CAT - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Caterpillar Inc. Earnings Conference Call. At this time, all participants are in a listen only mode.

I would now like to hand the conference over to your speaker today, Jennifer Driscoll. Please go ahead, ma'am.

Jennifer Driscoll

Jacqueline. Thanks everyone. morning, Good first call. Caterpillar's quarter to earnings Welcome

and Joining the CFO; Board today are Services Kyle IR Chairman of Jim Umpleby, Division; Finance and Global Vice of the Rengel, President Senior Manager. call Epley, our Rob CEO; Andrew Bonfield,

today earnings news expands earlier we release, our morning. on call which issued Our this

release & find section of Investors the today's Presentations. You the that can presentation along under Events in accompany slides with the news caterpillar.com,

to our also make news to than materially forecast. and release The to We’ll individually forward-looking from today. the the risks today actual on our subject we details reminder results the discuss factors different that that statements in and assumptions cause results filings vary make are we SEC for could or Please our forward-looking recent be combined cause refer could statements actual our uncertainties. to information

our it Caterpillar approval. has portion any copyrighted of this of call. prior written use prohibit without We

as Jim the and results, turn the share last hear Chairman quarter first X to assumptions benefit of share. liquidity, year’s boost This the non-GAAP you’ll re-measurement There news our tax appendix a our we’ve about this release. is quarter moment, call quarter reconciliation $X.XX Jim? morning’s a to year’s gain, a In benefit CEO, per few to the a of we actions Andrew turn XXXX, included Slide discrete a from please the to included in from $X.XX taken rest and over for a financial per key Umpleby. but first while

Jim Umpleby

earnings first call. and morning Good Thank you, Jennifer. Caterpillar’s to quarter welcome

well our We We frontline. have those loved who during the fight lost sympathies individuals as with those as pandemic. During this difficult to the our first time, helping affected deepest on the those responders healthcare, the pandemic by one, in a COVID-XX. thank are extend thoughts

Caterpillar. of XX I month This we also celebrating at Caterpillar’s thank to operation are want years global workforce.

have we century, challenges. For faced nearly and a many overcome

our keeping rising appreciate past, facilities while co-workers customers and the As in to occasion. are our I employees our the to support their commitment safe.

the and Caterpillar’s activity pandemic As products our infrastructure. is to the around customers that Caterpillar to support that delivering critical essential during critical our for the dealers, enable Working infrastructure spread COVID-XX many as COVID-XX services operations with governments support essential provide world, of pandemic. is society classified

and to use clean prime locomotives; standby grocery commodities mine trucks, global extract water to the power in essential to and fuels and hospitals, and and food Customers data stores, products to demand. and maintain critical and systems our for to transport centers; satisfy supplies provide ships, sewer energy

well-being Caterpillar we the serving our While safety, to needs health, are these and of dedicated important remains employees.

who and Caterpillar so. XXXX culture our health doing Caterpillar implementing work guidance Employees authorities. performance and with safe is best guards strong our requirements safety In The achieved can we the on team are pandemic. protect in members are accordance from leveraging in regulatory safety during our that team home from facilities our record open, to remain

around vary benefits enhanced a with regulatory These a maintain critical competitive this they dealers as world-class continue a during pandemic, network customers with the has our our their And us support global advantage. and dealer XXX to employees infrastructure. provided world medical systems various number on care employee of Caterpillar in them benefits Since help the country founded, by We’ve deal also to pandemic. was based introduced local requirements.

committed taken is the activities $XX COVID-XX one world. support we customers to Andrew detail. as of the Our to more describe has at times, by through so Caterpillar many which and million good Cat in around our Finance supports Financial support loyal also reasons times being response challenging our will team Foundation have continues customers. Cat customers organizations The also

pandemic. COVID-XX Now, well-positioned to is Caterpillar to Slide the navigate X. turning

ability our to our financial Our global confident customers. position strong continue is are serving in and we

The to growing our on while strategy services operational will and these expanded challenging times. We excellence. three strategy in continue offerings during based improving we introduced is which of positions well for execution the XXXX, years last us execute the

will period Our the revenues XX% us even our timeframe. COVID-XX. by of sales salaried storm same cost XXXX SG&A, the XXXX disciplined weather from headcount with We and increased of flat held cost help and end during along management created the structural to management though manufacturing R&D, of and our

the and increase less absolute margins us costs significantly period we during leaves cost mean had salaried last this the restructuring that than the cash lower downturn they cost to would and flow management less cut the While need been be have in allowed and three higher base our to for will headcount years.

our the to a already improve billion. liquidity. billion arranged $X and position. ended financial taken April, strong of the and issuing the On cash quarter we’ve with $XX.X response increase we available and raised pandemic, incremental basis, $X.X bonds XX-year to supplement and consolidated first actions In to facilities additional global of of Caterpillar company's credit billion of facilities position backup new XX-year cash $X In liquidity billion by

travel, reduced short-term for management employees salary plans XXXX-based executives. entertainment. We’ve most all and consulting, suspended compensation including and We incentive expenses, discretionary senior and salary increases

costs are We reducing demand. match also production customer to

includes continue and flexible operational structure our We competitive. on cost making focus which to improving excellence, more

supply facilities number pandemic combination in government and certain of a and due through a weak issues, related operational the working challenges have suspended customer to of chain regulations. to operations demand, are We

production continue As three across to our primary operate. of mid-April, main XX% our approximately segments facilities of

reopened, facilities were temporarily as closed in have Some China. that such

fright redirecting the parts. prioritizing We mitigate to other and the increasing to needed, using have centers, by distribution of most to chain impactful redistribution quickly worked our disruption orders air supply sources, alternative as

dealers our and continue serve to employees customers. Our

engines. X. by of was dealer inventories. in The Sales a for declined first and from users industries Asia-Pacific sales first and quarter's we XX%. results construction had lower impact at machines billion Sales the I’ll transportation and in decline North where from Slide quarter. weakness to in lower summary to on Now, the compete quarter primarily demand pronounced our due internal you the by below America, mainly in demand volume, and The give which was end-user most was changes expectations decreased including for revenues $XX.X energy the End-user XX%. in decline

declined EAME the Pacific for gas mining in power spots Asia generation. quarter. and and America, construction XX% bright Latin Small and included in Oil

