Caterpillar Reports Third-Quarter 2017 Results
DEERFIELD, Ill., Oct. 24, 2017 /PRNewswire/ --
Third Quarter
-------------
($ in billions except profit
per share) 2017 2016
---------------------------- ---- ----
Sales and Revenues $11.4 $9.2
------------------ ----- ----
Profit Per Share $1.77 $0.48
---------------- ----- -----
Adjusted Profit Per Share $1.95 $0.85
-- Third-quarter sales and revenues up more than $2 billion from a year ago
-- Operational performance driving improved results
-- Full-year 2017 sales and revenues outlook about $44 billion
-- Full-year profit per share outlook about $4.60 (adjusted profit per
share outlook about $6.25)
Caterpillar Inc. (NYSE: CAT) today announced third-quarter 2017 sales and revenues of $11.4 billion, compared with $9.2 billion in the third quarter of 2016. Third-quarter 2017 profit per share was $1.77, compared with $0.48 per share in the third quarter of 2016. Excluding restructuring costs, third-quarter 2017 adjusted profit per share was $1.95, compared with third-quarter 2016 adjusted profit per share of $0.85.
Caterpillar's financial position continued to strengthen in the quarter. Machinery, Energy & Transportation (ME&T) operating cash flow was about $600 million during the third quarter, and ME&T's debt-to-capital ratio improved to 36.1 percent, down from 38.6 percent at the end of the second quarter. The company ended the third quarter of 2017 with an enterprise cash balance of $9.6 billion.
"Higher sales volume and our team's focus on cost discipline resulted in improved profit margins across our three primary segments," said Caterpillar CEO Jim Umpleby.
2017 Outlook
Caterpillar continues to see strength in a number of industries and regions, including construction in China, on-shore oil and gas in North America, and increased capital investments by mining customers. We are working with our supply chain to increase production levels to satisfy customer demand for those markets that have improved.
In July 2017, Caterpillar provided an outlook range for full-year 2017 sales and revenues of $42 billion to $44 billion, with a midpoint of $43 billion. The company now expects full-year 2017 sales and revenues of about $44 billion.
For the full year of 2017, Caterpillar now expects profit per share of about $4.60, or adjusted profit per share of about $6.25. The previous outlook for 2017 profit was about $3.50 per share at the midpoint of the sales and revenues outlook, or adjusted profit per share of about $5.00. The company now expects to incur about $1.3 billion of restructuring costs in 2017, a slight increase from the previous outlook of about $1.2 billion. The outlook does not include potential mark-to-market gains or losses related to pension and other postemployment benefit (OPEB) plans. While the final impact will not be known until year end, the impact would be negative to profit based on information as of the end of the third quarter.
"As a result of our team's strong performance, we are raising our 2017 profit outlook," continued Umpleby. "We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services."
Notes:
-- Glossary of terms is included on pages 14-15; first occurrence of terms
shown in bold italics.
-- Information on non-GAAP financial measures is included on page 16.
-- Caterpillar will conduct a teleconference and live webcast, with a slide
presentation, beginning at 10 a.m. Central Time on Tuesday, October 24,
2017, to discuss its 2017 third-quarter financial results. The
accompanying slides will be available before the webcast on the
Caterpillar website at
http://www.caterpillar.com/investors/events-and-presentations.
About Caterpillar:
For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2016 sales and revenues of $38.537 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. For more information, visit caterpillar.com. To connect with us on social media, visit caterpillar.com/social-media.
Forward-Looking Statements
Certain statements in this press release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "project," "intend," "could," "should" or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance and speak only as of the date they are made, and we do not undertake to update our forward-looking statements.
Caterpillar's actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global and regional economic conditions and economic conditions in the industries we serve; (ii) commodity price changes, material price increases, fluctuations in demand for our products or significant shortages of material; (iii) government monetary or fiscal policies; (iv) political and economic risks, commercial instability and events beyond our control in the countries in which we operate; (v) our ability to develop, produce and market quality products that meet our customers' needs; (vi) the impact of the highly competitive environment in which we operate on our sales and pricing; (vii) information technology security threats and computer crime; (viii) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (ix) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (x) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xi) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xii) union disputes or other employee relations issues; (xiii) adverse effects of unexpected events including natural disasters; (xiv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xv) failure to maintain our credit ratings and potential resulting increases to our cost of borrowing and adverse effects on our cost of funds, liquidity, competitive position and access to capital markets; (xvi) our Financial Products segment's risks associated with the financial services industry; (xvii) changes in interest rates or market liquidity conditions; (xviii) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xix) currency fluctuations; (xx) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xxi) increased pension plan funding obligations; (xxii) alleged or actual violations of trade or anti-corruption laws and regulations; (xxiii) international trade policies and their impact on demand for our products and our competitive position; (xxiv) additional tax expense or exposure; (xxv) significant legal proceedings, claims, lawsuits or government investigations; (xxvi) new regulations or changes in financial services regulations; (xxvii) compliance with environmental laws and regulations; and (xxviii) other factors described in more detail in Caterpillar's Forms 10-Q, 10-K and other filings with the Securities and Exchange Commission.
CONSOLIDATED RESULTS
Consolidated Sales and Revenues
Consolidated Sales and Revenues Comparison
Third Quarter 2017 vs. Third Quarter 2016
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2017 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the third quarter of 2016 (at left) and the third quarter of 2017 (at right). Items favorably impacting sales and revenues appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting sales and revenues appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees.
Sales and Revenues
Total sales and revenues were $11.413 billion in the third quarter of 2017, an increase of $2.253 billion, or 25 percent, compared with $9.160 billion in the third quarter of 2016. The increase was primarily due to higher sales volume, with about half due to improved end-user demand and about half due to favorable changes in dealer inventories. The improvement in end-user demand was across all regions and most end markets. The favorable change in dealer inventories was primarily due to a decrease during the third quarter of 2016. By segment, the largest sales volume increase was in Construction Industries mostly due to the favorable impact of changes in dealer inventories and higher end-user demand for construction equipment. Sales volume for Resource Industries increased due to the favorable impact of changes in dealer inventories and higher end-user demand for aftermarket parts. Energy & Transportation's sales volume increased due to higher demand across all applications. Favorable price realization, primarily in Construction Industries, also contributed to the sales improvement. Financial Products' revenues were about flat.
Sales increased across all regions with the largest increase in North America. Sales improved 27 percent in North America primarily due to higher end-user demand for both equipment and aftermarket parts, as well as favorable changes in dealer inventories. Dealer inventories decreased during the third quarter of 2016 and were about flat in the third quarter of 2017. Asia/Pacific sales increased 31 percent primarily due to higher end-user demand for construction equipment. About half of the sales improvement in Asia/Pacific was in China resulting from increased building construction and infrastructure investment. EAME sales increased 22 percent primarily due to the favorable impact of changes in dealer inventories as dealers decreased inventories in the third quarter of 2016 and increased dealer inventories in the third quarter of 2017. Sales increased 24 percent in Latin America due to stabilizing economic conditions in several countries in the region that resulted in improved end-user demand from low levels.
Consolidated Operating Profit
Consolidated Operating Profit Comparison
Third Quarter 2017 vs. Third Quarter 2016
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 3Q 2017 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the third quarter of 2016 (at left) and the third quarter of 2017 (at right). Items favorably impacting operating profit appear as upward stair steps with the corresponding dollar amounts above each bar, while items negatively impacting operating profit appear as downward stair steps with dollar amounts reflected in parentheses above each bar. Caterpillar management utilizes these charts internally to visually communicate with the company's board of directors and employees. The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses.
