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): December 31, 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
January 21, 2000
CATERPILLAR REPORTS 1999 PROFIT PER SHARE OF $2.63
--------------------------------------------------
PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported
full year sales and revenues of $19.70 billion, 6 percent less than
1998. The decrease was primarily due to a 6 percent decline in
physical sales volume, partially offset by a 14 percent increase
in Financial Products revenues.
Profit of $946 million or $2.63 per share was $567 million
less than 1998. The decrease was due primarily to lower sales
volume, an unfavorable change in product sales mix and lower price
realization (primarily geographic mix and the impact of the stronger
U.S. dollar on sales denominated in currencies other than U.S.
dollars). Lower selling, general and administrative (SG&A) and
research and development (R&D) costs partially offset these
unfavorable items.
Sales and revenues for fourth-quarter 1999 were $5.02 billion,
$387 million lower than fourth-quarter 1998. The decrease was
primarily due to a 7 percent decrease in physical sales volume,
partially offset by an 11 percent increase in Financial Products
revenues. Profit of $239 million was $62 million less than
fourth-quarter 1998. The decrease was due primarily to lower sales
volume and price realization (primarily geographic mix and the
impact of the stronger U.S. dollar on sales denominated in currencies
other than U.S. dollars) as well as an unfavorable change in product
sales mix. Lower SG&A costs and higher other income (primarily foreign
exchange) partially offset these unfavorable items. Profit per
share of 67 cents was down 16 cents from fourth-quarter 1998.
"Profit in 1999 was significantly lower than we anticipated
at the beginning of the year due to weaker machine demand in the
second half and on-going price competition. However, our actions
to manage costs in this environment, together with strong performances
by our engine business and Cat Financial contributed to our overall
performance," said Caterpillar Chairman and CEO Glen Barton.
"In 2000, we anticipate sales and revenues and profits will
improve, with higher sales expected in every region of the world
except North America. We'll continue to carefully manage costs and
move forward with our growth initiatives while delivering solid
financial results," Barton said.
- -1-
<PAGE>
HIGHLIGHTS
----------
1999 COMPARED WITH 1998
- -----------------------
* Sales and revenues of $19.70 billion were $1.28 billion or 6
percent lower. Revenues from Financial Products increased 14
percent. Sales inside the United States were 50 percent of
worldwide sales compared with 51 percent a year ago.
* Truck engine sales reached an all-time high as the company
continued to be the industry leader for combined medium and
heavy-duty truck engine sales in North America.
* Machinery and Engines' SG&A and R&D expenses declined $148 million
from 1998.
* Profit of $946 million was down $567 million, reflecting
13 percent lower machine sales and an unfavorable sales mix.
* Profit per share of $2.63 was down 36 percent.
* 4.96 million shares were repurchased during the year 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 December 31, 1999 there were 353.8 million
shares outstanding.
FOURTH-QUARTER 1999 COMPARED WITH FOURTH-QUARTER 1998
- -----------------------------------------------------
* Sales and revenues of $5.02 billion were $387 million or
7 percent lower. Revenues from Financial Products increased
11 percent. Sales inside the United States were 44 percent
of worldwide sales compared with 49 percent a year ago.
* Profit of $239 million was down 21 percent.
* Profit per share of $.67 was down 19 percent.
* 848 thousand shares were repurchased during the quarter.
OUTLOOK
- -------
We expect full-year 2000 sales and revenues to be slightly
higher than 1999 and profit to increase in line with sales.
(Complete outlook begins on page 11.)
- -2-
<PAGE>
DETAILED ANALYSIS
-----------------
1999 COMPARED WITH 1998
- -----------------------
Sales and revenues for 1999 were $19.70 billion, $1.28
billion lower than 1998. The decrease was primarily due to a
6 percent decrease in physical sales volume, partially offset
by a 14 percent increase in Financial Products revenues. Profit
of $946 million was $567 million less than 1998. The decrease
was due primarily to lower sales volume, an unfavorable change
in product sales mix and slightly lower price realization
(primarily geographic mix and the impact of the stronger U.S.
dollar on sales denominated in currencies other than U.S. dollars).
Lower SG&A and R&D costs partially offset these unfavorable items.
Profit per share of $2.63 was down $1.48 from 1998.
