CAT Strategic Metals (CSE:CAT)
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From Oct 2019 to Oct 2024
Questions and Answers
Sales and Revenues / Economy and Industry
Q1: Are you seeing any significant changes in your sales related to
U.S. housing? What are you expecting for 2008 housing starts?
A: Available indicators suggest the housing downturn will continue in
2008, and we project starts will decline to 1.1 million units, down
from 1.35 million in 2007. New problems for the housing industry
that will emerge in 2008 include a high level of mortgage resets, an
increase in home repossessions and the likelihood of a significant
decrease in home prices.
Q2: Can you comment on your machinery sales related to nonresidential
construction, both in the United States and outside the United
States?
A: Machinery sales related to nonresidential construction declined
throughout 2007 in the United States, and economic factors impacting
the industry worsened in the last half. Banks tightened lending
standards, contracts for new construction declined at a faster pace,
vacancy rates started to increase and employment in nonresidential
construction declined relative to a year earlier. Slower economic
growth, a smaller increase in federal highway funding and reduced
corporate cash flows should cause the nonresidential construction
sector to weaken further in 2008.
Nonresidential construction should continue to do well outside the
United States. Low interest rates and good economic growth will
allow businesses to invest more in facilities and allow many
governments to invest more in infrastructure.
Q3: Your 2007 sales and revenues, your view of the world economy in 2008,
and your sales outlook for 2008 continue to be positive despite weak
conditions in the United States. Can you comment on why your sales
are expected to be up with weakness in the United States?
A: The U.S. economy accounts for less than 30 percent of the world
economy and has been underperforming the rest of the world since
early 2006. There are several factors that lead us to believe that
our growth will continue in 2008 despite weakness in the U.S.
economy.
First, European countries continued to turn in good economic growth
in 2007, and we believe interest rates in the eurozone will remain
at 4 percent for the rest of the year. We expect good growth in
European economies that should average 2.3 percent in 2008, down a
little from 2007. Exports to the United States account for a little
more than 2 percent of eurozone output; slower U.S. growth does not
have a large impact on the European economy.
Second, developing economies collectively are experiencing the best
growth in years. Factors contributing to that performance -- low
inflation, low interest rates, highly competitive exports, high
commodity prices and much improved government budgets -- remain in
place. Improved economic conditions have allowed these countries to
correct some past underinvestment in infrastructure, but more work
remains. In addition, growing populations are increasing the demand
for new housing units and infrastructure.
Third, metals mining and energy industries curtailed investments
throughout the 1980s and 1990s. The current worldwide economic
recovery revealed that production capacities were inadequate.
Producers have increased investment but have not yet caught up with
needs. More than 90 percent of both worldwide metals exploration
spending and oil production occurs outside the United States.
Fourth, even in North America, we expect flat to slightly higher
sales despite weakness in the U.S. economy.
-- In 2007, dealers reduced their machine inventories by about
$1.1 billion resulting in company sales to North American
dealers lower than dealer sales to end customers. While we
expect dealer sales to end users to decline again in 2008,
company sales will benefit as a result of substantially lower
forecasted changes to dealer inventories than we experienced in
2007.
-- Sales to U.S. coal mines were depressed in 2007; rising coal
prices and increasing exports are driving expected improvements
in 2008.
-- While the industry for on-highway truck engines is still very
weak as a result of very slow growth in the U.S. economy, we
expect our sales to improve from the depressed levels of 2007.
-- Sales in Canada remain strong, driven by high commodity prices.
Q4: Mining and Oil and Gas have been very strong industries for the past
few years. Can you comment on your expectations going forward from
here?
A: Both metals and energy prices increased in 2007, and we expect that
prices will remain attractive for investing in 2008. Demand is
increasing, particularly in the developing economies, and producers
continue to struggle to meet demand. Worldwide metals inventories
remain low, and spare oil production capacity is tight. Our outlook
assumes these industries will remain positive for both machinery and
engine sales in 2008.
Q5: Are you expecting an improvement in sales related to U.S. coal
mining?
A: In the fourth quarter of 2007, Central Appalachian coal prices
(a benchmark price for Eastern coal) averaged more than $53 per ton,
almost 17 percent higher than a year earlier. Powder River Basin
coal prices (Western coal) averaged $10.40 per ton, or 18 percent
higher. U.S. prices have been at a discount to international prices,
and that has led to a 16 percent increase in exports through
year-to-date October.
As a result, we experienced increased demand for some machines used
in coal mining such as large track-type tractors in fourth-quarter
2007. We expect that recovery will continue in 2008.
Q6: You mention the possibility of a U.S. recession. If this happens,
what would the impact be on Caterpillar?
