CAT Strategic Metals (CSE:CAT)
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From Oct 2019 to Oct 2024
Questions and Answers
Economy / Sales
Q1: What are your expectations for U.S. housing?
A: We project housing will weaken further in the first half and then
begin to improve later in the year. We expect housing starts will
be approximately 900 thousand units, about the same as 2008. The
more than 20-percent decline in home prices since early 2006 and
recent declines in mortgage interest rates have already improved
housing affordability to near the record highs reached in the early
1970s. We expect mortgage interest rates will decline below 4.5
percent, further improving affordability.
Q2: What's your forecast for key commodity prices in 2009?
A: We project West Texas Intermediate crude oil will average a little
more than $40 per barrel, down from $100 in 2008. Copper prices
should average about $1.10 per pound, compared to $3.15 in 2008.
Both price forecasts are below prices that we believe would be
attractive to launch new projects. Our forecast for the Central
Appalachian coal price is more than $40 per ton in 2009, down from
$89 in 2008. That price should be sufficiently high enough to
encourage about a 0.5 percent increase in coal production in the
United States. Coal prices in the rest of the world should also be
high enough to cause producers to increase output.
Q3: What is the forecast for economic growth in China, and how will the
China stimulus package impact Caterpillar?
A: We estimate the Chinese economy will grow about 7.5 percent this
year, down from 9 percent last year. The government recently
announced a $586 billion stimulus package to be spread over two
years. Total construction spending last year was about $900
billion, so the package should help offset the slowing in
construction that is underway. We do not anticipate that this
package, on its own, will stop the recent decline in the Chinese
machine industry.
Q4: How do you expect the U.S. stimulus package to impact Caterpillar?
A: Our initial assessment is that the package might have up to $150
billion in infrastructure-related spending, spread over a two-year
period. If enacted quickly, perhaps $50 billion could be spent in
2009. That expenditure would represent about 5 percent of total
U.S. construction spending in 2008 and would likely require some
increase in equipment purchases to handle the added work in addition
to increased utilization of the existing machine population. Other
measures in the package, such as tax cuts and actions to improve the
housing industry, could indirectly benefit construction.
Q5: How have dealer inventories changed recently, are they too high, and
what do you expect to happen in 2009?
A: The worse-than-expected weakening in dealer deliveries has
contributed to higher dealer inventories, in both dollars and months
of supply. We allowed dealers to cancel orders so that they could
more quickly adjust inventories to more appropriate amounts. We
anticipate dealers will reduce inventories this year around $1.5
billion, with much of it occurring during the first half.
Q6: Can you discuss your order backlog in total for Caterpillar? How
has it changed since year-end 2007? Has it deteriorated over the
past quarter?
A: Dealers reported significant slowdowns or declines in deliveries to
end users in fourth quarter 2008 and reduced their orders. We also
allowed dealers to cancel orders. As a result, our order backlog
declined significantly in the fourth quarter and ended the year at
$14.7 billion, well below the year-end 2007 level of $17.8 billion.
Q7: Can you address the backlog for mining products?
A: We have a mining order backlog today; however, as customers continue
to "delay" existing and greenfield expansions these orders are
getting pushed out accordingly. We are in constant dialogue with
our customers and dealers and are working through these issues.
-- In most cases, mining companies are delaying, not cancelling,
expansion plans.
-- Both the speed and magnitude of the drop in commodity prices,
especially base metals, has driven short-term cancellations and
delays.
-- Mining companies, like other industries, have increased costs
to obtain capital.
-- Some customers are highly leveraged, forcing short-term cost
shedding and capital preservation.
-- We expect that global stimulus packages will help improve
demand and commodity prices.
Engines
Q8: Can you address the backlog and sales prospects for 2009 for large
engines and turbines?
A: The order backlog for turbines has remained strong due to equipment
order lead times. While declines have varied by product family and
model, we have seen a reduction in reciprocating engine backlogs as
order rates have abruptly declined in all industries and
cancellations have increased. As a result, we have made necessary
production cuts to address these declines and have been able to
improve availability in all products. We anticipate weaker sales in
2009 and will continue to make the appropriate production scheduling
adjustments as needed.
Q9: What impact will your early exit from on-highway truck engines have?
