FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission File No. 1-768
CATERPILLAR INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
37-0602744
(I.R.S. Employer Identification No.)
100 NE Adams Street, Peoria, Illinois
(Address of principal executive offices)
61629
(Zip Code)
(309) 675-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ____.
At March 31, 1995, 199,913,215 shares of common stock of the Registrant were
outstanding.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CATERPILLAR INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
Statement of Consolidated Results of Operations
(Unaudited)
(Millions of dollars except per share data)
Three Months Ended
Mar. 31, Mar. 31,
1995 1994
MACHINERY AND ENGINES:
Sales ................................ $3,773 $ 3,181
------ ------
Operating costs:
Cost of goods sold ................. 2,890 2,483
Selling, general and
administrative expenses .......... 361 313
Research and development expenses .. 86 76
------ ------
3,337 2,872
------ ------
Operating profit ..................... 436 309
Interest expense ..................... 48 51
------ ------
388 258
Other income (expense) ............... 12 (8)
------ ------
Profit before taxes .................. 400 250
------ ------
FINANCIAL PRODUCTS:
Revenues ............................. 140 105
------ ------
Operating costs:
Selling, general and
administrative expenses .......... 54 43
Interest expense ................... 66 46
------ ------
120 89
------ ------
Operating profit ..................... 20 16
Other income (expense) ............... 12 (5)
------ ------
Profit before taxes .................. 32 11
------ ------
CONSOLIDATED PROFIT BEFORE TAXES ........ 432 261
Provision (credit) for income taxes .. 143 79
------ ------
Profit (loss) of consolidated
companies .......................... 289 182
Equity in profit (loss) of affiliated
companies (Note 6) ................. 11 10
------ ------
PROFIT ................................. $ 300 $ 192
====== ======
PROFIT PER SHARE OF COMMON STOCK (NOTE 8):
Profit ............................... $ 1.50 $ .94
====== ======
Cash dividends paid per share of
common stock ......................... $ .25 $ .07
See accompanying notes to Consolidated Financial Statements.
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Mar. 31, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 465 $ 419
Receivables -- trade and other .................. 3,066 2,971
Receivables -- finance .......................... 1,433 1,319
Deferred income taxes and prepaid expenses ...... 917 865
Inventories (Note 7) ............................ 2,095 1,835
------- -------
Total current assets .............................. 7,976 7,409
Land, buildings, machinery, and equipment -- net .. 3,708 3,776
Long-term receivables -- trade and other .......... 123 125
Long-term receivables -- finance .................. 2,680 2,669
Investments in affiliated companies (Note 6) ...... 462 455
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. 1,238 1,243
Intangible assets ................................. 237 237
Other assets ...................................... 374 336
------- -------
TOTAL ASSETS ........................................ $16,798 $16,250
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 848 $ 740
Accounts payable and accrued expenses ........... 2,835 2,624
Accrued wages, salaries, and employee benefits .. 953 1,047
Dividends payable ............................... - 50
Deferred and current income taxes payable ....... 289 144
Long-term debt due within one year .............. 825 893
------- -------
Total current liabilities ......................... 5,750 5,498
Long-term debt due after one year ................. 4,314 4,270
Liability for postemployment benefits ............. 3,532 3,548
Deferred income taxes ............................. 21 23
------- -------
TOTAL LIABILITIES ................................... 13,617 13,339
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (March 31, 1995 -- 203,723,656;
Dec. 31, 1994 -- 203,723,656) at paid in amount . 921 923
Profit employed in the business ................... 2,261 1,961
Foreign currency translation adjustment ........... 206 205
Treasury stock (March 31, 1995 -- 3,810,441
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... (207) (178)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 3,181 2,911
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $16,798 $16,250
======= =======
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1994 amounts.