MACHINERY AND ENGINES
- ---------------------
Sales Table
-----------
(Millions of North Latin Asia/
dollars) Total America EAME* America Pacific
-------- -------- ------- -------- --------
1999
Machinery $11,705 $6,725 $2,955 $851 $1,174
Engines ** 6,854 3,690 1,899 621 644
-------- -------- ------- -------- --------
$18,559 $10,415 $4,854 $1,472 $1,818
======== ======== ======= ======== ========
1998
Machinery $13,448 $8,352 $2,871 $1,252 $973
Engines ** 6,524 3,097 2,134 666 627
-------- -------- ------- -------- --------
$19,972 $11,449 $5,005 $1,918 $1,600
======== ======== ======= ======== ========
* Europe, Africa & Middle East and Commonwealth of Independent States
** Does not include internal engine transfers of $1,234 million and
$1,268 million in 1999 and 1998, respectively. Internal engine
transfers are valued at prices comparable to those for unrelated
parties.
Machinery sales were $11.71 billion, a decrease of $1.74 billion
or 13 percent from 1998. The lower sales resulted primarily from an
11 percent decrease in physical sales volume. Price realization also
declined primarily due to unfavorable geographic mix and the continued
effect of the stronger U.S. dollar on sales denominated in currencies
other than U.S. dollars.
Sales were lower in North America and Latin America, which more
than offset higher sales in Asia/Pacific and EAME. Sales in North
America were lower reflecting reductions in dealer inventory, especially
in the last half of the year, and declines in industry demand. Sales
were down in both the United States and Canada. In EAME, sales were
higher in Europe due to improved industry demand. This was partially
offset by significantly lower sales in Africa & Middle East, where
industry demand declined due to weak commodity prices. Sales in
Asia/Pacific improved because of higher sales to developing Asia
as dealers began rebuilding
- -3-
<PAGE>
inventories in response to improved retail demand. This improvement
in developing Asia more than offset lower sales in Australia. Latin
America sales fell sharply in 1999 due to recessions in a number of
countries and low commodity prices.
Engine sales were $6.85 billion, an increase of $330 million or
5 percent from 1998. This increase was primarily due to 4 percent
higher physical sales volume resulting from improved end user and
Original Equipment Manufacturer (OEM) demand. Price realization also
improved slightly in 1999.
Sales increased in North America and Asia/Pacific, which more than
offset declines in EAME and Latin America. Sales in the power generation
segment were up in every region of the world, while sales in the
petroleum segment declined in every region. Sales in North America
also benefited from extremely strong sales in the truck segment.
Operating Profit Table
----------------------
(Millions of dollars) 1999 1998
---- ----
Machinery $867 $1,584
Engines 506 504
------ ------
$1,373 $2,088
------ ------
Caterpillar operations are highly integrated; therefore, the company
uses a number of allocations to determine lines of business operating
profit.
Machinery operating profit decreased $717 million, or 45 percent
from 1998. Margin (sales less cost of goods sold) declined primarily
due to the lower sales volume, an unfavorable change in product sales
mix, the impact of lower production volumes on manufacturing efficiencies
and lower price realization. SG&A and R&D expenses were lower reflecting
the impact of ongoing cost reduction actions.
Total pension and other postretirement benefit costs were about the
same in 1999 as in 1998. However, SG&A and R&D expenses were favorably
impacted by approximately $60 million due to favorable returns on plan
assets, and cost of sales was unfavorably impacted by a like amount due
to plan amendments.
Engine operating profit increased $2 million from 1998 due to the
higher sales volume and slightly better price realization, partially
offset by an unfavorable sales mix. Sales into the petroleum segment
declined 35 percent, while sales into the lower margin truck engine
market increased 40 percent. SG&A and R&D expenses were slightly higher.
Interest expense was $5 million higher than a year ago.
Other income/expense reflects a net increase in income of $20
million primarily related to currency exchange.
- -4-
<PAGE>
FINANCIAL PRODUCTS
- ------------------
Revenues for 1999 were a record $1.28 billion, up $160 million or
14 percent compared with 1998. The increase resulted primarily from
continued growth in Cat Financial's portfolio.
Before tax profit decreased $53 million or 17 percent from 1998.