A: We began to manage costs down and redeploy resources away from the
truck engine business in late 2008. This will continue through the
first half of 2009 as we fulfill the last customer requirements. In
December 2008, we announced a layoff affecting up to 814 of our
production workforce at the Mossville facility. This is a result of
exiting the on-highway engine business, coupled with, lower demand
for off-highway engines.
Costs / Employment
Q10: You are going ahead with the new factories in Texas and Arkansas.
Why are you continuing with new U.S. capacity expansion?
A: The new facility in Texas represents a strategic long-term priority
for Caterpillar. The new facility will deliver a state-of-the-art
engine assembly process focused on producing the high-quality
products for which Caterpillar is known. The new assembly process
will be sized appropriately for our continuing off-highway engine
business and result in a more cost-effective assembly process. The
Texas location is also strategically located to the source of major
engine components and closer to a major seaport for export engines.
While the current market conditions are challenging, Caterpillar
must invest now to prepare for the introduction of Tier 4 off-
highway engines required in the more regulated markets after 2011.
The new facility in North Little Rock, Arkansas, represents an
important, long-term strategic step for Caterpillar. This facility
will be the North American home for Caterpillar's line of motor
graders. Manufacturing operations will be state-of-the-art, solely
dedicated to motor grader production, which will result in more
cost-effective production of motor graders. While the current
economic conditions are challenging, the new facility will support
the introduction of our Tier 4 compliant motor grader in 2010. The
move of motor grader production from our Decatur, Illinois, facility
also frees up space in Decatur to support the long-term growth of
our large off-highway truck business. We believe the benefits from
moving production of our motor grader line will improve
Caterpillar's long-term competitiveness for both motor graders and
large off-highway trucks.
Q11: What do you expect relative to R&D in 2009, and what about spending
related to Tier 4?
A: We expect R&D expenses to decline somewhat in 2009 from 2008 levels.
Sharper cuts are not likely as we continue to do the product
development required to meet Tier 4 emissions requirements. We are
prioritizing our R&D spending to focus on Tier 4 commitments and to
fund key technologies that will continue to allow Caterpillar to
provide industry leading customer value.
Q12: Summarize the impact of the consolidation of Cat Japan on
fourth quarter sales and profit.
A: The consolidation of Cat Japan added $261 million to fourth
quarter sales but was about neutral to profit.
Cash Flow / Financial Position
Q13: Outside of Cat Financial, what has been Caterpillar's recent
experience with debt markets? Do you have access to capital?
A: The problems in the credit markets have had limited impact on
Caterpillar Inc. due to our strong credit rating. We have been able
to maintain normal operations and fund our needs. Caterpillar Inc.
successfully issued $1.5 billion of long-term debt in early
December. The offering generated strong investor demand. There
also is strong demand for our commercial paper and we have benefited
from very low interest rates on commercial paper.
Q14: There seems to be more cash than usual on your balance sheet, can
you explain why?
A: The enterprise had $2.7 billion of cash at year-end 2008, an
increase of $1.6 billion from year-end 2007. We increased our
short-term borrowings to provide a cushion of extra cash in the
event that short-term credit markets become disrupted.
Q15: Can you summarize what happened to your pension and other
postretirement benefit plans in 2008 and how that impacts 2009?
A: Accounting standards require that we recognize the over-funded or
under-funded status of our pension and other postretirement benefit
plan liabilities on our balance sheet at the end of each year. Asset
losses in our pension and postretirement benefit plans were in
excess of 30 percent in 2008. The funded status of our pension plans
declined from 93 percent at the end of 2007 to 61 percent at the end
of 2008. The funded status of our postretirement benefit plans,
which are not required to be funded, declined from 29 percent to 21
percent. This increase in unfunded liabilities resulted in a $3.4
billion charge to Other Comprehensive Income (OCI), which is a
component of equity, in the fourth quarter of 2008. This non-cash
charge to equity negatively affected our debt-to-capital ratio by
approximately 11 percentage points. We expect to contribute
approximately $1 billion to our pension plans in 2009 compared with
$422 million in 2008. In addition, we expect our pension and other
postretirement benefit plan expenses to increase approximately $300
million in 2009, excluding any impact of redundancy charges.
Q16: What is your Machinery & Engines debt-to-capital ratio and how has
it changed over the course of the year?