Operating profit for the third quarter of 2017 was $1.577 billion, compared with $481 million in the third quarter of 2016. The increase of $1.096 billion was primarily due to higher sales volume. Favorable price realization, lower restructuring costs and variable manufacturing costs were partially offset by higher period costs. Price realization was favorable, primarily in Construction Industries.
Variable manufacturing costs were lower primarily due to the favorable impact from cost absorption as inventory increased in the third quarter of 2017 due to higher production volumes and was about flat in the third quarter of 2016. Material costs were slightly unfavorable due to increases in steel prices. Period costs were higher primarily due to higher short-term incentive compensation expense. Despite a significant increase in sales volume, period costs excluding short-term incentive compensation expense were about flat.
Restructuring costs were $90 million in the third quarter of 2017, compared with $324 million in the third quarter of 2016.
Other Profit/Loss Items
-- Other income/expense in the third quarter of 2017 was income of $64
million, compared with income of $28 million in the third quarter of
2016. The favorable change was primarily a result of gains on the sale
of securities.
-- The provision for income taxes in the third quarter reflects an
estimated annual tax rate of 32 percent, which excludes the discrete
item discussed in the following paragraph, compared with 25 percent for
the third quarter of 2016. The increase is primarily due to higher
non-U.S. restructuring costs in 2017 that are taxed at relatively lower
non-U.S. tax rates, along with other changes in the geographic mix of
profits from a tax perspective.
In addition, a discrete tax benefit of $18 million was recorded for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S. GAAP compensation expense.
Excluding restructuring costs, gain on the sale of Caterpillar's equity investment in IronPlanet in the second quarter of 2017, and discrete items, the 2017 estimated annual tax rate is expected to be 29 percent.
Global Workforce
Caterpillar worldwide, full-time employment was about 96,700 at the end of the third quarter of 2017, about flat with the end of the third quarter of 2016. The flexible workforce increased by about 6,500, primarily due to higher production volumes. In total, the global workforce increased by about 6,100. Since the end of the second quarter of 2017, the global workforce increased about 3,700 to support increasing production volumes.
September 30
------------
2017 2016 Increase/
(Decrease)
---------
Full-time employment 96,700 97,100 (400)
Flexible workforce 18,200 11,700 6,500
------ ------ -----
Total 114,900 108,800 6,100
======= ======= =====
Geographic Summary
------------------
U.S. workforce 49,700 46,900 2,800
Non-U.S. workforce 65,200 61,900 3,300
------ ------ -----
Total 114,900 108,800 6,100
======= ======= =====
SEGMENT RESULTS
Sales and Revenues by Geographic Region
% North % Latin % % Asia/ %
(Millions of dollars) Total Change America Change America Change EAME Change Pacific Change
----- ------ ------- ------ ------- ------ ---- ------ ------- ------
Third Quarter 2017
------------------
Construction Industries(1) $4,854 37% $2,165 31% $390 36% $1,008 28% $1,291 57%
Resource Industries(2) 1,870 36% 581 28% 329 30% 488 61% 472 29%
Energy & Transportation(3) 3,961 12% 1,928 22% 300 7% 1,166 7% 567 (2)%
All Other Segments? 56 100% 30 400% 1 - % 13 160% 12 (29)%
Corporate Items and Eliminations (28) (25) (1) (2) -
--- --- --- --- ---
Machinery, Energy & Transportation $10,713 27% $4,679 27% $1,019 24% $2,673 22% $2,342 31%
Financial Products Segment $774 3% $510 9% $64 (24)% $110 9% $90 (8)%
Corporate Items and Eliminations (74) (51) (5) (4) (14)
--- --- --- --- ---
Financial Products Revenues $700 - % $459 5% $59 (20)% $106 9% $76 (14)%
Consolidated Sales and Revenues $11,413 25% $5,138 25% $1,078 20% $2,779 22% $2,418 29%
======= ====== ====== ====== ======
Third Quarter 2016
------------------
Construction Industries(1) $3,554 $1,655 $287 $789 $823
Resource Industries(2) 1,377 454 254 303 366
Energy & Transportation(3) 3,534 1,583 280 1,094 577
All Other Segments? 28 6 - 5 17
Corporate Items and Eliminations (30) (26) - (3) (1)
--- --- --- --- ---
Machinery, Energy & Transportation $8,463 $3,672 $821 $2,188 $1,782
Financial Products Segment $749 $466 $84 $101 $98
Corporate Items and Eliminations (52) (28) (10) (4) (10)
--- --- --- --- ---
Financial Products Revenues $697 $438 $74 $97 $88
Consolidated Sales and Revenues $9,160 $4,110 $895 $2,285 $1,870
====== ====== ==== ====== ======
(1)Does not include inter-segment sales of $32 million and $27 million in third quarter 2017 and 2016, respectively.
(2)Does not include inter-segment sales of $86 million and $69 million in third quarter 2017 and 2016, respectively.
(3)Does not include inter-segment sales of $877 million and $629 million in third quarter 2017 and 2016, respectively.
4Does not include inter-segment sales of $89 million and $95 million in third quarter 2017 and 2016, respectively.
Sales and Revenues by Segment
Third Sales Price Third $ %
(Millions of dollars) Quarter 2016 Volume Realization Currency Other Quarter 2017 Change Change
------------ ------ ----------- -------- ----- ------------ ------ ------
Construction Industries $3,554 $1,002 $291 $7 $ - $4,854 $1,300 37%
Resource Industries 1,377 410 73 10 - 1,870 493 36%
Energy & Transportation 3,534 419 (21) 29 - 3,961 427 12%
All Other Segments 28 28 - - - 56 28 100%
Corporate Items and
Eliminations (30) 2 - - - (28) 2
--- --- --- --- --- --- ---
Machinery, Energy &
Transportation $8,463 $1,861 $343 $46 $ - $10,713 $2,250 27%
Financial Products Segment $749 $ - $ - $ - $25 $774 $25 3%
Corporate Items and
Eliminations (52) - - - (22) (74) (22)
--- --- --- --- --- --- ---
Financial Products Revenues $697 $ - $ - $ - $3 $700 $3 0%
Consolidated Sales and
Revenues $9,160 $1,861 $343 $46 $3 $11,413 $2,253 25%
====== ====== ==== === === ======= ======
Operating Profit (Loss)
by Segment
Third Third $ %
(Millions of dollars) Quarter 2017 Quarter 2016 Change Change
------------ ------------ ------ ------
Construction Industries $884 $326 $558 171%
Resource Industries 226 (77) 303 n/a %
Energy & Transportation 750 572 178 31%
All Other Segments 6 (22) 28 n/a %
Corporate Items and
Eliminations (359) (433) 74
---- ---- ---
Machinery, Energy &
Transportation $1,507 $366 $1,141 312%
Financial Products
Segment $185 $183 $2 1%
Corporate Items and
Eliminations (37) (12) (25)
--- --- ---
Financial Products $148 $171 $(23) (13)%
Consolidating
Adjustments (78) (56) (22)
Consolidated Operating
Profit $1,577 $481 $1,096 228%
====== ==== ======
CONSTRUCTION INDUSTRIES
(Millions of dollars)
Sales Comparison
Third Sales Price Currency Third $ %
Quarter 2016 Volume Realization Quarter 2017 Change Change
------------ ------ ----------- ------------ ------ ------
Sales Comparison(1) $3,554 $1,002 $291 $7 $4,854 $1,300 37%
Sales by Geographic Region
Third Third $ %
Quarter 2017 Quarter 2016 Change Change
------------ ------------ ------ ------
North America $2,165 $1,655 $510 31%
Latin America 390 287 103 36%
EAME 1,008 789 219 28%
Asia/Pacific 1,291 823 468 57%
Total(1) $4,854 $3,554 $1,300 37%
Segment Profit
Third Third $ %
Change Change
Quarter 2017 Quarter 2016
------------ ------------
Segment Profit $884 $326 $558 171%
(1)Does not include inter-segment sales of $32 million and $27 million in third quarter 2017 and 2016, respectively.