Profit at Caterpillar Insurance Co. Ltd. (Cat Insurance) was lower due
to less favorable reserve adjustments. This was partially offset by
record profits at Cat Financial as a result of portfolio growth.
INCOME TAXES
- ------------
1999 tax expense reflects an effective tax rate of 32 percent.
The 1998 effective tax rate was 31 percent and included a favorable
adjustment to recognize deferred tax assets at certain European
subsidiaries.
UNCONSOLIDATED AFFILIATED COMPANIES
- -----------------------------------
The company's share of unconsolidated affiliated companies'
results declined $24 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
effective June 1999.
SUPPLEMENTAL INFORMATION
- ------------------------
Dealer Machine Sales to End Users and Deliveries to Dealer
Rental Operations
- ----------------------------------------------------------
Sales (including both sales to end users and deliveries to
rental operations) in North America were down in 1999 due to weaker
industry demand in both the United States and Canada. Sales fell
in all eight key market segments. Sales in mining, forestry and
agriculture were depressed by low commodity prices. Sales of paving
related equipment were up considerably, but total machine sales in
the heavy construction segment (primarily highways and pipelines)
were lower because of delays in getting major highway capital projects
underway. Sales also were lower in the other segments including
general construction (residential, commercial and public), quarry &
aggregates, waste and industrial.
Sales in the EAME region remained near 1998 levels as higher
sales in Europe were offset by lower sales to Africa & Middle East
and the Commonwealth of Independent States (CIS). Stronger industry
demand in Europe resulted in higher sales to most European countries,
with significant increases in the United Kingdom, Germany, France and
Italy. In Africa & Middle East, low commodity prices reduced industry
demand and sales in 1999. Sales to users were lower in most countries
with significant sales declines in Turkey, Saudi Arabia and South
Africa. In the CIS, sales were sharply lower due to the continued
weakness in Russia. For the EAME region as a whole, sales were higher
in heavy construction, general construction and quarry & aggregates,
which offset lower sales in mining, agriculture and industrial segments.
Sales in Asia/Pacific were down slightly in 1999 as higher sales
in developing Asia and Japan were offset by declines in Australia. For
the region, sales increased in the forestry and quarry & aggregates
segments, and declined in mining, heavy construction and industrial
segments.
- -5-
<PAGE>
Sales in Latin America were significantly lower in 1999 due to
recessions in a number of countries and low commodity prices. Sales
were down in most major countries with sharp declines in Brazil,
Argentina and Chile. For the region, sales were down in all segments,
particularly heavy construction, general construction and industrial.
Dealer Inventories of New Machines
- ----------------------------------
Worldwide dealer new machine inventories at year end were down
compared to year-end 1998 and at normal levels relative to current
selling rates. Higher inventories in Asia/Pacific were more than
offset by declines in North America, Latin America and EAME.
At year end, North American dealer inventories were normal compared
to current selling rates. EAME dealer inventories were slightly below
normal and Asia/Pacific dealer inventories were moderately below normal
when compared to current selling rates. Dealer inventories in Latin
America ended the year significantly above levels needed to support
current selling rates.
Engine Sales to End Users and OEMs
- ----------------------------------
Sales in North America were up primarily due to very strong demand
for on-highway truck engines and higher share of industry sales, which
strengthened Caterpillar's position as the industry leader for combined
medium and heavy-duty truck engine sales. Sales were also significantly
higher in the power generation segment. These offset significantly
lower sales in the petroleum segment and lower sales in the marine
segment. Sales in the industrial segment were flat with 1998. Sales
were up in Canada as well as the United States.
Sales in EAME were lower as weaker sales in petroleum and industrial
segments more than offset higher sales in power generation and marine
segments.
Sales in Latin America were down primarily due to weaker petroleum
and truck segment sales, which more than offset gains in power generation
sales.
Sales in Asia/Pacific were down as sales gains in marine and power
generation segments were more than offset by declines in the petroleum
segment.