A: Over time, weakness in the economy has spread from housing to
nonresidential construction and more recently to employment and
manufacturing. A recession is defined as a broad downturn in the
economy, a development that seems to be taking place.
Many of our businesses are very economically sensitive and have been
declining in the United States since early 2006. With or without an
officially defined recession, we expect North American sales to
remain depressed in 2008. A recession or the potential for a
recession would likely lead to actions such as significant interest
rate cuts or fiscal measures, which would speed recovery. If the Fed
continues to cut interest rates in 2008 as we expect and the U.S.
government takes action to stimulate economic growth, 2008 could be
the bottom of this U.S. machinery cycle.
Q7: Can you comment on how dealer inventory changed in the fourth quarter
and the full year 2007?
A: Worldwide dealer machine inventories were fairly steady in the fourth
quarter (overall, dealer inventories increased less than
$50 million), and changes by region were relatively small. No
region changed up or down more than $50 million in the quarter.
For the full year 2007, North American dealers lowered inventories
about $1.1 billion. By comparison, North American dealers increased
inventories about $300 million in 2006. This change had a negative
impact on Caterpillar sales in North America in 2007.
Outside North America, dealers increased inventories about
$500 million in 2007 as compared with an increase of about half that
much in 2006.
Engines
Q8: Can you update your expectations for the 2008 heavy-duty on-highway
truck industry?
A: In 2008, we expect slow economic growth in the United States. This
slower growth will keep freight tonnage below 2006 levels and, given
adequate freight capacity, cause carriers to make only replacement
purchases. For 2008, we project the North American heavy-duty truck
industry will be 185,000 to 195,000 vehicles, up from an estimated
172,000 units in 2007. This small recovery will occur after current
vehicle inventory is reduced to desired levels beginning in the
second half of 2008.
Q9: Can you comment on how your program to increase production of large
3500 series engines is coming?
A: The capacity increase program continues to be on schedule. Capacity
began to increase in the third quarter of 2007 and will continue to
increase in 2008.
Q10: You've said that you are facing an important decision on the future
of your on-highway truck engine business. When will you be ready to
talk about your plans?
A: In light of the clear movement to vertical integration by North
American truck manufacturers, we are continuing to investigate our
full range of strategic options going forward. We should soon be
able to make this direction clear.
Costs / Profit
Q11: Can you comment on why core operating costs were higher than you
expected in 2007?
A: Our 2007 core operating costs increased $1.2 billion over 2006.
Manufacturing inefficiencies related to supply chain disruptions, our
focus on improving order-to-delivery processes and capacity expansion
initiatives have resulted in higher costs than we forecast. Higher
sales were also a factor and were more than $2 billion above our
original outlook. Many facilities are operating at or near capacity,
putting additional pressure on costs. In addition, volume declined
more than we anticipated in on-highway truck engine facilities and
negatively impacted costs.
Our initial assessment of 2007 core operating costs assumed flat
material costs. Instead, increasing commodity prices resulted in
about $300 million of additional material cost for the year.
Q12: Can you break down your change in core operating costs for the fourth
quarter and for the full year in more detail?
A: The following table summarizes the increase in core operating costs
in fourth quarter 2007 versus fourth quarter 2006.
Core Operating Cost Change
(Millions of dollars) Fourth Quarter
2007 vs. 2006
Manufacturing Costs $355
SG&A (43)
R&D (16)
Total $296
The following table summarizes the increase in core operating costs in 2007
versus 2006.
Core Operating Cost Change
(Millions of dollars) Full Year
2007 vs. 2006
Manufacturing Costs $1,225
SG&A (30)
R&D 37
Total $1,232
Cash Flow / Financing
Q13: Can you comment on the strength of your financial position?
A: We are in a very strong financial position with a Machinery and
Engines debt-to-capital ratio of 31.2 percent. Going forward, we
have the capacity to fund growth, maintain our benefit plans at a
well-funded level, continue to increase our dividend and repurchase
stock when it is attractive.
Q14: Can you comment on 2007 operating cash flow?
A: For Machinery and Engines, 2007 operating cash flow was
$5.446 billion. This was $833 million, or 18 percent higher than
full year 2006. The strong cash flow from Machinery and Engines was
primarily used for:
-- Share Repurchase - $2.405 billion-used to repurchase 33.5 million
shares
-- Capital Expenditures - $1.683 billion- primarily to replace and
upgrade existing production assets, support new product programs
and facilitate additional expansion of manufacturing capacity
-- Dividends - $845 million-an increase of $119 million compared to
2006
-- Acquisitions - $244 million -- primarily for Franklin Power
Products, Inc. and International Fuel Systems, Inc.
Q15: How much stock was repurchased in the fourth quarter and for the
year? Also, how many shares were outstanding at year-end?