Construction Industries' sales were $4.854 billion in the third quarter of 2017, compared with $3.554 billion in the third quarter of 2016. The increase was due to higher sales volume and favorable price realization.
-- About half of the sales volume increase was due to the impact of
favorable changes in dealer inventories as inventories decreased
significantly in the third quarter of 2016 and increased in the third
quarter of 2017. In addition, sales volume improved due to higher
end-user demand for construction equipment.
-- Although market conditions remain competitive, price realization was
favorable due to a particularly weak pricing environment in the third
quarter of 2016 and previously implemented price increases.
Sales increased across all regions with the largest increases in North America and Asia/Pacific.
-- In North America, the sales increase was primarily due to a favorable
impact of changes in dealer inventories, which decreased in the third
quarter of 2016 and were about flat in the third quarter of 2017.
Favorable price realization also contributed to increased sales. In
addition, end-user demand for construction equipment increased primarily
due to improved oil and gas, residential and nonresidential construction
activities.
-- Sales in Asia/Pacific were higher as a result of an increase in end-user
demand, primarily in China, stemming from increased building
construction and infrastructure investment. Favorable price realization
also contributed to increased sales.
-- Sales increased in EAME primarily due to the favorable impact of changes
in dealer inventories, which decreased in the third quarter of 2016 and
increased in the third quarter of 2017. Favorable price realization also
contributed to increased sales.
-- Although construction activity remained weak in Latin America, sales
were higher as end-user demand increased from low levels due to
stabilizing economic conditions in several countries in the region.
Construction Industries' profit was $884 million in the third quarter of 2017, compared with $326 million in the third quarter of 2016. The increase in profit was primarily due to higher sales volume and favorable price realization, partially offset by unfavorable period costs. The increase in period costs was due to higher short-term incentive compensation expense.
RESOURCE INDUSTRIES
(Millions of dollars)
Sales Comparison
Third Sales Price Realization Currency Third $ %
Quarter 2016 Volume Quarter 2017 Change Change
------------ ------ ------------ ------ ------
Sales
Comparison(1) $1,377 $410 $73 $10 $1,870 $493 36%
Sales by Geographic Region
Third Third $ %
Quarter 2017 Quarter 2016 Change Change
------------ ------------ ------ ------
North America $581 $454 $127 28%
Latin America 329 254 75 30%
EAME 488 303 185 61%
Asia/Pacific 472 366 106 29%
Total(1) $1,870 $1,377 $493 36%
Segment Profit (Loss)
Third Third $ %
Quarter 2017 Quarter 2016 Change Change
------------ ------------ ------ ------
Segment Profit
(Loss) $226 ($77) $303 n/a %
(1)Does not include inter-segment sales of $86 million and $69 million in third quarter 2017 and 2016, respectively.
Resource Industries' sales were $1.870 billion in the third quarter of 2017, an increase of $493 million from the third quarter of 2016. The increase was primarily due to the favorable impact of changes in dealer inventories, an increase in end-user demand for aftermarket parts and favorable price realization. Dealer inventories were about flat in the third quarter of 2017, compared with a decrease in the third quarter of 2016. Dealer deliveries for new equipment increased slightly. Increases in certain commodity prices over the past year, along with continued commodity consumption, have resulted in increased mining activity and the need for maintenance and rebuild activities. Although commodity prices have improved, they remain volatile, but are generally above investment threshold prices, which is a positive for end-user demand.
Resource Industries' profit was $226 million in the third quarter of 2017, compared with a loss of $77 million in the third quarter of 2016. The improvement was due to higher sales volume, favorable price realization and lower variable manufacturing costs primarily due to cost absorption. Cost absorption was favorable as inventory increased in the third quarter of 2017 to support higher production volumes and was about flat in the third quarter of 2016. Period costs were about flat as an increase in short-term incentive compensation expense was offset by the favorable impact of restructuring and cost reduction actions.
ENERGY & TRANSPORTATION
(Millions of dollars)
Sales Comparison
Third Sales Price Currency Third %
Quarter 2016 Volume Realization $ Change
Quarter 2017 Change
Sales
Comparison(1) $3,534 $419 ($21) $29 $3,961 $427 12%
Sales by Geographic Region
Third Third $ %
Quarter 2017 Change Change
Quarter 2016
North America $1,928 $1,583 $345 22%
Latin America 300 280 20 7%
EAME 1,166 1,094 72 7%
Asia/Pacific 567 577 (10) (2)%
Total(1) $3,961 $3,534 $427 12%
Segment Profit
Third Third $ %
Quarter 2017 Change Change
Quarter 2016
Segment Profit $750 $572 $178 31%
(1)Does not include inter-segment sales of $877 million and $629 million in third quarter 2017 and 2016, respectively.
Energy & Transportation's sales were $3.961 billion in the third quarter of 2017, compared with $3.534 billion in the third quarter of 2016. The increase was primarily due to higher sales volume across all applications.
-- Industrial - Sales were higher in all regions, reflecting increased
demand for equipment across end-user applications and aftermarket parts.
-- Oil and Gas - Sales increased in North America due to higher demand for
aftermarket parts supporting rebuild activity and for reciprocating
engines used in well servicing applications. This was partially offset
by a decrease in equipment sold in EAME due to the absence of several
large gas compression projects.
-- Power Generation - Sales increased in North America and EAME due to the
timing of projects. Asia/Pacific and Latin America were about flat.
-- Transportation - Sales were higher in North America for rail services as
rail traffic has increased.
Energy & Transportation's profit was $750 million in the third quarter of 2017, compared with $572 million in the third quarter of 2016. The increase was primarily due to higher sales volume and lower variable manufacturing costs, partially offset by higher period costs. Variable manufacturing costs were favorable primarily due to cost absorption as inventory increased in the third quarter of 2017 to support higher production volumes and was about flat in the third quarter of 2016. The increase in period costs was primarily due to higher short-term incentive compensation expense.
FINANCIAL PRODUCTS SEGMENT
(Millions of dollars)
Revenues by Geographic Region
Third Third $ %
Quarter 2017 Quarter 2016 Change Change
------------ ------------ ------ ------
North
America $510 $466 $44 9%
Latin
America 64 84 (20) (24)%
EAME 110 101 9 9%
Asia/
Pacific 90 98 (8) (8)%
Total $774 $749 $25 3%
Segment Profit
Third Third $ %
Quarter 2017 Quarter 2016 Change
Change
Segment
Profit $185 $183 $2 1%
Financial Products' segment revenues were $774 million in the third quarter of 2017, an increase of $25 million, or 3 percent, from the third quarter of 2016. The increase was primarily due to higher average financing rates in North America and a favorable impact from intercompany lending activity in North America. These favorable impacts were partially offset by lower average earning assets in North America and lower average financing rates in Asia/Pacific.
