Caterpillar Reports Second-Quarter 2018 Results
DEERFIELD, Ill., July 30, 2018 /PRNewswire/ --
Second Quarter
($ in billions except profit per share) 2018 2017
Sales and Revenues $14.0 $11.3
------------------ ----- -----
Profit Per Share $2.82 $1.35
---------------- ----- -----
Adjusted Profit Per Share $2.97 $1.49
-- Second-quarter sales and revenues up 24 percent
-- Profit per share doubled; adjusted profit per share nearly doubled
-- Raised full-year profit per share outlook
-- Repurchased $750 million of shares; increased quarterly dividend 10
percent
Caterpillar Inc. (NYSE: CAT) today announced second-quarter 2018 sales and revenues of $14.0 billion, compared with $11.3 billion in the second quarter of 2017, a 24 percent increase. Second-quarter 2018 profit per share of $2.82 was a second-quarter record. Profit per share was $1.35 in the second quarter of 2017. Adjusted profit per share in the second quarter of 2018 was $2.97, compared with second-quarter 2017 adjusted profit per share of $1.49.
During the second quarter of 2018, Machinery, Energy & Transportation (ME&T) operating cash flow was $2.1 billion, and the company repurchased $750 million of Caterpillar common stock. In June 2018, the board of directors approved an increase to the quarterly dividend of 10 percent to $0.86 per share. The second quarter of 2018 ended with an enterprise cash balance of $8.7 billion.
"Caterpillar delivered record second-quarter profit per share," said Caterpillar CEO Jim Umpleby. "Our team is doing a great job executing our strategy for profitable growth, focusing on operational excellence, expanded offerings and services."
2018 Outlook
The company is raising its 2018 profit per share outlook to a range of $10.50 to $11.50. Excluding restructuring costs of about $400 million, the company expects adjusted profit per share to be in a range of $11.00 to $12.00. The prior profit per share outlook range was $9.75 to $10.75, and the adjusted profit per share outlook range was $10.25 to $11.25.
"Based on outstanding results in the first half of the year and continued strength in many of our end markets, Caterpillar is again raising our profit outlook for 2018. We remain focused on operational excellence, cost discipline and investing for long-term profitable growth," said Umpleby.
Sales and revenues - Most end markets continue to improve, order rates are healthy, and the backlog remained solid in the quarter. For certain applications, particularly in oil and gas and mining, the company is seeing strong demand and taking orders for delivery well into 2019.
Operating profit - The company is raising the outlook range primarily due to the continued strength in many end markets. Recently imposed tariffs are expected to impact material costs in the second half of the year by approximately $100 million to $200 million, and the company expects supply chain challenges to continue to pressure freight costs. However, the company intends to largely offset these impacts through announced mid-year price increases and using the Operating & Execution Model to further drive operational excellence and structural cost discipline.
The outlook does not include a mark-to-market gain or loss for remeasurement of pension and other postemployment benefit (OPEB) plans, changes to provisional estimates recorded in 2017 for U.S. tax reform, or any impact from future geopolitical risks, including increased trade restrictions above those currently in place.
Share Repurchase; Authorization for New $10 Billion Share Repurchase Program
In January 2014, the board of directors authorized the repurchase of $10.0 billion of Caterpillar common stock. The current program expires at the end of this year. Under this authorization, the company repurchased $1.25 billion in common stock in the first half of 2018, of which $750 million was repurchased in the second quarter. As of June 30, 2018, $4.2 billion remained on the current authorization. The company currently expects share repurchases during the second half of 2018 to be in a similar range as the first half, but the amount could vary depending upon market conditions and investing priorities. Aligned with the cash deployment strategy, the company plans to be in the market for share repurchases on a fairly consistent basis.
In July 2018, the board of directors authorized the repurchase of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration date.
Notes:
-- Glossary of terms is included on pages 13-14; first occurrence of terms
shown in bold italics.
-- Information on non-GAAP financial measures is included on page 15.
-- Caterpillar will conduct a teleconference and live webcast, with a slide
presentation, beginning at 10 a.m. Central Time on Monday, July 30,
2018, to discuss its 2018 second-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 2017 sales and revenues of $45.462 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) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; (vi) our ability to develop, produce and market quality products that meet our customers' needs; (vii) the impact of the highly competitive environment in which we operate on our sales and pricing; (viii) information technology security threats and computer crime; (ix) additional restructuring costs or a failure to realize anticipated savings or benefits from past or future cost reduction actions; (x) failure to realize all of the anticipated benefits from initiatives to increase our productivity, efficiency and cash flow and to reduce costs; (xi) inventory management decisions and sourcing practices of our dealers and our OEM customers; (xii) a failure to realize, or a delay in realizing, all of the anticipated benefits of our acquisitions, joint ventures or divestitures; (xiii) union disputes or other employee relations issues; (xiv) adverse effects of unexpected events including natural disasters; (xv) disruptions or volatility in global financial markets limiting our sources of liquidity or the liquidity of our customers, dealers and suppliers; (xvi) 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; (xvii) our Financial Products segment's risks associated with the financial services industry; (xviii) changes in interest rates or market liquidity conditions; (xix) an increase in delinquencies, repossessions or net losses of Cat Financial's customers; (xx) currency fluctuations; (xxi) our or Cat Financial's compliance with financial and other restrictive covenants in debt agreements; (xxii) increased pension plan funding obligations; (xxiii) alleged or actual violations of trade or anti-corruption laws and regulations; (xxiv) additional tax expense or exposure, including the impact of U.S. tax reform; (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
Second Quarter 2018 vs. Second Quarter 2017
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 2Q 2018 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Sales and Revenues between the second quarter of 2017 (at left) and the second quarter of 2018 (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.
Total sales and revenues were $14.011 billion in the second quarter of 2018, an increase of $2.680 billion, or 24 percent, compared with $11.331 billion in the second quarter of 2017. The increase was primarily due to higher sales volume driven by improved demand across the three primary segments, with the largest increase in Construction Industries. Sales were also higher due to currency impacts, primarily from a stronger euro and Chinese yuan.