FOURTH-QUARTER 1999 COMPARED WITH FOURTH-QUARTER 1998
- -----------------------------------------------------
Sales and revenues for fourth-quarter 1999 were $5.02 billion,
$387 million lower than fourth-quarter 1998. The decrease was primarily
due to a 7 percent decrease in physical sales volume, partially offset
by an 11 percent increase in Financial Products revenues. Profit of
$239 million was $62 million less than fourth-quarter 1998. The decrease
was due primarily to lower sales volume, lower price realization (primarily
geographic mix and the impact of the stronger U.S. dollar on sales
denominated in currencies other than U.S. dollars) and an unfavorable
change in product sales mix. Lower SG&A costs, as well as higher other
income (primarily foreign exchange) partially offset these unfavorable
items. Profit per share of 67 cents was down 16 cents from fourth-quarter
1998.
- -6-
<PAGE>
MACHINERY AND ENGINES
- ---------------------
Sales Table
-----------
(Millions of North Latin Asia/
dollars) Total America EAME America Pacific
-------- -------- ------- -------- --------
Fourth-Quarter 1999
Machinery $2,537 $1,260 $734 $241 $302
Engines *** 2,181 1,076 676 235 194
-------- -------- ------- -------- --------
$4,718 $2,336 $1,410 $476 $496
======== ======== ======= ======== ========
Fourth-Quarter 1998
Machinery $3,111 $1,942 $674 $267 $228
Engines *** 2,025 858 662 262 243
-------- -------- ------- -------- --------
$5,136 $2,800 $1,336 $529 $471
======== ======== ======= ======== ========
*** Does not include internal engine transfers of $323 million and
$304 million in 1999 and 1998, respectively. Internal engine
transfers are valued at prices comparable to those for unrelated
parties.
Machinery sales were $2.54 billion, a decrease of $574 million
or 18 percent from fourth-quarter 1998. The lower sales resulted
primarily from a 15 percent decrease in physical sales volume reflecting
lower demand in North America and Latin America. Price realization was
lower as price increases taken over the past year were more than offset
by higher discounts.
Sales were down significantly in North America due primarily to
sharp reductions in dealer inventories and lower industry demand. In
EAME, sales increased as higher sales in Europe more than offset
significantly lower sales to Africa & Middle East. Sales in Asia/Pacific
were higher as dealers in developing Asia rebuilt inventories and sales
to end users improved, more than offsetting sales declines in Australia.
In Latin America, sales were lower reflecting weak industry demand and
reductions in dealer inventories.
Engine sales were $2.18 billion, an increase of $156 million above
fourth-quarter 1998, reflecting a 5 percent increase in physical sales
volume resulting from improved end user and OEM demand and slightly
better price realization (primarily geographic mix).
Sales were up in North America due primarily to significantly
higher sales in the power generation and truck segments. Sales in EAME
were higher due primarily to growth in power generation and marine
segments. Latin America sales declined primarily because of sharp
declines in the petroleum segment. Asia/Pacific sales declined
primarily because of declines in petroleum, power generation and
marine segments.
- -7-
<PAGE>
Operating Profit Table
----------------------
(Millions of dollars) Fourth-Quarter Fourth-Quarter
1999 1998
-------------- --------------
Machinery $131 $235
Engines 217 165
---- ----
$348 $400
---- ----
Caterpillar operations are highly integrated; therefore, the company
uses a number of allocations to determine lines of business operating
profit.
Machinery operating profit decreased $104 million, or 44 percent
from fourth-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 expenses were lower reflecting the impact of
ongoing cost reduction actions.
Engine operating profit increased $52 million, or 32 percent
from fourth-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 the same as a year ago.
Other income/expense reflects a net increase in income of $41
million due mostly to a favorable change in foreign exchange gains
and losses.
FINANCIAL PRODUCTS
- ------------------
Revenues for the fourth quarter were $333 million, up $28 million
or 9 percent compared with fourth-quarter 1998. The increase resulted
primarily from continued growth in Cat Financial's portfolio.
Before tax profit decreased $26 million or 33 percent from
fourth-quarter 1998 primarily due to less favorable reserve adjustments
at Caterpillar Insurance.
INCOME TAXES
- ------------
Fourth-quarter 1999 tax expense reflects an effective annual tax
rate of 32 percent. The fourth-quarter 1998 effective tax rate was
24 percent and included a favorable adjustment to recognize deferred
tax assets at certain European subsidiaries.