A: Our continued stock buy back is in support of our Board authorized
$7.5 billion stock repurchase program to be completed by 2011. In
the fourth quarter we repurchased 12.6 million shares at a cost of
$920 million. For the full year we repurchased 33.5 million shares
at a cost of $2.405 billion. Basic shares outstanding at the end of
the year were 624 million.
Q16: Are credit markets having any significant negative impact at Cat
Financial Services? Has Cat Financial's past due ratio increased
much this year? How about credit losses?
A: No. Due to Caterpillar's strong credit rating we were able to
maintain normal operations and fund all our needs. We've been able
to continue to fund growth at Cat Financial without significant
impact from the credit markets. Investor interest has been strong,
validating the quality of our debt issuance program.
At the end of the fourth quarter, past dues were 2.36 percent,
compared with 1.71 percent at the end of the fourth quarter of 2006.
Most of this increase is related to North America and the downturn in
the housing market. Notably, past dues have improved during this
past quarter -- from 2.52 percent at the end of the third quarter to
the current level of 2.36 percent. Write-offs net of recoveries were
$68 million in 2007 compared with $47 million in 2006. This increase
has also been driven by the downturn in the U.S. housing market.
Although past dues and write-offs have increased from 2006, by
historical standards Cat Financial's portfolio continues to perform
well.
Other
Q17: Can you comment on your progress in implementing the Cat Production
System and your expectations for 2008?
A: Extensive benchmarking of world-class production systems completed in
2006 enabled us to define the Caterpillar Production System (CPS)
recipe for more than 300 manufacturing facilities throughout the
world. This recipe was rolled out to all our manufacturing
operations during the first half of 2007; the first year of the CPS
journey. The CPS rollout included extensive training of 6 Sigma
black belts to conduct value stream mapping and rapid improvement
workshops.
In our benchmarking we learned that safety improvements usually
precede quality, velocity and cost benefits. We have been pleased
with steadily improving safety and quality across the company. We
expect safety and quality to continue to improve and expect modest
improvements in velocity and costs in 2008, with more to be realized
in 2009 and 2010.
GLOSSARY OF TERMS
1. Cat Production System (CPS) - The Caterpillar Production System is
the common Order-to-Delivery process being implemented
enterprise-wide to achieve our safety, quality, velocity, earnings and
growth goals for 2010 and beyond.
2. Consolidating Adjustments - Eliminations of transactions between
Machinery and Engines and Financial Products.
3. Core Operating Costs - Machinery and Engines variable manufacturing
cost change [adjusted for volume] and changes in period
manufacturing costs, SG&A expenses and R&D expenses. Excludes the
impact of currency.
4. Currency - With respect to sales and revenues, currency represents
the translation impact on sales resulting from changes in foreign
currency exchange rates versus the U.S. dollar. With respect to
operating profit, currency represents the net translation impact on
sales and operating costs resulting from changes in foreign currency
exchange rates versus the U.S. dollar. Currency includes the
impacts on sales and operating profit for the Machinery and Engines
lines of business only; currency impacts on Financial Products
revenues and operating profit are included in the Financial Products
portions of the respective analyses. With respect to other
income/expense, currency represents the effects of forward and
option contracts entered into by the company to reduce the risk of
fluctuations in exchange rates and the net effect of changes in
foreign currency exchange rates on our foreign currency assets and
liabilities for consolidated results.
5. Debt to Capital Ratio - A key measure of financial strength used by
both management and our credit rating agencies. The metric is a
ratio of Machinery and Engines debt (short-term borrowings plus
long-term debt) to the sum of Machinery and Engines debt and
stockholders' equity.
6. EAME - Geographic region including Europe, Africa, the Middle East
and the Commonwealth of Independent States (CIS).
7. Earning Assets - Assets consisting primarily of total finance
receivables net of unearned income, plus equipment on operating
leases, less accumulated depreciation at Cat Financial.
8. Engines - A principal line of business including the design,
manufacture, marketing and sales of engines for Caterpillar
machinery; electric power generation systems; on-highway vehicles
and locomotives; marine, petroleum, construction, industrial,
agricultural and other applications and related parts. Also
includes remanufacturing of Caterpillar engines and a variety of
Caterpillar machinery and engine components and remanufacturing
services for other companies. Reciprocating engines meet power
needs ranging from 5 to 21,500 horsepower (4 to more than 16 000
kilowatts). Turbines range from 1,600 to 20,500 horsepower (1 200
to 15 000 kilowatts).