XXXX. our the during inventory During of dealers inventory first by normal $XXX million year-over-year quarter $X.X first of XXXX This demand of end-users. in billion quarter billion increased anticipation in increase with in sales. also on pressure change from $X.X inventory dealer seasonal placed of dealer The the compares

primarily share lower sales are margin and per included as This XXX gain, by costs, strategy. Profit volume. per proceeding of down profit decline tax a decline. operating XX.X%, decline SG&A, partially short-term due with $X.XX R&D, was share. included basis compensation most year's R&D Favorable quarter first projects mostly Our the while from year's was consistent to was per incentive the discrete manufacturing lower our was our world $X.XX, year's share period. points. $X.XX offset re-measurement quarter R&D The last driven benefit compared of our with $X.XX prior benefit in a The quarter

In we share purchases. to first X. and through Slide to quarter, billion moving $X.X dividends returned Now, the shareholders

position month declared In strong dividend. quarterly and expect to addition, dividend support to this we financial we earlier the our normal our continue

of reminder, substantially flow through committed conditions. our to a a year challenging shareholders Caterpillar We business has the to returning paid a quarterly every free cash dividend since As remain variety cycles. XXXX through

temporarily opportunities. We are we the our upon for suspending January. to program We share that of XXbX-X the balance established completion compelling sheet repurchase program in M&A retained do

pandemic conditions in manufacturing and on flexibility operational times, to the the and shorter positive either for economic quickly on The our on react to operations and our impact negative. the magnitude lead of results market remains excellence, ultimate will focus uncertain based of changes or Our on global be duration us XXXX products. allow will the impact the of future virus and demand

Day providing of discussed associated its impacts May for on in on more uncertainty until the strategy At March the offering COVID-XX pandemic and withdrew in our and with outlook we and not XXXX, we financial global improve. second services, We affects, are today. excellence. conditions our operational an in be the expect our Due significant XXXX our one to linger to Investor XX, to expanded results based to quarter economic the

focus out described cost structure, flexible the be profitable we the new and described success product targets and excellence structural through durability. safety as on competitive XXXX operational laid on delivering processes, reliability Day costs to our out our our during operate the cycles more I our culture, efficiently and our Investor strengths, set based made lean highlighted and and goal we leveraged that and including earlier. We in had first we’ve our foundational improvements quality We we targets

versus points margin was improve XXX to operating adjusted One X% when to basis XX%. and from margins by points to basis XXX XXXX annual ranged XXXX

free $X XXXX ME&T billion second $X per flow The billion annual was performance billion range a through XXXX cash of to year. by increase billion $X to above $X actual to our to

However, envisioned. had has any business on and the we our than impact been more downturn significantly COVID-XX cyclical of severe chaotic

or closed Caterpillar’s have little suppliers with efficiency. Governments impacting notice no operational

we to profitable growth. growth to have elements we of actions offerings taken a and made long-term of strategy while key have services for expanded continue our enablers in Importantly, costs, invest conscious reduce to decision

us XXXX our to margins the XXXX better we in historical it how to our flow As than cash our free targets a while result, XXXX the achieve be of flows margin and challenging cash communicated Day. unfolds will Investor expect XXXX upon to for during depending pandemic be and performance

crisis to for emerge long-term as an better profitable goal company, stronger this growth. is positioned from Our even

first short-term balance actions over me our and let to recap of the a call strength results, turn we’ve quarter sheet. Andrew Now, of taken, for our the

Andrew Bonfield

the on for XX% discuss in and position. our morning by pandemic first actions to taking In Jim declined you, Operating by total, the billion. then our XX% everyone. good some and to of liquidity with COVID-XX sales and to profit before revenue begin cash first billion. turning X quarter quarter to $XX.X results decreased $X.X Slide we’re response I'll I’ll the Thank

share the rate currency per was negative the resulted included pension impacts $X.XX. XX% This of year's reductions quarter $X.XX quarter the share Last included movements. the by re-measurement to quarter year's benefit by gain settlement a that per $X.XX and tax obligation. volume discreet pandemic offset the from an were mitigate of decline taken the a item. higher international as cost from Profit by lower for The tax the driven decreased to

sales the to industries Pacific. energy and while decreased sales inventories. XX%. Machine by were declines decreased quarter, transportation sales The led America on up and small had for weaknesses see X, by $X.X impact, billion. you decreased coupled were and changes Currency with in As volume primarily sales results reflected but this demand volume. the driven by Slide by users, industries to including by decline price dealer North Geographically end-user construction and volume in a resource Asia XX% users quarter

impact a year You may expected with X% stronger expectations. to sales Demand the weaker to first second from small users In indicated a where than our a January, Asia half. recall on that expected, inventory was seasonal for we COVID-XX dealer quarter build in the sales we of decline Pacific in in that of including China. below direct users first we a expected we quarter. to X% Nevertheless,