UNCONSOLIDATED AFFILIATED COMPANIES
- -----------------------------------
The company's share of unconsolidated affiliated companies'
results declined $6 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
effective June 1999.
- -8-
<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 $908 million for 1999, a decrease of $798
million from 1998. This decrease was primarily due to lower profit
after tax and an unfavorable change in working capital, partially
offset by a decrease in capital expenditures. Net free cash flow in
1998 benefited by $1.2 billion from the initiation of a revolving sale
of receivables program with Cat Financial. Excluding this, 1999 net
free cash flow would have been higher than 1998 as reductions in
inventory and receivables more than offset the impact of lower profit.
For the Twelve Months Ended CONSOLIDATED
(Millions of dollars) Dec 31, Dec 31,
1999 1998
-------- -------
Profit after tax $946 $1,513
Depreciation and amortization 945 865
Change in working capital -
excluding cash, debt and
dividends payable (220) (1,442)
Capital expenditures excluding
equipment leased to others (790) (925)
Expenditures for equipment
leased to others, net of disposals (275) (203)
Dividends paid (445) (400)
------ ------
Net Free Cash Flow 161 (592)
------ ------
Other significant cash flow items:
Treasury shares purchased (260) (567)
Net (increase) decrease in
long-term finance receivables (530) (1,177)
Net increase (decrease) in debt 1,350 3,884
Investments and acquisitions -
(net of cash acquired) (302) (1,428)
Prefunding of employee benefit
plans - (200)
Other (231) 148
------ ------
Change in cash and short-term
Investments $188 $68
====== ======
------------------------------------------------
For the Twelve Months Ended MACHINERY & ENGINES*
(Millions of dollars) Dec 31, Dec 31,
1999 1998
-------- -------
Profit after tax $946 $1,513
Depreciation and amortization 745 697
Change in working capital -
excluding cash, debt and
dividends payable 423 806
Capital expenditures excluding
equipment leased to others (770) (918)
Expenditures for equipment
leased to others, net of disposals 9 8
Dividends paid (445) (400)
------ ------
Net Free Cash Flow 908 1,706
------ ------
Other significant cash flow items:
Treasury shares purchased (260) (567)
Net (increase) decrease in
long-term finance receivables - -
Net increase (decrease) in debt 215 628
Investments and acquisitions -
(net of cash acquired) (275) (1,428)
Prefunding of employee benefit
plans - (200)
Other (451) (77)
------ ------
Change in cash and short-term
Investments $137 $62
====== ======
* 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 $106 million,
respectively, included in the "Investments and acquisitions -
(net of cash acquired)" and "Other" lines for the twelve months ended
December 31, 1999; Lines titled "Change in working capital -
excluding cash, debt and dividends payable" and "Capital expenditures
excluding equipment leased to others" exclude $74 million and
$368 million, respectively, included in the "Investments and
acquisitions - (net of cash acquired)" line for the twelve months
ended December 31, 1998.
------------------------------------------------
For the Twelve Months Ended FINANCIAL PRODUCTS
(Millions of dollars) Dec 31, Dec 31,
1999 1998
-------- -------
Profit after tax $159 $193
Depreciation and amortization 200 168
Change in working capital -
excluding cash, debt and
dividends payable (707) (2,253)
Capital expenditures excluding
equipment leased to others (20) (7)
Expenditures for equipment
leased to others, net of disposals (284) (211)
Dividends paid (36) (49)
------ ------
Net Free Cash Flow (688) (2,159)
------ ------
Other significant cash flow items:
Treasury shares purchased - -
Net (increase) decrease in
long-term finance receivables (530) (1,177)
Net increase (decrease) in debt 1,234 3,224
Investments and acquisitions -
(net of cash acquired) (27) -
Prefunding of employee benefit
plans - -
Other 62 118
------ ------
Change in cash and short-term
Investments $ 51 $ 6
====== ======
- -9-
<PAGE>
EMPLOYMENT
- ----------
At the end of 1999, Caterpillar's worldwide employment was 66,896
compared with 65,824 one year ago. Acquisitions added 2,517 during this
period.
OUTLOOK
- -------
Summary
- -------
World economic growth in 2000 is forecast to improve as stronger
growth in Europe, Africa & Middle East and Latin America more than
offsets slightly slower growth in North America. Better world growth
should lead to higher prices for most commodities although agricultural
prices are expected to remain weak and oil prices are expected to retreat
slightly from recent very high levels.