Financial Products' profit was $185 million in the third quarter of 2017, compared with $183 million in the third quarter of 2016. The increase was primarily due to higher gains on sales of securities at Insurance Services, increased intercompany lending activity and an increase in net yield on average earning assets. These favorable impacts were mostly offset by an increase in the provision for credit losses at Cat Financial and an increase in selling, general and administrative (SG&A) expenses due to higher short-term incentive compensation expense.
At the end of the third quarter of 2017, past dues at Cat Financial were 2.73 percent, compared with 2.77 percent at the end of the third quarter of 2016. Write-offs, net of recoveries, were $47 million for the third quarter of 2017, compared with $29 million for the third quarter of 2016. The increase in write-offs, net of recoveries, was primarily due to the Latin America and marine portfolios.
As of September 30, 2017, Cat Financial's allowance for credit losses totaled $343 million, or 1.27 percent of finance receivables, compared with $346 million, or 1.28 percent of finance receivables as of September 30, 2016. The allowance for credit losses at year-end 2016 was $343 million, or 1.29 percent of finance receivables.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $396 million in the third quarter of 2017, a decrease of $49 million from the third quarter of 2016. Corporate items and eliminations include: restructuring costs; corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; retirement benefit costs other than service cost; currency differences for ME&T, as segment profit is reported using annual fixed exchange rates; cost of sales methodology differences, as segments use a current cost methodology; and inter-segment eliminations.
The decrease in expense from the third quarter of 2016 was primarily due to lower restructuring costs, partially offset by methodology differences and higher short-term incentive compensation expense.
QUESTIONS AND ANSWERS
Q1: Can you comment on third-quarter
restructuring costs and your 2017
outlook for restructuring costs?
A: Restructuring costs of $90 million in
the third quarter of 2017 were
primarily related to programs in
Resource Industries and Energy &
Transportation. Third-quarter
restructuring costs included a LIFO
Inventory Decrement Benefit of $29
million related to the closure of the
facility in Gosselies, Belgium.
We have incurred $1.011 billion of
restructuring costs through the first
nine months of 2017 and expect to
incur about $1.3 billion for the full
year of 2017, an increase from the
previous outlook for 2017
restructuring costs of about $1.2
billion.
Q2: Can you discuss changes in dealer
inventories during the third quarter
of 2017?
A: Changes in dealer inventories had a
positive impact on sales from the
third quarter of 2016 to the third
quarter of 2017. Dealer machine and
engine inventories increased about
$200 million in the third quarter of
2017, compared with a decrease of
about $700 million in the third
quarter of 2016. During the first nine
months of 2017, dealer inventories
increased about $100 million, compared
with a decrease of about $800 million
during the first nine months of 2016.
Q3: Can you discuss changes to your order
backlog by segment?
A: At the end of the third quarter of
2017, the order backlog was about
$15.4 billion, an increase of about
$600 million from the end of the
second quarter of 2017. Construction
Industries' order backlog increased
about $500 million, Resource
Industries' increased about $300
million and Energy & Transportation's
decreased about $200 million.
Compared with the third quarter of
2016, the order backlog increased
about $3.8 billion. The increase was
across all segments, most
significantly in Construction
Industries and Resource Industries.
Q4: Can you comment on expense related to
your 2017 short-term incentive
compensation plans?
A: Short-term incentive compensation
expense is directly related to
financial and operational performance,
measured against targets set annually.
Third-quarter 2017 expense was about
$400 million. No short-term incentive
compensation expense was recognized
during the third quarter of 2016.
For 2017, our current outlook includes
short-term incentive compensation
expense of about $1.4 billion. The
previous 2017 outlook, issued in July,
assumed short-term incentive
compensation expense of about $1.3
billion. Full-year 2016 short-term
incentive compensation expense was
about $250 million, significantly
below targeted levels.
Q5: What price action are you anticipating
for 2018?
A: In late September 2017, we notified our
dealers of a price action of 0 to 2
percent worldwide on most machines.
This price action will be effective
January 2018 and includes adjustments
to list prices and merchandising
discounts. In conjunction with the
planned January price action,
Caterpillar will be implementing a
structural change to machine pricing
that will result in a reduction to
list prices with offsetting reductions
to merchandising discounts. These
price actions are a result of current
industry factors and general economic
conditions. Details by product will be
released to dealers in the near future
and will vary across geographic
regions and products.
Q6: In the past, you provided sales and
revenues guidance for the following
year in the third quarter. Why have
you decided not to provide that
guidance this year?
A: Consistent with our new enterprise
strategy, we are focused on
operational excellence. Our segments
are in the process of implementing
strategies to drive profitable growth
through margin expansion, asset
efficiency, expanded offerings and
services. We will share more about
2018 in January.
GLOSSARY OF TERMS
1. Adjusted Profit Per Share - Profit per
share excluding restructuring costs for
2017 and 2016. For 2017, adjusted profit
per share also excludes a gain on the sale
of an equity investment in IronPlanet
recognized in the second quarter.
2. All Other Segments - Primarily includes
activities such as: business strategy,
product management and development, and
manufacturing of filters and fluids,
undercarriage, tires and rims, ground
engaging tools, fluid transfer products,
precision seals, and rubber sealing and
connecting components primarily for Cat(R)
products; parts distribution; distribution
services responsible for dealer
development and administration including a
wholly owned dealer in Japan, dealer
portfolio management and ensuring the most
efficient and effective distribution of
machines, engines and parts; digital
investments for new customer and dealer
solutions that integrate data analytics
with state-of-the-art digital
technologies while transforming the buying
experience.
3. Consolidating Adjustments - Elimination of
transactions between Machinery, Energy &
Transportation and Financial Products.
4. Construction Industries - A segment
primarily responsible for supporting
customers using machinery in
infrastructure, forestry and building
construction applications.
Responsibilities include business
strategy, product design, product
management and development, manufacturing,
marketing and sales and product support.
The product portfolio includes backhoe
loaders, small wheel loaders, small track-
type tractors, skid steer loaders, compact
track loaders, multi-terrain loaders,
mini excavators, compact wheel loaders,
telehandlers, select work tools, small,
medium and large track excavators, wheel
excavators, medium wheel loaders, medium
track-type tractors, track-type loaders,
motor graders, pipelayers, forestry and
paving products and related parts.
5. 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 only includes the
impact on sales and operating profit for
the Machinery, Energy & Transportation
lines of business excluding restructuring
costs; 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 (hedging) and the net
effect of changes in foreign currency
exchange rates on our foreign currency
assets and liabilities for consolidated
results (translation).
6. Debt-to-Capital Ratio - A key measure of
Machinery, Energy & Transportation's
financial strength used by management. The
metric is defined as Machinery, Energy &
Transportation's short-term borrowings,
long-term debt due within one year and
long-term debt due after one year (debt)
divided by the sum of Machinery, Energy &
Transportation's debt and shareholders'
equity. Debt also includes Machinery,
Energy & Transportation's long-term
borrowings from Financial Products.
7. EAME - A geographic region including
Europe, Africa, the Middle East and the
Commonwealth of Independent States (CIS).
8. Earning Assets - Assets consisting
primarily of total finance receivables net
of unearned income, plus equipment on
operating leases, less accumulated
depreciation at Cat Financial.