A: The debt-to-capital ratio for Machinery and Engines was 57.9 percent
at the end of 2008, above our target range of 35 to 45 percent. The
$3.4 billion equity reduction from pension and other postretirement
benefits increased the debt-to-capital ratio 11 percentage points.
Our extra cash cushion increased short-term debt and added 3
percentage points to the debt-to-capital ratio. Additionally, in
2008 the consolidation of Cat Japan increased the debt-to-capital
ratio about 7 percent.
Financial Products
Q17: Why did Financial Products profit drop in fourth quarter compared to
fourth-quarter 2007 when revenues were higher? Can you discuss any
unusual items that affected your fourth-quarter results?
A: Financial Products pre-tax loss was $24 million for the fourth
quarter of 2008, compared with a pre-tax profit of $181 million in
the fourth quarter of 2007. At Cat Financial, profitability related
directly to the portfolio was down $77 million and consisted of a
decreased net yield on average earning assets and a higher provision
for credit losses, partially offset by higher average earning
assets. In addition, interest rate volatility in the fourth quarter
resulted in mark-to-market adjustments on interest rate derivative
contracts, which lowered profit $47 million compared to 2007. Cat
Financial also reported a $20 million currency exchange loss in the
fourth quarter of 2008, compared to a $4 million gain in 2007, and
due to worse than expected loss experience, recorded a $15 million
write-down in retained interests related to the securitized asset
portfolio. In addition, at Cat Insurance there was a $33 million
charge related to equity investments within the Cat Insurance
investment portfolio.
Q18: Give us an update on the quality of Cat Financial's asset portfolio.
How are past dues, credit losses and allowances?
A: Key portfolio metrics remain somewhat stressed due to global
economic conditions. At the end of 2008, past dues were 3.88
percent compared with 2.36 percent at the end of 2007. The U.S. has
not yet shown signs of recovery, and we see continued slowing in
other geographical locations. We expect there will be continued
upward pressure on past dues throughout 2009.
Bad debt write-offs, net of recoveries, were $61 million for the
fourth quarter of 2008 compared with $27 million for the fourth
quarter of 2007; $31 million of the increase was driven by economic
conditions primarily in North America and $3 million was due to the
12-percent growth in Cat Financial's average retail finance
receivable portfolio. For the full year of 2008, bad debt write-
offs, net of recoveries, were $121 million compared with $68 million
for the full year of 2007.
At the end of 2008, Cat Financial's allowance for credit losses
totaled $395 million, an increase of $42 million from the end of
2007. Of the increase, $28 million is attributable to growth in the
retail finance receivable portfolio while $14 million resulted from
the increase in the allowance rate from 1.39 percent to 1.44 percent
of net finance receivables.
Q19: How do these asset quality metrics compare with prior recessions?
A: At the end of 2008, past dues were 3.88 percent. As an historical
comparison, total Cat Financial past dues during the last U.S.
recession were 4.78 percent at their peak at the end of the first
quarter of 2002. Total write-offs, net of recoveries for the full
year of 2002 were 0.69 percent of our average retail portfolio,
significantly higher than the full-year 2008 rate of 0.48 percent.
Cat Financial's allowance for credit losses, totaling $395 million
at the end of 2008, is appropriate for the current and expected
global economic environment.
Q20: What are you expecting relative to past dues and losses in 2009?
A: Consistent with our 2009 economic outlook and expected further
weakening of the global economy, we expect past dues and write-offs
will likely be higher in 2009 compared with 2008. Cat Financial
increased the allowance for credit losses to $395 million, or 1.44
percent of net finance receivables at the end of 2008, which we feel
is appropriate for the current and expected global economic
environment. Should economic conditions worsen beyond expectations,
additional increases to Cat Financial's allowance for credit losses
may be needed.
Q21: Describe your access to debt markets over the past quarter.
A: Generally, term debt markets were fragile during the fourth quarter.
In December 2008, Cat Financial issued $463 million in Cat Power
Notes in the U.S. These retail notes are unsecured demand notes
sold through brokers and dealers. The retail notes' terms range from
2 to 7 years. Credit spreads were elevated compared with normal
levels during the fourth quarter.
Cat Financial did not issue medium-term debt in the fourth quarter.
Since year-end, the U.S. and certain international debt markets,
notably Europe, have improved with a corresponding improvement in
credit spreads.