swing decline. Also, lower Dealers note of inventory in sales dealers increased dealer in to compared of $X.X shipments nearly important million about sales to users. we quarter, was the that – billion because which in an by this XXX a is inventories with reduced the This in our quarter $X.X revenues, the quarter to resulted billion is of their on XXXX. of half first increase of it

year-end, increased following $X.X the backlog by about Compared year our backlog since normal seasonal with $XXX billion. again pattern. down was Order million by ago,

retail of data whilst I and backlog customer underlying said represents demand machines lag sales view our before, users, a than I’ve in there demand engines. indicator believe and sales that a to for data better As I is better as

impact fell basis profits volume. compensation $X.X manufacturing operating incentive operating of and Moving quarter declines XX% points. only driver to offset profit. X, partially lower to lower billion. short-term Operating Volume $XXX decrease fell main first by the million by Favorable where Slide for costs the the of XXX in expense the margins the

was million. For year's in comparison, incentive first compensation $XXX quarter expense last

to individual the discuss driven I’ll America prices XX% for by Starting quarter. Within billion, sales the energy and as steady oil remain in significantly and Demand decline XX, $X.X transportation first quarter first Now, sales solar XX% oil North on in segments results prior year's first by of Slide and quarter. engines the for sales. with oil gas fell. gas, reciprocating slowed declined

short-term volume, as by sales declined points Pacific the lower segment's incentive America. well, segment in Asia compensation sales to partially operating primarily Profit transportation XX%, driven XXX Power generation XX.X%. for decreased. and decreased Industrial expense. by weakened margin by North offset lower and the by basis both The

$X.X resource first increasing in decreased of industries industries the XXXX. decline. experienced in on mining, of in quarter amid after of quarter remain most year first Slide quarter by as Specific and the dealer Dealer the demand XX% this period deployment lower to across in sales Changes the commodity shown to inventories drove We sales sales decreased were end-user XX, As inventories lower first lower in same we demand end-user CapEx miners their volatility. serve. disciplined billion.

However, rates is remain tracking fleet since began the it highest utilization age high. we and

current may and remain we delay prospects positive uncertainty in While replacements, mining long-term. medium we expect fleet in that this the

construction declines and North in saw we in America. addition, heavy In in quarry particularly aggregates,

became first Newmont's quarter, to Boddington autonomous first the completely gold mine the hauling. move During to

as Caterpillar Caterpillar using trucks autonomous for quarter the Recall favorable in profit volume hauling. margin, a benefits growth realization. of Currently of first the has high basis margin Newmont primary the finished point That Command next we is trucks Industries' in XXX Cat from decrease. very double-digit in XX.X%. shipping decrease XXX which profit the first begin to XX% expect that autonomously XXXX price was volume profit year. resulted its running saw at of We and XXXF Resource segment's the Lower driver

to Slide turning Now XX.

Industries, driven billion. change lower driven end-user was users the $X.X decrease XX% XX%, Sales China. decreased Construction prior The by by compared volume a sales XX% declined in Asia-Pacific, with lower by demand to a in including movements. and inventory year, dealer to For by

quarter, to was much incentive Lower and This prior and due favorable by impact expense increase XX%, noticeable on the a period. sales points declined than cost provided margin a mix. short-term during The negative basis offset. material profit decrease the to America. the XXX decreased in lower inventories by The volume and particularly increased North the slight quarter compensation dealers in XX.X%. Although first had segment's period

lower by Moving mark-to-market taken the the impacts our average $XXX in Profitability the to Slide equity XX, by support Financial on million X% assets. million $XXX customers financial services Cat to important XX% during dealers by time. to quarter revenue decreased steps decreased products to insurance on this earning has and first in securities portfolio. led challenging

approach Slide Typically, deferral learned on payments streamlined customer to we care in allowing customers relief principal shown simplified added and for helping Interest of XX continues end the loan. and process. of As provide from apply days. a It’s regions launched programs for payment all to an XX, interest through disasters. to we we’ve customers accrue the and the deferred natural the

took in When loan-loss and Past increased to the reserve quarter in associated loyalty. dues increase there was a risk customer due to we actions COVID-XX. our did we this X.XX%, in similar XXXX noticeable with quarter elevated boost moderately

two in are mind. to there However, points keep

their customers our financially downturn of and loans. current into most First, went the on healthy,

the America crisis, whereas in start I'll X.X% respectively. of financial both were provide the those X.X% North and dues the XXXX and of regions end comparison. China, where you with in X.X%, the at Past dues at past

by are they payments businesses, are normally machines. and our customers loans prioritize which These are working secured means our critical assets Cat to Second, to Financial.

qualified action perspective, banks regions funding all volume provide strong the means positive flat broad around global paper new business mix around to commercial in customers solutions America, a liquidity maintaining a note, central North financial world sources, diverse and globe. as From On we across debt was including financing. to and are continue a rose global XX% access the of and our quarter-over-quarter the we to from

partly Caterpillar by which compensation was incentive the the quarter cash free flow. cash inventory slightly last lower profits, from increased ME&T Lower as positive from offset lower levels, as short-term year-end, benefits than payouts. flow higher was year. to were Turning well for

typically of The our first the cash payout annual short-term a incentive. quarter perspective, is year of weakest to the from flow due

higher in short-term in Caterpillar anticipation as the about stores We in paid out production to XXXX. of levels production half the this approximately levels amount million quarter we compensation in paid $XXX brought quarter. inventory incentive rose

will We work down. these now

to Slide XX. turning Now,

level impacts mentioned, their in the unprecedented speed, and Jim pandemic its of depth, As were complexity. and

taken From on areas more strong, demand executed availability demand as actions far. the business relatively and optimize is perspective, Here work where a in have such some plans continuity we for parks. to thus of color we’ve remains