9. Financial Products - A principal line of business consisting
primarily of Caterpillar Financial Services Corporation (Cat
Financial), Caterpillar Insurance Holdings, Inc. (Cat Insurance),
Caterpillar Power Ventures Corporation (Cat Power Ventures) and
their respective subsidiaries. Cat Financial provides a wide range
of financing alternatives to customers and dealers for Caterpillar
machinery and engines, Solar gas turbines as well as other equipment
and marine vessels. Cat Financial also extends loans to customers
and dealers. Cat Insurance provides various forms of insurance to
customers and dealers to help support the purchase and lease of our
equipment. Cat Power Ventures is an investor in independent power
projects using Caterpillar power generation equipment and services.
10. Integrated Service Businesses - A service business or a business
containing an important service component. These businesses
include, but are not limited to, aftermarket parts, Cat Financial,
Cat Insurance, Cat Logistics, Cat Reman, Progress Rail, OEM
Solutions and Solar Turbine Customer Services.
11. Latin America - Geographic region including Central and South
American countries and Mexico.
12. Machinery - A principal line of business which includes the design,
manufacture, marketing and sales of construction, mining and
forestry machinery -- track and wheel tractors, track and wheel
loaders, pipelayers, motor graders, wheel tractor-scrapers, track
and wheel excavators, backhoe loaders, log skidders, log loaders,
off-highway trucks, articulated trucks, paving products, skid steer
loaders and related parts. Also includes logistics services for
other companies and the design, manufacture, remanufacture,
maintenance and services of rail-related products.
13. Machinery and Engines (M&E) - Due to the highly integrated nature of
operations, it represents the aggregate total of the Machinery and
Engines lines of business and includes primarily our manufacturing,
marketing and parts distribution operations.
14. Manufacturing Costs - Manufacturing costs represent the
volume-adjusted change for variable costs and the absolute dollar
change for period manufacturing costs. Variable manufacturing costs
are defined as having a direct relationship with the volume of
production. This includes material costs, direct labor and other
costs that vary directly with production volume such as freight,
power to operate machines and supplies that are consumed in the
manufacturing process. Period manufacturing costs support
production but are defined as generally not having a direct
relationship to short-term changes in volume. Examples include
machinery and equipment repair, depreciation on manufacturing
assets, facility support, procurement, factory scheduling,
manufacturing planning and operations management.
15. M&E Other Operating Expenses - Comprised primarily of gains
(losses) on disposal of long-lived assets, long-lived asset
impairment charges and impairment of goodwill.
16. Operating Profit - Sales and revenues minus operating costs.
17. Price Realization - The impact of net price changes excluding
currency and new product introductions. Consolidated price
realization includes the impact of changes in the relative weighting
of sales between geographic regions.
18. Profit - Consolidated profit before taxes less provision for income
taxes plus equity in profit (loss) of unconsolidated affiliated
companies.
19. Sales Volume - With respect to sales and revenues, sales volume
represents the impact of changes in the quantities sold for
machinery and engines as well as the incremental revenue impact of
new product introductions. With respect to operating profit, sales
volume represents the impact of changes in the quantities sold for
machinery and engines combined with product mix -- the net operating
profit impact of changes in the relative weighting of machinery and
engines sales with respect to total sales.
20. 6 Sigma - On a technical level, 6 Sigma represents a measure of
variation that achieves 3.4 defects per million opportunities. At
Caterpillar, 6 Sigma represents a much broader cultural philosophy
to drive continuous improvement throughout the value chain. It is a
fact-based, data-driven methodology that we are using to improve
processes, enhance quality, cut costs, grow our business and deliver
greater value to our customers through Black Belt-led project teams.
At Caterpillar, 6 Sigma goes beyond mere process improvement -- it has
become the way we work as teams to process business information,
solve problems and manage our business successfully.
NON-GAAP FINANCIAL MEASURES
The following definition is provided for "non-GAAP financial measures" in connection with Regulation G issued by the Securities and Exchange Commission. This non-GAAP financial measure has no standardized meaning prescribed by U.S. GAAP and therefore is unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend this item to be considered in isolation or as a substitute for the related GAAP measure.
MACHINERY AND ENGINES
Caterpillar defines Machinery and Engines as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery and Engines information relates to the design, manufacture and marketing of our products. Financial Products information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. The nature of these businesses is different, especially with regard to the financial position and cash flow items. Caterpillar management utilizes this presentation internally to highlight these differences. We also believe this presentation will assist readers in understanding our business. Pages 34-39 reconcile Machinery and Engines with Financial Products on the equity basis to Caterpillar Inc. Consolidated financial information.
Caterpillar's latest financial results and current outlook are also available via:
Telephone:
(800) 228-7717 (Inside the United States and Canada)
(858) 244-2080 (Outside the United States and Canada)
Internet:
http://www.cat.com/investor
http://www.cat.com/irwebcast (live broadcast/replays of quarterly conference call)
Caterpillar Inc.