Q22: How much commercial paper do you have, and do you have commercial
paper with maturities beyond a few days?
A: Cat Financial has maintained access to commercial paper (CP) markets
throughout the credit market disruption to fund ongoing operations.
At year-end 2008, Cat Financial had $5.244 billion in global CP
outstanding. Of this amount, 90 percent was in maturities beyond
one week. Over the fourth-quarter 2008, CP issuance ranged from
overnight to three months. Access has been good in the U.S. and
satisfactory in Europe and Canada. Pricing levels have been
attractive in the U.S. and satisfactory in both Europe and Canada.
For example, since year-end 2008 Cat Financial has issued 30-day CP
in the U.S. at 0.2 percent APR, Europe at 2.0 percent APR and Canada
at 1.4 percent APR.
The broader prevailing market conditions in Australia and Japan have
been more challenging, with higher pricing and more limited access.
Overall, global CP investor response has been positive.
Q23: Are you backing up your commercial paper with bank lines? How much?
A: Caterpillar Inc. and Cat Financial share a revolving credit facility
that, in September 2008, was increased by $0.3 billion to $6.85
billion. The majority of this facility, totaling $5.85 billion, is
allocated to Cat Financial and is used to backup 100 percent of our
CP issuance globally.
Q24: What happens if Cat Financial's access to debt is severely limited
in 2009?
A: If global conditions deteriorate so significantly that access to the
debt markets becomes unavailable to Cat Financial, it would rely on:
a) cash flow from its existing retail portfolio approximating $1
billion per month to assist in retiring debt balances; b)
utilization of Cat Financial's cash balances, which totaled $1.08
billion at year-end 2008; and/or c) access to the $6.85 billion
revolving credit facility shared jointly with Caterpillar Inc. and
other credit line facilities held by the company.
Q25: From a competitive standpoint, are you competitive with other
lenders in financing Cat product, or are margins getting squeezed?
A: Cat Financial's overall competitiveness varies depending on the
specific competitor, type of customer, geographic location,
transaction amount, type of financial product (e.g. operating lease
vs. installment sales contract), tenor of transaction and the use of
below market interest rate programs. Cat Financial is less
competitive on certain transactions compared to companies with
access to government-supported funding programs. Cat Financial
remains competitive compared with those companies without access to
government-supported programs and for specific transaction types.
Cat Financial's net yield on average earning assets was $57 million
lower in the fourth quarter of 2008 compared with 2007 for a number
of reasons, including the impacts of intense competition,
maintaining higher cash balances in the fourth quarter and higher
levels of past due accounts.
Q26: What happened with Cat Insurance? Can you describe the fourth-
quarter write-off in more detail?
A: In the fourth quarter of 2008, Cat Insurance recorded a $37 million
charge for an Other Than Temporary Impairment of the equity
investments within the Cat Insurance investment portfolio. Under
Cat Insurance's policy, management performs an equity-by-equity
review of investments where the market value is below book value.
Cat Insurance has a conservative investment philosophy. At year-
end, the portfolio mix was approximately 90 percent debt securities
and approximately 10 percent equity securities. The fourth-quarter
adjustment represents the mark-to-market amount for equities whose
value is not expected to recover in a reasonable timeframe. While
the charge in the fourth quarter was appropriate for current market
conditions, there could be additional write-downs if stock prices
decline from year-end levels or if the value of those stocks whose
value is only temporarily impaired fails to recover as expected.
Q27: Are used equipment prices continuing to fall and how does that
impact Cat Financial's lease business?
A: Cat Financial has had a consistent approach to underwriting over a
number of years and has a very diversified portfolio serving
multiple industries. Residuals are established by model based on a
range of factors including: the application, expected usage, lease
term and past remarketing experience. While in general used
equipment prices are continuing to trend lower, we believe that
current lease residual values are appropriate. Over the past 10
years, Cat Financial's gain or loss on terminations has not been
significant to profitability and has averaged about 1 percent of Cat
Financial's profit before tax. In addition, Cat Financial's recent
experience is consistent with its historical performance.
GLOSSARY OF TERMS
1. Cat Production System (CPS) -- The Cat 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. 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.
4. 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) and redeemable noncontrolling interest to the sum of
Machinery and Engines debt, redeemable noncontrolling interest, and
stockholders' equity.