We customer produce not we take to ensure our and are as segment our needs. do care over managing we by production dealers while of

also We different depth and adjusting moment taken capital strengthen potential less expenditures are to our returns. we by projects and segment. with workforce by cash stewardship for our have to describe a of and facility scenario more in we’re We've position this reducing prepared From completed perspective, visible a a those that pandemic. delaying about and whilst aiming steps ensure R&D I’ll lengths analysis

cost-control travel, and entertainment. reduced discretionary perspective, a expenses, we From including consulting,

we and executives. COVID-XX Given the salary suspended for environment many compensation employees and incentive plans all short-term our XXXX-based senior increases,

cost ways competitive. will continue for look We to structure and our to make more flexible

suppliers their suppliers, support our to through faces to also we can financial flow solutions to our provide them keep products. commitments working will whilst identify to with access banks. health help the supplier cash to financial their we a This ensuring closer well. support as partnership payment capital to all third one Caterpillar's a distress, of that on In quick risk event Turning a for Caterpillar. will have eye no In supply at party particular, cover our access them

we meet recently process as address a our to Separately, to of normal challenged facilities closing Germany. don't contemplation a last mining for two those goals in potentially began continue the our OPACC. stated products addition We result in restructuring we could quarter, programs, that in that

forward these a addressing higher challenged performance, portfolio and challenged also have a cash products, charge flows. of impairment we against By margins an better level the better taken We deliver smaller including move can slightly of with one other and products.

as reduction in the said ongoing certain office to in be back benefits these to cost will program procurement and strive launching reduce XXXX. functions we January, including Meanwhile, preparing efforts, although outsourcing continue our a for cost, of impactful more we

turn XXXX. optimize I’ll We few remain to aren’t guidance XX while a focused working Let’s talk profit Slide inventory about with providing share for and per their levels. key thoughts to on we dealers

inventory billion. in at tax to decline of on billion well will impact changes prior the provisions the income. higher as profits expected a U.S. the $X.X which $X.X of geographic year-end, XXXX was Our to anticipate and higher-end the certain in range, be of tax in expectation, We non-U.S. rate the now dealer our due by mix

be As quarter, $XXX million grew dealer you model a will year last setting different the the second that quarter. normal Also fluid, the it by impact provide virus up quarter greater clearer able the remember Jim guidance the said, the please practice. do All-in-all, second of inventory not being in remains the to comparison short-term. second becomes per we very situation in as in our until anticipate

we Turning Due completion we that on our cash declared XX, through in allocation recently consistent shareholders of liquidity our return Investor Slide flow dividends I’ll free share and quarterly our We and capital to Day more upon We our share to in will and XXXX touch temporarily said at established suspended that program January. repurchase position. associated our uncertainties mid-April all with XXbXX the COVID-XX, annual program substantially we repurchases. May in and to cash dividend.

the cash. quarter and strong $X.X financial share with repurchases. through profile, in the ended to enterprise we shareholders We a In billion including first dividends first billion $X.X quarter, returned

incremental credit liquidity remain have billion we existing billion facility revolving these resources environment, addition to in our undrawn. Both $X.X of had credit short-term the facility. Given $XX.X

After cash supplemental in balance registered $X leveraged strong provide now commercial need United the we’ve at in issuing $X.X States very our paper Canada, rates. addition, billion sheet billion In should incremental support available quarter-end, raise the bonds of the by liquidity the attractive to we arise. and could which programs,

X.XX%, in as Specifically, XX-year coupon debt million we billion $X.X at and at issuance. issued X.X% $XXX notes XX-year our same bonds XXXX in the

the billion debt until in XXXX. with long-term the to Also, we’re We plans U.S. maturities foreseeable currently future. no to for make contributions $XX.X not have pension required

retain our earlier Following agencies ratings. month, credit strong meetings with this the we credit rating

to gives the an stronger it weather All of even emerge and our us this storm confidence ability from company. in

XX finally, turn Slide today’s So recap to let’s key and points.

our a financial ability during to difficult customers strong this continue are have We in position time. our serving global and confident

our $XX.X Our committed enterprise billion in through substantially free billion dividends the and hand first $X.X billion flow total in cash repurchases available cycle, cash remain we a including of returned quarter. have and on to We liquidity. through is $X.X returning all the

on their We’re and actively working inventory dealers monitoring demand customer closely needs. with

agile, factories lean remain leveraging Our principles.

our changes to or operations to negative respond We continue in manage to demand. positive

unchanged, focusing strategy and on excellence, Our expanded services, operational offerings. is

and our food And again, they a as of company by energized pandemic role needs we well critical our serving energy. and customers. essentials this global global for how the that our have as are enabling for supports We satisfying infrastructure the medicine such been thank navigating from and transportation employees once

Q&A I’ll that, With the to session. operator to over the it hand start

Jennifer Driscoll

Jacqueline?