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES
(Caterpillar Inc. with Financial
Products on the equity basis)
Mar. 31, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 424 $ 395
Receivables -- trade and other .................. 2,978 2,919
Receivables -- finance .......................... - -
Deferred income taxes and prepaid expenses ...... 907 888
Inventories (Note 7) ............................ 2,095 1,835
------- -------
Total current assets .............................. 6,404 6,037
Land, buildings, machinery, and equipment -- net .. 3,269 3,343
Long-term receivables -- trade and other .......... 123 125
Long-term receivables -- finance .................. - -
Investments in affiliated companies (Note 6) ...... 462 455
Investments in Financial Products subsidiaries .... 603 548
Deferred income taxes ............................. 1,249 1,254
Intangible assets ................................. 237 237
Other assets ...................................... 142 143
------- -------
TOTAL ASSETS ........................................ $12,489 $12,142
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 6 $ 17
Accounts payable and accrued expenses ........... 2,543 2,416
Accrued wages, salaries, and employee benefits .. 951 1,045
Dividends payable ............................... - 50
Deferred and current income taxes payable ....... 233 112
Long-term debt due within one year .............. 86 86
------- -------
Total current liabilities ......................... 3,819 3,726
Long-term debt due after one year ................. 1,936 1,934
Liability for postemployment benefits ............. 3,532 3,548
Deferred income taxes ............................. 21 23
------- -------
TOTAL LIABILITIES ................................... 9,308 9,231
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (March 31, 1995 -- 203,723,656;
Dec. 31, 1994 -- 203,723,656) at paid in amount . 921 923
Profit employed in the business ................... 2,261 1,961
Foreign currency translation adjustment ........... 206 205
Treasury stock (March 31, 1995 -- 3,810,441
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... (207) (178)
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 3,181 2,911
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $12,489 $12,142
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide required supplemental disclosure
of information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1994 amounts.
CATERPILLAR INC.
Statement of Financial Position *
(Dollars in millions)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Mar. 31, Dec. 31,
1995 1994
ASSETS
Current assets:
Cash and short-term investments ................. $ 41 $ 24
Receivables -- trade and other .................. 93 96
Receivables -- finance .......................... 1,433 1,319
Deferred income taxes and prepaid expenses ...... 19 3
Inventories (Note 7) ............................ - -
------- -------
Total current assets .............................. 1,586 1,442
Land, buildings, machinery, and equipment -- net .. 439 433
Long-term receivables -- trade and other .......... - -
Long-term receivables -- finance .................. 2,680 2,669
Investments in affiliated companies (Note 6) ...... - -
Investments in Financial Products subsidiaries .... - -
Deferred income taxes ............................. - -
Intangible assets ................................. - -
Other assets ...................................... 232 193
------- -------
TOTAL ASSETS ........................................ $ 4,937 $ 4,737
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings ........................... $ 842 $ 723
Accounts payable and accrued expenses ........... 306 278
Accrued wages, salaries, and employee benefits .. 2 2
Dividends payable ............................... - -
Deferred and current income taxes payable ....... 56 32
Long-term debt due within one year .............. 739 807
------- -------
Total current liabilities ......................... 1,945 1,842
Long-term debt due after one year ................. 2,378 2,336
Liability for postemployment benefits ............. - -
Deferred income taxes ............................. 11 11
------- -------
TOTAL LIABILITIES ................................... 4,334 4,189
------- -------
STOCKHOLDERS' EQUITY
Common stock of $1.00 par value:
Authorized shares: 450,000,000
Issued shares (March 31, 1995 -- 203,723,656
Dec. 31, 1994 -- 203,723,656) at paid in amount . 333 303
Profit employed in the business ................... 264 245
Foreign currency translation adjustment ........... 6 -
Treasury stock (March 31, 1995 -- 3,810,441
shares; Dec. 31, 1994 -- 3,281,569 shares)
at cost.......................................... - -
------- -------
TOTAL STOCKHOLDERS' EQUITY .......................... 603 548
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 4,937 $ 4,737
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide required supplemental disclosure
of information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
* Unaudited except for Consolidated December 31, 1994 amounts.
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
CONSOLIDATED
(Caterpillar Inc.
and subsidiaries)
Mar. 31, Mar. 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 300 $ 192
Adjustments for noncash items:
Depreciation and amortization ..................... 174 169
Profit of Financial Products ...................... - -
Other ............................................. 1 70
Changes in assets and liabilities:
Receivables -- trade and other .................. (60) (382)
Inventories ..................................... (260) (153)
Accounts payable and accrued expenses ........... 257 242
Other -- net .................................... 8 14
------- -------
Net cash provided by operating activities ........... 420 152
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (74) (82)
Expenditures for equipment leased to others ....... (43) (39)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 21 13
Additions to finance receivables .................. (966) (589)
Collections of finance receivables ................ 583 445
Proceeds from the sale of finance receivables...... 300 -
Other -- net ...................................... (51) (49)
------- -------
Net cash used for investing activities .............. (230) (301)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (50) (15)
Common stock issued, including treasury
shares reissued ................................. - 10
Treasury shares purchased ......................... (33) (47)
Proceeds from long-term debt issued ............... 296 250
Payments on long-term debt ........................ (285) (293)
Short-term borrowings -- net ...................... 15 229
------- -------
Net cash provided by financing activities ........... (57) 134
------- -------
Effect of exchange rate changes on cash ............. (87) (4)
------- -------
Increase (decrease) in cash and
short-term investments ............................ 46 (19)
Cash and short-term investments at the
beginning of the period ........................... 419 83
------- -------
Cash and short-term investments at the
end of the period ................................. $ 465 $ 64
======= =======
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.
