Caterpillar Reports Third-Quarter Profit and Raises 2009 Profit Outlook
2010 Sales and Revenues Expected to be up 10 to 25 Percent from 2009
Caterpillar Inc. (NYSE: CAT) today announced a third-quarter profit of $0.64 per share, down $0.75 per share from the third quarter of 2008. Sales and revenues of $7.298 billion were down 44 percent from $12.981 billion in the third quarter of 2008.
"We are pleased with this quarter's profit given the severe economic environment and with our sales well below end-user demand as dealers continue to aggressively draw down inventories," said Chairman and Chief Executive Officer Jim Owens.
"During the quarter, our primary focus continued to be on trough management and operational execution. We lowered production as dealers continued to cut inventories, we reduced costs, maintained positive price realization, lowered inventory, delivered positive operating cash flow and improved our financial position. I'm confident that Team Caterpillar, supported by our strong dealers and suppliers, can leverage our comprehensive lineup of products and services to improve our leadership position as we move from recession to growth," Owens added.
Third-quarter profit of $404 million was down $464 million from $868 million in the third quarter of 2008. The decline was primarily due to significantly lower sales volume. The negative impact of lower volume was partially offset by lower costs, a favorable effective tax rate, favorable price realization and pre-tax LIFO inventory decrement benefits of $120 million or $0.16 per share. Manufacturing costs, selling, general and administrative and research and development expenses were all significantly lower than a year ago. The favorable effective tax rate included $129 million of benefits related to prior year tax returns. Utilizing the Caterpillar Production System with 6 Sigma, the company has reduced inventory by about $2 billion since the end of 2008 and expects continued reduction through the remainder of the year.
"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway," Owens said. "However, the world economy is still facing significant challenges. There is uncertainty about the timing and strength of recovery."
Caterpillar expects 2009 sales and revenues of $32 to $33 billion. The 2009 profit outlook range has improved to $1.10 to $1.30 per share compared to the previous range of $0.40 to $1.50 per share. The 2009 profit outlook includes redundancy costs of about $0.75 per share. Excluding redundancy costs, the profit forecast for 2009 is $1.85 to $2.05 per share compared to the previous range of $1.15 to $2.25 per share.
"Caterpillar's improved profit outlook for 2009 is a clear demonstration of our ability to implement our economic trough plans, which we announced as part of our corporate strategy in 2005," Owens said. "While we are still navigating through a very difficult environment in 2009, we see signs of improving economic conditions throughout most of the world."
Preliminary 2010 Sales and Revenues Outlook
The preliminary outlook for 2010 sales and revenues is an increase of 10 to 25 percent from the midpoint of the 2009 outlook range, in part driven by the end of dealer inventory reductions which significantly impacted sales in 2009.
"While 2010 will still be a difficult year, we expect improvement in our top line from the lows of 2009, and it's critical that we manage on the way up as well as we did in the face of declining volume. As a result, we've already started planning for an upturn. When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared," Owens said.
- Information on non-GAAP financial measures, including the treatment of redundancy costs in the outlook, is included on page 25.
- Glossary of terms is included on pages 22-24; first occurrence of terms shown in bold italics.
For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2008 sales and revenues of $51.324 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at: www.cat.com.
Certain statements in this release relate to future events and expectations and as such constitute forward-looking statements involving known and unknown factors that may cause actual results of Caterpillar Inc. to be different from those expressed or implied in the forward-looking statements. In this context, words such as "will," "would," "expect," "anticipate," "should" or other similar words and phrases often identify forward-looking statements made on behalf of Caterpillar. It is important to note that actual results of the company may differ materially from those described or implied in such forward-looking statements based on a number of factors and uncertainties, including, but not limited to, (i) adverse change in general economic conditions; (ii) adverse change in the industries Caterpillar serves including construction, infrastructure, mining, energy, marine and electric power generation; (iii) Caterpillar's ability to manage material, including steel, and freight costs; (iv) Caterpillar's ability to generate cash from operations, secure external funding for its operations and manage its liquidity needs; (v) material adverse change in customers' access to liquidity and capital; (vi) currency exchange or interest rates changes; (vii) political stability; (viii) market acceptance of the company's products and services; (ix) significant changes in the competitive environment; (x) epidemic diseases; (xi) severe change in weather conditions negatively impacting operations; (xii) changes in law, regulations and tax rates; and (xiii) other general economic, business and financing conditions and factors described in more detail in "Item 1A - Risk Factors" in Part II of our Form 10-Q filed with the SEC on July 31, 2009 for the 2nd quarter 2009. The filing is available on our website at www.cat.com/sec_filings. We do not undertake to update our forward-looking statements.