Operator

Your comes question Instructions] from Melius first Research. [Operator Rob Wertheimer from

is line open. Your

Rob Wertheimer

you Thank good everybody. and morning

have had given started trade-offs to I see off be make. you the think something. wanted uncertainties, buyers, that the trend just of doing whether falling talk targets, us various curious some further I among And margin your of XXXX are could may you sort what, you you to just with I’ll the or hear or about towards uncertainty some the already choosing if the of it's mining – I thought to aftermarket below lower-end then trend, kick

Some done temporary or companies otherwise. salary have cuts,

trade-offs like to to you if you continue might whether from expect choosing to need and on and return investment cutting focus to to? You're positive hear that and to the I’d Thanks. see growth, you more

Jim Umpleby

Rob. your question. Yes, good morning Thanks for

cyclical downturn. really your It of nature not this in about first margin The chaotic question down targets comes downturn. of to was normal the part

wasn't area happened. our there business just one it’s it way downturn So, versus so of the a another, in really much

havoc redirecting that it’s manufacturing not an in really downturn. operations we’ve on and overcome, normal no So cyclical but serve we’re customers again our a which efficiency, operation or continuing impact our our it to but notice, by government things, through now created shutdown suppliers work has our with with had it little way

pull, And the levers think could investment we performance and a various short-term are between looked as we’ve is we balance long-term. the appropriate that at we striking for

actions to X.X as really discretionary years. will in managed during we business taken have the have costs reduce mentioned I a number remind you of is, my differently one the and X, remarks We things I last of

flat produce period salaried sales Investor management though our our about at the our flat kept XXXX We do lot the absolute performance Day between to still even and historical driving headcount that points between that talked end XXXX up fact and all and we and went we’re of cost higher presentations XX%. to margins to and our intend the end in XXXX a higher flow XXXX absolute cash in of cycle, compared we that. And the

but, these new large environment, cash will Just our chaotic during well. that targets this we fact strategy it margins Cash established us to be that with of will amounts believe suppliers, serve think – not severance absolute large times. saying the given happening us but well and I incur I challenging with higher, king in costs, is nature will again what’s flow and May restructuring, and be to we that will obviously this downturn we're those of in serve expect achieve us do for the XXXX, we

positions XXXX XXXX think that I we headcount maintain well. between again fact the So of very and and end us cost

Rob Wertheimer

rising ongoing? for or has disruption it seemed chain Thank is you. to And temporary have that maximum still supply clarity, reached or

Jim Umpleby

a – our again we that China across well, in how it’s as China but of and it’s improved our lessened pandemic again we’re way situation the finding to the mean, through continue parts. to unfolds are our all on continue so I so situation, obviously kind suppliers has are serve it. depending geographic situation world, in working as in but are and in products doing our the much of – and pandemic Yes, better China country, to rolling ship operating the facilities obviously has ways customers, the

as our would are but it impact challenging Our dealers having efficiency operational our and expect. on you it supporting is customers, it’s more making

Rob Wertheimer

Thank you.

Operator

comes [Operator Robert Instructions] Dobre next Your from question Baird. from Mircea

Your line is open.

Mircea Dobre

Yes, Good you. morning thank everyone.

at there, fair the Just color most as the – to lingering maybe is on but question some the it can assume second know, the the follow-up what to in you and year, of you that sort is maybe of quarter demand? quarter, Thanks. provided you look backlog there, Rob’s context beyond challenging full and detail changes this of it you out – within Or terms from you given, you're effects in do the seeing the production quarter second foresee maybe a in standpoint? these second quarter

Jim Umpleby

expect said, we the performance a quarter, long will on financial we as first pandemic wear the until than we believe – those as From effects financial second the weaker to quarter linger be as impact the and that perspective, the certainly impact off. Caterpillar continues

for a me quantify finding through way our to to judgment. it. But In a make description trying difficult give so QX, of very of terms ways or QX, you again, it work it’s is to really fluid terms we’re situation, of QX in our operations,

Operator

Jamie Your Suisse. from next question comes Cook Credit from

Your line is open.

Jamie Cook

saw but with goal line will produce maybe you retail exit end April I more Or dealer good in in goal you the you I and you about XXXX? could saying declines what centers question guess of as be that? support quarter, what still on just you. bigger to the dealer inventory, Thank that you in declines? we’re declines is my could So guess, comment Hi, we inventory know, that to see provided guess range able the cited be not around morning. I significant that why last the the you higher to

Andrew Bonfield

Andrew, thanks Jamie. It’s Yes, good morning. and

obviously we on we’re $X.X plans Based based to of looking end they’re from dealers is going of obviously, $X So, the that had they’re January their billion. on that when to demand a higher we perspective, forward. billion yes, what what remember, Always – the at see pointing we be making range at range. are the in out, see expect what

determine beyond their it what view XXXX, and as any even end to final in So, their of said, early number. which depends this what viewpoint just us too Jim quarter will the XXXX for far have happens that is of is

what yes, and at minimum, So, expect, more higher determine may we’re outlook is, obviously, be it on out would just to the may they be would go at that depending flexible, lower, whether would we that but it of range. the like the pointing end

Jamie Cook

And if sorry, on you're you able you saw in to? comment trends can April,

Andrew Bonfield

really it’s April obviously, are mean have you result we mean early still know, too don't yet. say. in I we I April, to

hard particularly impact purely are just it’s gas challenging oil You data, be like engines, lockdown and situation are the expecting been prices have know in we for things given – and with remote April working, month. will in know, reciprocating you get and the the gas. and oil a Remember, but obviously, we negative a that are where to impacts month

Jamie Cook

I thank healthy. stays everyone Okay, you. hope

Jim Umpleby

Same to you Jamie, thank you.