See accompanying notes to Consolidated Financial Statements.
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
MACHINERY AND ENGINES
(Caterpillar Inc. with Financial
Products on the equity basis)
Mar. 31, Mar. 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 300 $ 192
Adjustments for noncash items:
Depreciation and amortization ................... 147 147
Profit of Financial Products .................... (19) (8)
Other ........................................... 6 62
Changes in assets and liabilities:
Receivables -- trade and other .................. (24) (374)
Inventories ..................................... (260) (153)
Accounts payable and accrued expenses ........... 180 179
Other -- net .................................... 2 22
------- -------
Net cash provided by operating activities ........... 332 67
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (73) (82)
Expenditures for equipment leased to others ....... (4) (2)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 4 3
Additions to finance receivables .................. - -
Collections of finance receivables ................ - -
Other -- net ...................................... (44) (9)
------- -------
Net cash used for investing activities .............. (117) (90)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... (50) (15)
Common stock issued, including treasury
shares reissued ................................. - 10
Treasury shares purchased ......................... (33) (47)
Proceeds from long-term debt issued ............... - (2)
Payments on long-term debt ........................ (4) (139)
Short-term borrowings -- net ...................... (11) 205
------- -------
Net cash provided by financing activities ........... (98) 12
------- -------
Effect of exchange rate changes on cash ............. (88) (5)
------- -------
Increase (decrease) in cash and
short-term investments ............................ 29 (16)
Cash and short-term investments at the
beginning of the period ........................... 395 62
------- -------
Cash and short-term investments at the
end of the period ................................. $ 424 $ 46
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide supplemental disclosure of
information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
CATERPILLAR INC.
Statement of Cash Flows for Three Months Ended
(Unaudited)
(Millions of dollars)
SUPPLEMENTAL CONSOLIDATING DATA
FINANCIAL PRODUCTS
Mar. 31, Mar. 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit ............................................ $ 19 $ 8
Adjustments for noncash items:
Depreciation and amortization ................... 27 22
Profit of Financial Products .................... - -
Other ........................................... (5) 8
Changes in assets and liabilities:
Receivables -- trade and other .................. 3 23
Inventories ..................................... - -
Accounts payable and accrued expenses ........... 21 22
Other -- net .................................... 23 2
------- -------
Net cash provided by operating activities ........... 88 85
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- excluding equipment
leased to others ................................ (1) -
Expenditures for equipment leased to others ....... (39) (37)
Proceeds from disposals of land, buildings,
machinery, and equipment ........................ 17 10
Additions to finance receivables .................. (966) (589)
Collections of finance receivables ................ 583 445
Proceeds from the sale of finance receivables...... 300 -
Other -- net ...................................... (37) (40)
------- -------
Net cash used for investing activities .............. (143) (211)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid .................................... - -
Common stock issued, including treasury
shares reissued ................................. 30 -
Treasury shares purchased ......................... - -
Proceeds from long-term debt issued ............... 296 252
Payments on long-term debt ........................ (281) (154)
Short-term borrowings -- net ...................... 26 24
------- -------
Net cash provided by financing activities ........... 71 122
------- -------
Effect of exchange rate changes on cash ............. 1 1
------- -------
Increase (decrease) in cash and
short-term investments ............................ 17 (3)
Cash and short-term investments at the
beginning of the period ........................... 24 21
------- -------
Cash and short-term investments at the
end of the period ................................. $ 41 $ 18
======= =======
The supplemental consolidating data is presented for the purpose of
additional analysis and to provide supplemental disclosure of
information about the Financial Products subsidiaries.
See accompanying notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share data)
1. In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of (a) the
consolidated results of operations for the three-month periods
ended March 31, 1995 and 1994, (b) the consolidated financial
position at March 31, 1995 and December 31, 1994, and (c) the
consolidated statement of cash flows for the three-month periods ended
March 31, 1995 and 1994 have been made.
2. The results for the three-month period ended March 31, 1995 are not
necessarily indicative of the results for the entire year 1995.
3. When inflationary effects are material, the company removes certain
components of foreign currency exchange gains and losses arising from
operations in Brazil's highly inflationary economy from "Other income" on
the Statement of Consolidated Results of Operations and includes these
amounts on the operating statement lines where the related inflationary
effects are reported. Consequently, exchange gains and losses on local
currency denominated debt and cash deposits, where the interest rates
reflect the rate of inflation, are offset against interest expense or
interest income, respectively. Similarly, exchange gains on local
currency liabilities subject to monetary correction are offset against
the related expense. This treatment was applied for the first quarter
of 1994. The first quarter 1995 inflationary effects were immaterial.