Condensed Consolidated Statement of Results of Operations
(Unaudited)
(Dollars in millions except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Sales and revenues:
Sales of Machinery and
Engines $11,360 $10,328 $41,962 $38,869
Revenues of Financial
Products 784 675 2,996 2,648
Total sales and revenues 12,144 11,003 44,958 41,517
Operating costs:
Cost of goods sold 8,920 7,971 32,626 29,549
Selling, general and
administrative expenses 1,025 1,016 3,821 3,706
Research and development
expenses 357 368 1,404 1,347
Interest expense of
Financial Products 293 269 1,132 1,023
Other operating expenses 294 233 1,054 971
Total operating costs 10,889 9,857 40,037 36,596
Operating profit 1,255 1,146 4,921 4,921
Interest expense excluding
Financial Products 60 68 288 274
Other income (expense) 88 49 320 214
Consolidated profit
before taxes 1,283 1,127 4,953 4,861
Provision for income taxes 330 252 1,485 1,405
Profit of consolidated
companies 953 875 3,468 3,456
Equity in profit (loss) of
unconsolidated affiliated
companies 22 7 73 81
Profit $975 $882 $3,541 $3,537
Profit per common share $1.55 $1.36 $5.55 $5.37
Profit per common share -
diluted (1) $1.50 $1.32 $5.37 $5.17
Weighted average common
shares outstanding (millions)
- Basic 630.4 647.6 638.2 658.7
- Diluted (1) 650.8 669.5 659.5 683.8
Cash dividends declared
per common share $.72 $.60 $1.38 $1.15
(1) Diluted by assumed exercise of stock-based compensation awards using
the treasury stock method.
Caterpillar Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
(Millions of dollars)
Assets December 31, December 31,
Current assets: 2007 2006
Cash and short-term investments $1,122 $530
Receivables - trade and other 8,249 8,607
Receivables - finance 7,503 6,804
Deferred and refundable income taxes 816 733
Prepaid expenses and other current assets 583 638
Inventories 7,204 6,351
Total current assets 25,477 23,663
Property, plant and equipment - net 9,997 8,851
Long-term receivables - trade and other 685 860
Long-term receivables - finance 13,462 11,531
Investments in unconsolidated affiliated
companies 598 562
Noncurrent deferred and refundable
income taxes 1,553 1,949
Intangible assets 475 387
Goodwill 1,963 1,904
Other assets 1,922 1,742
Total assets $56,132 $51,449
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery and Engines $187 $165
-- Financial Products 5,281 4,990
Accounts payable 4,723 4,085
Accrued expenses 3,178 2,923
Accrued wages, salaries and employee
benefits 1,126 938
Customer advances 1,442 921
Dividends payable 225 194
Other current liabilities 951 1,145
Long-term debt due within one year:
-- Machinery and Engines 180 418
-- Financial Products 4,952 4,043
Total current liabilities 22,245 19,822
Long-term debt due after one year:
-- Machinery and Engines 3,639 3,694
-- Financial Products 14,190 13,986
Liability for postemployment benefits 5,059 5,879
Other liabilities 2,116 1,209
Total liabilities 47,249 44,590
Stockholders' equity
Common stock 2,744 2,465
Treasury stock (9,451) (7,352)
Profit employed in the business 17,398 14,593
Accumulated other comprehensive income (1,808) (2,847)
Total stockholders' equity 8,883 6,859
Total liabilities and stockholders' equity $56,132 $51,449
Certain amounts for prior periods have been reclassified to conform to the
current period financial statement presentation.
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Twelve Months Ended
December 31,
Cash flow from operating activities: 2007 2006
Profit $3,541 $3,537
Adjustments for non-cash items:
Depreciation and amortization 1,797 1,602
Other 199 197
Changes in assets and liabilities:
Receivables - trade and other 899 (148)
Inventories (745) (827)
Accounts payable and accrued expenses 618 670
Customer advances 576 511
Other assets - net 66 (262)
Other liabilities - net 984 519
Net cash provided by (used for) operating
activities 7,935 5,799
Cash flow from investing activities:
Capital expenditures - excluding
equipment leased to others (1,700) (1,593)
Expenditures for equipment leased to
others (1,340) (1,082)
Proceeds from disposals of property,
plant and equipment 408 572
Additions to finance receivables (13,946) (10,522)
Collections of finance receivables 10,985 8,094
Proceeds from the sale of finance
receivables 866 1,067
Investments and acquisitions (net of cash
acquired) (229) (513)
Proceeds from release of security deposit 290 -
Proceeds from sale of available-for-sale
securities 282 539
Investments in available-for-sale
securities (485) (681)
Other - net 461 323
Net cash provided by (used for) investing
activities (4,408) (3,796)
Cash flow from financing activities:
Dividends paid (845) (726)
Common stock issued, including treasury
shares reissued 328 414
Payment for stock repurchase derivative
contracts (56) -
Treasury shares purchased (2,405) (3,208)
Excess tax benefit from stock-based
compensation 155 169
Proceeds from debt issued (original
maturities greater than three months) 11,039 11,269
Payments on debt (original maturities
greater than three months) (10,888) (10,375)
Short-term borrowings (original
maturities three months or less)-net (297) (136)
Net cash provided by (used for) financing
activities (2,969) (2,593)
Effect of exchange rate changes on cash 34 12
Increase (decrease) in cash and short-term
investments 592 (578)
Cash and short-term investments at beginning
of period 530 1,108
Cash and short-term investments at end of
period $1,122 $530
Certain amounts for prior periods have been reclassified to conform to
the current period financial statement presentation.