Jennifer Driscoll

too. You

Operator

comes Your from Ann Morgan. next from question JP Duignan

open. is line Your

Ann Duignan

Thank morning. you and good

Andrew Bonfield

morning. Good

Ann Duignan

those gas equipment and how and us you weaker just on resource about oil contemplating impaired in the may impairments about construction outlook for gas, gas expectations in know, and permanently of what longer and if the businesses, we’ll term talk can your sands that across your the and impact construction and various oil – businesses segment, permanently? the of your terms and business give talk in Maybe you and you say, you could oil impact oil more

Jim Umpleby

and with start I’ll impact some I’ll short-term the about the the Yes. of longer – term. talk maybe

in have compression. for drilling, America servicing, we’ll impact On the things and an reciprocating that have and obviously, the like particularly on decline, an North our engine gas oil businesses will short-term, oil – gas WTI,

XXXX expecting – sales expecting And oil gas the went now we lower lower. that. be know year would than we recip they and you so, we're our that And even would be obviously, into

holding up So our well. business, solar turbines is mid-stream

business the and of the continue You hang should low downturn large course sales the we related the turbines last are even services oil during of continued and to stop oil there, compression about in run solar I solar’s had and gas, think prices. to and turbines part

recover will So that are if I there kind career. our provides at XX-year and I it I really a fifth, in permanent worse do don’t are some point. think again, you they better cushion business, of business. will things be a I impairment the it permanent I don’t impairment might good but old, believe get that It any a things there. anticipate will it our when think never take cycle my oil while, And really never know is market perceive get bad, again. my the believe on people in will when think

Ann Duignan

like non-oil in even sands? Not oil gas and

Jim Umpleby

will could certainly permanent be short-term a And anything do is on in business, as major about impairment we on North an and will of construction terms amount significant construction is I our a so but sell well. in obviously as business. oil be impact certain be there that America that again, Yes, impact don’t our see yes to slow of related so gas, a business equipment well, that that

Ann Duignan

you. Okay, thank appreciate that. I

Jim Umpleby

Thanks Ann.

Jennifer Driscoll

You’re welcome Ann.

Operator

Your Raso next comes from from David Evercore. question

open. Your line is

David Raso

that to for chaotic Hi, than to things the the little as quarter thought. we have ability decrementals XX% planning decremental open? margins, to reopening, but related shutdown nature, your the up Related and reopening. those you us that think versus quarter with should be margins, comments, what you how would about ramp on governments little the I better first are the How your good I up more about you assume the bit challenging, first to morning. quarter things and in a a local Cat a question were saw nature bit telling thoughtful at you can the to a are about national second related to be

Jim Umpleby

closures combination your mandates. customer weak your they supply are of Maybe, first, so question of and government and second we’ve part due to temporary chain are I’ll constraints, had a demand the

that that that we – and with have non-pandemic Even sometimes situation, to customer now going just in reopen the again. constraints. the we’re supply at of closures aren’t close demand align closed look reopened, have customer the facility many were some to we production at look We So, facilities chain probably have demand.

So, not really don't see there. to for understand this new is us. big We bring we issue so a facilities up, how

in local been provided term by so, us the that world distancing. we’ve practices and the implemented also governments work best authorities able to guidelines social And they to around have with and

done staggered We like hours. shifts. things We’ve we’re extended and taking temperatures. – We’ve lunch

are as practices. been – recommended things We’re that doing best of variety a whole that have

So, between achieving at compared what those And cycle, did XXXX implement point we’re mentioned we XXXX. each to we’re focused as in I they continuing higher really on to the as and out. come margins earlier,

is decremental our cycle. point incremental XXXX, out cash And each laid from period margins us absolute and a absolute will so, earlier, was in higher to flows two rather cash achieve think Days serve an in about XXXX well the mentioned perspective, it ability Investor and and king. in than at we what our at I as And believe I where that

Andrew Bonfield

And this Andrew. good is morning, David,

volume first and is if somewhere would operating compensation year. the in is the what the biggest higher just XX%. for about year, leverage you of add it think leverage the actual because in was short-term factor. to that, the quarter obviously, last quarter than that decrementals to Obviously, first the remainder incentive you terms that was slightly average about incrementals be the decline remind the the your obviously around biggest in factor in Also still amount of single Just

you forward will quarters have remaining that slightly go won’t vary through will bit. because that little it of the be the So offset as on going against negative obviously a much margins year, we as so

David Raso

higher the equipment clarify to a this same higher $XX what to billion that versus will you is Analyst last they you're year revenues revenues whatever would margins little versus margins $XX when sales be expect were the at billion, know, bit XXXX expect when similar is, So, fair? then, $XX to saying related this history, revenues, XXXX you be saying, were think what the May’s it, your be be Meeting, we year you billion, or you’re to

Jim Umpleby

correct. is That's I what That said.

David Raso

much. it. very Alright, appreciate I thank you

Andrew Bonfield

David. Thank you,

Operator

from Cleveland Adam comes from Research. question Uhlman next Your

line is open. Your

Adam Uhlman

you with on you’re could question explain and the your the dragged efforts you equipment bunch does there mid-single like have that sales in sales? declines Or like you think you keep Thanks. a something it place, all revenues everyone. seeing new up morning, holding down the service thoughts in healthy. had the good the staying a Hi, you’re a there, get are what about range? sales, do I how Hope growth could

Andrew Bonfield

Actually, Hi, in through quarter year, marginally, build that parts a original the the Obviously, revenues Adam. sales hold year-on-year. services channels, you will saw due of in we that was anticipate revenues slight were go services [indiscernible] know revenues down. obviously, up Last better and inventory Andrew. equipment small and a down we It’s to in cycle. movement’s first the part services than as decrease we

are This Obviously, depend it’s the on you too know, use – if are you so always and look percentage will at forth. to – way. the customer-by-customer, by, has history where to able but, going stage they what early obviously machine to predict is are rates change they open, they utilization what been that and

before So, more see a how few we need making that regard. and in to data all pans predictions we get points start out that