4. The company buys and sells currencies in amounts large enough to cover
requirements for the business, and to protect its financial and
competitive positions in those currencies whose relative values may
change in foreign exchange markets. The company manages foreign
exchange exposures that arise from cash inflows or outflows denominated
in currencies other than the U.S. dollar with the objective to maximize
consolidated aftertax U.S. dollar cash flows. At March 31, 1995, the
company had approximately $650 in contracts to buy or sell foreign
currency in the future. The carrying value of such contracts was a
liability of $13 and the fair market value was a liability of $126.
5. The company has reviewed the status of its environmental and legal
contingences and believes there are no material changes from that
disclosed in Form 10-K for the year ended December 31, 1994.
6. Affiliated Companies
The company's investments in affiliated companies consist principally of
a 50% interest in Shin Caterpillar Mitsubishi Ltd., Japan $(431). The
other 50% owner of this company is Mitsubishi Heavy Industries, Ltd.,
Japan.
Combined financial information of the affiliated companies, as
translated to U.S. dollars, was as follows:
Three Months Ended
Dec. 31, Dec. 31,
1994 1993
RESULTS OF OPERATIONS
(Unaudited)
Sales ..................... $ 936 $ 784
====== ======
Profit (loss) ............. $ 22 $ 16
====== ======
Dec. 31, Sept. 30,
1994 1994
(unaudited)
FINANCIAL POSITION
Assets:
Current assets ................................. $2,025 $1,853
Land, buildings, machinery and equipment - net.. 771 781
Other assets ................................... 282 298
------ ------
3,078 2,932
------ ------
Liabilities:
Current liabilities ............................ 1,718 1,575
Long-term debt due after one year .............. 330 332
Other liabilities .............................. 131 150
------ ------
2,179 2,057
------ ------
Ownership ........................................ $ 899 $ 875
====== ======
7. Inventories (principally "last- in, first-out" method) comprised the
following
Mar. 31, Dec. 31,
1995 1994
(unaudited)
Raw materials and work-in-process ................ $ 820 $ 697
Finished goods ................................... 1,078 942
Supplies ......................................... 197 196
------ ------
$2,095 $1,835
====== ======
8. Following is a computation of profit per share:
Three Months Ended
Mar. 31, Mar. 31,
1995 1994
(Unaudited)
I. Net profit for period:
Profit - consolidated (A) .. $ 300 $ 192
====== ======
II. Determination of shares (millions):
Weighted average number of
common shares outstanding (B) .. 200.1 203.8
Shares issuable on exercise of
stock options, net of shares
assumed to be purchased out
of proceeds at market price .... 2.1 2.5
------ ------
Average common shares
outstanding for fully diluted
computation (C) ................ 202.2 206.3
====== ======
III. Profit per share of common
stock:
Assuming no dilution (A/B) ...... $1.50 $0.94
Assuming full dilution (A/C) .... $1.48 $0.93
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND LIQUIDITY AND CAPITAL RESOURCES
A. Consolidated Results of Operations
THREE MONTHS ENDED MARCH 31, 1995 VS. THREE MONTHS ENDED MARCH 31, 1994
Caterpillar Inc. reported its fifth consecutive quarter of record
profit. Profit of $300 million and profit per share of $1.50 were records
(after excluding nonrecurring tax-related items from third quarter 1993).
This represents an improvement of $108 million or 56 cents per share from
profit of $192 million or 94 cents per share for the first quarter of 1994.
Sales and revenues of $3.91 billion were a first-quarter record and were
second only to the fourth quarter of 1994. A 15% improvement in physical
sales volume was the most significant factor contributing to the increase in
profit from first quarter 1994.
Machinery and Engines
Sales of Machinery and Engines were $3.77 billion, a $592 million
increase from the same quarter a year ago. The higher sales resulted from a
15% increase in physical sales volume and a 4% improvement in price
realization. Profit before tax of $400 million was $150 million better than
the first quarter of 1994 primarily because of the sales increase.