Sales and Revenues by Geographic Region
North Latin External Sales Total Sales
America America EAME Asia/Pacific and Revenues Inter-Segment and Revenues
(Millions of dollars) $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg $ % Chg
--- ----- --- ----- --- ----- --- ----- --- ----- --- ----- --- -----
Second Quarter 2018
-------------------
Construction Industries $2,739 18% $392 8% $1,171 21% $1,835 43% $6,137 24% $35 21% $6,172 24%
Resource Industries 804 31% 394 32% 569 44% 664 47% 2,431 38% 95 23% 2,526 38%
Energy & Transportation 2,582 30% 287 (8%) 1,153 7% 692 22% 4,714 20% 1,010 22% 5,724 20%
All Other Segments 17 70% 1 - 4 (64%) 19 73% 41 24% 83 (21%) 124 (10%)
Corporate Items and Eliminations (40) (3) - (1) (44) (1,223) (1,267)
--- --- --- --- --- ------ ------
Machinery, Energy & Transportation $6,102 25% $1,071 10% $2,897 18% $3,209 39% $13,279 25% - - $13,279 25%
Financial Products Segment $537 6% $71 (10%) $101 - $120 32% $829 7% - - $829 7%
Corporate Items and Eliminations (57) (11) (7) (22) (97) - (97)
--- --- --- --- --- --- ---
Financial Products Revenues $480 6% $60 (6%) $94 (2%) $98 26% $732 6% - - $732 6%
Consolidated Sales and Revenues $6,582 23% $1,131 9% $2,991 18% $3,307 38% $14,011 24% - - $14,011 24%
====== ====== ====== ====== ======= === =======
Second Quarter 2017
-------------------
Construction Industries $2,318 $364 $964 $1,284 $4,930 $29 $4,959
Resource Industries 612 299 396 452 1,759 77 1,836
Energy & Transportation 1,982 312 1,079 568 3,941 827 4,768
All Other Segments 10 1 11 11 33 105 138
Corporate Items and Eliminations (22) - (2) - (24) (1,038) (1,062)
--- --- --- --- --- ------ ------
Machinery, Energy & Transportation $4,900 $976 $2,448 $2,315 $10,639 - $10,639
Financial Products Segment $505 $79 $101 $91 $776 - $776
Corporate Items and Eliminations (51) (15) (5) (13) (84) - (84)
--- --- --- --- --- --- ---
Financial Products Revenues $454 $64 $96 $78 $692 - $692
Consolidated Sales and Revenues $5,354 $1,040 $2,544 $2,393 $11,331 - $11,331
====== ====== ====== ====== ======= === =======
Sales and Revenues by Segment
Inter-
Second Sales Price Segment / Second $ %
(Millions of dollars) Quarter 2017 Volume Realization Currency Other Quarter 2018 Change Change
------------ ------ ----------- -------- ----- ------------ ------ ------
Construction Industries $4,959 $1,126 $(68) $149 $6 $6,172 $1,213 24%
Resource Industries 1,836 565 94 13 18 2,526 690 38%
Energy & Transportation 4,768 641 64 68 183 5,724 956 20%
All Other Segments 138 6 - 2 (22) 124 (14) (10%)
Corporate Items and Eliminations (1,062) (21) 1 - (185) (1,267) (205)
------ --- --- --- ---- ------ ----
Machinery, Energy &
Transportation $10,639 $2,317 $91 $232 $ - $13,279 $2,640 25%
Financial Products Segment $776 $ - $ - $ - $53 $829 $53 7%
Corporate Items and Eliminations (84) - - - (13) (97) (13)
--- --- --- --- --- --- ---
Financial Products Revenues $692 $ - $ - $ - $40 $732 $40 6%
Consolidated Sales and Revenues $11,331 $2,317 $91 $232 $40 $14,011 $2,680 24%
======= ====== === ==== === ======= ======
Consolidated Operating Profit
Consolidated Operating Profit Comparison
Second Quarter 2018 vs. Second Quarter 2017
To access this chart, go to http://www.caterpillar.com/en/investors/quarterly-results.html for the downloadable version of Caterpillar 2Q 2018 earnings.
The chart above graphically illustrates reasons for the change in Consolidated Operating Profit between the second quarter of 2017 (at left) and the second quarter of 2018 (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 second quarter of 2018 was $2.167 billion, compared to $1.184 billion in the second quarter of 2017. The increase of $983 million was mostly due to higher sales volume. Favorable price realization was partially offset by higher manufacturing costs.
Manufacturing costs were higher due to increased freight and material costs, partially offset by lower warranty expense. Freight costs were unfavorable primarily due to supply chain inefficiencies as the industry responds to strong global demand. Material costs were higher primarily due to increases in steel prices.
Lower operating profit from Financial Products and slightly higher selling, general and administrative (SG&A) and research and development (R&D) expenses were partially offset by a decrease in restructuring costs.
Profit by Segment
Second Second $ %
(Millions
of
dollars) Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Construction
Industries $1,154 $900 $254 28%
Resource
Industries 411 99 312 315%
Energy
&
Transportation 1,012 694 318 46%
All
Other
Segments 23 (19) 42
Corporate
Items
and
Eliminations (466) (589) 123
---- ---- ---
Machinery,
Energy
&
Transportation $2,134 $1,085 $1,049 97%
Financial
Products
Segment $134 $191 $(57) (30%)
Corporate
Items
and
Eliminations (5) (5) -
--- --- ---
Financial
Products $129 $186 $(57) (31%)
Consolidating
Adjustments (96) (87) (9)
Consolidated
Operating
Profit $2,167 $1,184 $983 83%
====== ====== ====
Other Profit/Loss Items
-- Other income/expense in the second quarter of 2018 was income of $121
million, compared with income of $96 million in the second quarter of
2017. The favorable change was primarily a result of lower currency
translation and hedging net losses, the impact from pension and OPEB
plans and other miscellaneous items, mostly offset by the absence of a
pretax gain of $85 million on the sale of Caterpillar's equity
investment in IronPlanet in the second quarter of 2017.