Adam Uhlman

thanks. Great,

Operator

UBS. next question from comes And your from Fisher Steven

line Your open. is

Steven Fisher

morning. good Thanks,

ask E&T. you is the it resilient be in a Just have be wanted little to expected across seemed really to board, but about would more than pricing, particularly I

So, the maybe various where can sustainable in a from and how just give about in think then you of segments? and that comments other just some E&T maybe sense came it other strength dynamics us you competitive is

Andrew Bonfield

Yes, Steven. It’s Andrew.

say the rather look industries pricing China. and actually in quarter. pricing you mix at if did we negative some overall, pricing, construction see Most geo obviously was So, in than competitive pressure that was it that really per although mostly of was in

regions again mix, on geo have does you come mix. does an distort see remind to you, the Just pricing obviously sales mix impact to the if so favorable do which that does in different

level been and pricing competitive have go but the hasn't increases Asia-Pacific expecting segment, granularity were mix generally did discussing put geo up. Xst of January, – don't We by through has of we changed. on has by So, we it to held down it that what position was but

Steven Fisher

curious, was just so I but Thanks, actually I in E&T was it up, mean…

Jim Umpleby

the the across – increase that was Yes. in Well that’s relating put Xst January. of that to the price through is price increase

Andrew Bonfield

E&T to lumpy get the things going are in well. also as And

So, [indiscernible].

Steven Fisher

Thanks much. Okay. very

Operator

question from comes of Bank Gilardi next Your America. from Ross

Your is open. line

Ross Gilardi

good Hi, guys. morning

Jim Umpleby

Russ. Hi,

Andrew Bonfield

Good morning, Russ.

Ross Gilardi

had billion you now, years presentation raising allocation, cash, a return paid you you cash out does then follow-up are is next unforeseeable going your predicted question commitment? have the I And gets the flow question in dividend that that to Thanks. this in high X.X program the buyback committed to but still that that a capital suspending unlikely all free when given year? are are single-digit to situation mean yet for made you you couldn't dividend is, exceed the this on that that percentage you the via stated the for to the four of

Jim Umpleby

back put Yes, question you Andrew. answer so I I I’ll will to think, dividend the first and

is the a obviously us. for So, dividend priority

already year You saw this this dividend in even our that raised we situation.

for the in feel to a making not priority do the are it’s rest later we’ll to what keep posted. terms increases prediction but dividend We with obviously ability you support we’ll comfortable make a recommendation you and dividend, the posted. we a decision Obviously, our of and the the It’s we’ll and as year. of future board the in year board we’ll in to a keep

Andrew Bonfield

plus the cash billion that X.X billion in if about of quarters the actually flow distribution year to around into dividend Yes, dividend, the buyback or the cash of out as $X.X the by of account remaining the – of implies so free over year. remainder free paid first flow, $X.X for billion you we three the for far if across take full you Russ shareholders then look quarter, if as extrapolated and you

distributing even to than whether position suspension. substantially cash is, decided on whether we put the that in the a as we’re yet flow free we are all us that’s at which to cash our are flow because slightly moment pause we what or sort put maybe Question to certain buybacks will uncertainty we’ve a uncertain the of to the not are more while free – causes be, obviously

make become decisions. things we’ll clearer, As

position. financial We strong are in

slightly of cash year. quarter I and As the the free had if balance more distributed flow the billion than our end we of sheet last on actually at first the we you for say, $X.X year remember cash

Ross Gilardi

much. very Thanks

Operator

Your next Jerry from Goldman Instructions] comes from question [Operator Revich Sachs.

Your line is open.

Jerry Revich

hi morning good everyone. Yes,

Jim Umpleby

morning, Jerry. Good

Jerry Revich

restructuring expand than if your plans spending the contemplating on on what targeting you are were for of you comments the could is provide we the product discontinued lines, to continuity product the wider year Thanks. the for wondering ago, what range of lines just restructuring kind I’m and prepared repost your program, payback periods investment a those could be expand are quarter can and dealers? this presumably range of to what we Andrew

Andrew Bonfield

on. would So, we of up of all, beginning for the $XXX the expense somewhere we’ll obviously normal products. year challenged put a for you that our at and region that in have don't $XXX we in and of of restructuring beyond stage, was as keep but update going place you time the to that’s posted first the see goes million it’s restructuring stage, we at $XXX of expectation that this placeholder the million million At this

factor timing is a year. Obviously, issues – charge the again, the of timing significant for actions the on of these these

in we took along products. that was value view QX. my So, we that charge the as sort taken we Germany, the asset, and the the asset may while those of the action Similarly, will the in the do in year challenged we remarks, impaired lines in and said we financial contemplation actually process as a how started for action relating example much impairment take so being in that determine to

at So, that this the about talked still we’ll we do in we we’re within outside make we range believe sure it’s stage, original range you keep will January. Obviously, and if update posted.

Jim Umpleby

focusing and And ask more falls obviously more or a reduce bucket restructuring whether find and efficient comment additional we we are cost that regardless and vamp managers ways into continually this we cost about up, environment really to to our ways efficient not maybe to be focus add on so just on to during that to finding costs. be

Jerry Revich

dealer line question? the the product And part of

Jennifer Driscoll

plans Of businesses? product any the replace exited lines What are he the to said?