In this environment, company sales and revenues are forecast to
increase in 2000 with higher sales expected in each region of the world
except North America. In the United States, we expect industry demand
for machines to decline, but company sales are expected to be about flat
as machine shipments come back into line with retail demand. Engine
sales in North America also are expected to remain near 1999 levels as
higher commercial engine sales offset lower industry demand for on-highway
truck engines. Elsewhere, stronger economic growth and higher commodity
prices should lead to higher retail demand and higher company sales.
We estimate the growth initiatives discussed in previous public
statements unfavorably impacted 1999 profit by about 20 percent.
Benefits from these initiatives have been delayed due largely to slower
than expected sales growth. These growth initiatives are expected
to unfavorably impact profit in 2000 by approximately 10 percent.
For Machinery and Engines, SG&A and R&D are expected to remain in
the same range as 1999 as a percentage of sales. In addition,
capital expenditures are expected to be up about $100 million in 2000.
In summary, company sales are forecast to improve slightly in 2000
due to better worldwide growth, higher commodity prices and less dealer
inventory reduction. Profit is expected to increase in line with sales.
North America
- -------------
In the United States, Gross Domestic Product (GDP) growth is
forecast to slow from 4 percent in 1999 to 3 to 3.5 percent in 2000
as the Federal Reserve raises interest rates. Higher rates, slower
economic growth and fewer housing starts are expected to result in
lower sales into the general construction sector. The heavy
construction segment, however, should provide a partial offset since
sales into the highway sector are forecast to increase as states
accelerate contracts for highway construction. Sales into the
commodity segments should begin to stabilize with the exception of
agriculture where sales are forecast to decline for another year.
Overall, retail industry demand for machines is expected to decline
because of the drop in general construction, continued weakness in
agriculture and a drop in replacement buying due to the age of the
current expansion. Company machine sales, however, are expected to
be about flat as shipments come back into line with retail demand.
- -10-
<PAGE>
Higher interest rates, slower growth and less replacement buying
also are expected to impact the engine business resulting in lower
industry demand for on-highway truck engines. Demand for other
engines, though, should continue to grow. Overall, company engine
sales are forecast to remain near 1999 levels.
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 of
machines and engines are forecast to remain near last year's level.
EAME
- ----
In Western Europe, GDP growth is expected to accelerate from
2 percent in 1999 to 3 percent in 2000 leading to stronger demand
for both machines and engines. Growth is also expected to improve
in Africa & Middle East, which combined with higher oil prices,
should lead to better demand for both machines and engines. Sales
in Russia and elsewhere in the CIS, however, are likely to remain
depressed. For the region as a whole, better growth and improved
business confidence should lead to higher company sales.
Asia/Pacific
- ------------
In developing Asia, economic recovery is forecast to continue
with GDP growth remaining in the 5 to 6 percent range which should
lead to better sales of both machines and engines. Good economic
growth is also expected to continue in Australia resulting in sales
near or slightly above 1999 levels. In Japan, demand should continue
to improve from very depressed levels. For the region as a whole,
company sales should be higher.
Latin America
- -------------
GDP growth for the region is forecast to improve from flat in
1999 to 3 to 4 percent in 2000 as countries begin to recover from
last year's recessions. While this improvement should result in
higher machine and reciprocating engine sales, consolidation by l
arge oil companies is expected to result in much lower turbine engine
sales. In total, company sales for the region are forecast to be up
as higher machine sales more than offset lower engine sales.