9. Energy & Transportation - A segment
primarily responsible for supporting
customers using reciprocating engines,
turbines, diesel-electric locomotives and
related parts across industries serving
power generation, industrial, oil and gas
and transportation applications, including
marine and rail-related businesses.
Responsibilities include business
strategy, product design, product
management and development, manufacturing,
marketing and sales and product support of
turbines and turbine-related services,
reciprocating engine-powered generator
sets, integrated systems used in the
electric power generation industry,
reciprocating engines and integrated
systems and solutions for the marine and
oil and gas industries; reciprocating
engines supplied to the industrial
industry as well as Cat machinery; the
remanufacturing of Cat engines and
components and remanufacturing services
for other companies; the business
strategy, product design, product
management and development, manufacturing,
remanufacturing, leasing and service of
diesel-electric locomotives and
components and other rail-related
products and services and product support
of on-highway vocational trucks for North
America.
10. Financial Products Segment - Provides
financing alternatives to customers and
dealers around the world for Caterpillar
products, as well as financing for
vehicles, power generation facilities and
marine vessels that, in most cases,
incorporate Caterpillar products.
Financing plans include operating and
finance leases, installment sale
contracts, working capital loans and
wholesale financing plans. The segment
also provides insurance and risk
management products and services that help
customers and dealers manage their
business risk. Insurance and risk
management products offered include
physical damage insurance, inventory
protection plans, extended service
coverage for machines and engines, and
dealer property and casualty insurance.
The various forms of financing, insurance
and risk management products offered to
customers and dealers help support the
purchase and lease of our equipment.
Financial Products segment profit is
determined on a pretax basis and includes
other income/expense items.
11. Latin America - A geographic region
including Central and South American
countries and Mexico.
12. LIFO Inventory Decrement Benefit - A
significant portion of Caterpillar's
inventory is valued using the last-in,
first-out (LIFO) method. With this
method, the cost of inventory is comprised
of "layers" at cost levels for years when
inventory increases occurred. A LIFO
decrement occurs when inventory decreases,
depleting layers added in earlier,
generally lower cost years. A LIFO
decrement benefit represents the impact on
operating profit of charging cost of goods
sold with prior-year cost levels rather
than current period costs.
13. Machinery, Energy & Transportation (ME&T) -
Represents the aggregate total of
Construction Industries, Resource
Industries, Energy & Transportation and
All Other Segments and related corporate
items and eliminations.
14. Machinery, Energy & Transportation Other
Operating (Income) Expenses - Comprised
primarily of gains/losses on disposal of
long-lived assets, gains/losses on
divestitures and legal settlements and
accruals. Restructuring costs classified
as other operating expenses on the Results
of Operations are presented separately on
the Operating Profit Comparison.
15. Pension and Other Postemployment Benefit
(OPEB) - The company's defined benefit
pension and postretirement benefit plans.
16. Period Costs - Includes period
manufacturing costs, ME&T selling, general
and administrative (SG&A) and research and
development (R&D) expenses excluding the
impact of currency and exit-related costs
that are included in restructuring costs
(see definition below). 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. SG&A and R&D costs are not
linked to the production of goods or
services and include marketing, legal and
finance services and the development of
new and significant improvements in
products or processes.
17. Price Realization - The impact of net price
changes excluding currency and new product
introductions. Price realization includes
geographic mix of sales, which is the
impact of changes in the relative
weighting of sales prices between
geographic regions.
18. Resource Industries - A segment primarily
responsible for supporting customers using
machinery in mining, quarry, waste and
material handling applications.
Responsibilities include business
strategy, product design, product
management and development, manufacturing,
marketing and sales and product support.
The product portfolio includes large
track-type tractors, large mining trucks,
hard rock vehicles, longwall miners,
electric rope shovels, draglines,
hydraulic shovels, track and rotary
drills, highwall miners, large wheel
loaders, off-highway trucks, articulated
trucks, wheel tractor scrapers, wheel
dozers, landfill compactors, soil
compactors, material handlers, continuous
miners, scoops and haulers, hardrock
continuous mining systems, select work
tools, machinery components, electronics
and control systems and related parts. In
addition to equipment, Resource Industries
also develops and sells technology
products and services to provide customers
fleet management, equipment management
analytics and autonomous machine
capabilities. Resource Industries also
manages areas that provide services to
other parts of the company, including
integrated manufacturing and research and
development.
19. Restructuring Costs - Primarily costs for
employee separation, long-lived asset
impairments and contract terminations.
These costs are included in Other
Operating (Income) Expenses. Restructuring
costs also include other exit-related
costs primarily for accelerated
depreciation, inventory write-downs,
equipment relocation and project
management costs and also LIFO inventory
decrement benefits from inventory
liquidations at closed facilities
(primarily included in Cost of goods
sold).
20. Sales Volume - With respect to sales and
revenues, sales volume represents the
impact of changes in the quantities sold
for Machinery, Energy & Transportation as
well as the incremental revenue impact of
new product introductions, including
emissions-related product updates. With
respect to operating profit, sales volume
represents the impact of changes in the
quantities sold for Machinery, Energy &
Transportation combined with product mix
as well as the net operating profit impact
of new product introductions, including
emissions-related product updates.
Product mix represents the net operating
profit impact of changes in the relative
weighting of Machinery, Energy &
Transportation sales with respect to total
sales. The impact of sales volume on
segment profit includes inter-segment
sales.
21. Variable Manufacturing Costs - Represents
volume-adjusted costs excluding the
impact of currency and restructuring costs
(see definition above). 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.
NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures Caterpillar uses have no standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management does not intend these items to be considered in isolation or substituted for the related GAAP measure.
Adjusted Profit per Share
Caterpillar believes it is important to separately quantify the profit impact of two special items in order for the company's results to be meaningful to readers. These items consist of restructuring costs, which are incurred in the current year to generate longer-term benefits, and a gain on sale of an equity investment. Caterpillar does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measure will provide useful perspective on underlying business results and trends, and a means to assess the company's period-over-period results.
Reconciliations of adjusted profit per share to the most directly comparable GAAP measure, diluted profit per share, are as follows:
Third Quarter 2017 Outlook
------------- ------------
2016 2017 Previous (1) Current (2)
---- ---- ----------- ----------
Profit per
share $0.48 $1.77 $3.50 $4.60
Per share
restructuring
costs(3) $0.37 $0.18 $1.59 $1.74
Per share
gain on sale
of equity
investment4 - - ($0.09) ($0.09)
Adjusted
profit per
share $0.85 $1.95 $5.00 $6.25
1 2017 sales and revenues outlook in a range of $42 billion to $44 billion (as of July 25, 2017). Profit per share at midpoint.
2 2017 sales and revenues outlook of about $44 billion.
3 At estimated annual tax rate based on full-year outlook
for per share restructuring costs at statutory tax rates.
Third-quarter 2017 and current 2017 outlook at estimated
annual rate of 20 percent. Previous 2017 outlook at
estimated annual rate of 22 percent. 2017 outlook also
includes $15 million increase to prior year taxes related
to non-U.S. restructuring costs recognized in the first
quarter of 2017. Third-quarter 2017 includes an
unfavorable interim adjustment of $0.06 per share
resulting from the difference in the estimated annual tax
rate for consolidated reporting of 32 percent and the
estimated annual tax rate for profit per share excluding
restructuring costs, gain on sale of equity investment and
discrete items of 29 percent.