5. EAME -- Geographic region including Europe, Africa, the Middle East
and the Commonwealth of Independent States (CIS).
6. Earning Assets -- Assets consisting primarily of total finance
receivables net of unearned income, plus equipment on operating
leases, less accumulated depreciation at Cat Financial.
7. 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 10 to 21,700 horsepower (8 to more than 16 000 kilowatts).
Turbines range from 1,600 to 30,000 horsepower (1 200 to 22 000
kilowatts).
8. 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.
9. 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, Progress Rail, Solar Turbines Customer Services, Cat
Logistics, OEM Solutions and Cat Reman.
10. Latin America -- Geographic region including Central and South
American countries and Mexico.
11. 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.
12. 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.
13. Machinery and Engines Other Operating Expenses -- Comprised
primarily of gains (losses) on disposal of long-lived assets, long-
lived asset impairment charges and employee severance charges.
14. Manufacturing Costs -- Represent the volume-adjusted change for
manufacturing costs. Manufacturing costs are defined as material
costs and labor and overhead costs related to the production
process. Excludes the impact of currency.
15. 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.
16. 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.
17. Shin Caterpillar Mitsubishi Ltd. (SCM) -- Formerly a 50/50 joint
venture between Caterpillar and Mitsubishi Heavy Industries Ltd.
(MHI). On August 1, 2008, SCM redeemed one-half of MHI's shares.
Caterpillar now owns 67 percent of the renamed entity, Caterpillar
Japan Ltd.
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 39-44 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/investorhttp://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,
2008 2007 2008 2007
Sales and revenues:
Sales of Machinery
and Engines $12,120 $11,360 $48,044 $41,962
Revenues of
Financial Products 803 784 3,280 2,996
Total sales and
revenues 12,923 12,144 51,324 44,958
Operating costs:
Cost of goods sold 10,066 8,920 38,415 32,626
Selling, general
and administrative
expenses 1,305 1,025 4,399 3,821
Research and
development expenses 507 357 1,728 1,404
Interest expense of
Financial Products 299 293 1,153 1,132
Other operating
(income) expenses 289 294 1,181 1,054
Total operating
costs 12,466 10,889 46,876 40,037
Operating profit 457 1,255 4,448 4,921
Interest expense
excluding Financial
Products 71 60 274 288
Other income (expense) (26) 88 299 320
Consolidated profit
(loss) before taxes 360 1,283 4,473 4,953
Provision (benefit)
for income taxes (296) 330 953 1,485
Profit of consolidated
companies 656 953 3,520 3,468
Equity in profit (loss)
of unconsolidated
affiliated companies 5 22 37 73
Profit $661 $975 $3,557 $3,541
Profit per common share $1.10 $1.55 $5.83 $5.55
Profit per common
share - diluted(1) $1.08 $1.50 $5.66 $5.37
Weighted average common
shares outstanding
(millions)
- Basic 602.1 630.4 610.5 638.2
- Diluted(1) 610.6 650.8 627.9 659.5
Cash dividends declared
per common share $.84 $.72 $1.62 $1.38
(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)
December 31, December 31,
2008 2007
Assets
Current assets:
Cash and short-term investments $2,736 $1,122
Receivables - trade and other 9,397 8,249
Receivables - finance 9,051 7,503
Deferred and refundable income taxes 1,223 816
Prepaid expenses and other current assets 765 583
Inventories 8,781 7,204
Total current assets 31,953 25,477
Property, plant and equipment - net 12,524 9,997
Long-term receivables - trade and other 1,479 685
Long-term receivables - finance 13,944 13,462
Investments in unconsolidated affiliated
companies 94 598
Noncurrent deferred and refundable income taxes 3,311 1,553
Intangible assets 511 475
Goodwill 2,261 1,963
Other assets 1,705 1,922
Total assets $67,782 $56,132
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery and Engines $1,632 $187
-- Financial Products 6,997 5,281
Accounts payable 4,827 4,723
Accrued expenses 4,121 3,178
Accrued wages, salaries and employee benefits 1,242 1,126
Customer advances 1,898 1,442
Dividends payable 253 225
Other current liabilities 1,027 951
Long-term debt due within one year:
-- Machinery and Engines 330 180
-- Financial Products 5,036 4,952