-- The provision for income taxes in the second quarter of 2018 reflected
an estimated annual tax rate of 24 percent, compared to 32 percent for
the second quarter of 2017, excluding the discrete items discussed in
the following paragraph. The decrease was primarily due to the reduction
in the U.S. corporate tax rate beginning January 1, 2018, along with
other changes in the geographic mix of profits from a tax perspective.
The provision for income taxes in the second quarter of 2018 also
included a $25 million benefit for the release of a valuation allowance
against the deferred tax assets of a non-U.S. subsidiary. In addition, a
discrete tax benefit of $9 million was recorded in the second quarter of
2018, compared to $10 million in the second quarter of 2017, for the
settlement of stock-based compensation awards with associated tax
deductions in excess of cumulative U.S. GAAP compensation expense.
Global Workforce
Caterpillar worldwide, full-time employment was about 101,600 at the end of the second quarter of 2018. The increase of about 6,800 full-time employees from the end of the second quarter of 2017 was primarily due to an increase in production employment to support higher volumes. The flexible workforce increased by about 3,300, also primarily due to higher production volumes. In total, the global workforce increased by about 10,100 from the end of the second quarter of 2017.
June 30
-------
2018 2017 Increase
---- ---- --------
Full-time employment 101,600 94,800 6,800
Flexible workforce 19,700 16,400 3,300
------ ------ -----
Total 121,300 111,200 10,100
======= ======= ======
Geographic summary
------------------
U.S. workforce 52,900 48,500 4,400
Non-U.S. workforce 68,400 62,700 5,700
------ ------ -----
Total 121,300 111,200 10,100
======= ======= ======
CONSTRUCTION INDUSTRIES
(Millions of dollars)
Segment Sales
Second Sales Price Currency Inter- Second $ %
Quarter 2017 Volume Realization Segment Quarter 2018 Change Change
------------ ------ ----------- ------- ------------ ------ ------
Total Sales $4,959 $1,126 ($68) $149 $6 $6,172 $1,213 24%
Sales by Geographic Region
Second Second $ %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
North America $2,739 $2,318 $421 18%
Latin America 392 364 28 8%
EAME 1,171 964 207 21%
Asia/Pacific 1,835 1,284 551 43%
External Sales $6,137 $4,930 $1,207 24%
Inter-segment 35 29 6 21%
Total Sales $6,172 $4,959 $1,213 24%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Segment Profit $1,154 $900 $254 28%
Segment Profit
Margin 18.7% 18.1% 0.6 pts
Construction Industries' total sales were $6.172 billion in the second quarter of 2018, compared with $4.959 billion in the second quarter of 2017. The increase was mostly due to higher sales volume for construction equipment. Sales were also higher due to currency impacts, primarily from a stronger Chinese yuan and euro, partially offset by unfavorable price realization.
Sales increased in all regions.
-- In North America, the sales increase was mostly due to higher demand for
construction equipment, primarily due to oil and gas, including
pipelines, and non-residential construction activities. The sales
increase was partially offset by unfavorable price realization.
-- Although construction activities remained weak in Latin America, sales
were slightly higher in the region.
-- Sales increased in EAME primarily due to higher demand and the favorable
impact of currency, mostly from a stronger euro. Higher demand was
driven by increased construction activities across several countries in
the region.
-- Sales in Asia/Pacific were higher across the region, with most of the
improved demand in China stemming from increased building construction
and infrastructure investment. The favorable impact of a stronger
Chinese yuan also contributed to increased sales.
Construction Industries' profit was $1.154 billion in the second quarter of 2018, compared with $900 million in the second quarter of 2017. The increase in profit was a result of higher sales volume, partially offset by unfavorable price realization, higher material and freight costs, and increased SG&A/R&D expenses.
RESOURCE INDUSTRIES
(Millions of dollars)
Segment Sales
Second Sales Price Currency Inter- Second $ %
Quarter 2017 Volume Realization Segment Quarter 2018 Change Change
------------ ------ ----------- ------- ------------ ------ ------
Total Sales $1,836 $565 $94 $13 $18 $2,526 $690 38%
Sales by Geographic Region
Second Second $ %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
North America $804 $612 $192 31%
Latin America 394 299 95 32%
EAME 569 396 173 44%
Asia/Pacific 664 452 212 47%
External Sales $2,431 $1,759 $672 38%
Inter-segment 95 77 18 23%
Total Sales $2,526 $1,836 $690 38%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Segment Profit $411 $99 $312 315%
Segment Profit
Margin 16.3% 5.4% 10.9 pts
Resource Industries' total sales were $2.526 billion in the second quarter of 2018, an increase of $690 million from the second quarter of 2017. The increase was primarily due to higher demand for equipment across all regions. Commodity prices remained strong in the second quarter of 2018, and the company saw mining customers invest in current fleets and mine expansions, resulting in higher equipment sales. However, the company believes mining customers have not yet commenced full-scale fleet replacements. Increased mine production and higher machine utilization resulted in improved aftermarket parts sales. In addition, global economic growth contributed to stronger sales for heavy construction equipment. Favorable price realization also contributed to increased sales.
Resource Industries' profit was $411 million in the second quarter of 2018, compared with $99 million in the second quarter of 2017. The improvement was mostly due to higher sales volume and favorable price realization. Manufacturing costs were favorable primarily due to lower warranty expense, partially offset by higher freight costs. The favorable warranty was mostly driven by the absence of a customer warranty program that occurred in the second quarter of 2017.
