9,681 9,419
-------- -------
Operating costs:
Cost of goods sold 7,398 7,321
Selling, general, and
administrative expenses 1,037 1,067
Research and development expenses 312 307
Interest expense of Financial Products - -
-------- -------
Total operating costs 8,747 8,695
-------- -------
Operating Profit 934 724
Interest expense excluding
Financial Products 145 132
Other income (expense) (42) (2)
-------- -------
Consolidated profit before taxes 747 590
Provision for income taxes 235 183
-------- -------
Profit of consolidated companies 512 407
Equity in profit of
unconsolidated affiliates (14) (3)
Equity in profit of Financial
Products subsidiaries 75 84
-------- -------
Profit $ 573 $ 488
======== =======
* 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 SIX MONTHS ENDED
(Millions of dollars except per share data)
FINANCIAL PRODUCTS
June 30, June 30,
2000 1999
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 689 618
-------- -------
Total sales and revenues 689 618
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 265 232
Research and development expenses - -
Interest expense of Financial Products 344 276
-------- -------
Total operating costs 609 508
-------- -------
Operating Profit 80 110
Interest expense excluding
Financial Products - -
Other income (expense) 33 23
-------- -------
Consolidated profit before taxes 113 133
Provision for income taxes 39 49
-------- -------
Profit of consolidated companies 74 84
Equity in profit of
unconsolidated affiliates 1 -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $ 75 $ 84
======== =======
-11-
<PAGE>
CATERPILLAR INC.
CONDENSED FINANCIAL POSITION
(Millions of dollars)
Consolidated
(Caterpillar Inc. and Subsidiaries)
-----------------------------------
June 30, Dec. 31, June 30,
2000 1999 1999
--------- --------- ---------
Assets
Current assets:
Cash and short-term investments $ 469 $ 548 $ 325
Receivables - trade and other 2,517 3,233 3,880
Receivables - finance 5,554 4,206 4,065
Deferred income taxes 445 405 534
Prepaid expenses 818 748 676
Inventories 2,555 2,594 2,772
------- -------- --------
Total current assets 12,358 11,734 12,252
Property, plant, and
equipment - net 5,253 5,201 4,913
Long-term receivables
- trade and other 76 95 86
Long-term receivables
- finance 6,092 5,588 5,602
Investments in unconsolidated
affiliated companies 559 553 602
Deferred income taxes 917 954 1,045
Intangible assets 1,508 1,543 1,578
Other assets 1,121 967 677
-------- -------- --------
Total Assets $27,884 $26,635 $26,755
======== ======== ========
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery & Engines $ 75 $ 51 $ 245
-- Financial Products 852 719 960
Accounts payable 2,266 2,003 2,060
Accrued expenses 1,102 1,048 1,037
Accrued wages, salaries, and
employee benefits 1,041 1,115 1,059
Dividends payable 118 115 116
Deferred and current
income taxes payable 85 23 39
Long-term debt due within one year:
-- Machinery & Engines 155 167 37
-- Financial Products 2,801 2,937 2,654
-------- -------- --------
Total current liabilities 8,495 8,178 8,207
Long-term debt due after one year:
-- Machinery & Engines 3,047 3,099 3,008
-- Financial Products 7,806 6,829 7,098
Liability for post-employment
benefits 2,534 2,536 2,666
Deferred income taxes
and other liabilities 544 528 530
-------- -------- --------
Total Liabilities 22,426 21,170 21,509
-------- -------- --------
Stockholders' Equity
Common stock 1,049 1,045 1,046
Profit employed in the business 6,959 6,617 6,389
Accumulated other comprehensive
income 42 78 (17)
Treasury stock (2,592) (2,275) (2,172)
-------- -------- --------
Total Stockholders' Equity 5,458 5,465 5,246
-------- -------- --------
Total Liabilities and
Stockholders' Equity $27,884 $26,635 $26,755
======== ======== ========
Certain amounts for prior periods have been reclassified to conform
with current financial statement presentation.
-12-
<PAGE>
SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995
-----------------------------------------------------
Certain statements contained in our Second Quarter 2000 Financial
Release are forward looking and involve uncertainties that could
significantly impact 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 international businesses, as
well as matters specific to the Company and the markets it serves.
World Economic Factors
----------------------
Our current outlook calls for recovery to continue in Latin America.
North America, Europe, Africa & Middle East should register improved
growth, while strong growth is expected to continue in Asia. If, for
any reason, these projected growth rates falter, sales would likely be
lower than anticipated in the affected region. In general, renewed
currency speculation, significant declines in the stock markets,
political disruptions or much higher interest rates 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 economic uncertainty and a weaker economy. 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 Russian economy has improved, but political and economic
uncertainty remains high and a further deterioration could impact
worldwide stock or currency markets, which in turn could weaken Company
sales.
Commodity Prices
----------------
The outlook for our sales also depends on commodity prices, most of
which are expected to trend slightly higher through 2000. Oil prices
have moved up considerably since the start of last year and are
expected to remain high, averaging $25 - $30 per barrel for the year.
Agricultural prices are likely to be weak while most metals prices
should be up slightly. Based on this forecast of only modest
improvement in most commodity prices, equipment sales into sectors that
are sensitive to commodity prices are likely to remain relatively weak
for 2000.
Weaker than anticipated world economic growth could lead to a further
drop in commodity prices and lower than expected sales. Europe plays a
key role in this forecast and our current outlook is for improvement
leading to annual average GDP growth of about 3.3%. If Europe falters,
then commodity prices could be weaker.
-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 interest rates significantly,
the U.S. economy could slow abruptly leading to an unanticipated
decline in sales. The United States, in particular, is vulnerable to
higher interest rates as it completes the tenth year of expansion -
which is the longest in U.S. history. Our outlook assumes the Federal
Reserve will raise interest rates 125-150 basis points in 2000, which
will contribute to lower industry demand. If the Federal Reserve
raises rates significantly more than anticipated, then industry demand
could be even lower, potentially resulting in lower Company sales.
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 could
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 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. There are also a number of
presidential elections scheduled to take place in 2000 which could
affect economic policy, particularly in Latin America.
Currency Fluctuations
---------------------
Currency fluctuations are also an unknown for global companies. The
Company has facilities in major sales areas throughout the world and
significant costs and revenues in most major currencies. This
diversification greatly reduces the overall impact of currency
movements on results. However, if the U.S. dollar strengthens against
foreign currencies, the conversion of net non-U.S. dollar proceeds to
U.S. dollars would somewhat adversely impact the Company's results.
Further, since the Company's largest manufacturing presence is in the
U.S., a sustained overvalued dollar could have an unfavorable impact on
our global competitiveness.
Dealer Practices
----------------
A majority of the Company's sales are made through its independent
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. In particular, the outlook assumes that inventory to
sales ratios will be somewhat lower at the end of 2000 than at the end
of 1999. If dealers reduce inventory levels more than anticipated,
Company sales will be adversely impacted.
-14-
<PAGE>
Other Factors
-------------
The rate of infrastructure spending, housing starts, commercial
construction and mining 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 did not boost U.S. sales as much as
anticipated due to delays in getting major capital projects for
highways underway. If funding continues to be delayed or concentrated
on bridge repair, sales could be negatively impacted.
Results may be impacted positively or negatively by changes in the
sales mix. Our outlook assumes a certain geographic mix of sales as
well as a product mix of sales.
The Company operates in a highly competitive environment and our
outlook depends on a forecast of the Company's share of industry sales.
A reduction in that share 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 environment also remains very competitive from a pricing
standpoint. Additional price discounting 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: July 20, 2000
-15-
<PAGE>