Total current liabilities 27,363 22,245
Long-term debt due after one year:
-- Machinery and Engines 5,862 3,639
-- Financial Products 15,678 14,190
Liability for postemployment benefits 9,975 5,059
Other liabilities 2,293 2,116
Total liabilities 61,171 47,249
Redeemable noncontrolling interest 524 -
Stockholders' equity
Common stock 3,057 2,744
Treasury stock (11,217) (9,451)
Profit employed in the business 19,826 17,398
Accumulated other comprehensive income (5,579) (1,808)
Total stockholders' equity 6,087 8,883
Total liabilities, redeemable noncontrolling
interest and stockholders' equity $67,782 $56,132
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Twelve Months Ended
December 31,
2008 2007
Cash flow from operating activities:
Profit $3,557 $3,541
Adjustments for non-cash items:
Depreciation and amortization 1,980 1,797
Other 383 199
Changes in assets and liabilities:
Receivables - trade and other (545) 899
Inventories (833) (745)
Accounts payable and accrued expenses 656 618
Customer advances 286 576
Other assets - net (470) 66
Other liabilities - net (227) 984
Net cash provided by (used for) operating
activities 4,787 7,935
Cash flow from investing activities:
Capital expenditures - excluding equipment
leased to others (2,445) (1,700)
Expenditures for equipment leased to others (1,566) (1,340)
Proceeds from disposals of property, plant and
equipment 982 408
Additions to finance receivables (14,031) (13,946)
Collections of finance receivables 9,717 10,985
Proceeds from sale of finance receivables 949 866
Investments and acquisitions (net of cash
acquired) (117) (229)
Proceeds from release of security deposit - 290
Proceeds from sale of available-for-sale
securities 357 282
Investments in available-for-sale securities (339) (485)
Other - net 197 461
Net cash provided by (used for) investing
activities (6,296) (4,408)
Cash flow from financing activities:
Dividends paid (953) (845)
Common stock issued, including treasury shares
reissued 135 328
Payment for stock repurchase derivative
contracts (38) (56)
Treasury shares purchased (1,800) (2,405)
Excess tax benefit from stock-based
compensation 56 155
Proceeds from debt issued (original maturities
greater than three months) 17,930 11,039
Payments on debt (original maturities greater
than three months) (14,439) (10,888)
Short-term borrowings (original maturities
three months or less)-net 2,074 (297)
Net cash provided by (used for) financing
activities 2,965 (2,969)
Effect of exchange rate changes on cash 158 34
Increase (decrease) in cash and short-term
investments 1,614 592
Cash and short-term investments at beginning of
period 1,122 530
Cash and short-term investments at end of period $2,736 $1,122
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, 2008
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery Financial Consolidating
Consolidated and Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $12,120 $12,120 $- $-
Revenues of
Financial Products 803 - 869 (66) (2)
Total sales and
revenues 12,923 12,120 869 (66)
Operating costs:
Cost of goods sold 10,066 10,066 - -
Selling, general
and administrative
expenses 1,305 1,131 186 (12) (3)
Research and
development expenses 507 507 - -
Interest expense of
Financial Products 299 - 305 (6) (4)
Other operating
(income) expenses 289 (16) 304 1 (3)
Total operating
costs 12,466 11,688 795 (17)
Operating profit 457 432 74 (49)
Interest expense
excluding Financial
Products 71 67 - 4 (4)
Other income (expense) (26) 19 (98) 53 (5)
Consolidated profit
(loss) before taxes 360 384 (24) -
Provision (benefit) for
income taxes (296) (267) (29) -
Profit of consolidated
companies 656 651 5 -
Equity in profit (loss)
of unconsolidated
affiliated companies 5 5 - -
Equity in profit of
Financial Products'
subsidiaries - 5 - (5) (6)
Profit $661 $661 $5 $(5)
(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, 2007
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery Financial Consolidating
Consolidated and 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 - (3)
Research and
development expenses 357 357 - -
Interest expense of
Financial Products 293 - 295 (2) (4)
Other operating
(income) 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
(loss) before taxes 1,283 1,102 181 -
Provision (benefit)
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 Twelve Months Ended December 31, 2008