ENERGY & TRANSPORTATION
(Millions of dollars)
Segment Sales
Second Sales Price Currency Inter- Second $ %
Quarter 2017 Volume Realization Segment Quarter 2018 Change Change
------------ ------ ----------- ------- ------------ ------ ------
Total Sales $4,768 $641 $64 $68 $183 $5,724 $956 20%
Sales by Application
Second Second $ %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Oil and Gas $1,467 $1,053 $414 39%
Power Generation 992 877 115 13%
Industrial 969 884 85 10%
Transportation 1,286 1,127 159 14%
External Sales $4,714 $3,941 $773 20%
Inter-segment 1,010 827 183 22%
Total Sales $5,724 $4,768 $956 20%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Segment Profit $1,012 $694 $318 46%
Segment Profit Margin 17.7% 14.6% 3.1 pts
Energy & Transportation's total sales were $5.724 billion in the second quarter of 2018, compared with $4.768 billion in the second quarter of 2017. The increase was primarily due to higher sales volume across all applications. Favorable currency impacts, mostly from a stronger euro, and favorable price realization also contributed to the increase in sales.
-- Oil and Gas - Sales increased due to higher demand in North America for
gas compression, well servicing and production applications. Higher
energy prices and growth in U.S. onshore oil and gas drove increased
sales for reciprocating engines and related aftermarket parts. Sales in
North America were also positively impacted by the timing of turbine
project deliveries.
-- Power Generation - Sales improved mostly due to higher demand in EAME,
primarily from growth in the gas power generation market and favorable
currency impacts.
-- Industrial - Sales were higher in North America and Asia/Pacific due to
favorable economic conditions.
-- Transportation - Sales were higher for rail services, driven primarily
by acquisitions in Asia/Pacific and EAME, and increased rail traffic in
North America. Marine sales were higher in EAME primarily due to
activity in the cruise sector and favorable currency.
Energy & Transportation's profit was $1.012 billion in the second quarter of 2018, compared with $694 million in the second quarter of 2017. The improvement was due to higher sales volume, favorable price realization and lower short-term incentive compensation expense. This was partially offset by higher freight costs and increased spending for targeted investments.
FINANCIAL PRODUCTS SEGMENT
(Millions of dollars)
Revenues by Geographic Region
Second Second $ %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
North America $537 $505 $32 6%
Latin America 71 79 (8) (10%)
EAME 101 101 - -
Asia/Pacific 120 91 29 32%
Total $829 $776 $53 7%
Segment Profit
Second Second %
Quarter 2018 Quarter 2017 Change Change
------------ ------------ ------ ------
Segment Profit $134 $191 ($57) (30%)
Financial Products' segment revenues were $829 million in the second quarter of 2018, an increase of $53 million, or 7 percent, from the second quarter of 2017. The increase was primarily due to higher average financing rates in North America and higher average earning assets in Asia/Pacific and North America, partially offset by lower intercompany lending activity in North America and lower average earning assets in Latin America.
Financial Products' segment profit was $134 million in the second quarter of 2018, compared with $191 million in the second quarter of 2017. The decrease was primarily due to an increase in the provision for credit losses at Cat Financial, partially offset by an increase in net yield on average earning assets and a favorable impact from higher average earning assets.
At the end of the second quarter of 2018, past dues at Cat Financial were 3.16 percent, compared with 2.71 percent at the end of the second quarter of 2017. Write-offs, net of recoveries, in the second quarter of 2018 were $80 million, compared with $26 million in the second quarter of 2017. The increase in write-offs, net of recoveries, was primarily driven by a small number of customers in the Cat Power Finance portfolio and recent collection experience in the Latin America portfolio.
As of June 30, 2018, Cat Financial's allowance for credit losses totaled $416 million, or 1.48 percent of finance receivables, compared with $403 million, or 1.45 percent of finance receivables at March 31, 2018. The allowance for credit losses at year-end 2017 was $365 million, or 1.33 percent of finance receivables.
Corporate Items and Eliminations
Expense for corporate items and eliminations was $471 million in the second quarter of 2018, a decrease of $123 million from the second quarter of 2017. Corporate items and eliminations include: restructuring costs; corporate-level expenses; timing differences, as some expenses are reported in segment profit on a cash basis; 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 was primarily due to lower restructuring costs and cost of sales methodology differences. Restructuring costs were $114 million in the second quarter of 2018, compared to $169 million in the second quarter of 2017.
QUESTIONS AND ANSWERS
Q1: Can you discuss changes in dealer
inventories during the second quarter
of 2018?
A: Dealer machine and engine inventories
increased about $100 million in the
second quarter of 2018, compared to a
decrease of about $300 million in the
second quarter of 2017. During the
first six months of 2018, dealer
machine and engine inventories
increased about $1.3 billion, compared
to a decrease of about $100 million in
the first six months of 2017.
Q2: Can you discuss changes to your order
backlog by segment?
A: At the end of the second quarter of
2018, the order backlog was $17.7
billion, about flat with the first
quarter of 2018. Energy &
Transportation's order backlog
increased, while Construction
Industries' order backlog decreased.
It is not uncommon for the
construction order backlog to decline
during the second-quarter selling
season. Resource Industries' order
backlog was about flat as increased
order rates were about offset by
increased production and sales.
Compared with the second quarter of
2017, the order backlog increased
about $2.9 billion with increases
across the three primary segments.
Q3: Can you comment on expense related to
your 2018 short-term incentive
compensation plans and the impact on
the 2018 outlook?
A: Short-term incentive compensation
expense is directly related to
financial and operational performance,
measured against targets set annually.
Second-quarter 2018 expense was about
$360 million, compared to second-
quarter 2017 expense of about $415
million.
For the full year of 2018, across the
current outlook range, short-term
incentive compensation expense is
expected to be about $1.4 billion,
nearly the same as 2017.
Q4: Can you give us an update on the
quality of Cat Financial's asset
portfolio? How are write-offs and
past dues performing?
A: Cat Financial's core asset portfolio
continues to perform well overall.