4 At U.S. statutory tax rate of 35 percent.
Machinery, Energy & Transportation
Caterpillar defines Machinery, Energy & Transportation as it is presented in the supplemental data as Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis. Machinery, Energy & Transportation information relates to the design, manufacture and marketing of Caterpillar 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. The company also believes this presentation will assist readers in understanding Caterpillar's business. Pages 17-25 reconcile Machinery, Energy & Transportation with Financial Products on the equity basis to Caterpillar Inc. consolidated financial information.
Caterpillar's latest financial results and outlook are also available via:
Telephone: 800-228-7717 (Inside the United States and Canada)
858-764-9492 (Outside the United States and Canada)
Internet:
http://www.caterpillar.com/en/investors.html
http://www.caterpillar.com/en/investors/quarterly-results.html (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 Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Sales and revenues:
Sales of Machinery, Energy &
Transportation $10,713 $8,463 $30,482 $26,888
Revenues of Financial Products 700 697 2,084 2,075
Total sales and revenues 11,413 9,160 32,566 28,963
Operating costs:
Cost of goods sold 7,633 6,527 22,160 20,768
Selling, general and
administrative expenses 1,237 992 3,571 3,203
Research and development
expenses 455 453 1,326 1,429
Interest expense of Financial
Products 163 147 484 447
Other operating (income)
expenses 348 560 1,780 1,356
Total operating costs 9,836 8,679 29,321 27,203
Operating profit 1,577 481 3,245 1,760
Interest expense excluding
Financial Products 118 126 362 385
Other income (expense) 64 28 88 112
Consolidated profit before taxes 1,523 383 2,971 1,487
Provision (benefit) for income
taxes 470 96 921 372
Profit of consolidated
companies 1,053 287 2,050 1,115
Equity in profit (loss) of
unconsolidated affiliated
companies 8 (4) 8 (7)
Profit of consolidated and affiliated companies 1,061 283 2,058 1,108
Less: Profit (loss) attributable to noncontrolling interests 2 - 5 4
Profit (1) $1,059 $283 $2,053 $1,104
====== ==== ====== ======
Profit per common share $1.79 $0.48 $3.48 $1.89
Profit per common share - diluted (2) $1.77 $0.48 $3.44 $1.88
Weighted-average common shares
outstanding (millions)
- Basic 592.9 584.7 590.3 583.8
- Diluted (2) 600.1 589.6 596.5 588.7
Cash dividends declared per common share $ - $ - $1.55 $1.54
(1) Profit
attributable
to common
shareholders.
Diluted by
assumed
exercise of
stock-based
compensation
awards using
the treasury
(2) stock method.
Caterpillar Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
(Millions of dollars)
September 30, December 31,
2017 2016
Assets
Current assets:
Cash and short-
term investments $9,591 $7,168
Receivables -
trade and other 6,691 5,981
Receivables -
finance 8,984 8,522
Prepaid expenses
and other current
assets 1,707 1,682
Inventories 10,212 8,614
------ -----
Total current assets 37,185 31,967
Property, plant and
equipment - net 14,187 15,322
Long-term
receivables - trade
and other 969 1,029
Long-term
receivables -
finance 13,192 13,556
Noncurrent deferred
and refundable
income taxes 2,845 2,790
Intangible assets 2,175 2,349
Goodwill 6,196 6,020
Other assets 1,811 1,671
Total assets $78,560 $74,704
======= =======
Liabilities
Current liabilities:
Short-term
borrowings:
--Machinery, Energy &
Transportation $11 $209
-- Financial Products 5,459 7,094
Accounts payable 6,113 4,614
Accrued expenses 3,114 3,003
Accrued wages,
salaries and
employee benefits 2,333 1,296
Customer advances 1,510 1,167
Dividends payable - 452
Other current
liabilities 1,744 1,635
Long-term debt
due within one
year:
--Machinery, Energy &
Transportation 5 507
-- Financial Products 5,614 6,155
----- -----
Total current
liabilities 25,903 26,132
Long-term debt due
after one year:
--Machinery, Energy &
Transportation 8,820 8,436
-- Financial Products 16,015 14,382
Liability for
postemployment
benefits 8,973 9,357
Other liabilities 3,152 3,184
Total liabilities 62,863 61,491
------ ------
Shareholders' equity
Common stock 5,460 5,277
Treasury stock (17,130) (17,478)
Profit employed in
the business 28,530 27,377
Accumulated other
comprehensive income
(loss) (1,233) (2,039)
Noncontrolling
interests 70 76
Total shareholders' equity 15,697 13,213
------ ------
Total liabilities and shareholders' equity $78,560 $74,704
======= =======
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Nine Months Ended
September 30,
2017 2016
Cash flow from operating activities:
Profit of
consolidated
and affiliated
companies $2,058 $1,108
Adjustments for
non-cash
items:
Depreciation and amortization 2,153 2,255
Other 592 640
Changes in
assets and
liabilities,
net of
acquisitions
and
divestitures:
Receivables - trade and other (455) 1,128
Inventories (1,489) 331
Accounts payable 1,371 (163)
Accrued expenses 121 (153)
Accrued wages, salaries and
employee benefits 962 (727)
Customer advances 310 (24)
Other assets - net (137) (141)
Other liabilities - net (325) (279)
---- ----
Net cash provided by (used for) operating
activities 5,161 3,975
----- -----
Cash flow from investing activities:
Capital
expenditures -
excluding
equipment
leased to
others (566) (807)
Expenditures for
equipment
leased to
others (1,071) (1,393)
Proceeds from
disposals of
leased assets
and property,
plant and
equipment 864 572
Additions to
finance
receivables (8,246) (6,911)
Collections of
finance
receivables 8,532 6,968
Proceeds from
sale of finance
receivables 98 55
Investments and
acquisitions
(net of cash
acquired) (47) (72)
Proceeds from
sale of
businesses and
investments
(net of cash
sold) 93 -
Proceeds from
sale of
securities 431 304
Investments in
securities (594) (339)
Other - net 38 5
Net cash provided by (used for) investing
activities (468) (1,618)
---- ------
Cash flow from financing activities:
Dividends paid (1,367) (1,348)
Distribution to
noncontrolling
interests (7) (8)
Common stock
issued,
including
treasury shares
reissued 353 (54)
Proceeds from
debt issued
(original
maturities
greater than
three months) 7,334 4,430
Payments on debt
(original
maturities
greater than
three months) (6,220) (5,602)
Short-term
borrowings -
net (original
maturities
three months or
less) (2,403) (111)
Net cash provided by (used for) financing
activities (2,310) (2,693)
------ ------
Effect of exchange rate changes on cash 40 (11)
--- ---
Increase (decrease) in cash and short-term
investments 2,423 (347)
Cash and short-term investments at beginning
of period 7,168 6,460
----- -----
Cash and short-term investments at
end of period $9,591 $6,113
====== ======
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 September 30, 2017
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Products Adjustments
Transportation (1)
---
Sales and revenues:
Sales of Machinery, Energy &
Transportation $10,713 $10,713 $ - $ -
Revenues of Financial Products 700 - 793 (93) (2)
Total sales and revenues 11,413 10,713 793 (93)
Operating costs:
Cost of goods sold 7,633 7,633 - -
Selling, general and administrative
expenses 1,237 1,067 173 (3) (3)
Research and development expenses 455 455 - -
Interest expense of Financial
Products 163 - 169 (6) 4
Other operating (income) expenses 348 51 303 (6) (3)
---
Total operating costs 9,836 9,206 645 (15)
Operating profit 1,577 1,507 148 (78)
Interest expense excluding Financial
Products 118 143 - (25) 4
Other income (expense) 64 (22) 33 53 5
---
Consolidated profit before taxes 1,523 1,342 181 -
Provision (benefit) for income taxes 470 413 57 -
Profit of consolidated companies 1,053 929 124 -
Equity in profit (loss) of
unconsolidated affiliated companies 8 8 - -
Equity in profit of Financial
Products' subsidiaries - 122 - (122) 6
----
Profit of consolidated and affiliated
companies 1,061 1,059 124 (122)
Less: Profit (loss) attributable to
noncontrolling interests 2 - 2 -
--- --- --- ---
Profit 7 $1,059 $1,059 $122 $(122)
====== ====== ==== =====
(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,
Energy & Transportation.