All short-term investments, which consist primarily of highly liquid
investments with original maturities of three months or less, are
considered to be cash equivalents.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Three Months Ended December 31, 2007
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $11,360 $11,360 $- $-
Revenues of Financial
Products 784 - 888 (104)(2)
Total sales and revenues 12,144 11,360 888 (104)
Operating costs:
Cost of goods sold 8,920 8,920 - -
Selling, general and
administrative expenses 1,025 887 138 -
Research and development
expenses 357 357 - -
Interest expense of
Financial Products 293 - 295 (2)(4)
Other operating expenses 294 6 294 (6)(3)
Total operating costs 10,889 10,170 727 (8)
Operating profit 1,255 1,190 161 (96)
Interest expense excluding
Financial Products 60 61 - (1)(4)
Other income (expense) 88 (27) 20 95(5)
Consolidated profit before
taxes 1,283 1,102 181 -
Provision for income taxes 330 254 76 -
Profit of consolidated
companies 953 848 105 -
Equity in profit (loss)
of unconsolidated
affiliated companies 22 21 1 -
Equity in profit of
Financial Products'
subsidiaries - 106 - (106)(6)
Profit $975 $975 $106 $(106)
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' revenues earned from Machinery and
Engines.
(3) Elimination of net expenses recorded by Machinery and Engines paid to
Financial Products.
(4) Elimination of interest expense recorded between Financial Products
and Machinery and Engines.
(5) Elimination of discount recorded by Machinery and Engines on
receivables sold to Financial Products and of interest earned between
Machinery and Engines and Financial Products.
(6) Elimination of Financial Products' profit due to equity method of
accounting.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Three Months Ended December 31, 2006
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $10,328 $10,328 $- $-
Revenues of Financial
Products 675 - 799 (124)(2)
Total sales and revenues 11,003 10,328 799 (124)
Operating costs:
Cost of goods sold 7,971 7,971 - -
Selling, general and
administrative expenses 1,016 916 120 (20)(3)
Research and development
expenses 368 368 - -
Interest expense of
Financial Products 269 - 272 (3)(4)
Other operating expenses 233 (8) 235 6(3)
Total operating costs 9,857 9,247 627 (17)
Operating profit 1,146 1,081 172 (107)
Interest expense excluding
Financial Products 68 71 - (3)(4)
Other income (expense) 49 (62) 7 104(5)
Consolidated profit before
taxes 1,127 948 179 -
Provision for income
taxes 252 196 56 -
Profit of consolidated
companies 875 752 123 -
Equity in profit (loss)
of unconsolidated
affiliated companies 7 7 - -
Equity in profit of
Financial Products'
subsidiaries - 123 - (123)(6)
Profit $882 $882 $123 $(123)
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' revenues earned from Machinery and
Engines.
(3) Elimination of net expenses recorded by Machinery and Engines paid to
Financial Products.
(4) Elimination of interest expense recorded between Financial Products
and Machinery and Engines.
(5) Elimination of discount recorded by Machinery and Engines on
receivables sold to Financial Products and of interest earned between
Machinery and Engines and Financial Products.
(6) Elimination of Financial Products' profit due to equity method of
accounting.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Twelve Months Ended December 31, 2007
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $41,962 $41,962 $- $-
Revenues of Financial
Products 2,996 - 3,396 (400)(2)
Total sales and revenues 44,958 41,962 3,396 (400)
Operating costs:
Cost of goods sold 32,626 32,626 - -
Selling, general and
administrative expenses 3,821 3,356 480 (15)(3)
Research and development
expenses 1,404 1,404 - -
Interest expense of
Financial Products 1,132 - 1,137 (5)(4)
Other operating expenses 1,054 (8) 1,089 (27)(3)
Total operating costs 40,037 37,378 2,706 (47)
Operating profit 4,921 4,584 690 (353)
Interest expense excluding
Financial Products 288 294 - (6)(4)
Other income (expense) 320 (104) 77 347(5)
Consolidated profit before
taxes 4,953 4,186 767 -
Provision for income
taxes 1,485 1,220 265 -
Profit of consolidated
companies 3,468 2,966 502 -
Equity in profit (loss)
of unconsolidated
affiliated companies 73 69 4 -
Equity in profit of
Financial Products'
subsidiaries - 506 - (506)(6)
Profit $3,541 $3,541 $506 $(506)
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' revenues earned from Machinery and
Engines.