Write-offs, net of recoveries, were
$80 million for the second quarter of
2018, primarily driven by a small
number of customers in the Cat Power
Finance portfolio and recent
collection experience in the Latin
America portfolio.
At the end of the second quarter of
2018, past dues at Cat Financial were
3.16 percent, mostly impacted by
higher delinquencies in the Cat Power
Finance and Latin America portfolios.
This is below the second-quarter 10-
year historical average past dues of
3.52 percent.
Q5: First-half 2018 sales and revenues
were up 27 percent. Is this
significant ramp in demand impacting
availability?
A: The sharp increase in demand has led to
supply chain challenges. Although the
company continues to see improvements
in material flows, constraints remain
for some parts and components that are
impacting lead times and availability.
GLOSSARY OF TERMS
1. Adjusted Profit Per Share -Profit per
share excluding restructuring costs for
2018 and 2017. 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,
manufacturing of filters and fluids,
undercarriage, ground engaging tools,
fluid transfer products, precision seals,
rubber sealing and connecting components
primarily for Cat(R) products; parts
distribution; integrated logistics
solutions, 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 asphalt
pavers, backhoe loaders, compactors, cold
planers, compact track and multi-terrain
loaders, mini, small, medium and large
track excavators, forestry excavators,
feller bunchers, harvesters, knuckleboom
loaders, motor graders, pipelayers, road
reclaimers, site prep tractors, skidders,
skid steer loaders, telehandlers, small
and medium track-type tractors, track-
type loaders, utility vehicles, wheel
excavators, compact, small and medium
wheel loaders and related parts and work
tools.
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. EAME -A geographic region including
Europe, Africa, the Middle East and the
Commonwealth of Independent States (CIS).
7. Earning Assets -Assets consisting
primarily of total finance receivables net
of unearned income, plus equipment on
operating leases, less accumulated
depreciation at Cat Financial.
8. Energy & Transportation - A segment
primarily responsible for supporting
customers using reciprocating engines,
turbines, diesel-electric locomotives and
related parts across industries serving
Oil and Gas, Power Generation, Industrial
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
turbine machinery and integrated systems
and solutions 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.
9. 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. The
segment also earns revenues from
Machinery, Energy & Transportation, but
the related costs are not allocated to
operating segments. Financial Products
segment profit is determined on a pretax
basis and includes other income/expense
items.
10. Latin America -A geographic region
including Central and South American
countries and Mexico.
11. Machinery, Energy & Transportation (ME&T) -
Represents the aggregate total of
Construction Industries, Resource
Industries, Energy & Transportation, All
Other Segments and related corporate items
and eliminations.
12. 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.
13. Manufacturing Costs - Manufacturing costs
exclude the impacts of currency and
restructuring costs (see definition below)
and represent the volume-adjusted change
for variable costs and the absolute dollar
change for period manufacturing costs.
Variable manufacturing costs are defined
as having a direct relationship with the
volume of production. This includes
material costs, direct labor and other
costs that vary directly with production
volume such as freight, power to operate
machines and supplies that are consumed in
the manufacturing process. Period
manufacturing costs support production but
are defined as generally not having a
direct relationship to short-term changes
in volume. Examples include machinery and
equipment repair, depreciation on
manufacturing assets, facility support,
procurement, factory scheduling,
manufacturing planning and operations
management.
14. Pension and Other Postemployment Benefit
(OPEB) - The company's defined-benefit
pension and postretirement benefit plans.
15. 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.
16. Resource Industries - A segment primarily
responsible for supporting customers using
machinery in mining, quarry and
aggregates, 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, rotary drills, large
wheel loaders, off-highway trucks,
articulated trucks, wheel tractor
scrapers, wheel dozers, landfill
compactors, soil compactors, hard rock
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.
17. Restructuring Costs - Primarily costs for
employee separation, long-lived asset
impairments and contract terminations.
These costs are included in Other
operating (income) expenses except for
defined-benefit plan curtailment losses
and special termination benefits, which
are included in Other income (expense).
Restructuring costs also include other
exit-related costs primarily for
accelerated depreciation, inventory write-
downs, equipment relocation and project
management costs and LIFO inventory
decrement benefits from inventory
liquidations at closed facilities,
primarily included in Cost of goods sold.
18. 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 sales 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.
NON-GAAP FINANCIAL MEASURES
The following definitions are provided for the non-GAAP financial measures used in this report. These non-GAAP financial measures 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 as a substitute for the related GAAP measures.
Adjusted Profit Per Share
The company 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 in the second quarter of 2017. The company does not consider these items indicative of earnings from ongoing business activities and believes the non-GAAP measure provides investors with useful perspective on underlying business results and trends and aids with assessing 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:
Second Quarter 2018 Outlook
-------------- ------------
2017 2018 Previous (1) Current (2)
---- ---- ----------- ----------
Profit per share $1.35 $2.82 $9.75-$10.75 $10.50-$11.50
Per share restructuring costs(3) $0.23 $0.15 $0.50 $0.50
Per share gain on sale of equity investment4 ($0.09) - - -
Adjusted profit per share $1.49 $2.97 $10.25-$11.25 $11.00-$12.00
1 2018 profit per share outlook range as of April 24, 2018.
2 2018 profit per share outlook range as of July 30, 2018.
3 At estimated annual tax rate
based on full-year outlook for
per share restructuring costs
at statutory tax rates. 2018 at
estimated annual tax rate of 24
percent.