--- -----------------------------------
(3) Elimination of net expenses recorded
by Machinery, Energy &
Transportation paid to Financial
Products.
--- -------------------------------------
4 Elimination of interest expense
recorded between Financial Products
and Machinery, Energy &
Transportation.
--- ------------------------------------
5 Elimination of discount recorded by
Machinery, Energy & Transportation
on receivables sold to Financial
Products and of interest earned
between Machinery, Energy &
Transportation and Financial
Products.
--- ------------------------------------
6 Elimination of Financial Products'
profit due to equity method of
accounting.
--- -----------------------------------
7 Profit attributable to common
shareholders.
--- ------------------------------
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Three Months Ended September 30, 2016
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation (1) Adjustments
Products
---
Sales and revenues:
Sales of Machinery, Energy &
Transportation $8,463 $8,463 $ - $ -
Revenues of Financial Products 697 - 768 (71) (2)
---
Total sales and revenues 9,160 8,463 768 (71)
Operating costs:
Cost of goods sold 6,527 6,528 - (1) (3)
Selling, general and administrative
expenses 992 858 138 (4) (3)
Research and development expenses 453 453 - -
Interest expense of Financial
Products 147 - 151 (4) 4
Other operating (income) expenses 560 258 308 (6) (3)
---
Total operating costs 8,679 8,097 597 (15)
Operating profit 481 366 171 (56)
Interest expense excluding Financial
Products 126 139 - (13) 4
Other income (expense) 28 (25) 10 43 5
---
Consolidated profit before taxes 383 202 181 -
Provision (benefit) for income taxes 96 36 60 -
Profit of consolidated companies 287 166 121 -
Equity in profit (loss) of
unconsolidated affiliated companies (4) (4) - -
Equity in profit of Financial
Products' subsidiaries - 120 - (120) 6
----
Profit of consolidated and affiliated
companies 283 282 121 (120)
Less: Profit (loss) attributable to
noncontrolling interests - (1) 1 -
--- --- --- ---
Profit 7 $283 $283 $120 $(120)
==== ==== ==== =====
(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,
Energy & Transportation.
--- -----------------------------------
(3) Elimination of net expenses recorded
by Machinery, Energy &
Transportation paid to Financial
Products.
--- -------------------------------------
4 Elimination of interest expense
recorded between Financial Products
and Machinery, Energy &
Transportation.
--- ------------------------------------
5 Elimination of discount recorded by
Machinery, Energy & Transportation
on receivables sold to Financial
Products and of interest earned
between Machinery, Energy &
Transportation and Financial
Products.
--- ------------------------------------
6 Elimination of Financial Products'
profit due to equity method of
accounting.
--- -----------------------------------
7 Profit attributable to common
shareholders.
--- ------------------------------
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 30, 2017
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Products
Transportation (1) Adjustments
----------------- -----------
Sales and revenues:
Sales of Machinery, Energy &
Transportation $30,482 $30,482 $ - $ -
Revenues of Financial Products 2,084 - 2,363 (279) (2)
----
Total sales and revenues 32,566 30,482 2,363 (279)
Operating costs:
Cost of goods sold 22,160 22,160 - -
Selling, general and administrative
expenses 3,571 3,145 438 (12) (3)
Research and development expenses 1,326 1,326 - -
Interest expense of Financial
Products 484 - 499 (15) 4
Other operating (income) expenses 1,780 890 906 (16) (3)
---
Total operating costs 29,321 27,521 1,843 (43)
Operating profit 3,245 2,961 520 (236)
Interest expense excluding Financial
Products 362 433 - (71) 4
Other income (expense) 88 (110) 33 165 5
---
Consolidated profit before taxes 2,971 2,418 553 -
Provision (benefit) for income taxes 921 750 171 -
Profit of consolidated companies 2,050 1,668 382 -
Equity in profit (loss) of
unconsolidated affiliated companies 8 8 - -
Equity in profit of Financial
Products' subsidiaries - 377 - (377) 6
----
Profit of consolidated and affiliated
companies 2,058 2,053 382 (377)
Less: Profit (loss) attributable to
noncontrolling interests 5 - 5 -
Profit 7 $2,053 $2,053 $377 $(377)
====== ====== ==== =====
(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,
Energy & Transportation.
--- -----------------------------------
(3) Elimination of net expenses recorded
by Machinery, Energy &
Transportation paid to Financial
Products.
--- -------------------------------------
4 Elimination of interest expense
recorded between Financial Products
and Machinery, Energy &
Transportation.
--- ------------------------------------
5 Elimination of discount recorded by
Machinery, Energy & Transportation
on receivables sold to Financial
Products and of interest earned
between Machinery, Energy &
Transportation and Financial
Products.
--- ------------------------------------
6 Elimination of Financial Products'
profit due to equity method of
accounting.
--- -----------------------------------
7 Profit attributable to common
shareholders.
--- ------------------------------
Caterpillar Inc.
Supplemental Data for Results of Operations
For the Nine Months Ended September 30, 2016
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Products Adjustments
Transportation (1)
---
Sales and revenues:
Sales of Machinery, Energy &
Transportation $26,888 $26,888 $ - $ -
Revenues of Financial Products 2,075 - 2,305 (230) (2)
----
Total sales and revenues 28,963 26,888 2,305 (230)
Operating costs:
Cost of goods sold 20,768 20,769 - (1) (3)
Selling, general and administrative
expenses 3,203 2,794 424 (15) (3)
Research and development expenses 1,429 1,429 - -
Interest expense of Financial
Products 447 - 458 (11) 4
Other operating (income) expenses 1,356 462 914 (20) (3)
---
Total operating costs 27,203 25,454 1,796 (47)
Operating profit 1,760 1,434 509 (183)
Interest expense excluding Financial
Products 385 422 - (37) 4
Other income (expense) 112 (72) 38 146 5
---
Consolidated profit before taxes 1,487 940 547 -
Provision (benefit) for income taxes 372 198 174 -
Profit of consolidated companies 1,115 742 373 -
Equity in profit (loss) of
unconsolidated affiliated companies (7) (7) - -
Equity in profit of Financial
Products' subsidiaries - 369 - (369) 6
----
Profit of consolidated and affiliated
companies 1,108 1,104 373 (369)
Less: Profit (loss) attributable to
noncontrolling interests 4 - 4 -
--- --- --- ---
Profit 7 $1,104 $1,104 $369 $(369)
====== ====== ==== =====
(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,
Energy & Transportation.
--- -----------------------------------
(3) Elimination of net expenses recorded
by Machinery, Energy &
Transportation paid to Financial
Products.
--- -------------------------------------
4 Elimination of interest expense
recorded between Financial Products
and Machinery, Energy &
Transportation.