The increase in physical sales volume resulted primarily from higher
machine sales both inside and outside the United States as customer demand
improved over the past year. The continued weakness of the U.S. dollar
contributed to higher sales as the company's products manufactured in the
United States are more competitive with products sourced in countries that
have stronger currencies compared with the dollar. Price realization improved
primarily because of price increases taken over the past year and the effect
of the weaker dollar as sales in European currencies translated into more U.S.
dollars. The benefit to sales (and margin) of the weaker dollar was limited
by currency hedges (forward contracts) covering most U.S. manufactured
products sold in Europe. The hedges were put in place in 1991 to protect
margins against potential strengthening of the U.S. dollar. Without these
currency hedges, sales and margin during the first quarter would have been
about $30 million higher. All remaining forward contracts mature during 1995.
Margin (sales less cost of goods sold) increased $185 million primarily
because of higher sales volume and better price realization. These favorable
items were partially offset by the effect of the weaker dollar as costs in
European currencies translated into more U.S. dollars, inflation on material
costs, and proportionately higher sales of lower margin products. These
lower margin products continue to increase in volume and contribute to the
company's overall margin, but at a rate that is slightly less than the average
margin on other products. Total margin as a percent of sales was 23.4%, a 1.5
percentage point increase from the first quarter a year ago.
Over the long term, a weaker dollar should favorably impact Caterpillar's
sales and margins. Many of the company's key competitors have their principal
manufacturing operations based in Japan or European countries with strong
currencies. The majority of Caterpillar's manufacturing assets are in the
United States. Consequently, with a weaker dollar, the company's costs
compared with these competitors are lower. As a major net exporter from the
United States, the weaker dollar has a favorable impact on Caterpillar's
global competitive position.
Selling, general and administrative (SG&A) expenses were $361 million,
compared with $313 million in the first quarter of 1994. The increase
reflects higher spending levels to support increased sales volume (including
parts distribution costs), inflation on costs and the effect of the weaker
dollar as costs in European currencies translated into more U.S. dollars.
Research and development (R&D) expenses of $86 million increased $10
million from the same quarter last year. The increase primarily reflects
expanded activity for new product introductions.
Operating profit of $436 million increased $127 million and was 11.6% of
sales, the highest since the second quarter of 1981. This compares with 9.7%
for the same period last year.
Interest expense of $48 million was $3 million lower than a year ago as
the benefit of lower average debt of approximately $400 million was partially
offset by higher interest rates.
Other income/expense was income of $12 million compared with expense of
$8 million in the first quarter of 1994. The improvement primarily reflects
the absence of a $17 million first-quarter 1994 charge related to the
settlement of two class action complaints.
Financial Products
Before-tax profit for Financial Products was $32 million, an improvement
of $21 million from the same quarter last year. The higher profit resulted
from a $15 million favorable change in the unrealized mark-to-market
adjustment for Caterpillar Financial Services Corporation's written interest
rate caps and from Cat Financial's larger average portfolio of earning assets.
Revenues of $140 million were up $35 million, primarily a result of Cat
Financial's larger portfolio. Cat Financial financed new retail business of
$610 million, a $168 million or 38% increase compared with the first quarter a
year ago.
Selling, general and administrative expenses were $54 million, $11
million higher than the first quarter of 1994. The increase reflects
depreciation of a higher amount of equipment on operating leases and other
volume-related expenses at Cat Financial. Interest expense increased $20
million because of higher average borrowings to support the larger portfolio
and higher interest rates.
Other income/expense was income of $12 million compared with expense of
$5 million a year ago. The favorable change resulted from a $6 million
unrealized mark-to-market gain for interest rate caps in the current quarter,
compared with a $9 million unrealized mark-to-market loss in the first quarter
of 1994.
Income Taxes
Tax expense of $143 million was $64 million higher than the same quarter
last year. The increase was due to higher before-tax profit and a change in
the estimated annual tax rate to 33%, compared with 30% for the first quarter
of 1994.
Affiliated Companies
The company's share of affiliated companies' results was $11 million, up
$1 million. The increase reflects higher sales and cost-cutting measures at
the company's 50%-owned affiliate, Shin Caterpillar Mitsubishi Ltd. (SCM) in
Japan largely offset by lower gains from sales of surplus land at SCM.
THREE MONTHS ENDED MARCH 31, 1995 VS THREE MONTHS ENDED DECEMBER 31, 1994
First-quarter profit of $300 million or $1.50 per share was $21 million
higher than fourth-quarter 1994 profit of $279 million or $1.38 per share.
Despite a slight decrease in sales volume, profit before tax improved $66
million. The increase in profit after tax reflects the higher before-tax
profit partially offset by an increase in the tax rate from the fourth-quarter
effective rate of 28% to the first-quarter estimated effective annual rate of
33%.