Second-quarter 2017 at
estimated annual tax rate of
about 22 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 19-24 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 Six Months Ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
Sales and revenues:
Sales of
Machinery,
Energy &
Transportation $13,279 $10,639 $25,429 $19,769
Revenues of
Financial
Products 732 692 1,441 1,384
Total sales and
revenues 14,011 11,331 26,870 21,153
Operating costs:
Cost of goods
sold 9,422 7,816 17,988 14,617
Selling,
general and
administrative
expenses 1,440 1,304 2,716 2,365
Research and
development
expenses 462 458 905 883
Interest
expense of
Financial
Products 182 162 348 321
Other operating
(income)
expenses 338 407 638 1,403
Total operating
costs 11,844 10,147 22,595 19,589
Operating profit 2,167 1,184 4,275 1,564
Interest
expense
excluding
Financial
Products 102 121 203 244
Other income
(expense) 121 96 248 128
Consolidated profit before taxes 2,186 1,159 4,320 1,448
Provision
(benefit) for
income taxes 490 361 962 451
Profit of
consolidated
companies 1,696 798 3,358 997
Equity in
profit (loss)
of
unconsolidated
affiliated
companies 9 5 14 -
Profit of consolidated and affiliated
companies 1,705 803 3,372 997
Less: Profit (loss) attributable to
noncontrolling interests (2) 1 - 3
Profit (1) $1,707 $802 $3,372 $994
====== ==== ====== ====
Profit per common share $2.86 $1.36 $5.65 $1.69
Profit per common share -
diluted (2) $2.82 $1.35 $5.56 $1.67
Weighted-average common shares
outstanding (millions)
- Basic 596.2 590.2 597.0 588.8
- Diluted(2) 604.2 595.4 606.1 594.4
Cash dividends declared per
common share $1.64 $1.55 $1.64 $1.55
(1) Profit
attributable
to common
shareholders.
(2) 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)
June 30, December 31,
2018 2017
Assets
Current assets:
Cash and short-term investments $8,654 $8,261
Receivables - trade and other 7,991 7,436
Receivables - finance 8,906 8,757
Prepaid expenses and other current assets 1,835 1,772
Inventories 11,255 10,018
------ ------
Total current assets 38,641 36,244
Property, plant and equipment - net 13,752 14,155
Long-term receivables - trade and other 1,084 990
Long-term receivables - finance 13,318 13,542
Noncurrent deferred and refundable income
taxes 1,626 1,693
Intangible assets 2,039 2,111
Goodwill 6,249 6,200
Other assets 2,278 2,027
Total assets $78,987 $76,962
======= =======
Liabilities
Current liabilities:
Short-term borrowings:
-- Machinery, Energy & Transportation $35 $1
-- Financial Products 6,185 4,836
Accounts payable 6,831 6,487
Accrued expenses 3,450 3,220
Accrued wages, salaries and employee
benefits 1,789 2,559
Customer advances 1,378 1,426
Dividends payable 511 466
Other current liabilities 1,871 1,742
Long-term debt due within one year:
-- Machinery, Energy & Transportation 9 6
-- Financial Products 6,241 6,188
----- -----
Total current liabilities 28,300 26,931
Long-term debt due after one year:
-- Machinery, Energy & Transportation 7,982 7,929
-- Financial Products 15,717 15,918
Liability for postemployment benefits 8,092 8,365
Other liabilities 3,954 4,053
Total liabilities 64,045 63,196
------ ------
Shareholders' equity
Common stock 5,746 5,593
Treasury stock (18,028) (17,005)
Profit employed in the business 28,657 26,301
Accumulated other comprehensive income
(loss) (1,496) (1,192)
Noncontrolling interests 63 69
Total shareholders' equity 14,942 13,766
------ ------
Total liabilities and shareholders' equity $78,987 $76,962
======= =======
Caterpillar Inc.
Condensed Consolidated Statement of Cash Flow
(Unaudited)
(Millions of dollars)
Six Months Ended
June 30,
2018 2017
Cash flow from operating activities:
Profit of consolidated and affiliated companies $3,372 $997
Adjustments for non-cash items:
Depreciation and amortization 1,367 1,430
Other 446 490
Changes in assets and liabilities, net of acquisitions and
divestitures:
Receivables - trade and other (703) (442)
Inventories (1,208) (688)
Accounts payable 545 1,113
Accrued expenses (31) 251
Accrued wages, salaries and employee benefits (768) 641
Customer advances (54) 374
Other assets - net 174 (280)
Other liabilities - net (57) 38
--- ---
Net cash provided by (used for) operating activities 3,083 3,924
----- -----
Cash flow from investing activities:
Capital expenditures - excluding equipment leased to
others (645) (371)
Expenditures for equipment leased to others (883) (753)
Proceeds from disposals of leased assets and property,
plant and equipment 539 563
Additions to finance receivables (6,143) (5,264)
Collections of finance receivables 5,405 5,508
Proceeds from sale of finance receivables 124 83
Investments and acquisitions (net of cash acquired) (348) (21)
Proceeds from sale of businesses and investments (net of
cash sold) 12 91
Proceeds from sale of securities 168 187
Investments in securities (318) (207)
Other - net 21 25
Net cash provided by (used for) investing activities (2,068) (159)
------ ----
Cash flow from financing activities:
Dividends paid (933) (906)
Common stock issued, including treasury shares reissued 256 83
Common shares repurchased (1,250) -
Proceeds from debt issued (original maturities greater
than three months) 4,307 4,868
Payments on debt (original maturities greater than three
months) (4,436) (4,228)
Short-term borrowings - net (original maturities three
months or less) 1,487 (505)
Other - net (4) (6)
Net cash provided by (used for) financing activities (573) (694)
---- ----
Effect of exchange rate changes on cash (68) 13
--- ---
Increase (decrease) in cash and short-term investments and restricted cash 374 3,084
Cash and short-term investments and restricted cash at beginning of period 8,320 7,199
----- -----