--- ------------------------------------
5 Elimination of discount recorded by
Machinery, Energy & Transportation
on receivables sold to Financial
Products and of interest earned
between Machinery, Energy &
Transportation and Financial
Products.
--- ------------------------------------
6 Elimination of Financial Products'
profit due to equity method of
accounting.
--- -----------------------------------
7 Profit attributable to common
shareholders.
--- ------------------------------
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 30, 2017
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation (1) Products Adjustments
-----------
Cash flow from operating activities:
Profit of
consolidated and
affiliated
companies $2,058 $2,053 $382 $(377) (2)
Adjustments for
non-cash items:
Depreciation and amortization 2,153 1,507 646 -
Undistributed profit of Financial
Products - (377) - 377 (3)
Other 592 524 (111) 179 4
Changes in assets
and liabilities,
net of
acquisitions and
divestitures:
Receivables - trade and other (455) (324) 62 (193) 4,5
Inventories (1,489) (1,487) - (2) 4
Accounts payable 1,371 1,412 (33) (8) 4
Accrued expenses 121 118 3 -
Accrued wages, salaries and
employee benefits 962 943 19 -
Customer advances 310 310 - -
Other assets - net (137) 18 (54) (101) 4
Other liabilities - net (325) (533) 107 101 4
---- ---- --- --- ---
Net cash provided by (used for) operating
activities 5,161 4,164 1,021 (24)
----- ----- ----- ---
Cash flow from investing activities:
Capital
expenditures -
excluding
equipment leased
to others (566) (561) (6) 1 4
Expenditures for
equipment leased
to others (1,071) (13) (1,074) 16 4
Proceeds from
disposals of
leased assets
and property,
plant and
equipment 864 142 733 (11) 4
Additions to
finance
receivables (8,246) - (9,765) 1,519 5
Collections of
finance
receivables 8,532 - 10,194 (1,662) 5
Net intercompany
purchased
receivables - - (161) 161 5
Proceeds from
sale of finance
receivables 98 - 98 -
Net intercompany
borrowings - 165 (1,000) 835 6
Investments and
acquisitions
(net of cash
acquired) (47) (47) - -
Proceeds from
sale of
businesses and
investments (net
of cash sold) 93 93 - -
Proceeds from
sale of
securities 431 36 395 -
Investments in
securities (594) (165) (429) -
Other - net 38 17 21 -
Net cash provided by (used for) investing
activities (468) (333) (994) 859
---- ---- ---- ---
Cash flow from financing activities:
Dividends paid (1,367) (1,367) - -
Distribution to
noncontrolling
interests (7) (7) - -
Common stock
issued,
including
treasury shares
reissued 353 353 - -
Net intercompany
borrowings - 1,000 (165) (835) 6
Proceeds from
debt issued
(original
maturities
greater than
three months) 7,334 362 6,972 -
Payments on debt
(original
maturities
greater than
three months) (6,220) (506) (5,714) -
Short-term
borrowings -
net (original
maturities three
months or less) (2,403) (196) (2,207) -
Net cash provided by (used for) financing
activities (2,310) (361) (1,114) (835)
------ ---- ------ ----
Effect of exchange rate changes on cash 40 9 31 -
--- --- --- ---
Increase (decrease) in cash and short-term
investments 2,423 3,479 (1,056) -
Cash and short-term investments at beginning of
period 7,168 5,257 1,911 -
----- ----- ----- ---
Cash and short-term investments at
end of period $9,591 $8,736 $855 $ -
====== ====== ==== === ===
(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) Elimination of 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 Financial Products' cash flow activity from investing to operating for receivables
that arose from the sale of inventory.
--- -------------------------------------------------------------------------------------------------------
6 Elimination of net proceeds and payments to/from Machinery, Energy & Transportation and Financial
Products.
--- --------------------------------------------------------------------------------------------------
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Nine Months Ended September 30, 2016
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Products Adjustments
Transportation (1)
---
Cash flow from operating activities:
Profit of
consolidated and
affiliated
companies $1,108 $1,104 $373 $(369) (2)
Adjustments for
non-cash items:
Depreciation and amortization 2,255 1,591 664 -
Undistributed profit of Financial
Products - (362) - 362 (3)
Other 640 503 (11) 148 4
Changes in assets
and liabilities,
net of
acquisitions and
divestitures:
Receivables - trade and other 1,128 252 42 834 4,5
Inventories 331 335 - (4) 4
Accounts payable (163) (130) 16 (49) 4
Accrued expenses (153) (93) (60) -
Accrued wages, salaries and
employee benefits (727) (713) (14) -
Customer advances (24) (24) - -
Other assets - net (141) (278) 102 35 4
Other liabilities - net (279) (390) 146 (35) 4
---- ---- --- --- ---
Net cash provided by (used for) operating
activities 3,975 1,795 1,258 922
----- ----- ----- ---
Cash flow from investing activities:
Capital
expenditures -
excluding
equipment leased
to others (807) (802) (6) 1 4
Expenditures for
equipment leased
to others (1,393) (56) (1,377) 40 4
Proceeds from
disposals of
leased assets
and property,
plant and
equipment 572 89 510 (27) 4
Additions to
finance
receivables (6,911) - (8,888) 1,977 5
Collections of
finance
receivables 6,968 - 9,308 (2,340) 5
Net intercompany
purchased
receivables - - 580 (580) 5
Proceeds from
sale of finance
receivables 55 - 55 -
Net intercompany
borrowings - (716) (999) 1,715 6
Investments and
acquisitions
(net of cash
acquired) (72) (72) - -
Proceeds from
sale of
securities 304 25 279 -
Investments in
securities (339) (22) (317) -
Other - net 5 15 (17) 7 8
---
Net cash provided by (used for) investing
activities (1,618) (1,539) (872) 793
------ ------ ---- ---
Cash flow from financing activities:
Dividends paid (1,348) (1,348) (7) 7 7
Distribution to
noncontrolling
interests (8) (8) - -
Common stock
issued,
including
treasury shares
reissued (54) (54) 7 (7) 8
Net intercompany
borrowings - 999 716 (1,715) 6
Proceeds from
debt issued
(original
maturities
greater than
three months) 4,430 6 4,424 -
Payments on debt
(original
maturities
greater than
three months) (5,602) (525) (5,077) -
Short-term
borrowings -
net (original
maturities three
months or less) (111) 254 (365) -
Net cash provided by (used for) financing
activities (2,693) (676) (302) (1,715)
------ ---- ---- ------
Effect of exchange rate changes on cash (11) (26) 15 -
--- --- --- ---
Increase (decrease) in cash and short-term
investments (347) (446) 99 -
Cash and short-term investments at beginning of
period 6,460 5,340 1,120 -
----- ----- ----- ---
Cash and short-term investments at
end of period $6,113 $4,894 $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) Elimination of 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 Financial Products' cash flow activity from investing to operating for receivables
that arose from the sale of inventory.
--- -------------------------------------------------------------------------------------------------------
6 Elimination of net proceeds and payments to/from Machinery, Energy & Transportation and Financial
Products.
--- --------------------------------------------------------------------------------------------------
7 Elimination of dividend from Financial Products to Machinery, Energy & Transportation.
--- --------------------------------------------------------------------------------------
8 Elimination of change in investment and common stock related to Financial Products.
--- -----------------------------------------------------------------------------------
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SOURCE Caterpillar Inc.