- -11-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
CONSOLIDATED
Dec 31, Dec 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $4,718 $5,136
Revenues of Financial Products 301 270
-------- -------
Total sales and revenues 5,019 5,406
-------- -------
Operating costs:
Cost of goods sold 3,690 3,971
Selling, general, and
administrative expenses 640 709
Research and development expenses 168 160
Interest expense of Financial Products 153 132
-------- -------
Total operating costs 4,651 4,972
-------- -------
Operating Profit 368 434
Interest expense excluding
Financial Products 66 66
Other income (expense) 69 40
-------- -------
Consolidated profit before taxes 371 408
Provision for income taxes 119 100
-------- -------
Profit of consolidated companies 252 308
Equity in profit of
unconsolidated affiliates (13) (7)
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $239 $301
======== =======
EPS of common stock $0.67 $0.84
======== =======
EPS of common stock - assuming dilution $0.67 $0.83
======== =======
Weighted average shares
outstanding (thousands)
Basic 354,236 358,073
Assuming dilution 357,864 362,586
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES*
Dec. 31, Dec. 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $4,718 $5,136
Revenues of Financial Products - -
-------- -------
Total sales and revenues 4,718 5,136
-------- -------
Operating costs:
Cost of goods sold 3,690 3,971
Selling, general, and
administrative expenses 512 605
Research and development expenses 168 160
Interest expense of Financial Products - -
-------- -------
Total operating costs 4,370 4,736
-------- -------
Operating Profit 348 400
Interest expense excluding
Financial Products 66 66
Other income (expense) 35 (6)
-------- -------
Consolidated profit before taxes 317 328
Provision for income taxes 98 72
-------- -------
Profit of consolidated companies 219 256
Equity in profit of
unconsolidated affiliates (14) (7)
Equity in profit of Financial
Products subsidiaries 34 52
-------- -------
Profit $239 $301
======== =======
* 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
Dec. 31, Dec. 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 333 305
-------- -------
Total sales and revenues 333 305
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 137 110
Research and development expenses - -
Interest expense of Financial Products 160 136
-------- -------
Total operating costs 297 246
-------- -------
Operating Profit 36 59
Interest expense excluding
Financial Products - -
Other income (expense) 18 21
-------- -------
Consolidated profit before taxes 54 80
Provision for income taxes 21 28
-------- -------
Profit of consolidated companies 33 52
Equity in profit of
unconsolidated affiliates 1 -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $ 34 $ 52
======== =======
- -12-
<PAGE>
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE YEAR ENDED
(Millions of dollars except per share data)
CONSOLIDATED
Dec. 31, Dec. 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $18,559 $19,972
Revenues of Financial Products 1,143 1,005
-------- -------
Total sales and revenues 19,702 20,977
-------- -------
Operating costs:
Cost of goods sold 14,481 15,031
Selling, general, and
administrative expenses 2,541 2,561
Research and development expenses 626 643
Interest expense of Financial Products 560 489
-------- -------
Total operating costs 18,208 18,724
-------- -------
Operating Profit 1,494 2,253
Interest expense excluding
Financial Products 269 264
Other income (expense) 196 185
-------- -------
Consolidated profit before taxes 1,421 2,174
Provision for income taxes 455 665
-------- -------
Profit of consolidated companies 966 1,509
Equity in profit of
unconsolidated affiliates (20) 4
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $946 $1,513
======== =======
EPS of common stock $2.66 $4.17
======== =======
EPS of common stock - assuming dilution $2.63 $4.11
======== =======
Weighted average shares
outstanding (thousands)
Basic 355,392 363,189
Assuming dilution 359,367 368,130
------------------------------------------------
CATERPILLAR INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE YEAR ENDED
(Millions of dollars except per share data)
MACHINERY & ENGINES*
Dec. 31, Dec. 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $18,559 $19,972
Revenues of Financial Products - -
-------- -------
Total sales and revenues 18,559 19,972
-------- -------
Operating costs:
Cost of goods sold 14,481 15,031
Selling, general, and
administrative expenses 2,079 2,210
Research and development expenses 626 643
Interest expense of Financial Products - -
-------- -------
Total operating costs 17,186 17,884
-------- -------
Operating Profit 1,373 2,088
Interest expense excluding
Financial Products 269 264
Other income (expense) 66 46
-------- -------
Consolidated profit before taxes 1,170 1,870
Provision for income taxes 362 554
-------- -------
Profit of consolidated companies 808 1,316
Equity in profit of
unconsolidated affiliates (21) 4
Equity in profit of Financial
Products subsidiaries 159 193
-------- -------
Profit $946 $1,513
======== =======
* 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 YEAR ENDED
(Millions of dollars except per share data)
FINANCIAL PRODUCTS
Dec. 31, Dec. 31,
1999 1998
-------- -------
Sales and revenues:
Sales of Machinery & Engines $ - $ -
Revenues of Financial Products 1,277 1,117
-------- -------
Total sales and revenues 1,277 1,117
-------- -------
Operating costs:
Cost of goods sold - -
Selling, general, and
administrative expenses 493 377
Research and development expenses - -
Interest expense of Financial Products 585 501
-------- -------
Total operating costs 1,078 878
-------- -------
Operating Profit 199 239
Interest expense excluding
Financial Products - -
Other income (expense) 52 65
-------- -------
Consolidated profit before taxes 251 304
Provision for income taxes 93 111
-------- -------
Profit of consolidated companies 158 193
Equity in profit of
unconsolidated affiliates 1 -
Equity in profit of Financial
Products subsidiaries - -
-------- -------
Profit $159 $193
======== =======
- -13-
<PAGE>
CATERPILLAR INC.