(3) Elimination of net expenses recorded by Machinery and Engines paid to
Financial Products.
(4) Elimination of interest expense recorded between Financial Products
and Machinery and Engines.
(5) Elimination of discount recorded by Machinery and Engines on
receivables sold to Financial Products and of interest earned between
Machinery and Engines and Financial Products.
(6) Elimination of Financial Products' profit due to equity method of
accounting.
Caterpillar Inc.
Supplemental Data for Results of Operations
For The Twelve Months Ended December 31, 2006
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $38,869 $38,869 $- $-
Revenues of Financial
Products 2,648 - 3,114 (466)(2)
Total sales and revenues 41,517 38,869 3,114 (466)
Operating costs:
Cost of goods sold 29,549 29,549 - -
Selling, general and
administrative expenses 3,706 3,294 446 (34)(3)
Research and development
expenses 1,347 1,347 - -
Interest expense of
Financial
Products 1,023 - 1,033 (10)(4)
Other operating expenses 971 22 965 (16)(3)
Total operating costs 36,596 34,212 2,444 (60)
Operating profit 4,921 4,657 670 (406)
Interest expense excluding
Financial Products 274 285 - (11)(4)
Other income (expense) 214 (256) 75 395(5)
Consolidated profit before
taxes 4,861 4,116 745 -
Provision for income
taxes 1,405 1,158 247 -
Profit of consolidated
companies 3,456 2,958 498 -
Equity in profit (loss)
of unconsolidated
affiliated companies 81 79 2 -
Equity in profit of
Financial Products'
subsidiaries - 500 - (500)(6)
Profit $3,537 $3,537 $500 $(500)
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' revenues earned from Machinery and
Engines.
(3) Elimination of net expenses recorded by Machinery and Engines paid to
Financial Products.
(4) Elimination of interest expense recorded between Financial Products
and Machinery and Engines.
(5) Elimination of discount recorded by Machinery and Engines on
receivables sold to Financial Products and of interest earned between
Machinery and Engines and Financial Products.
(6) Elimination of Financial Products' profit due to equity method of
accounting.
Caterpillar Inc.
Supplemental Data for Cash Flow
For The Twelve Months Ended December 31, 2007
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Cash flow from operating
activities:
Profit $3,541 $3,541 $506 $(506)(2)
Adjustments for non-cash
items:
Depreciation and
amortization 1,797 1,093 704 -
Undistributed profit of
Financial Products - (256) - 256(3)
Other 199 114 (267) 352(4)
Changes in assets and
liabilities:
Receivables - trade and
other 899 (317) (105) 1,321(4,5)
Inventories (745) (745) - -
Accounts payable and
accrued expenses 618 408 216 (6)(4)
Customer advances 576 576 - -
Other assets - net 66 63 (9) 12(4)
Other liabilities - net 984 969 40 (25)(4)
Net cash provided by (used
for) operating activities 7,935 5,446 1,085 1,404
Cash flow from investing
activities:
Capital expenditures -
excluding equipment leased
to others (1,700) (1,683) (17) -
Expenditures for equipment
leased to others (1,340) - (1,349) 9(4)
Proceeds from disposals of
property, plant and
equipment 408 14 398 (4)(4)
Additions to finance
receivables (13,946) - (36,251) 22,305(5)
Collections of finance
receivables 10,985 - 33,456 (22,471)(5)
Proceeds from sale of
finance receivables 866 - 2,378 (1,512)(5)
Net intercompany borrowings - (177) 3 174(6)
Investments and
acquisitions (net of
cash acquired) (229) (244) - 15(7)
Proceeds from release of
security deposit 290 290 - -
Proceeds from sale of
available-for-
sale securities 282 23 259 -
Investments in
available-for-sale
securities (485) (29) (456) -
Other - net 461 122 341 (2)(7)
Net cash provided by (used
for) investing activities (4,408) (1,684) (1,238) (1,486)
Cash flow from financing
activities:
Dividends paid (845) (845) (254) 254(8)
Common stock issued,
including treasury
shares reissued 328 328 (2) 2(7)
Payment for stock
repurchase derivative
contracts (56) (56) - -
Treasury shares purchased (2,405) (2,405) - -
Excess tax benefit from
stock-based compensation 155 155 - -
Net intercompany borrowings - (3) 177 (174)(6)
Proceeds from debt issued
(original maturities
greater than three
months) 11,039 224 10,815 -
Payments on debt (original
maturities greater than
three months) (10,888) (598) (10,290) -
Short-term borrowings
(original maturities
three months or less)-net (297) (41) (256) -
Net cash provided by (used
for) financing activities (2,969) (3,241) 190 82
Effect of exchange rate
changes on cash 34 22 12 -
Increase (decrease) in cash
and short-term investments 592 543 49 -
Cash and short-term
investments at beginning
of period 530 319 211 -
Cash and short-term
investments at end
of period $1,122 $862 $260 $-
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' profit after tax due to equity
method of accounting.