Cash and short-term investments and restricted cash at end of period $8,694 $10,283
====== =======
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 June 30, 2018
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation
(1) Products Adjustments
-----------
Sales and revenues:
Sales of Machinery, Energy &
Transportation $13,279 $13,279 $ - $ -
Revenues of Financial Products 732 - 849 (117) (2)
----
Total sales and revenues 14,011 13,279 849 (117)
Operating costs:
Cost of goods sold 9,422 9,422 - -
Selling, general and administrative
expenses 1,440 1,223 223 (6) (3)
Research and development expenses 462 462 - -
Interest expense of Financial
Products 182 - 191 (9) 4
Other operating (income) expenses 338 38 306 (6) (3)
---
Total operating costs 11,844 11,145 720 (21)
Operating profit 2,167 2,134 129 (96)
Interest expense excluding Financial
Products 102 111 - (9) 4
Other income (expense) 121 27 7 87 5
---
Consolidated profit before taxes 2,186 2,050 136 -
Provision (benefit) for income taxes 490 457 33 -
Profit of consolidated companies 1,696 1,593 103 -
Equity in profit (loss) of
unconsolidated affiliated companies 9 9 - -
Equity in profit of Financial
Products' subsidiaries - 98 - (98) 6
---
Profit of consolidated and affiliated
companies 1,705 1,700 103 (98)
Less: Profit (loss) attributable to
noncontrolling interests (2) (7) 5 -
--- --- --- ---
Profit 7 $1,707 $1,707 $98 $(98)
====== ====== === ====
(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 June 30, 2017
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation
(1) Products Adjustments
-----------
Sales and revenues:
Sales of Machinery, Energy &
Transportation $10,639 $10,639 $ - $ -
Revenues of Financial Products 692 - 793 (101) (2)
----
Total sales and revenues 11,331 10,639 793 (101)
Operating costs:
Cost of goods sold 7,816 7,816 - -
Selling, general and administrative
expenses 1,304 1,169 139 (4) (3)
Research and development expenses 458 458 - -
Interest expense of Financial
Products 162 - 167 (5) 4
Other operating (income) expenses 407 111 301 (5) (3)
---
Total operating costs 10,147 9,554 607 (14)
Operating profit 1,184 1,085 186 (87)
Interest expense excluding Financial
Products 121 146 - (25) 4
Other income (expense) 96 32 2 62 5
---
Consolidated profit before taxes 1,159 971 188 -
Provision (benefit) for income taxes 361 303 58 -
Profit of consolidated companies 798 668 130 -
Equity in profit (loss) of
unconsolidated affiliated companies 5 5 - -
Equity in profit of Financial
Products' subsidiaries - 129 - (129) 6
----
Profit of consolidated and affiliated
companies 803 802 130 (129)
Less: Profit (loss) attributable to
noncontrolling interests 1 - 1 -
--- --- --- ---
Profit 7 $802 $802 $129 $(129)
==== ==== ==== =====
(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 Six Months Ended June 30, 2018
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation
(1) Products Adjustments
--------------- -------- -----------
Sales and revenues:
Sales of Machinery, Energy &
Transportation $25,429 $25,429 $ - $ -
Revenues of Financial Products 1,441 - 1,660 (219) (2)
----
Total sales and revenues 26,870 25,429 1,660 (219)
Operating costs:
Cost of goods sold 17,988 17,988 - -
Selling, general and administrative
expenses 2,716 2,310 412 (6) (3)
Research and development expenses 905 905 - -
Interest expense of Financial
Products 348 - 364 (16) 4
Other operating (income) expenses 638 37 616 (15) (3)
---
Total operating costs 22,595 21,240 1,392 (37)
Operating profit 4,275 4,189 268 (182)
Interest expense excluding Financial
Products 203 223 - (20) 4
Other income (expense) 248 81 5 162 5
---
Consolidated profit before taxes 4,320 4,047 273 -
Provision (benefit) for income taxes 962 898 64 -
Profit of consolidated companies 3,358 3,149 209 -
Equity in profit (loss) of
unconsolidated affiliated companies 14 14 - -
Equity in profit of Financial
Products' subsidiaries - 200 - (200) 6
----
Profit of consolidated and affiliated
companies 3,372 3,363 209 (200)
Less: Profit (loss) attributable to
noncontrolling interests - (9) 9 -
Profit 7 $3,372 $3,372 $200 $(200)
====== ====== ==== =====
(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 Six Months Ended June 30, 2017
(Unaudited)
(Millions of dollars)
Supplemental Consolidating Data
-------------------------------
Machinery,
Consolidated Energy & Financial Consolidating
Transportation
(1) Products Adjustments
-----------
Sales and revenues:
Sales of Machinery, Energy &
Transportation $19,769 $19,769 $ - $ -
Revenues of Financial Products 1,384 - 1,570 (186) (2)
----
Total sales and revenues 21,153 19,769 1,570 (186)
Operating costs:
Cost of goods sold 14,617 14,617 - -
Selling, general and administrative
expenses 2,365 2,109 265 (9) (3)
Research and development expenses 883 883 - -
Interest expense of Financial
Products 321 - 330 (9) 4
Other operating (income) expenses 1,403 810 603 (10) (3)
---
Total operating costs 19,589 18,419 1,198 (28)
Operating profit 1,564 1,350 372 (158)
Interest expense excluding Financial
Products 244 290 - (46) 4
Other income (expense) 128 16 - 112 5
---
Consolidated profit before taxes 1,448 1,076 372 -
Provision (benefit) for income taxes 451 337 114 -
Profit of consolidated companies 997 739 258 -
Equity in profit (loss) of
unconsolidated affiliated companies - - - -
Equity in profit of Financial
Products' subsidiaries - 255 - (255) 6
----
Profit of consolidated and affiliated
companies 997 994 258 (255)
Less: Profit (loss) attributable to
noncontrolling interests 3 - 3 -
--- --- --- ---
Profit 7 $994 $994 $255 $(255)
==== ==== ==== =====
(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 Six Months Ended June 30, 2018