CONDENSED FINANCIAL POSITION
(Millions of dollars)
Consolidated
(Caterpillar Inc. and Subsidiaries)
Dec. 31, Dec. 31,
1999 1998
-------- --------
Assets
Current assets:
Cash and short-term investments $548 $360
Receivables - trade and other 3,233 3,660
Receivables - finance 4,206 3,516
Deferred income taxes 405 474
Prepaid expenses 748 607
Inventories 2,594 2,842
-------- --------
Total current assets 11,734 11,459
Property, plant, and
equipment - net 5,201 4,866
Long-term receivables
- trade and other 95 85
Long-term receivables
- finance 5,588 5,058
Investments in unconsolidated
affiliated companies 553 773
Deferred income taxes 954 955
Intangible assets 1,543 1,241
Other assets 967 691
-------- --------
Total Assets $26,635 $25,128
======== ========
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery & Engines $51 $ 49
-- Financial Products 719 760
Accounts payable 2,003 2,250
Accrued expenses 1,048 928
Accrued wages, salaries, and
employee benefits 1,115 1,217
Dividends payable 115 107
Deferred and current
income taxes payable 23 15
Long-term debt due within one year:
-- Machinery & Engines 167 60
-- Financial Products 2,937 2,179
-------- --------
Total current liabilities 8,178 7,565
Long-term debt due after one year:
-- Machinery & Engines 3,099 2,993
-- Financial Products 6,829 6,411
Liability for post-employment
benefits 2,536 2,590
Deferred income taxes
and other liabilities 528 438
-------- --------
Total Liabilities 21,170 19,997
-------- --------
Stockholders' Equity
Common stock 1,045 1,063
Profit employed in the business 6,617 6,123
Accumulated other comprehensive
income 78 1
Treasury stock (2,275) (2,056)
-------- --------
Total Stockholders' Equity 5,465 5,131
-------- --------
Total Liabilities and
Stockholders' Equity $26,635 $25,128
======== ========
Certain amounts for 1998 have been reclassified to conform with the
1999 financial statement presentation.
- -14-
<PAGE>
SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995
- ------------------------------------------------------
Certain statements contained in our Fourth 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
Latin America. Africa and Middle East also should register improved
growth in 2000. 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.), political disruption 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, most of
which are expected to trend slightly higher through 2000 but remain
considerably below 1999 levels. Oil prices have moved up considerably
since the start of last year and are expected to decline some from
recent highs. Gold prices moved higher last year on announcements of
government plans to refrain from selling gold, and we assume gold
prices average about $300 per ounce in 2000. Agricultural prices
are likely to remain 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.
Stronger than anticipated world growth could lead to noticeable
improvement in commodity prices which could result in greater than
expected sales this year. Conversely, weaker than anticipated world
economic growth could lead to a 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%. 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.
- -15-
<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 United States, in particular,
is vulnerable to higher interest rates as it enters the tenth year
of expansion - which is the largest in U.S. history. Our outlook
assumes the Federal Reserve will raise interest rates 25 to 50
basis points in the first half of the year which will contribute
to lower industry demand. If the Federal Reserve raises rates
more that 50 basis points then industry demand will likely be
even lower 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 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. 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 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. In
particular, the outlook assumes that inventory 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.
- -16-
<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 did not boost
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 and 1999 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: January 21, 2000
- -17-
<PAGE>