Machinery and Engines
Profit before tax for Machinery and Engines was $400 million, an increase
of $46 million from the fourth quarter of 1994. Sales of $3.77 billion
declined $27 million as a decrease in turbine engine sales both inside and
outside the United States was largely offset by higher machine sales inside
the United States.
Although sales declined slightly, margin improved $30 million, primarily
because of lower manufacturing costs. As a percent of sales, the margin rate
was 23.4%, 1.0 percentage point higher than the fourth-quarter rate of 22.4%
as the decrease in costs more than offset the impact of lower sales and the
absence of LIFO (last-in, first-out) decrement benefits of $28 million.
Selling, general and administrative expenses of $361 million were $13
million lower than the previous quarter. The decrease was the result of
timing of expenses, as the fourth quarter is generally a higher cost quarter
for these types of expenses. In addition, incentive pay expense was lower.
The decline was partially offset because fewer SG&A employees were working in
manufacturing areas in the first quarter compared with the fourth quarter.
Research and development expenses were up $4 million from one quarter
ago. Fewer R&D employees worked in manufacturing functions in the first
quarter than in the fourth quarter.
Operating profit of $436 million increased $39 million from the previous
quarter despite lower sales of $27 million.
Interest expense of $48 million was about the same as the fourth quarter.
Other income/expense was $12 million of income compared with $7 million
of income in the fourth quarter as the absence of several small unfavorable
items from the fourth quarter was partially offset by an unfavorable change in
foreign exchange gains and losses.
Financial Products
Before-tax profit for Financial Products was $32 million, an increase of
$20 million from the fourth quarter of 1994. The increase was the result of a
first-quarter unrealized mark-to-market gain of $6 million for interest rate
caps written by Cat Financial compared with a fourth-quarter loss of $4
million, Cat Financial's larger portfolio of earning assets and higher
investment income at Cat Insurance Company, Ltd.
Income Taxes
Income tax expense of $143 million was $43 million higher than the fourth
quarter. The increase reflects use of a 33% estimated effective annual tax
rate for the first quarter compared with an effective rate of 28% for the
fourth quarter and the higher profit before tax.
Affiliated Companies
The company's share of affiliated companies' results was $2 million lower
than last quarter as the benefit from higher SCM sales was more than offset by
the absence of favorable year-end adjustments at SCM recorded in the fourth
quarter.
SALES
Following are summaries of first-quarter company sales and dealer
deliveries compared with the same quarter in 1994.
Company Sales Inside the United States
Caterpillar sales inside the United States were $1.98 billion, a $322
million or 19% increase from the same quarter a year ago. The improvement was
due primarily to stronger industry demand for machines and engines. Company
sales also benefited from higher price realization, an increased share of
industry sales and a larger increase in dealer inventories than in the first
quarter of 1994.
Sales inside the United States were 52% of total sales, the same as the
first quarter 1994.
U.S. Dealer Machine Sales to End-Users
As a result of recent improvements in industry sales reporting practices,
the following analysis of sales to end-users will no longer include deliveries
to dedicated dealer rental fleets. These deliveries will be addressed
separately in the next section.
Dealer sales were up considerably from a year ago, with increases in the
construction and commodity sectors, as well as in solid waste market
applications.
Sales in all construction sectors have increased:
- Highway sales were stronger even though spending on highway
construction and repair was near last year's level.
- Sales to the commercial, industrial and government building sector
were higher reflecting increased construction spending in these areas,
particularly in the commercial and industrial construction sectors.
- Housing-related sales registered another gain even though housing
starts were slightly lower than first quarter 1994.
Sales also have increased in all commodity sectors except coal and
petroleum:
- Sand and quarry mining sector sales were higher, reflecting stronger
mining activity in response to greater levels of construction.
- Sales for coal mining applications were lower despite higher mine
production. Coal prices were below first-quarter 1994 levels.
- Metal mining-related sales exceeded year-earlier levels. Mine
production was down but metals prices were significantly higher.
- Agricultural-related sales rose reflecting the introduction of several
new models.
- Sales to the forestry sector were up reflecting slightly higher
forestry production. Lumber prices were below year-earlier levels.
- Sales to the petroleum sector were below year ago levels. Oil prices
are higher but pipeline construction continues to trend down.
Deliveries to U.S. Dealer Rental Fleets
Deliveries to U.S. dealers for their dedicated rental fleets increased
significantly over first-quarter 1994 levels. U.S. dealer rental inventories
were unchanged from the fourth quarter but significantly higher than a year
earlier.
U.S. Dealer New Machine Inventories
U.S. dealer new machine inventories were up significantly from the end of
the fourth quarter as dealers prepared for the spring selling season. New
machine inventories remained slightly above normal relative to current selling
rates.