(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 $3,372 $3,363 $209 $(200) (2)
Adjustments for
non-cash items:
Depreciation and amortization 1,367 933 434 -
Undistributed profit of Financial
Products - (200) - 200 (3)
Other 446 197 61 188 4
Changes in assets
and liabilities,
net of
acquisitions and
divestitures:
Receivables - trade and other (703) 136 (74) (765) 4,5
Inventories (1,208) (1,186) - (22) 4
Accounts payable 545 570 (56) 31 4
Accrued expenses (31) (40) 9 -
Accrued wages, salaries and
employee benefits (768) (745) (23) -
Customer advances (54) (54) - -
Other assets - net 174 176 (10) 8 4
Other liabilities - net (57) (118) 69 (8) 4
--- ---- --- --- ---
Net cash provided by (used for) operating
activities 3,083 3,032 619 (568)
----- ----- --- ----
Cash flow from investing activities:
Capital
expenditures -
excluding
equipment leased
to others (645) (550) (95) -
Expenditures for
equipment leased
to others (883) (4) (919) 40 4
Proceeds from
disposals of
leased assets
and property,
plant and
equipment 539 93 461 (15) 4
Additions to
finance
receivables (6,143) - (6,823) 680 5,7
Collections of
finance
receivables 5,405 - 6,144 (739) 5
Net intercompany
purchased
receivables - - (608) 608 5
Proceeds from
sale of finance
receivables 124 - 124 -
Net intercompany
borrowings - 112 - (112) 6
Investments and
acquisitions
(net of cash
acquired) (348) (348) - -
Proceeds from
sale of
businesses and
investments (net
of cash sold) 12 18 - (6) 7
Proceeds from
sale of
securities 168 10 158 -
Investments in
securities (318) (19) (299) -
Other - net 21 24 (4) 1 8
---
Net cash provided by (used for) investing
activities (2,068) (664) (1,861) 457
------ ---- ------ ---
Cash flow from financing activities:
Dividends paid (933) (933) - -
Common stock
issued,
including
treasury shares
reissued 256 256 1 (1) 8
Common shares
repurchased (1,250) (1,250) - -
Net intercompany
borrowings - - (112) 112 6
Proceeds from
debt issued > 90
days 4,307 - 4,307 -
Payments on debt
> 90 days (4,436) (3) (4,433) -
Short-term
borrowings - net
< 90 days 1,487 34 1,453 -
Other - net (4) (4) - -
Net cash provided by (used for) financing
activities (573) (1,900) 1,216 111
---- ------ ----- ---
Effect of exchange rate changes on cash (68) (61) (7) -
--- --- --- ---
Increase (decrease) in cash and short-term
investments and restricted cash 374 407 (33) -
Cash and short-term investments and restricted
cash at beginning of period 8,320 7,416 904 -
----- ----- --- ---
Cash and short-term investments and
restricted cash at end of period $8,694 $7,823 $871 $ -
====== ====== ==== === ===
(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 proceeds received from
Financial Products related to
Machinery, Energy & Transportation's
sale of businesses and investments.
--- --------------------------------------
8 Elimination of change in investment and
common stock related to Financial
Products.
--- ---------------------------------------
Caterpillar Inc.
Supplemental Data for Cash Flow
For the Six Months Ended June 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 $997 $994 $258 $(255) (2)
Adjustments for
non-cash items:
Depreciation and amortization 1,430 998 432 -
Undistributed profit of Financial
Products - (255) - 255 (3)
Other 490 453 (84) 121 4
Changes in assets
and liabilities,
net of
acquisitions and
divestitures:
Receivables - trade and other (442) (54) 63 (451) 4,5
Inventories (688) (688) - -
Accounts payable 1,113 1,145 (52) 20 4
Accrued expenses 251 234 17 -
Accrued wages, salaries and
employee benefits 641 634 7 -
Customer advances 374 374 - -
Other assets - net (280) (152) (48) (80) 4
Other liabilities - net 38 (130) 88 80 4
--- ---- --- --- ---
Net cash provided by (used for) operating
activities 3,924 3,553 681 (310)
----- ----- --- ----
Cash flow from investing activities:
Capital
expenditures -
excluding
equipment leased
to others (371) (367) (4) -
Expenditures for
equipment leased
to others (753) (12) (749) 8 4
Proceeds from
disposals of
leased assets
and property,
plant and
equipment 563 87 481 (5) 4
Additions to
finance
receivables (5,264) - (6,240) 976 5
Collections of
finance
receivables 5,508 - 6,602 (1,094) 5
Net intercompany
purchased
receivables - - (425) 425 5
Proceeds from
sale of finance
receivables 83 - 83 -
Net intercompany
borrowings - 44 (1,500) 1,456 6
Investments and
acquisitions
(net of cash
acquired) (21) (21) - -
Proceeds from
sale of
businesses and
investments (net
of cash sold) 91 91 - -
Proceeds from
sale of
securities 187 9 178 -
Investments in
securities (207) (11) (196) -
Other - net 25 8 17 -
Net cash provided by (used for) investing
activities (159) (172) (1,753) 1,766
---- ---- ------ -----
Cash flow from financing activities:
Dividends paid (906) (906) - -
Common stock
issued,
including
treasury shares
reissued 83 83 - -
Net intercompany
borrowings - 1,500 (44) (1,456) 6
Proceeds from
debt issued > 90
days 4,868 361 4,507 -
Payments on debt
> 90 days (4,228) (505) (3,723) -
Short-term
borrowings - net
< 90 days (505) (200) (305) -
Other - net (6) (6) - -
Net cash provided by (used for) financing
activities (694) 327 435 (1,456)
---- --- --- ------
Effect of exchange rate changes on cash 13 (6) 19 -
--- --- --- ---
Increase (decrease) in cash and short-term
investments and restricted cash 3,084 3,702 (618) -
Cash and short-term investments and restricted
cash at beginning of period 7,199 5,259 1,940 -
----- ----- ----- ---
Cash and short-term investments and
restricted cash at end of period $10,283 $8,961 $1,322 $ -
======= ====== ====== === ===
(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.
--- -------------------------------------
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SOURCE Caterpillar Inc.