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery Financial Consolidating
Consolidated and Engines(1) Products Adjustments
Sales and revenues:
Sales of Machinery
and Engines $48,044 $48,044 $- $-
Revenues of
Financial Products 3,280 - 3,588 (308) (2)
Total sales and
revenues 51,324 48,044 3,588 (308)
Operating costs:
Cost of goods sold 38,415 38,415 - -
Selling, general and
administrative
expenses 4,399 3,812 616 (29) (3)
Research and
development expenses 1,728 1,728 - -
Interest expense of
Financial Products 1,153 - 1,162 (9) (4)
Other operating
(income) expenses 1,181 (33) 1,231 (17) (3)
Total operating
costs 46,876 43,922 3,009 (55)
Operating profit 4,448 4,122 579 (253)
Interest expense
excluding Financial
Products 274 270 - 4 (4)
Other income (expense) 299 80 (38) 257 (5)
Consolidated profit
(loss) before taxes 4,473 3,932 541 -
Provision (benefit)
for income taxes 953 822 131 -
Profit of
consolidated
companies 3,520 3,110 410 -
Equity in profit (loss)
of unconsolidated
affiliated companies 37 38 (1) -
Equity in profit of
Financial Products'
subsidiaries - 409 - (409) (6)
Profit $3,557 $3,557 $409 $(409)
(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 Financial Consolidating
Consolidated and 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
(income) 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
(loss) before taxes 4,953 4,186 767 -
Provision (benefit)
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 Cash Flow
For The Twelve Months Ended December 31, 2008
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery Financial Consolidating
Consolidated and Engines(1) Products Adjustments
Cash flow from
operating activities:
Profit $3,557 $3,557 $409 $(409) (2)
Adjustments for non-
cash items:
Depreciation and
amortization 1,980 1,225 755 -
Undistributed
profit of
Financial Products - (409) - 409 (3)
Other 383 194 55 134 (4)
Changes in assets and
liabilities:
Receivables - trade
and other (545) (471) (49) (25)(4,5)
Inventories (833) (833) - -
Accounts payable and
accrued expenses 656 574 69 13 (4)
Customer advances 286 286 - -
Other assets - net (470) (503) (102) 135 (4)
Other liabilities -
net (227) (60) (33) (134) (4)
Net cash provided by
(used for) operating
activities 4,787 3,560 1,104 123
Cash flow from investing
activities:
Capital expenditures -
excluding equipment
leased to others (2,445) (2,421) (24) -
Expenditures for
equipment leased to
others (1,566) - (1,588) 22 (4)
Proceeds from
disposals of
property, plant and
equipment 982 30 952 - (4)
Additions to finance
receivables (14,031) - (37,811) 23,780 (5)
Collections of
finance receivables 9,717 - 32,135 (22,418) (5)
Proceeds from sale of
finance receivables 949 - 2,459 (1,510) (5)
Net intercompany
borrowings - (168) 33 135 (6)
Investments and
acquisitions (net
of cash acquired) (117) (148) 28 3 (7)
Proceeds from release
of security deposit - - - -
Proceeds from sale of
available-for-sale
securities 357 23 334 -
Investments in available-
for-sale securities (339) (18) (321) -
Other - net 197 139 58 - (7)
Net cash provided by
(used for) investing
activities (6,296) (2,563) (3,745) 12
Cash flow from
financing activities:
Dividends paid (953) (953) - - (8)
Common stock issued,
including treasury
shares reissued 135 135 - - (7)
Payment for stock
repurchase derivative
contracts (38) (38) - -
Treasury shares
purchased (1,800) (1,800) - -
Excess tax benefit
from stock-based
compensation 56 56 - -
Net intercompany
borrowings - (33) 168 (135) (6)
Proceeds from debt
issued (original
maturities greater
than three months) 17,930 1,673 16,257 -
Payments on debt
(original maturities
greater than three
months) (14,439) (296) (14,143) -
Short-term borrowings
(original maturities
three months or
less)-net 2,074 737 1,337 -
Net cash provided by
(used for) financing
activities 2,965 (519) 3,619 (135)
Effect of exchange rate
changes on cash 158 177 (19) -
Increase (decrease) in
cash and short-term
investments 1,614 655 959 -
Cash and short-term
investments at beginning
of period 1,122 862 260 -
Cash and short-term
investments at end of
period $2,736 $1,517 $1,219 $-
(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, 2007
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
Machinery Financial Consolidating
Consolidated and 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.
DATASOURCE: Caterpillar Inc.
Web site: http://www.cat.com/