Company Engine Sales Inside the United States
Sales of diesel engines were considerably higher than the same quarter
last year due to higher demand for on-highway truck engines from Original
Equipment Manufacturers (OEMs) and due to considerably higher end-user demand
for engines in marine, petroleum, material handling and power generation
applications. OEM-related diesel engine sales continue at an all-time high.
Sales of turbine engines declined slightly.
Company Sales Outside the United States
Caterpillar sales outside the United States were $1.80 billion, a $270
million or 18% increase from first quarter 1994. The improvement was
primarily due to a larger increase in dealer machine inventory during the
quarter than occurred during the first quarter of 1994 and higher machine
sales to end-users. Improved price realization also contributed to the
improvement in company sales.
Sales outside the United States represented 48% of worldwide sales, the
same as the first quarter last year.
Dealer Machine Sales to End-Users Outside the United States
Dealer sales outside the United States were up moderately from the first
quarter of 1994. Sales were higher in all regions except Australia and the
CIS.
- Europe: Sales improved moderately in Western Europe and significantly
in Central Europe. In the five largest economies, sales rose in
Germany, the United Kingdom, France and Italy but fell in Spain.
- Latin America: Much higher sales in Brazil, Chile, Colombia and Peru
more than offset lower sales in several other large countries. In
Mexico,severe recession, loss of investor confidence and suspension of
most infrastructure projects caused sales to decline sharply. Sales
also fell in Argentina due to the higher interest rates and government
actions needed to defend their currency. Lower sales also were
reported in Venezuela due to ongoing recession and in Ecuador due to
the border war with Peru.
- Asia (excluding China): Sales were moderately higher as excellent
economic growth continues. The currency crisis in Mexico had no
measurable impact on Asia with the exception of a very short-lived run
on Thailand's currency. Sales in both Thailand and Indonesia were up
moderately.
- Africa and the Middle East: End-user demand rose significantly
reflecting improved commodity prices, exports and economic growth.
Sales to South Africa strengthened.
- Canada: End-user demand continued to rise significantly. Particularly
strong sales gains were registered in highway construction, forestry,
petroleum and metal mining.
- Australia: Good economic growth continues and unit sales were near
1994 levels. Dollar sales, however, were considerably below first
quarter 1994 which was an exceptionally strong quarter for mining
sales.
- China: Sales were up significantly despite government efforts to lower
inflation.
- Japan: Sales of imported product just matched year-earlier levels
although sales of domestically-made product were moderately higher.
- Commonwealth of Independent States (CIS): Sales were very limited in
the first quarter and considerably less than first quarter last year,
which was an exceptionally strong quarter.
Dealer New Machine Inventories Outside the United States
Dealer new machine inventories outside the United States were up
significantly from the end of the fourth quarter but remained slightly below
normal relative to current selling rates.
Company Engine Sales Outside the United States
Due to timing differences, company sales of diesel engines were slightly
lower despite strengthening end-user demand for commercial engines,
particularly for power generation applications in Latin America, and higher
OEM demand for truck engines. Sales of turbine engines were down
significantly.
PLANT CLOSING AND CONSOLIDATION COSTS
At March 31, 1995 the reserve for plant closing and consolidation costs
was $325 million. Of this balance, $176 million related to costs associated
with the probable closure of the Component Products Division's York,
Pennsylvania, facility. The probable closing of the York facility was
announced in December 1991. The company determined that unless significant
cost reductions were made, the unit would be closed -- probably in the 1996
time frame.
Also in the reserve for plant closing and consolidation costs at March
31, 1995, was $119 million for write-downs of buildings, machinery and
equipment at previously closed facilities. The remainder of the reserve
related to severance benefits provided to former employees at previously
closed facilities. The reserve for such benefits is amortized as the benefits
are provided. Currently amortization periods are through 2003.
LABOR UPDATE
The strike by the United Auto Workers (UAW) union that began on June 21,
1994, at eight of the company's U.S. facilities continued. These striking
employees represent about 16% of Caterpillar's total work force. The ongoing
strike had virtually no impact on the company's ability to meet the needs of
its customers or on its financial results.
EMPLOYMENT
At the end of the first quarter, Caterpillar's worldwide employment,
including UAW members on strike, was 54,298, compared with 51,671 one year
ago. Hourly employment increased 2,531 to 32,331, while salaried and
management employment increased 96 to 21,967.
1995 OUTLOOK
The world economic outlook is essentially unchanged from that issued in
January. The outlook continues to call for moderate economic growth in the
United States but better growth in Europe, Japan, Africa and the Middle East.