Andrew Bonfield

made those haven't of this stage. we to actually is, exit businesses at point The decisions any

issue as far stage. this why for concerned, are that’s them obviously not So an it’s dealers at as

Jerry Revich

you. thank Okay,

Jim Umpleby

And to exiting. restructure ways without there are

there. it leave just So,

Operator

your next comes Morgan question Stanley. And from Yakavonis Courtney

open. is line Your

Courtney Yakavonis

thanks. Hi,

Thanks. the impact you seem can on can in Bob, quarter, restrictive some us the uncertainty near-term or how and that? construction in some you and big the on big to for of just wanted of comments this pressure how the resources, think some more side? decline Jim resources you inventories if did positive Just the aggregates dealer heavy an just quarry And CapEx with positive long-term in outlook see understand overhang mining, medium, that so you and then of help so I but on miners your is from comment in the the

Andrew Bonfield

Sorry, Andrew and Courtney it’s good morning.

where of dealer don't RI for it. the on was inventory quarter-on-quarter specific the of a revenues We a the disclose inventory On actually was quarter. impact significant over sales, most in half majority dealer decline side, reductions it the number, it small but the

Jim Umpleby

on And maybe our surprising if the just mining a impact pandemic it would wouldn't comment on short-term. have mining, an be business

medium However, based mining about on positive feel the state still in cycle, long-term? and the of the industry, replacement the we

Courtney Yakavonis

actually discrepancies some Okay of then thanks. geographic have more the and And just on color your your over you Europe, you can or just, America holding seemed seeing sales all any little I on North you are think give based of between but European us up has weaker talked like bit peers because about the fairly for worst some restrictions retail more of Europe a there, data. being

on you April, share just just in in April you’re there general? can what in seeing or if So, not

Andrew Bonfield

was dependent Europe obviously which not was, Yes, strong Courtney last last if quarter I there the comparative factors. remember year strong you of in period is is think of particularly couple and the One, are a first how year.

think little that I So, is Europe. of a that in some why data year-on-year bit better looks

construction is non-residential in Europe, started starting we’re very seen cycle side, the factor. had diminish. in strength particularly non-residential obviously, hadn't a construction another has the to see in On retail We U.S. which obviously the we where to strong, that

Jim Umpleby

the did This the make maintain this we talked just a wanted word dividend about informed I that used earlier Jim, mistakenly raised when dividend, a raise we year, not have the been I statement, is to dividend. I

So, my apologies mistake. for that

Jennifer Driscoll

have one go more question we Jim's for And time before to we wrap-up. now

Operator

Your is Joe Research. Vertical question from final from O'Dea

Your line is open.

Joe O'Dea

level about with overall XX XXX where Can up allowance comment services stands, good financial that just up your morning. Hi, with figure on and you and past dues comfort bips allowances sequentially bips quarter more thoughts they most start the those down? up move on I direction provisions before and are to next it’s likely of that over moving whether importantly provisions think your two or the

Andrew Bonfield

Financial portfolio, which of hot America, the significant but look it’s were Power actually of some dues both around of the a X.XX% to quarter, has the at East the Andrew you the meant the Cat factors the past. we this bit been at past significant of I've with Hi and obviously that in historically issues were reserve Middle Latin legacy dealing drivers quite which little my if have remarks, and and were cover Joe, then end also in were and spots – been

So, issues, which dealing we’re those are with. ongoing

crisis our in to customers the remarks, healthy very As in a actually my I in position. mentioned came

they America so time the the they North health crisis. were So indication versus that and X.X% were X.X%. of financial end past X.X% the of you China in last gives dues of crisis at in of the base an the were the year At of customer financial end in that X.X%

obviously, to are is lower So reserves have security be a many increase is the on loan, a loan the in and reserve is write-off financial because reduces the in did from would other that itself risk will which the our quarter, scenario. the the reserves again, institutions is see very machine obviously we difference against. that than over modestly that we different perspective. We now loan The reason why the secured the process CECL we your is you have required

We be the through inevitably lot do we as think go write-offs we us remainder have see of some it year. So would that yes will comfort, gives is lower do again, a been than will that historically. expect, would we the

Joe O'Dea

you. Thank

Jennifer Driscoll

to closing for it turn back I'll remarks. And Jim

Jim Umpleby

everyone we and thank Caterpillar has just operation an XX challenges. have been your many faced years, Well wrap-up it, questions. a for for I here. overcome

position described a morning. financial have we this strong very which We to you

on operational pursue to focused and continuing our excellence. strategy We’re offerings expanded services,

to colleagues like for to customers the enable my our and again their to with COVID-XX. good working the dealers and on world fight focused that thank services Caterpillar deliver safety for products our Once I’d against around staying fight

emerge pandemic Thank the profitable reminders. Jennifer than it to before, better stronger Our you long-term even some again from turn goal is I’ll closing growth. that, to and position for back with for

Jennifer Driscoll

us joined Jim and and Thanks Andrew who everyone today.

by you replay online of call, catch missed later this morning. you it portion any If can the

a day. relations on website post transcript one the will We investor business within

out me. have to Rob questions, please or reach any you If

Jacqueline You conclude me I'm can general ask let reach call. The number And Rob at driscoll_jennifer@cat.com. investor rengel_rob@cat.com. at our now relations phone XXX-XXX-XXXX. to is

Operator

for your Thank gentlemen, you concludes this you. Ladies participation. and call. Thank conference today's

disconnect. now may You

Caterpillar (CAT) 28 Apr 202020 Q1 Earnings call transcript