(3) Non-cash adjustment for the undistributed earnings from Financial
Products.
(4) Elimination of non-cash adjustments and changes in assets and
liabilities related to consolidated reporting.
(5) Reclassification of Cat Financial's cash flow activity from investing
to operating for receivables that arose from the sale of inventory.
(6) Net proceeds and payments to/from Machinery and Engines and Financial
Products.
(7) Change in investment and common stock related to Financial Products.
(8) Elimination of dividends from Financial Products to Machinery and
Engines.
Caterpillar Inc.
Supplemental Data for Cash Flow
For The Twelve Months Ended December 31, 2006
(Unaudited)
(Millions of dollars) Supplemental Consolidating Data
Machinery
and Financial Consolidating
Consolidated Engines(1) Products Adjustments
Cash flow from operating
activities:
Profit $3,537 $3,537 $500 $(500)(2)
Adjustments for non-cash
items:
Depreciation and
amortization 1,602 943 659 -
Undistributed profit of
Financial Products - (128) - 128 (3)
Other 197 140 (330) 387 (4)
Changes in assets and
liabilities:
Receivables - trade and
other (148) (351) 6 197 (4,5)
Inventories (827) (827) - -
Accounts payable and
accrued expenses 670 507 185 (22)(4)
Customer advances 511 511 - -
Other assets - net (262) (205) (44) (13)(4)
Other liabilities - net 519 486 30 3 (4)
Net cash provided by (used for)
operating activities 5,799 4,613 1,006 180
Cash flow from investing
activities:
Capital expenditures -
excluding equipment leased
to others (1,593) (1,580) (41) 28 (4)
Expenditures for equipment
leased to others (1,082) - (1,111) 29 (4)
Proceeds from disposals of
property, plant and
equipment 572 29 581 (38)(4)
Additions to finance
receivables (10,522) - (35,561) 25,039 (5)
Collections of finance
receivables 8,094 - 32,670 (24,576)(5)
Proceeds from the sale of
finance receivables 1,067 - 2,110 (1,043)(5)
Net intercompany borrowings - 123 (2) (121)(6)
Investments and acquisitions
(net of cash acquired) (513) (513) - -
Proceeds from sale of
available-for-sale
securities 539 26 513 -
Investments in
available-for-sale
securities (681) (35) (646) -
Other - net 323 33 294 (4)(7)
Net cash provided by (used for)
investing activities (3,796) (1,917) (1,193) (686)
Cash flow from financing
activities:
Dividends paid (726) (726) (372) 372(8)
Common stock issued, including
treasury shares reissued 414 414 (13) 13(7)
Treasury shares purchased (3,208) (3,208) - -
Excess tax benefit from
stock-based compensation 169 169 - -
Net intercompany borrowings - 2 (123) 121(6)
Proceeds from debt issued
(original maturities greater
than three months) 11,269 1,445 9,824 -
Payments on debt (original
maturities greater than
three months) (10,375) (839) (9,536) -
Short-term borrowings
(original maturities three
months or less)-net (136) (593) 457 -
Net cash provided by (used for)
financing activities (2,593) (3,336) 237 506
Effect of exchange rate
changes on cash 12 8 4 -
Increase (decrease) in cash
and short-term investments (578) (632) 54 -
Cash and short-term investments
at beginning of period 1,108 951 157 -
Cash and short-term investments
at end of period $530 $319 $211 $-
(1) Represents Caterpillar Inc. and its subsidiaries with Financial
Products accounted for on the equity basis.
(2) Elimination of Financial Products' profit after tax due to equity
method of accounting.
(3) Non-cash adjustments for the undistributed earnings from Financial
Products.
(4) Elimination of non-cash adjustments and changes in assets and
liabilities related to consolidated reporting.
(5) Reclassification of Cat Financial's cash flow activity from investing
to operating for receivables that arose from the sale of inventory.
(6) Net proceeds and payments to/from Machinery and Engines and Financial
Products.
(7) Change in investment and common stock related to Financial Products.
(8) Elimination of dividends from Financial Products to Machinery and
Engines.
DATASOURCE: Caterpillar Inc.