Latin America will be weaker than earlier expected. Good growth is expected
to continue in Canada and Australia with strong growth forecast to continue in
Asia.
In Latin America the downward revision is due to just two countries.
Severe recession is now forecast for Mexico for the entire year in the
aftermath of December's devaluation. Argentina, the only other country to be
noticeably impacted by the Mexican crisis, will suffer much slower growth due
to the high interest rates and reduction in government spending. Strong
growth is still forecast for the other key countries of Brazil, Chile,
Colombia and Peru.
The recent strengthening of the yen and several European currencies does
pose certain risks for the economic outlook. At this time, however, we
believe that the Japanese and European governments will take appropriate
actions to offset the stronger currencies, such as lowering interest rates.
In the United States, the Federal Reserve is not expected to raise rates
simply to defend the currency, although one more rate hike is still possible
to slow the economy's momentum.
In this generally improving global environment, industry demand is
expected to increase moderately in all major regions outside the United States
and Latin America. A slowing U.S. economy is still forecast to keep the U.S.
industry near 1994 levels. In Latin America better than expected demand in
several countries will partially offset lower sales in Mexico and Argentina to
hold demand near 1994 levels for the region as a whole. Moreover, demand
appears to be somewhat stronger than expected in Europe, Africa and the Middle
East. In total, industry demand is still expected to be moderately higher and
in line with January's outlook.
The 1995 outlook for company sales and profits is unchanged from that
reported in January.
B. Liquidity & Capital Resources
Consolidated operating cash flows totaled $420 million in the first
quarter of 1995, compared with $152 million in the first quarter of 1994.
Total debt at the end of the quarter was $5.99 billion, an increase of
$84 million from year end 1994. During the first quarter, debt related to
Machinery & Engines decreased $9 million, to $2.03 billion, while debt
related to Financial Products increased $93 million to $3.96 billion.
Machinery and Engines
Operating cash flows totaled $332 million in the first quarter of 1995,
compared with $67 million in the first quarter of 1994. The cash flow
increase is primarily the result of increased profitability and a smaller
increase in receivables.
Capital expenditures, excluding equipment leased to others, totaled $73
million in the first quarter compared with $82 million a year ago. The percent
of debt to debt plus stockholders equity improved to 39% at March 31, 1995,
from 41% at December 31, 1994.
Financial Products
Operating cash flows totaled $88 million in the first quarter of 1995,
compared with $85 million in the first quarter of 1994. Cash used to purchase
equipment leased to others totaled $39 million in the first quarter of 1995.
In addition, first-quarter 1995 net cash used for finance receivables was $83
million, compared with $144 million during the first quarter of 1994.
Financial Products' debt was $3.96 billion at March 31, 1995, an increase
of $93 million from December 31, 1994. At the end of the first quarter,
finance receivables past due over 30 days were 2.0%, compared with 2.1% at the
end of the same period one year ago. The ratio of debt to equity of Cat
Financial was 7.1:1 at March 31, 1995, compared with 7.7:1 at December 31,
1994.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Caterpillar Inc. was held on April
12, 1995, for the purpose of electing a board of directors, approving
amendments to the 1987 Stock Option Plan, approving the appointment of
auditors, and voting on the proposals described below. Proxies
for the meeting were solicited pursuant to Section 14(a) of the Securities
Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
J. R. Junkins 169,368,444 1,214,368 0
G. R. Parker 169,354,755 1,228,057 0
G. A. Schaefer 169,313,564 1,269,248 0
Amendments to the 1987 Stock Option Plan were approved by the following
vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
157,973,741 10,246,752 2,362,319 0
The appointment of Price Waterhouse as independent auditor was approved
by the following vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
169,797,759 419,557 365,496 0
The stockholder proposal to declassify the Board of Directors for the
purpose of director elections was defeated with the following vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
73,834,219 79,531,631 2,967,085 14,249,877
The stockholder proposal requesting the board take steps to provide for
cumulative voting in the election of directors was defeated with the following
vote:
Shares Shares Shares
Voted Voted Shares Not
"FOR" "AGAINST" "ABSTAINING" Voted
51,198,242 102,251,515 2,883,178 14,249,877
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) There have been no reports on Form 8-K filed during the quarter for
which this report on Form 10-Q is being filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CATERPILLAR INC.
Date: May 1, 1995 By: /s/ D. R. Oberhelman
D. R. Oberhelman, Vice President
and Principal Financial Officer
Date: May 1, 1995 By: /s/ R. R. Atterbury III
R. R. Atterbury III, Secretary
EXHIBIT INDEX
Number Description
27 Financial Data Schedule